Patterico's Pontifications

8/15/2011

Paul Krugman, Phone Home

Filed under: General — Karl @ 11:27 am



[Posted by Karl]

Someone needs to beam up fmr. Enron advisor Paul Krugman:

It’s very hard to get inflation in a depressed economy. But if you had a program of government spending plus an expansionary policy by the Fed, you could get that. So, if you think about using all of these things together, you could accomplish, you know, a great deal.

If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months.

Ed Morrissey savors the irony of the lefty economic icon turned warmonger. Tom Maguire notes fmr Obama economic advisor Christina Romer wrote (at the NYT, no less) just last weekend that WWII helped the recovery from the Depression, but the economy was improving long before military spending increased.

Romer’s recent piece is an understatement, even by her own standards, as Amity Shlaes recounted almost a year ago:

After shrinking 3.4% in 1938, real GDP grew 8.1% in 1939 and 8.9% in 1940, before Pearl Harbor.

What might have caused this upturn? There were monetary factors. Gold flowed to the United States as the crisis in Europe worsened. Since the U.S. was on a form of the gold standard this meant an effective loosening of money. The inflow was not sterilized, but whether the heads at Treasury and the Fed understood the full import of the non-sterilizing decision is not clear. In a 1991 National Bureau of Economic Research working paper Christina Romer, who just retired as chair of the Council of Economic Advisors, stresses the importance of these gold inflows for recovery. You can also argue there were spending factors – the government grew as a share of the economy, although not in the massive fashion that Dr. Krugman prescribes.

But other factors in the 1938-1939 upturn were taxes and the diminishment of [government-induced] uncertainty. In 1938, the political tide began to turn against Roosevelt. In the spring of 1938, lawmakers gutted his undistributed profits tax and dropped the graduated corporate income tax in spite of Roosevelt’s objections. Their bill became law without his signature. In the midterm Congressional elections of 1938, Democrats lost 81 seats, not enough to lose control of the House, but enough to chasten them. Bored and frustrated with the New Deal, FDR turned to foreign policy, an area to which he was better suited in any case. The Supreme Court ruled against sit down strikes, limiting the scope of union power. Washington’s war on business was suspended, in part because the president knew he would now need the same industrial giants he had prosecuted if he was going to arm the U.S. and Britain. Treasury Secretary Henry Morgenthau, who had personally sicced attorneys on his predecessor Andrew Mellon, now put a sign on his desk to signal friendship for business. The sign read “Does it contribute to recovery?” The policy mix of the late 1930s was far from ideal, but the direction was enough to cheer everyone.

The real question is not how war spending ended the Depression. It is why the Depression lasted so long. Spending, in any case, didn’t have much to do with the Depression’s end. As Dr. Romer herself summed up in that 1991 paper, “it is hard to argue that changes in government spending caused by the war were a major factor in the recovery. The recovery was nearly complete before the war had a noticeable fiscal impact.”

This is one of many things about which Krugman has been wrong. Indeed, there is a growing body of academic studies, including one from Romer (and her husband) showing that tax cuts would be a more effective economic stimulus. The magical-thinking establishment media will let the debate pass largely unnoticed, keeping their eyes on the skies.

–Karl

122 Responses to “Paul Krugman, Phone Home”

  1. Yet, when Christina Romer worked in the White House for Barack Obama, she was his official advocate and most prominent spokesperson for the Stimulus Bill. She knew it was the wrong thing to do, that it would damage the economy and inhibit and she did it anyway.

    ropelight (b80e6b)

  2. The defense of Boston’s Big Dig insane cost overruns is outrageous in itself. Krugman believes spending $22 billion even for this is too little stimulation.

    From wikipedia:
    The Big Dig was the most expensive highway project in the U.S. and was plagued by escalating costs, scheduling overruns, leaks, design flaws, charges of poor execution and use of substandard materials, criminal arrests, and even four deaths. The project was scheduled to be completed in 1998 at an estimated cost of $2.8 billion. The project was not completed, however, until December of 2007, at a cost of over $14.6 billion. … the project will ultimately cost $22 billion, including interest, and that it will not be paid off until 2038.

