. . . when you (almost) agree with Krugman.
He is right about this:
The root of our current troubles lies in the debt American families ran up during the Bush-era housing bubble. Twenty years ago, the average American household’s debt was 83 percent of its income; by a decade ago, that had crept up to 92 percent; but by late 2007, debts were 130 percent of income.
All this borrowing took place both because banks had abandoned any notion of sound lending and because everyone assumed that house prices would never fall. And then the bubble burst.
What we’ve been dealing with ever since is a painful process of “deleveraging”: highly indebted Americans not only can’t spend the way they used to, they’re having to pay down the debts they ran up in the bubble years.
Congress’s new stimulus may not work, then, because we’re still not dealing with the original problem. Too many people still owe too much money, and the nation’s financial institutions haven’t been able to clear out the mess so that we can go on with life.
Here’s another problem: Does anyone think that Congress will be able to hold this “one-year” holiday on a portion of Social Security taxes to just one year if unemployment, come Christmas 2011, is still closer to 10 percent than to 5 percent? Politically, it’s going to be hard for members of either party, ahead of an election, to start taking more cash out of people’s paychecks.
Congress could extend the payroll-tax break for another year — that is, to when the Bush tax cuts re-expire. The payroll-tax holiday, then, would be indefinitely tied to the Bush tax cuts, taking us in the wrong direction on entitlement programs.
— Nicole Gelinas is contributing editor to the Manhattan Institute’s City Journal.
"Congress could extend the payroll-tax break for another year — that is, to when the Bush tax cuts re-expire. The payroll-tax holiday, then, would be indefinitely tied to the Bush tax cuts, taking us in the wrong direction on entitlement programs."
I do not disagree that debt is the problem and it has to be reduced. But the attack has to be on spending. Lowering taxes is generally not the wrong direction.
Reply to this commentLinkReport AbusePrivate debt=bad, public debt=good. At least in Krugworld.
Reply to this commentLinkReport AbuseI think what Krugman is ignoring is that interest rates are much lower than 20 years ago.
Back 20 years ago, $100K @ 10% cost $10k/year in interest. Now, $300k @ 3.3% also costs $10k/year.
Consumers don't care how much they owe compared with income, they care how much a mortgage will cost/month compared with what they bring in per month.
Reply to this commentLinkReport AbusePaul Krugman is a Nobel Laureate. Why would it be a bad morning to agree with him? Oh, right, because he's a liberal. How pathetic to instantly think negatively of someone's ideas simply because of their location on the political spectrum.
Reply to this commentLinkReport AbuseAnd why did banks abandon any notion of sound lending? Banks have been loaning money for mortgages since the early 1900's and we NEVER had a problem like this. What could have changed? Did banks suddenly conclude these sound notions were unnecessary? Did they suddenly become extra greedy? Hmmm...what good have happened to change the banks behavior?
Krugman never acknowledges the government's responsibility in this mess, he's still blaming the banks for being banks.
Reply to this commentLinkReport AbuseGosh, no mention of government debt? Surely that debt fueled the trade deficit, which fueled the cheap money, which fueled the household debt, no?
At what point does denial become delusional?
Reply to this commentLinkReport Abuse"Paul Krugman is a Nobel Laureate. Why would it be a bad morning to agree with him? Oh, right, because he's a liberal. How pathetic to instantly think negatively of someone's ideas simply because of their location on the political spectrum."
No, people don't disagree with Paul Krugman because he's on the other side of the political spectrum. People disagree with Paul Krugman because he has been massively wrong on a lot of things.
Reply to this commentLinkReport AbuseDo you have any examples of when Paul Krugman has been massively wrong?
Reply to this commentLinkReport AbuseOn Sunday our 4 year old dutifully pointed out spilled milk and a broken cup on the kitchen floor. She had accidently knocked it off of the island while reaching for another cookie. But when I asked, "How did that happen?" she just shrugged innocently saying, "It just spilled daddy". Hmm.
He is so close to understanding Election 2010, the Tea Party, the EU disaster, why Stimulus has not worked, and the abandonment of Democrats and Obama by 2/3 of the country.
