Free Markets, Free People


Krugman, Peacocks, The Deficit, Health Care And Spending

If you’ve been following Nobel economist and NY Times columnist Paul Krugman over the last few months, you’ve seen him slowly fall out of love with the Obama administration.  The primary reason is the administration has seemingly ignored his advice about the size of the deficit spending  – stimulus – that should be happening.  Krugman feels that the first stimulus was “too small”. I disagree, I feel it was a poorly targeted pork bill that didn’t address stimulus at all (with spending delayed on most of it for future years, it’s hard to fathom how it acts to stimulate the economy now).  But the amount should have been more than adequate to do that which Keynesian’s like Krugman prefer.  In fact, my guess is Krugman knows that, but can’t bring himself to admit it.  Thus he continues to pretend the size of the “stimulus” is the problem.

That said, today he goes after the president’s claim in the SOTU that he’s addressing the deficit.  Krugman essentially comes to the same conclusion most of us have – it’s not at all a serious attempt to do so:

Last week, the Center for American Progress, a think tank with close ties to the Obama administration, published an acerbic essay about the difference between true deficit hawks and showy “deficit peacocks.” You can identify deficit peacocks, readers were told, by the way they pretend that our budget problems can be solved with gimmicks like a temporary freeze in nondefense discretionary spending.

Guess who he identifies as a “deficit peacock?” Anyone who listened to the State of the Union address knows that answer. Krugman goes on to tell us why it is in our best interest to be spending more right now and not worrying about the deficit:

The nature of America’s troubles is easy to state. We’re in the aftermath of a severe financial crisis, which has led to mass job destruction. The only thing that’s keeping us from sliding into a second Great Depression is deficit spending. And right now we need more of that deficit spending because millions of American lives are being blighted by high unemployment, and the government should be doing everything it can to bring unemployment down.

But that brings us back to the $787 billion dollar “stimulus” bill (which, btw, the CBO now says will cost us $862 billion). That bill was supposed to be focused on bringing unemployment down, wasn’t it? In fact, the explicit claim was if it was passed, unemployment wouldn’t rise above 8%.

Of course one has to wonder if the money had been spent to stimulate job growth instead of monitoring the radioactive feces of rabbits whether or not such spending could have kept that unemployment number down. Only $256 billion of the $787 has been spent with no appreciable effect on unemployment at all. Could it have had an effect if it had been spent on what it should have been? We’ll never know. What we do know, as does Krugman, is that politically a second stimulus is a very unpopular.

That’s not to say we won’t see one. What we will see, however, is any second stimulus introduced to the public as a massive “jobs bill”. The word stimulus won’t be attached to it in any way, shape or form. But that’s why the characterization of Obama as a “deficit peacock” is dead on.

Krugman then gets to the pretzel logic that leaves everyone shaking their head:

In the long run, however, even the U.S. government has to pay its way. And the long-run budget outlook was dire even before the recent surge in the deficit, mainly because of inexorably rising health care costs. Looking ahead, we’re going to have to find a way to run smaller, not larger, deficits.

How can this apparent conflict between short-run needs and long-run responsibilities be resolved? Intellectually, it’s not hard at all. We should combine actions that create jobs now with other actions that will reduce deficits later. And economic officials in the Obama administration understand that logic: for the past year they have been very clear that their vision involves combining fiscal stimulus to help the economy now with health care reform to help the budget later.

First, not everyone agrees that you must “spend” to help the recovery. In fact, credit where credit is due, Obama layed out some tax cuts for small businesses and cap gains tax cuts that may indeed provide the impetus for hiring. The fact that he could have done that a year ago shouldn’t be lost on anyone. But while that means some reduced tax revenue for government, it isn’t a massive spending program. And, in fact, to offset that loss of revenue, government ought to cut spending commensurate with the loss. That’s the way toward fiscal sanity and a balanced budget – or at least one which is closer to being balanced than it is now.

So Krugman’s attempt to claim there’s only one “intellectual” solution to the contradiction he’s posed is poppycock. Note also that he brings up health care reform. The “budget” he’s talking about is that of the US government. The reform he’s talking about in this particular case has to do with the government programs which are out of control. Not the private side which as zip to do with the US budget. Only the Medicare/Medicaid side. Which again begs the question of why taking over much of the private side helps solve the crisis on the government side?

