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Tag Archives: Paul Krugman

It’s the Demand, Stupid

04 Monday Jul 2011

Posted by Craig in Clinton, economy, Financial Crisis, too big to fail

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Aspen Ideas Festival, Bill Clinton, Brooksley Born, Commodity Futures Modernization Act, consumer demand, corporate profits, corporate tax rates, derivatives, Glass-Steagall, Paul Krugman

Bill Clinton blathers:

“President Bill Clinton says the nation’s corporate tax rate is “uncompetitive,” and called for a lower rate as part of a “mega-deal” to raise the debt ceiling.

“When I was president, we raised the corporate income-tax rates on corporations that made over $10 million [a year],” the former president told the Aspen Ideas Festival on Saturday evening.

“It made sense when I did it. It doesn’t make sense anymore – we’ve got an uncompetitive rate. We tax at 35 percent of income, although we only take about 23 percent. So, we SHOULD cut the rate to 25 percent, or whatever’s competitive, and eliminate a lot of the deductions so that we still get a FAIR amount, and there’s not so much variance in what the corporations pay.”

Paul Krugman responds:

“Over the last two years profits have soared while employment has remained disastrously high. Why should anyone believe that handing even more money to corporations, no strings attached, would lead to faster job creation?

[…]

[T]he evidence strongly says that the real reason businesses are sitting on cash is lack of consumer demand. In any case, if corporations already have plenty of cash they’re not using, why would giving them a tax break that adds to this pile of cash do anything to accelerate recovery?

[…]

Lack of corporate cash is not the problem facing America. Big business already has the money it needs to expand; what it lacks is a reason to expand with consumers still on the ropes and the government slashing spending.

What our economy needs is direct job creation by the government and mortgage-debt relief for stressed consumers. What it very much does not need is a transfer of billions of dollars to corporations that have no intention of hiring anyone except more lobbyists.”

BTW Bill, I don’t think we need economic advice from the president who set “too big to fail” in motion with the repeal of Glass–Steagall, or the president who lit the fuse on the derivatives time-bomb with the Commodity Futures Modernization Act, or the president who fired Brooksley Born when she tried to warn us about what would happen if derivatives weren’t regulated. Keep it to yourself. Please.

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Vote to Repeal Health Care Reform Not Meaningless At All

20 Thursday Jan 2011

Posted by Craig in budget, Congress, Conservatives, health care, Politics, Republicans

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Boehner, CBO report, deficit, fever blisters, hangnails, health care reform, job killing, minor thing, Paul Krugman, Phil Gingrey, pre-existing conditions, repeal, Republicans, Steve King

My first inclination is to call the Republican vote to repeal health care reform yesterday meaningless, since it’s unlikely to even come up for a vote in the Senate and faces a certain presidential veto even if it did,  but it actually wasn’t meaningless at all. It told us everything we need to know about today’s Republican party. Since they offered no alternative, only a “no” to the current law, the message was loud and clear.

Republicans are in favor of denying coverage to people with pre-existing conditions. Republicans are in favor of Americans going bankrupt because of medical expenses. Republicans are in favor of insurance companies cancelling your policy for any reason, real or imagined, as soon as you get sick. Republicans don’t give a damn about the deficit. Republicans will lie about, distort, and ignore facts and figures that don’t support their positions.

Here it is straight from the horses mouths. Steve King sees the pre-existing conditions provision as a “minor thing”:

“Rep. Steve King (R-Iowa) claimed Wednesday that he wasn’t worried about eliminating the popular preexisting conditions provision of the health care bill through the current GOP effort to repeal the law…This is too many pages, it’s too cluttered, it’s too big an argument to allow it to turn on one or two minor things.”

Phil Gingrey brushes aside the HHS report which says that up to 129 million Americans have a pre-existing condition that would deny them coverage, saying that number must include people with “hangnails and fever blisters” and that “if you believe those statistics, I’ve got a beach I can sell you in Pennsylvania.”

Gingrey is only following his leader. Speaker Boehner on the CBO report which says repealing health care will increase the deficit by $230 billion:

“…Boehner told reporters: “I do not believe that repealing the job-killing health care law will increase the deficit.” The budget experts are “entitled to their opinion,” added Boehner.”