But like a frightened child covering his eyes with a blanket, or my daughter and her milk, "I don't have to accept it if I pretend I didn't see it happen."
Reply to this commentLinkReport AbuseTyler, Krugman supported, in fact advocated for, the stimulus, using spittle-flecked invective, as the way to an improved economy. Massively wrong enough for me.
Reply to this commentLinkReport AbuseTry calling for a multi-billion dollar stimulus to help jump start the economy for one. Also, see his suggestion to inflate the housing bubble to stimulate consumer demand. He also has been quite wrong on what is needed to solve our healthcare problems. Those everyone knows about, but try this website for others:
External Link
When Krugman comments on things outside of his expertise, he has been more miss than hit.
Reply to this commentLinkReport AbuseYou can also do a search on this very site to find other more capable individuals who take apart Paul Krugman and his arguments (Stephen Spruiell and Kevin Williamson, for starters).
Reply to this commentLinkReport AbuseExternal Link
Personally, when it comes to Krugman, I prefer the My Cousin Vinny cross examination.
The Laws of Economics apparently only apply to the rest of the world...but not to the United States Government.
Reply to this commentLinkReport AbusePaul Krugman is a Nobel Laureate. Why would it be a bad morning to agree with him? Oh, right, because he's a liberal. How pathetic to instantly think negatively of someone's ideas simply because of their location on the political spectrum.
_________________________
Yeah, the Nobel Prize was for his work studying trade, which I'm told is world class, and rigorously academic.
His newspaper column exists to advocate for his preferred political policies, and his expertise in trade does not make him an expert in fiscal or monetary policy. Does he know more then the layman? He certainly thinks he does, and he should, but many laymen predicted the stimulus would be a bust, because we understand the basic axiom that TANSTAAFL. You might say this layman is bitterly clinging to pre-Keynesian economics. Which makes me a hopeless reactionary, but it also makes me right and the Nobel prize winning Krugman wrong.
Oh, and when liberals start latching onto Hayek and Friedman simply because of their Nobel prizes, I can maybe take your utterings a little more seriously. Of course, if you ever read Hayek or Friedman you'd know just how wrong Krugman is, especially on the way out of this mess.
Oh, and my favorite Krugmanism is when he called for a housing bubble in 2002:
[Krugman]
The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.
[/Krugman]
Yeah I think I'll get my economic thought from someone else, thank you very much.
Reply to this commentLinkReport AbuseYes, all better responses to Tyler than mine. And to continue the movie meme, I think he brought a knife to a gun fight!
Seriously though, why would one ask that question here, of all places?
Reply to this commentLinkReport AbusePaul Krugman, CBO, and Moody's Analytics all agree that the stimulus saved us from a depression. They also agree that a larger stimulus would have reduced unemployment even further.
Reply to this commentLinkReport AbuseTyler, when you reference Moody's are you refering to this External Link
? If so:
1) Please note all the "mights" and "ifs" and "estimates" sprinkled throughout, and
2) The report follows the familar comparative fallacy between what was done as opposed to doing nothing, which was never the preferred conservative reponse.
For crying out loud, the report even drags out the phrase "laissez faire" in its conclusion to buttress its position.
Regarding the CBO, did you put so much reliance in it when Pelosi was using it like a dishrag in the healthcare debate run-up as "proof" of her claim that BOCare didn't add to our deficits?
Reply to this commentLinkReport Abuse"Paul Krugman, CBO, and Moody's Analytics all agree that the stimulus saved us from a depression. They also agree that a larger stimulus would have reduced unemployment even further."
Can't prove a negative. Then again, were we not promised unemployment no higher than 8% if we spent $787 billion? I believe unemployment is at 9.8%.
Reply to this commentLinkReport AbuseCBO has said that unemployment would be lower if the stimulus had been larger.
Reply to this commentLinkReport AbuseYes, in Krugman's world a bigger stimulus would have worked better. So how much lower would unemployment have gone if the stimulus were two trillion? Three trillion? Ten trillion? Could we eliminate unemployment altogether by spending a quadrillion?
The trouble is, we don't have that money, we have to borrow it. Which takes it from productive uses elsewhere. The CBO doesn't take that into account.
Reply to this commentLinkReport Abuse