    Wesson (e5cf78)

  3. If deficit spending to fight space aliens will get us out of this mess how did Bush’s spending on unfunded wars and the Medicare drug benefit cause the problems as the democrats say.

    Jeff (6fa8e5)

  4. Wasn’t much of the benefit of war spending leading up to WW2 from the fact that other nations were buying so much from us? It was a transfer a wealth from those nations to us, rather than spending of borrowed money. When we spend our own money on military equipment it takes the value of that equipment out of the economy, whether it is used or stored.

    Machinist (b6f7da)

  5. If I got a tax cut I would just save the money. Until a Republican was president.

    I’m just spiteful like that.

    happyfeet (a55ba0)

  6. If we had saved a ton of money in a rainy day fund, and used that to spur the economy, without quite the same inflation impact, combined with a tax holiday, of course that kind of spending could stimulate if you aren’t too inefficient and corrupt. But maxing out the credit card yet again is not the same thing. You’re causing instability that the stimulus can’t address.

    Dustin (b7410e)

  7. Krugman endorses Bush/Obama Twilight Zone Economics.

    Wesson (e5cf78)

  8. When the govt purchases arms, that causes employment to increase in the commodity sector – someone has to dig the coal that fires the power plants and steel mills, someone else has to dig the iron ore that will make that steel, transportation benefits from moving all that coal and iron-ore, and then the subsequent steel to fabricating plants, etc, etc (you see where this is going). This is all a plus to the economy because we are actually making “stuff”, and a great amount of military expenditures are on-going since the “stuff” is used, and has to be replaced on a continueing basis.
    In the late thirties, those gold transfers were to a large degree, collateral for the armaments that some EU contries were buying from the U.S. So, as Lend-Lease would provide arms, that gold would be transferred – for example – from the UK bin at the NY-Fed, to the USA bin.
    And, don’t forget, Lend-Lease was alleged by many to be a violation of the Neutrality Act, not the least of which IIRC was Berlin.

    Another Drew - Restore the Republic / Obama Sucks! (61abdc)

  9. Indeed, there is a growing body of academic studies, including one from Romer (and her husband) showing that tax cuts would be a more effective economic stimulus.

    Sure they do.

    Witness the economic miracle W bequeathed us.

    Spartacvs (2d9449)

  10. I’m just spiteful like that.

    Comment by happyfeet — 8/15/2011 @ 12:26 pm

    If being cautious with your resources is spiteful, ye suffering gawds, I’m downright hateful.

    oh wait…

    ppk_pixie (901c40)

  11. -Comment by Another Drew – Restore the Republic / Obama Sucks! — 8/15/2011 @ 12:48 pm-

    “This is all a plus to the economy …”

    I question this in the long run Sir as the money to pay for these goods and services is coming out of that economy, either directly through taxes or stealthily through inflation if the money is borrowed. This is the problem with government spending. Taking a dollar out of the economy, skimming off half for government expenses, and putting the other half back into circulation, does not add $.50 to the economy but leaves $.50 less in the economy. If the money is spent on a road or dam then it will pay back the cost over time in greater productivity or efficiency but military spending, while essential, takes the produced value out of the economy. We need bombs and bullets but they do not create economic value. They are a drain on the economy.

    Machinist (b6f7da)

  12. This is also why adding government jobs does not offset lost private sector jobs. Private sector employees create enough wealth to pay their compensation plus enough profit to help the employer grow. Government employees create no wealth. However important they might be they are paid for out of the wealth created by those private sector workers. Each dollar a public employee gets and spends came out of the economy in the first place, with some skimmed of by the government.

    Machinist (b6f7da)

  13. sometimes bombs add value you just have to do it right

    happyfeet (a55ba0)

  14. But Dynamite has not been used in military ordinance since the development of practical high explosives. That is private sector in action.