The “job-killing” part of the statement is a distortion of another CBO report on whether or not health care reform would lead to job losses. But Republicans have never been ones to let facts get in the way of a good lie, See “death panels” and “pull the plug on Grandma.”

Paul Krugman gets down to the nitty-gritty:

“The key to understanding the GOP analysis of health reform is that the party’s leaders are not, in fact, opposed to reform because they believe it will increase the deficit. Nor are they opposed because they seriously believe that it will be “job-killing” (which it won’t be). They’re against reform because it would cover the uninsured — and that’s something they just don’t want to do. And it’s not about the money…the modern GOP has been taken over by an ideology in which the suffering of the unfortunate isn’t a proper concern of government, and alleviating that suffering at taxpayer expense is immoral, never mind how little it costs.”

What Communication Problem?

29 Monday Nov 2010

Posted by Craig in bailout, economy, Financial Crisis, Obama administration, Politics, Wall Street

≈ 1 Comment

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Charles Ferguson, communication problem, economic message, LA Times, Obama administration, Paul Krugman, Richard Wolffe, Salon, structural problem, White House

I keep reading about the Obama administration’s so-called “communication problem.” The latest being this piece in the LA Times by Richard Wolffe:

“[The] lack of agreement on economic fundamentals is a primary factor behind one of this White House’s most obvious failures: communications. As one senior Obama advisor told me the day after the disastrous midterms: “It was hard to find a single economic message when the economic team couldn’t agree on a single economic policy.”

I don’t get it. To me, the “economic message” has been crystal clear since the president began to name his team of advisors. The message has been and continues to be, save Wall Street by any means necessary. And to that I give a hearty “Mission Accomplished”:

Charles Ferguson, whose documentary about the financial crisis–Inside Job– is a must see, wrote in Salon:

“When Barack Obama was elected, he had an unprecedented opportunity to shape American history by bringing the country’s new financial oligarchy under control. Elected on a platform of change and renewal by a nation in crisis and with strong majorities in both houses of Congress, his election celebrated throughout the world, Obama could have done great things. Instead, he gave us more of the same. America will be paying for his decision for a very long time.

And now, nearly two years later, the Obama administration has established a clear record…It is, in short, overwhelmingly clear that President Obama and his administration decided to side with the oligarchs — or at least not to challenge them.”

Paul Krugman:

“No wonder we’re in such trouble. Obama must gravitate instinctively to people who give him bad economic advice, and who almost surely don’t share the values he was elected to promote. That’s what I’d call a structural problem.”

I’ll take it one fairly obvious (to me anyway) step further, President Obama doesn’t share the values he was elected to promote. (On a related note; if anyone’s looking for a Christmas present for the person who has everything, I’ll make you a good deal on some slightly used snake oil I bought two years ago). He’s the one who put that team in place and who continues to defend them (heckuva job Larry) on their way out the door. I have a difficult time believing that the replacements will be any different. A structural problem indeed.

Krugman: “Sacrifice is For the Little People”

20 Monday Sep 2010

Posted by Craig in budget, Congress, Democrats, economy, Politics, Republicans, Taxes, Unemployment

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campaign contributions, little people, Paul Krugman, poverty, Republicans, rich, Social Security cuts, taxes

Never mind this, let’s just be sure we keep rich people’s taxes low.


And it’s not just Republicans. Why? Paul Krugman explains:

“You see, the rich are different from you and me: they have more influence. It’s partly a matter of campaign contributions, but it’s also a matter of social pressure, since politicians spend a lot of time hanging out with the wealthy. So when the rich face the prospect of paying an extra 3 or 4 percent of their income in taxes, politicians feel their pain — feel it much more acutely, it’s clear, than they feel the pain of families who are losing their jobs, their houses, and their hopes.

And when the tax fight is over, one way or another, you can be sure that the people currently defending the incomes of the elite will go back to demanding cuts in Social Security and aid to the unemployed. America must make hard choices, they’ll say; we all have to be willing to make sacrifices.

But when they say “we,” they mean “you.” Sacrifice is for the little people.”

Obama and Axelrod’s Mixed Messages

12 Monday Jul 2010

Posted by Craig in Congress, Democrats, economy, Obama, Obama administration, Politics, Republicans

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Atrios, David Axelrod, DNC, job creation, no desire on Capitol Hill, Paul Krugman, President Obama, speech, This Week, Washington Monthly, White House

To whom it may concern at the White House and the DNC:

If you want to lose the House and possibly the Senate in November, if you want to increase the possibility of the 2 most dreaded words in the English language—President Palin—becoming a reality in 2012, keep the lack of a cohesive message coming. And keep on waiting for the GOP to get on board.