He finally admits it later on in the article:

So if health reform fails, you can forget about any serious effort to rein in rising Medicare costs.

He’s most likely right. And here’s what’s interesting about that sentence. Many of us on the right have been saying for quite some time, “if Medicare and Medicaid are the problem, why not fix those problems first and then, if successful, we can talk about further reform”. Instead we’ve gotten this monstrosity which really doesn’t address those problem areas (despite Krugman’s belief it will) and grabs for even more.

I’d love to see Krugman defend the logic of that.

So we’re paralyzed in the face of mass unemployment and out-of-control health care costs. Don’t blame Mr. Obama. There’s only so much one man can do, even if he sits in the White House. Blame our political culture instead, a culture that rewards hypocrisy and irresponsibility rather than serious efforts to solve America’s problems. And blame the filibuster, under which 41 senators can make the country ungovernable, if they choose — and they have so chosen.

I mostly agree in general with the sentiments expressed here, just not some of the specifics. Our political culture leaves much to be desired. You have to understand that when the best you can hope for is gridlock, something is very wrong with the mechanism that governs the country. It incentivizes behavior that looks short-term and rewards those who bring money to their home districts and states. Until that sort of system is changed, gridlock is about the best we can hope for. Unfortunately those who would have to change the system are presently rewarded by it.

That said, Obama is as much a part of the problem as anyone. He stole into the White House by promising “change” and people like Krugman bought into it. And while some of the scales have slipped from Krugman’s eyes, he still hasn’t accepted the fact that Obama is a double-talker who says all the right things and then acts exactly like a Chicago machine pol in his daily dealings. Obama is as much a part of the problem as anyone else in the system.

Lastly – it seems all the cool kids in DC and NY have discovered a new word for “they won’t go along with what we want to do” – “ungovernable”. Have you noticed that? We weren’t ungovernable when the Democrats wielded the minority filibuster in the Senate. We weren’t ungovernable when the anti-war crowd filled the streets. We weren’t ungovernable when Democrats used every procedural trick in the book to block Social Security reform. Nope, that only happens when Republicans have 41 seats in the Senate, Tea Parties protest and the right fights health care reform.

Krugman, like much of the left, has a very short and selective memory.

~McQ


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40 Responses to Krugman, Peacocks, The Deficit, Health Care And Spending

  • When both the left and the right are mad at Obama, that’s a sign he’s doing something right.  And if you look at the 5.7% GDP growth in the last quarter, the slow easing of new unemployment claims (remember unemployment is a lagging indicator), the drop in the current account deficit, and the resilience of the dollar, Obama has accomplished step one of an economic recovery.   His stimulus has pushed the US economy back into growth mode, and so far without increasing the current account deficit to unsustainable numbers.   As jobs come back throughout the next year, he has set himself up for a “morning in America” rebound, similar to what Reagan experienced in 1984.
    What Obama needs to do next, however, is move to cut debt and deficits, and restructure the economy to sustain the retirement of the boomers, and changes in energy costs as oil becomes more scarce.  This stimulus-spurred growth probably will peter out by 2013, and without progress on other fronts, the economy could lapse back into recession.  Unlike Reagan in 1985, Obama can’t continue to increase debt since we’re already so deep in debt.   Moreover, in the 80s total private debt was not the problem it is now.   Obama is probably going to mirror much of how Reagan I got out of the dilemma after the last recession, but if his second term is going to be successful, he has to start now in making difficult decisions to restructure the national economy.   I think the White House has to feel good about the economic numbers though — these will have political impact by this fall, and especially into the next Presidential election cycle.

    • When both the left and the right are mad at Obama, that’s a sign he’s doing something right.

      I have a different theory.. a more likely theory .. Obama is a complete imbecile.

    • “When both the left and the right are mad at Obama, that’s a sign he’s doing something right. “
      This is my new nomination for the dumbest thing you’ve ever said.  And right there, first sentence.  It’s better to save these for later in the text.

    • We know Erbie is definitely back at QandO when he shows up in every other thread to post generic pap.