    Machinist (b6f7da)

  15. So, the demonic midget economist partisan hack and spurty think a pre-emptive war against imaginary aliens and high inflation would be beneficial to the economy. Color me shocked.

    JD (6e25b4)

  16. Dynamite has not been used in military ordinance since the development of practical high explosives.

    no one tells me anything

    happyfeet (a55ba0)

  17. Sparty,

    Does your version of the Internet have links? If not, how do you get here? If so, try clicking on one in the post. The one I’m thinking of goes to the NYT — same site that hosts the fabulous Paul Krugman!

    Karl (f07e38)

  18. As I remarked over on Hot Air, if the aliens wiped out the District of Columbia, that would indeed help the economy. 😉

    LarryD (feb78b)

  19. STFU SpartacBinLaden.

    DohBiden (d54602)

  20. If we discovered space aliens were planning to attack, Democrats would hold a rally supporting them and register them to vote.

    malclave (4f3ec1)

  21. As with most topics, Krugman is partly right, but mostly wrong.

    I’ve argued that it isn’t the war itself that creates growth, growth is a result of the excitement that flows from ‘winning’ the war as well as a consequence of pent up demand being unleashed.

    Growth comes when people are optimistic, leading them to spend the money they have and investing to grow their business… and the two big things that over time that increase confidence is winning a war (a biggie, not some little excursion) and technological breakthroughs, real or imagined.

    Oh, that’s right, there’s a third… the euphoria when Obama loses re-election.

    steve (369bc6)

  22. Comment by Machinist — 8/15/2011 @ 12:58 pm

    I was speaking mainly in the context of WW-2/Lend Lease, where the purchase of these arms were paid for with money (gold) transferred into the country from abroad (or shuffled from one bin to another at the NY-Fed – which counts the same).

    When we are engaged in military activities, these are vital supplies that lacking would lead to, if not ensure, defeat, which is in no one’s best interest.
    Also, I would remind you that of the enumerated powers granted the Federal Government by the Constitution, defense against enemies foreign and domestic is one, if not the pre-eminent one.
    Now, we can argue about the wisdom of this current round of “kinetic military actions”, but as long as they are supported by the Congress, this “old soldier” has his orders, will salute smartly, and say “Aye-Aye, Sir!”

    That is the problem with Libya, that it was not presented to the Congress for authorization either before or after the fact, unlike our presence in both Afghanistan and Iraq.

    Another Drew - Restore the Republic / Obama Sucks! (61abdc)

  23. “no one tells me anything”
    Comment by happyfeet — 8/15/2011 @ 1:16 pm —

    It was in the late 1800s. They made large airguns to mount in the hulls of ships to fire fin stabilized shells full of Dynamite, which was too sensitive to shoot with gunpowder but much more powerful than the black powder used for shells at the time. Better explosives like TNT could be fired in regular shells with the new smokeless powders so they dropped the idea.

    Machinist (b6f7da)

  24. 😀 If zombies decided to attack the white house thta would be a good thing.

    DohBiden (d54602)

  25. Comment by Machinist — 8/15/2011 @ 1:09 pm

    We have tons and tons of “dumb” bombs/shells sitting in ordinance depots such as Seal Beach CA, and Hawthorne NV, filled with TNT.
    The Navy never did run out of 16″ HE shells for the IA class battlewagons.

    Another Drew - Restore the Republic / Obama Sucks! (61abdc)

  26. -Comment by Another Drew – Restore the Republic / Obama Sucks! — 8/15/2011 @ 1:41 pm-

    I thought I made all these points.

    “these are vital supplies that lacking would lead to, if not ensure, defeat, which is in no one’s best interest.”

    I completely agree which is why I called them “essential” and said “We need bombs and bullets”. I agree with you that they are needed and I think the cost of shorting these expenditures is paid in more war and loss of life. Inexcusable. Never the less, while essential, like police and firemen, they do not add to the economy unless someone else is paying for them. They are an essential and proper cost but they should not be confused with productive economic activity which is what pays for that. An invasion as he calls for would be an economic disaster at this time as we would have to pay for it with debt, and we can’t afford it (unless we can sell arms to another race of aliens who are fighting our enemies.)