First have President Obama come out on a Thursday with a speech focusing on job creation—saying how we can’t afford to give the keys back to the Republicans because they’re the ones whose policies “gave us the economic crisis” and drove the economy into the ditch. This is called firing up the base for the upcoming mid-term elections. (BTW, mid-term elections are all about turning out the base, and in case you haven’t noticed the Republican base is ready to vote today).

Then have David Axelrod go on This Week on Sunday and say that “there is no great desire on Capitol Hill” for more spending to stimulate the economy and that “we’re hoping we can persuade enough people on the other side of the aisle to put politics aside and join us.”  This makes your base throw up their hands (or just throw up) and say ‘For cryin’ out loud, somebody get a freakin’  clue. The Republicans don’t want anything that resembles economic growth, now or in the next 2 years. When are you guys gonna get it?’

Here are some steps you might want to consider and some advice you might want to listen to. First from Atrios:

“So let’s say Obama’s people have correctly deduced that there’s no chance in hell of getting anything through Congress. They have two basic options. First, they could get on the teevee every day and say, “This is my plan to help. Republicans in Congress won’t pass it.” They could hold rallies in Maine. Allies could run ads. At least people would know who is for and who is against…and just what it was that people are for or against.”

Option two is back off proposals you’ve previously made and have Axelrod get on the teevee and say, “there is some argument for additional spending in the short-run to continue to generate economic activity.”

Paul Krugman adds:

“I have no idea what they’re thinking. It would be one thing if polls suggested a tolerable outcome in November, so that playing it safe could possibly make sense as a political strategy. But that’s not the way it is; and it’s hard to see what possible motivation there is for pulling punches.”

Steve Benen at Washington Monthly:

“My sense is that President Obama really hates — and actively avoids — picking fights he fully expects to lose…The defeat would leave him weaker, exacerbate intra-party tensions, and at the same time signal that the White House lacks confidence in the strength of the economic recovery.

But the current alternative is far worse, especially given the fact that the White House should lack confidence in the strength of the economic recovery. It makes a lot more sense to push an ambitious jobs bill — like, now — invite Republicans to do what they always do, give Democrats something to fight for, and have the debate.

[…]

Yes, Republicans will block any measure intended to improve the economy, and it’s largely too late for a new stimulus effort to boost the economy before November. But it’s still worth having the fight — force the GOP to stand in the way of job creation, and show the public that Democrats are prepared to fight to improve on an unsatisfactory status quo.”

To sum up, you’re quickly approaching (if not already at) ‘nothing to lose’ stage. In sports terminology, this is not the time for basketball’s 4-corner offense or football’s prevent defense. (Long-time Houston fans can tell you how both of those work out, and it ain’t good. See UH–NC State and Oilers vs. Buffalo Bills). For those who don’t follow sports, let’s go with “faint heart never won fair maiden.” And faint heart never kicked the shit out of an obstructionist Republican either. It’s time to go bold and force the other team to re-act to you, not you to them.

Just my $0.02.

Alan Greenspan and the “Everybody Missed It” Myth

05 Monday Apr 2010

Posted by Craig in bailout, economy, Financial Crisis, financial reform, financial regulation, Politics, too big to fail, Wall Street

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Alan Greenspan, ARM, Bernanke, Bruce Bartlett, Geithner, home prices, housing bubble, Lehman Brothers, Long Term Capital Management, missed it, Paul Krugman, This Week

On ABC’s This Week yesterday former Fed Chairman Alan Greenspan once again pulled out the “nobody saw it coming” excuse for missing the conditions which led to the financial meltdown in 2008:

“…the reason it was missed is we have had no experience of the type of risks that arose following the default of Lehman Brothers in September 2008.That’s the critical mistake. And I made it. Everybody that I know who works in this business made it.”

False on many fronts. First, the “no experience” myth. The collapse of Lehman Brothers in 2008 was predictable, or should have been, by the failure of Long Term Capital Management in 1998 because both were brought about by similar business practices. Both had debt that far exceeded their assets and both were major players in the mortgage backed securities “shadow market.”