      Tell us again, Erbie, how you’re not here to find someone to lecture and feel superior to. Tell us again how we’ve got you all wrong.

      And then explain why, when you stomped off a while back, we all said you would be back despite your insistence that you were not commenting here anymore. In that particular case, we have proof that we understood you better than you understood yourself.

      I guess to be complete, we have to admit one more possibility – that you knew you would eventually be back, but you were consciously lying to us.

      You’re a pathetic person, needy beyond any ability of yourself to control it. You must come here. You can’t help it. It’s a compulsion, and it’s clear to all of us what the psychological need for it really is. Now, you go ahead and laugh it off, and give us one of your more in sorrow than in anger, head-hanging diatribes about insults and such. That will let you persist in your denial that much longer.

      It doesn’t matter. We know who and what you are. A clown not worth taking seriously. A mediocre thinker with delusions that he has analytical skills. A psychological basket case who comes to this site to convince himself that he’s better than people who can run rings around him in every way.

    • “When both the left and the right are mad at Obama, that’s a sign he’s doing something right. ”
      So your contention is this narcissistic child is smarter than everyone else?  Like you then, yes?
      “the slow easing of new unemployment claims” – proof, numbers, links – show your research and see below for mine. “Payrolls fell by 85,000 last month after a 4,000 gain in November that was the first increase in almost two years.”
      “As jobs come back throughout the next year, he has set himself up for a “morning in America” rebound, similar to what Reagan experienced in 1984.” – Jobs rebound, where, oh, in your predictions, right.  Because last month it declined during this ‘growth’ period, talk about lagging!
      “The job market is one area where a rebound is still not evident. Payrolls fell by 85,000 last month after a 4,000 gain in November that was the first increase in almost two years. The U.S. has lost 7.2 million since the start of the recession in December 2007, the most of any slowdown in the post-World War II era.
      The jobless rate held at 10 percent in December, the Labor Department said on Jan. 8. A jump in the number of discouraged workers leaving the labor market kept the rate from rising.”  -
      Note the last part Doc – people discouraged about finding jobs stopped looking. That’s NOT how you keep your unemployment numbers looking good.

      “and restructure the economy” will we be using a 3 year plan or a 5 year plan for that Dr. Stalin?
       

      • Wow, you guys really enjoy insulting people.  Calling Obama names like narcissist, imbecile, etc.   I guess that’s a mirror image of what the left was calling Bush, ODS and BDS have similar attributes.   Grocky is trying to attack me…but I’m trying to see if you make any substantive point at all.   Well, while I do think Obama is going to surprise a lot of you — I think he may end up being remembered as one of the great Presidents, time will tell — looker, you are right that jobs haven’t started to come back yet.   That is traditionally a lagging indicator, and if the growth we’re seeing takes at all, we should see jobs rebound at least by summer.  So I’d advise patience here, jobs are always the last thing to come back after a recession — and when they do, the political pendulum is likely to swing again.

        • I’m not calling him names Scott, I’m stating a fact, he’s a massive narcissist, he’s a narcissist’s narcissist.  If he’d lived in ancient Greece instead of Narcissus as the character in the Greek myth, it would be OBAMA, and today we’d be calling people obamaisists when they spent too much time admiring and thinking greatly of themselves.  It’s world wide, the opinion is world wide – read the op-ed pieces from foreign journals, read the American journals – I’m certainly NOT the only one that thinks the man is in love with himself beyond even the normal amount any President might be.
          Jobs – rebound – patience, another year?  two years?  how long?  Recovery is not happening BECAUSE of the man sir, it’s happening DESPITE the man.  His signature policies are ruinous.  Ineffective & outrageous government stimulus spending,  Cap & Trade, Health Care Reform, Banking reform (as he proposes it) any of which ,on it’s own, could savage the American economy in the fragile condition it’s in now.  He’s not content going for one disaster, no, he wants to juggle beakers of VX nerve gas and chainsaws while balanced on a motorcycle headed for a cliff.

          He’ll be remembered as one of the biggest mistakes we’ve made in my lifetime (mine’s longer than yours….heh)  Bigger than Nixon and even bigger than your beloved James Earl Carter Jr.