    Aren’t we in agreement on this?

    Machinist (b6f7da)

  27. -Comment by Another Drew – Restore the Republic / Obama Sucks! — 8/15/2011 @ 1:45 pm-

    Quite right, Sir. They did hand repack the propellant powder but we don’t even have the facilities anymore to make either shells, gun barrels, or liners. All those used in Viet Nam were from WW2, as you say. The guns themselves from those ships were built in the 1920s for a cancelled class of battleships. The other 16″ guns were 45 caliber but the ones used on the Iowas were 50 caliber.

    Machinist (b6f7da)

  28. Viet Nam and later.

    Machinist (b6f7da)

  29. Fareed Zakaria and Krugman did more damage to liberalism in one interview on CNN than I can recall. Claiming we should have another Boston BIG DIG then fill in the hole and start over will not be a position taxpaying Americans find sensible.

    Dennis D (e0b996)

  30. As Dr. Romer herself summed up in that 1991 paper, “it is hard to argue that changes in government spending caused by the war were a major factor in the recovery. The recovery was nearly complete before the war had a noticeable fiscal impact.”

    That’s true. But you’re stepping on a Republican talking point.

    Sammy Finkelman (d3daeb)

  31. I saw this segment on Zakaria’s show and the most significant thing I learned was that Krugman has the manners of a small child. He interupted constantly, most laughably at the very end where Zakaria gives the other guy the “last word” and before he gets to his second sentence Krugman is stepping all over him with the insight of something like ‘that’s not how I read history’.

    He steps on the other guest to say economists differ over history. In other news the sun will set in the West this evening.

    East Bay Jay (2fd7f7)

  32. I think we are in basic agreement.
    The problems our govt has today go back to during VietNam when LBJ tried to have both “guns and butter”, and deficits started to get out of control.
    And then, he piled Medicare and the Great Society on top of that, and the Congresses have never looked back.
    We have too much govt, much more than we can afford, or pay for.
    It is past time to start closing down entire Departments that have lasted well past their useful purpose – if they even had one.
    Think what Education would be like in the country if the funds that power the DofEd were divied up among every school age child in America for a voucher, a voucher that could be presented for full and/or partial payment of K-12 tuition at any accredited school in America.
    Ed.gov says that their budeget is $69.6B (probably a likely story), and they serve the 56MM school children of America.
    Well, right off the bat that’s $1340/student.
    Pardon me, but there are a lot of parents who would look kindly at putting the kid(s) into a private/parochial school if they had DC shouldering $1340/yr in costs – things become a lot less prohibitive, and the quality of the child’s education would dramatically improve ATBE.
    I could go on, but you get the idea; and don’t even get me started on Interior, Agriculture, HUD, Energy, Labor, Commerce – Oh, and the proposed Dept of JOBS!

    Another Drew - Restore the Republic / Obama Sucks! (61abdc)

  33. Correct, Sammy. Everyone knows FDR saved America by heading off the Great Depression by his lonesome. And that’s not a talking point, that’s science.

    East Bay Jay (2fd7f7)

  34. -Comment by Another Drew – Restore the Republic / Obama Sucks! — 8/15/2011 @ 2:12 pm-

    No argument. I agree.

    Machinist (b6f7da)

  35. Re. Department of Education, remember that funding increased dramatically with NCLB in 2001. Remember that Bush wanted National testing and the Dems wanted more money and that’s how the deal went down – a grand bargain of sorts.

    Flash forward 10 years later and Obama is offering states waivers so they can set up their own testing regimes. Do you think the media will point out that the Dems have reneged on the grand bargain they agreed to just 10 years ago? I look forward to the future news that every California child is now above average scholastically.