The other thing that “everyone” missed, according to Greenspan and his fellow revisionists anyway, and what was driving the mortgage backed securities explosion, was the housing bubble. Again false. Economists from Paul Krugman on the left to Reagan administration Treasury Department official Bruce Bartlett on the right were warning of the impending disaster in the housing market.

But putting aside economists for a minute, it shouldn’t have taken a Nobel Prize in economics to see that a 50% increase in home prices from 1995-2005 was unsustainable. Or that giving a $500,000 loan to someone with no documented income was not a good idea. Or that adjustable rate mortgages, 100% financing, interest-only loans, and all the other exotic mortgage variations were an accident looking for a time to happen. What was Greenspan saying at the time?

“Federal Reserve Chairman Alan Greenspan said Monday that Americans’ preference for long-term, fixed-rate mortgages means many are paying more than necessary for their homes and suggested consumers would benefit if lenders offered more alternatives…He said a Fed study suggested many homeowners could have saved tens of thousands of dollars in the last decade if they had ARMs.”

No, Mr. Greenspan, not “everybody” missed it. YOU missed it. You and the disciples of the group-think mentality in Washington who were afraid to buck you because of your position as the alleged “Maestro” and “Wizard” who was responsible for the supposedly booming economy which was in reality a house of cards. Unfortunately two of those disciples, Ben Bernanke and Timothy Geithner, are still in decision-making positions.

Just as a side note, there could be some fireworks at the Financial Crisis Commission hearings this week. Greenspan is set to testify on Wednesday and Don Robert Rubin-leone is up on Thursday.

Obama as "The Candidate"

31 Sunday Jan 2010

Posted by Craig in Obama, Politics

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Obama, Paul Krugman, Robert Redford, The Candidate

When I read Paul Krugman today, it brought to mind something that I’ve been thinking about off and on  for the last few months:

“…this is about the president. After Massachusetts, Democrats were looking for leadership; they didn’t get it. Ten days later, nobody is sure what Obama intends to do, and his aides are giving conflicting readings. It’s as if Obama checked out.

Look, Obama is a terrific speaker and a very smart guy. He really showed up the Republicans in the now-famous give-and-take. But we knew that. What’s now in question isn’t his ability to talk, it’s his ability to lead.”

More and more I have the sneaking suspicion that this conversation took place sometime on the night of November 4, 2008, with Barack Obama in the role of Bill McKay, the character portrayed by Robert Redford in the movie The Candidate. “What do we do now?” seems to be the operative phrase in the Obama administration.

Life imitates art.

"Deficit Peacocks"

30 Saturday Jan 2010

Posted by Craig in economy

≈ 1 Comment

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Center for American Progress, deficit hawks, deficit peacocks, New York Times, Paul Krugman

In his op-ed in Thursday’s New York Times Paul Krugman refers to Michael Linden’s piece at the Center for American Progress which makes the distinction between what he calls “deficit hawks” and “deficit peacocks.” Linden describes the hawks as, “those who believe that the long-term deficits pose serious risks, but that short-term deficits are necessary and wise during a recession” and “those who believe that deficits are always risky and should be avoided at all costs.”

The two have this is common:

“Both kinds of hawks are genuine in their concern over our nation’s finances and are sincerely committed to working toward a more sustainable federal budget.”

Then he turns to the “peacocks:”

“Deficit peacocks like to preen and call attention to themselves, but are not sincerely interested in taking the difficult but necessary steps toward a balanced budget. Peacocks prefer scoring political points to solving problems.”

Unfortunately, this category takes in the lion’s share of our elected officials in Washington–on both sides of the aisle–whose top priority is their own re-election, and who see those “difficult but necessary steps” as an impediment to that. After all, difficult choices are not often popular choices.

Linden then lists 4 ways to distinguish the hawks from the peacocks. Peacocks:

“1. Never mention revenues.
Increasing revenues is going to have to be part of the solution for meeting the fiscal challenge. Any suggestion that we can solve this problem solely by cutting spending reveals an utter misunderstanding or ignorance of the budget numbers. Balancing the budget without raising any additional revenue 10 years from now would require cutting every program in the entire budget by more than 25 percent, including all defense spending, Social Security and Medicare benefits, air-traffic-control funding, veterans’ benefits, aid to schools, job training programs, agriculture subsidies, highway maintenance, and everything else.