          • Well, we disagree about Obama, and I know enough about psychology that you cannot make a psychological diagnosis on the basis of media coverage.  I’ve seen nothing “narcissistic” at all about him, and believe that’s a right wing name calling “meme” that will fade.  But the left applies similar labels — it would be nice if we could rise above that.
            Obviously, time will tell in terms of the judgment of Obama.   Carter certainly looks good now in retrospect (at least he’s getting good press and his Presidency is being seen in a different light — while Reagan now looks like a mistake, having started the massive debt pile up).   Nixon is, in my opinion, a flawed man whose foreign policy nonetheless helped assure a peaceful end to the Cold War.  I doubt Humphrey would have done better.    Do you see Bush the Younger as a mistake?

          • Carter good press, Reagan a mistake,  I shudder to think what you’re reading.  On Nixon we agree, especially on China,  but the opinions of the time are still in my mind, he was widely, literally, hated, with, I think, a pathology easily rivaling BDS.  Course I was from Massachusetts, the only state he lost (and I was a few years shy of voting age so what I thought was moot).  Bush Jr, no not a mistake, but…chuckle…partially a victim of a vast left wing conspiracy he did nothing to combat.
            WRT Obama’s narcissism – I noticed it during the debates.  It hasn’t changed.  I expect a man who wants to be President to have a great deal of confidence in himself, and to believe he can lead, etc.  A certain amount of self love is a must.  I think the current President has an inordinate amount.  I was willing to concede it was an opinion that I alone held but have since seen it repeated and discussed in many many opinion pieces to the point where I think the diagnosis is valid.  Were it only me, or, to recognize reality that we are in a place of like thinkers, only those here that said it, I would consider the probability that we were feeding off each other to achieve that opinion valid.  That’s not the case.  He doesn’t think he has to DO anything, he  thinks he only has to ‘BE’ and talk about doing and all manner of goodness will flow from his mere presence here on Earth, now that he has achieved the world’s (current) highest office.  He has led a totally rudderless 1st year and I personally think he has no experience in taking the rudder, in fact, to further the analogy,  I’m fairly confident he doesn’t know what the tiller looks like.  If he had a competent crew, he might get away with it, but they are as big a collection of useless political hacks as has been assembled in many many a decade.  A perfect storm of idiocy at a time when we can ill afford it.

        • And the high and mighty at Davos don’t see a rosy future -

          • Reagan’s getting bad press because he started the massive increase in debt in the 80′s — from 30% of GDP to 60%.  He started the imbalances we have to fix now.
            My wife and I finally watched Obama’s speech.  The night it was on we forgot about it and were watching a DVD of “The Office” and when we realized we missed the speech we DVR’d the late night repeat on CNN.  I have to say, Obama thinks like I do.   Perhaps that makes me a narcissist in your opinion, but that speech was exactly what I would have wanted to give.  I have a President who thinks like I do, and I’m not used to that.  You think he’s failing, I think/hope he’ll succeed.  We’ll see.  But I take seriously his challenge to BOTH parties to work together and problem solve.

        • “Wow, you guys really enjoy insulting people.”

          LOL. This from someone who said to us ‘you are scum’ not too long ago (November 29, to be exact). 

        •  “That is traditionally a lagging indicator, and if the growth we’re seeing takes at all, we should see jobs rebound at least by summer.  So I’d advise patience here, jobs are always the last thing to come back after a recession”

          Gee, what about all those ‘shovel ready’ jobs that the stimulus was supposed to create?  

        • Who, except you said I was calling him a name ?    He is an imbecile.

    • Oh, yes, Scott, what a surprise that eight quarters into a recession comes finally a quarter of robust growth!

      Inspite of this administration, not because of it.

      I’m overjoyed to see it. It’s about time. The analysis of it does not suggest Obama had anything to do with it at all. Usually, my attitude is that the fates fall and whoever is President gets the credit or the blame. Not with this guy. No more of that. This idiot wants to do irreversible harm to the U.S. We just witnessed that in his all-out push to force that health care plan on the country.

      This economy is by no means in shape for a long and robust recovery, and the best thing that Obama can do is nothing at all. That will reassure the markets, and everyone else.