    East Bay Jay (2fd7f7)

  36. Has Lake Wobegone been moved?

    Another Drew - Restore the Republic / Obama Sucks! (61abdc)

  37. -Comment by Sammy Finkelman — 8/15/2011 @ 2:08 pm-

    Between 1929 and 1939 unemployment averaged over 13%, over 11 million Americans in 1932. In 1940 it was still over 5 million Americans. The GDP just past 1929 levels in 1936. Progress had been made but I would hardly say that we had recovered before we started selling war material to others.

    Machinist (b6f7da)

  38. Sure they do.

    Witness the economic miracle W bequeathed us.

    Did you have fun assaulting that straw man, spartacvs? No one has ever said that reducing tax rates will end cyclical recessions. And there’s nothing in the tax rate reductions of 2001-2003 that caused the meltdown in 2008.

    So, until you learn a little bit about economics and business cycles and how government operates, shut your pie hole.

    Chuck Bartowski (e84e27)

  39. And a reminder:
    The DOW did not move past it’s pre-Crash high until 1952!

    Another Drew - Restore the Republic / Obama Sucks! (61abdc)

  40. “If we discovered space aliens were planning to attack, Democrats would hold a rally supporting them and register them to vote.”

    malclave – You’re probably right, but my first guess was that Democrats would call the lawyers and look for root causes.

    daleyrocks (bf33e9)

  41. And blame Republican warmongering.

    daleyrocks (bf33e9)

  42. turn on your heartlight

    now

    happyfeet (a55ba0)

  43. -Comment by daleyrocks — 8/15/2011 @ 2:36 pm-

    True. What was Obama’s first response to the Gulf spill but to send in the lawyers?

    Machinist (b6f7da)

  44. 8 years ago today:
    All this is, of course, an indictment of our economic policy — a policy that has managed the remarkable trick of generating immense budget deficits without giving the economy much stimulus. But that’s a subject for another day.
    — Paul Krugman, Twilight Zone Economics, Aug 15, 2003

    http://www.nytimes.com/2003/08/15/opinion/twilight-zone-economics.html

    Wesson (e5cf78)

  45. He just couldn’t get a handle on all of those “burger flipping jobs” that he was obviously under-qualified for…
    I mean, if you were running a McDonald’s, would you offer employment to someone who had advised Enron?

    Another Drew - Restore the Republic / Obama Sucks! (61abdc)

  46. Evidently, it is still unimportant to Krugman that he’s pissed away all the respect his Nobel earned him among real economists to be a partisan hack. Those still doing real work in the field on this subject are all groaning with the ludicrous piece and its trashing of all accepted economic principles.

    SPQR (26be8b)

  47. Enron paid dearly for the consultation of that genius Princeton economist, Paul Krugman.

    Bugg (ea1809)

  48. BIG ZER0 lash out
    ham cheese on wry with malaise
    killer rabbit lurks

    ColonelHaiku (d1f5ff)

  49. I’ve long been of the opinion that the majority of Krugman’s columns are actually written by his wife…..

    gahrie (b456eb)

  50. future things like this
    will happen in the future
    hang it up krugman

    ColonelHaiku (d1f5ff)

  51. Mrs. Krugman and
    Mrs. Obama keep keen
    eye on their whipped hubs

    elissa (ac1977)

  52. gahrie, that’s been noted by others as well, in large part due to internal inconsistencies that can’t be explained among them.

    SPQR (26be8b)

  53. what’s stupid about all of this is that we are presently in 3 wars, and that is not saving us–why does he think an intersteller war would?

    But Karl, you should totally find the video where Reagan fantasized about how we would unite if there was an alien threat… and then says something like, “what could be more alien to the human spirit than communism?” And of course Krugman is a communist without the courage of his convictions.

    Aaron Worthing (73a7ea)

  54. roll up… roll up for
    Magical Misery Tour
    coming to take you

    ColonelHaiku (d1f5ff)

  55. … and of course the Democrats have been trying to lower defense spending these past few months.
    It only goes to reason that if there is a way out of this “Great Recession” that Nancy Pelosi will be trying to stop it.