2. Offer easy answers.
We face a very large budget gap over the coming decade, and the scale of the problem is such that no one solution is going to solve it all. It is going to take a mix of increased revenues, spending reductions, and improved government efficiency to get our fiscal house in order. Those who claim that we could get the budget back to sustainability if we only cut out earmarks, or say that the solution is to simply freeze discretionary spending, are just peddling fiscal snake oil.”

(Note: this article is dated January 20, prior to President Obama’s State of the Union address)

“There are no easy answers to our budgetary challenges. We have an aging population, rising health care costs, and a tax code full of loopholes, exceptions, and targeted subsidies. It is going to take more than simple solutions to meet these challenges. If you hear the words, “all we have to do to balance the budget is…” then you know whoever spoke them hasn’t fully grasped the scope of the problem.

3. Support policies that make the long-term deficit problem worse.
Congress voted repeatedly over the past eight years to make huge tax cuts and create new spending programs without offsetting any of those costs. Many of the very same members of Congress who voted for those policies are now loudly urging the president to clean up the mess that they themselves made.

4. (Sorry, Sen. McCain, but facts is facts.) Think our budget woes appeared suddenly in January 2009.
More than 50 % of 2009’s huge deficit can be directly attributed to policies enacted by the previous administration, and that is not counting the 20 percent that was due to the economic disaster that began and gathered its momentum on President Bush’s watch. President Obama’s efforts to rescue the economy, on the other hand, are responsible for only 16 percent…The Bush-era tax cuts alone will add more than $5 trillion to the budget deficit over the next 10 years.”

Linden concludes:

“There are people from all parts of the political spectrum who strongly and sincerely believe that our current budget path is unsustainable and are committed to taking concrete steps to put the country on a better path. But there are also many who are only interested in scoring political points or in getting in the way of progress on this issue. Sometimes it can be difficult to distinguish between the two. Now, all you need to do to tell the former from the latter is apply any of these four handy tests.”

Paul Krugman: “What Do You Mean We”?

01 Monday Dec 2008

Posted by Craig in Election 2008, Obama, Politics, Uncategorized

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Lawrence Summers, New York Times, op-ed, Paul Krugman, President-elect Obama, Timothy Geithner

With all due respect to Timothy Geithner, Lawrence Summers, and the rest of President-elect Obama’s economic team, there is one name I would like to have seen included on that list–that of Nobel prize winning economist Paul Krugman.

Here’s why. From a Krugman op-ed piece in the New York Times recently:

“A few months ago I found myself at a meeting of economists and finance officials, discussing — what else? — the crisis. There was a lot of soul-searching going on. One senior policy maker asked, “Why didn’t we see this coming?”

There was, of course, only one thing to say in reply, so I said it: “What do you mean ‘we,’ white man?”

Seriously, though, the official had a point. Some people say that the current crisis is unprecedented, but the truth is that there were plenty of precedents, some of them of very recent vintage. Yet these precedents were ignored. And the story of how “we” failed to see this coming has a clear policy implication — namely, that financial market reform should be pressed quickly, that it shouldn’t wait until the crisis is resolved.

About those precedents: Why did so many observers dismiss the obvious signs of a housing bubble, even though the 1990s dot-com bubble was fresh in our memories?

Why did so many people insist that our financial system was “resilient,” as Alan Greenspan put it, when in 1998 the collapse of a single hedge fund, Long-Term Capital Management, temporarily paralyzed credit markets around the world?

Why did almost everyone believe in the omnipotence of the Federal Reserve when its counterpart, the Bank of Japan, spent a decade trying and failing to jump-start a stalled economy?

One answer to these questions is that nobody likes a party pooper. While the housing bubble was still inflating, lenders were making lots of money issuing mortgages to anyone who walked in the door; investment banks were making even more money repackaging those mortgages into shiny new securities; and money managers who booked big paper profits by buying those securities with borrowed funds looked like geniuses, and were paid accordingly. Who wanted to hear from dismal economists warning that the whole thing was, in effect, a giant Ponzi scheme?”

Put more succinctly by Upton Sinclair:

“It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

Mr. Krugman’s conclusion, and one I hope is heeded by the Obama administration, is that now is the time not only to focus on the short-term crisis, but to make the long-term fixes that will prevent the next one from occurring.

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