      Actually, the best thing he can do is to get lost. He was not and is not equipped to be President, doesn’t have a clue about what he is doing, and should have been laughed off the national stage a year before the ’08 election.

      • Oh, but then we would have all been racists – an entire country full.  And it still may (probably will) be revealed that we really are a country of racists, and that will be the reason that Imeme is worse than Carter, not because he’s incompetent, but because as a nation we’re racists and we just couldn’t bring ourselves to have an eloquent, intelligent, man of color lead us, and we viciously sabotaged our own country after electing him to prove it.  Pity Zinn died so soon, he could have written that in his next diatribe on evil America.

    • I hope this means we get to see Ott Scerb more often.

    • Both the left and right hate Carrot Top, too.  And he’d probably make a better President.

    • “When both the left and the right are mad at Obama, that’s a sign he’s doing something right.”

      And the first shovelful is the very first sentence. I am impressed. 

  • It seems that Krugman’s article, like Obama’s SOTU speech, gives a slightly different meaning to the words ‘shovel ready’.

  • Whoa! What timeing! Speaking of ‘shovel ready’…

    • It could said that Democratic prospects this election season are ’shovel ready’.
      If they try another “stimulus”, they will most likely re-energize the “tea party” and other fiscal conscience voters

  • The federal government contends that the economy grew at a 5.7% annualized pace in the final quarter of 2009.
    “About 60% of the fourth quarter’s growth resulted from a sharp slowdown in the reduction of inventories as firms began to rebuild stockpiles depleted by the recession. Excluding inventory changes, the economy would have grown at a 2.2% clip,” the Associated Press noted.

    • And that 2.2% number may be further adjusted downwards, like the previous quarter’s was.  It’s good to see growth, but I worry that we may still be playing games with the numbers.

      In any event, people like Krugman are part of the problem.  They have to find a way to reduce deficits?  No, you idiot!  They have to STOP RUNNING A DEFICIT AT ALL!!!  Deficits are not debt!  We have to reduce the debt, we have to eliminate deficits.  Debt carries over from one year to the next, deficits do not have to.  It’s this kind of dishonest approach to the problem that’s got us in such a financial hole.  It’s just mind boggling to see the government continue to cling to it when we’re so close to doing real and lasting damage to the economy.

      • Yes, and how much of that 2.2% was private sector and how much was public sector “spending gone nuts”? (Yes, gub’mint spending is included in the figures)

      • And putting aside all the ideological positioning on each side, the only way they will ever have the political capacity to reduce debt is if the Republicans  and Democrats agree to do so, no one party will have the capacity to do it on its own.  The Republicans will have to accept tax increases, the Democrats will have to accept spending cuts.  Each will have to give up some of its bread and butter ideology.   If they can’t, then the country is going to ultimately suffer a severe economic collapse.

        • I’d prefer that both parties embrace spending cuts.  Tax increases should be a last resort.  Tax increases will not teach fiscal responsibility.  Cut spending.  Obama said that the country has to tighten its belt the way an average family does.  Most families will grit their teeth and figure out ways to do without.  They don’t simply grab another credit card off the rack (increased debt ceiling) or visit the local loan shark (float more bonds) in order to “solve” their money woes.

          • Practically I think the only possible way out of this is a mix of both — that’s the only way to get political agreement.   Once the budget is balanced (assuming the politicians can muster the will to do so), and the economy stabilized, then I think a real debate can proceed about the level of taxation, social welfare spending and the like.   After a generation of “something for nothing” thinking (on both the left and right) we need first to get our economic house in order.

        • Are you volunteering to pay more ?   No need to involve Congress or the White House.
          Just start right here.

  • Did anybody catch GMA this morning when host George Stephanopoulos was informed, that based on a mapping of his DNA, he is most likely a maternal cousin of Hiliary Clinton ?

  • Looking ahead, we’re going to have to find a way to run smaller, not larger, deficits.

    As anybody who’s ever got in over his head with a credit card will tell you:

    When you’re in a hole, you stop digging.  You don’t just dig slower.

    Don’t blame Mr. Obama. There’s only so much one man can do, even if he sits in the White House. Blame our political culture instead, a culture that rewards hypocrisy and irresponsibility rather than serious efforts to solve America’s problems. And blame the filibuster, under which 41 senators can make the country ungovernable, if they choose — and they have so chosen.

    This is nauseating.  Is Krugman seriously asking us to believe:

    1.  That the arrogant “we won” attitude taken by Imeme, SanFran Nan, Dingy Harry, and the rest of the democrat trash has had nothing to do with the gridlock in DC;

    2.  That only the democrats’ proposals are “serious efforts to solve America’s problems”;

    3.  That refusing to go along with Imeme and his disgusting comrades makes the country “ungovernable”;

    4.  That our political culture is somehow magically different than it has been for the past two centuries;

    5.  That there are and have been 41 GOP senators who uniformly have NEVER shown ANY interest in “bipartisanship”, and;

    6.  That Imeme, who was boosted by the likes of Krugman as a “post-partisan” messiah who would bridge all gaps, heal all wounds, and bring us all together, isn’t to blame for any of this?

    Man, those NYT columnists have really lowered their expectations for Imeme.  First we had (IIRC) Friedman throwing in the towel on the Middle East (“nobody can do it”), and now we’ve got Krugman throwing in the towel on DC.  What else is just too gosh-darned hard for Imeme or anybody else to do?  Defend the country?  Keep the lid on in Iraq?  Negotiate fishing rights with Canada?  Find the White House men’s room?

    Pathetic.

    McQ[I]t seems all the cool kids in DC and NY have discovered a new word for “they won’t go along with what we want to do” – “ungovernable”. Have you noticed that?

    Yeah, they are like spoiled children: “If you won’t play the way I want to play, I’ll just pack up my toys and go home!” Maybe the next step will be for Imeme and his surrogates like Krugman to start calling us poopy-heads.

    I think what libs mean when they say “ungovernable” is that many Americans still maintain some shreds of independence.  I’m guessing that Krugman and people like him might be more happy in a country where the people are a bit more… malleable.  Anybody know when the next flight to North Korea leaves?

  • Speaking of Imeme’s awesome post-partisan abilities to bridge divides, heal wounds, and get people to agree:

    In a face-to-face encounter, President Barack Obama chastised Republican lawmakers Friday for opposing him on health care, economic stimulus and other major issues.
    Republicans pushed back on taxes and spending, and accused Obama of not taking their ideas seriously.
    Obama, attending the House Republicans’ retreat in Baltimore, began with conciliatory remarks but soon became more pointed. He said a GOP-driven “politics of no” was blocking action on bills that could help Americans obtain jobs and health care. [emphasis mine - dj505]

    How stupid can he be???  He can’t even get his own caucus to go along with him, but instead of trying to sprinkle on a little sugar to persuade at least a few RINO’s to help… he wags his finger in their faces and blames them for not bowing to his will!  WHAT AN IDIOT.

    No word in the story if he called them poopy-heads, but I wouldn’t be surprised at this point.

  • When ever I read anything by Krugman, I end up hearing it in Robert Reich’s voice in my head.  The 2 of them are essentially the same person to me – smarmy, bearded, con artists.  Both are smart enough to see the flaws in their own economic philosophies, so for them to keep pushing their tired Keynesianism is complete hypocrisy.

  • In the last 150 years or so there have been 32 recessions with an average duration of less than 18 months. The longest was, of course, the great depresssion, with a duration of 43 months.

    This recession officially began in Dec., 2007, about 24 months ago. So, after 24 months and trillions of dollars in ‘stimulus’, we still have about 6 more months to go before unemployment begins to drop. Nice work, Obama. And Bush, of course. Money well spent.

  • Wow that font was hard to read.  In the first place, I don’t know that anyone, left or right pays much attention to Krugman anymore.  Even to the left he is sort of like the embarrassing crazy old uncle who drops his pants at the dinner table.
    Secondly. things are going to get a lot worse, a whole lot worse.  Look for rapid inflation in the third quarter of this year and massive commodity inflation,  then we might see the bottom fall out of the commercial real estate market.

    • Bernanke got another term as Fed Chairman because the Republicans feared someone like Krugman might be next in line.