    Neo (d1c681)

  56. @24
    “If zombies decided to attack the white house [that] would be a good thing.”

    I don’t understand… why would Democrats attack the White House? They already control it.

    @41
    “my first guess was that Democrats would call the lawyers and look for root causes.”

    Maybe, but I figure the aliens probably already have Gloria Allred on retainer.

    malclave (4f3ec1)

  57. nothin’ but Bad Luck
    that’s whacha got, whatcha got
    Bad Luck whatcha got!

    http://campaign2012.washingtonexaminer.com/blogs/beltway-confidential/obama-i-reversed-recession-until-bad-luck-hit

    ColonelHaiku (d1f5ff)

  58. Aaron,

    I considered the Reagan item, but figured the ‘net likely doesn’t have enough libs getting the vapors over it online.

    Karl (37b303)

  59. #38 – machinist:

    Amen, sir, it’s amazing how often people forget the economic impact of ‘lend – lease’. Industry was also thus already ‘spun up’ for our actual entry into the war.

    Old Bob (b3bc0d)

  60. I will give Obama credit for one thing:

    W turned Krugman — an Ivy League economist, Nobel winner and NYTimes columnist — into a babbling fool.

    Obama made him into an incoherent, babbling fool.

    That is hope and change.

    Ag80 (9a213d)

  61. drive me to drinkin’
    if he don’t stop sayin’ he’s
    Abraham Lincoln

    ColonelHaiku (d1f5ff)

  62. One good thing…if space aliens invade they might take Krugman back home.

    Dave Surls (d12fb8)

  63. ________________________________________________

    The real question is not how war spending ended the Depression. It is why the Depression lasted so long.

    Why did the Great Depression remain so great?

    I think it was largely because both Hoover and Roosevelt weren’t liberal enough. They both were too rightwing. They weren’t kind-hearted enough. They didn’t do enough to slam greedy rich people and greedy big business. They didn’t do enough to make government wonderful, beautiful, humane and generous.

    Hoover and Roosevelt were both too conservative. They were like early versions of Tea Party-ers. They both were too laisezz faire in their approach to economics and society.

    Damn those un-caring, tight-fisted, cheap-o administrations of Herbert Hoover and Franklin Roosevelt for not shedding enough tears on the plight of the American people and allowing the Great Depression to drag on so long!

    cato.org: In the 1920s, Treasury Secretary Andrew Mellon championed a series of income tax cuts that reduced the top individual rate from 73 percent to just 25 percent by 1925. As rates fell, the U.S. economy boomed until the stock market crash in 1929.

    After the crash and a sharp monetary contraction that pushed the economy into the Great Depression, the lessons of Mellon’s successful tax cuts were forgotten. Presidents Hoover and Roosevelt pursued large tax increases based on the mistaken ideas that the budget should be balanced during a contraction and that high tax rates would achieve that goal.

    President Hoover radically changed course from the low-tax policies of the 1920s with the Revenue Act of 1932. That law sharply increased individual tax rates at all income levels, with the top rate rising from 25 percent to 63 percent.

    Following Hoover, President Roosevelt signed into law a series of large tax increases for taxpayers at all income levels. At the bottom end, personal exemptions were reduced, and an earned income credit was eliminated. At the top end, the highest marginal rate was increased to 79 percent in 1936.

    Between 1930 and 1940, the corporate income tax rate was doubled from 12 percent to 24 percent, and an “excess profits” tax was added on top. In addition, Roosevelt imposed an excise tax on dividends, a capital stock tax, and liquor taxes, and he increased estate taxes. Finally, the Social Security payroll tax was imposed with a 2 percent rate beginning in 1937.

    [Roosevelt] claimed that “increasing the tax paid by individuals in the higher brackets — those of income over $50,000 — was the American thing to do and increasing still further the taxes paid by individuals in the highest brackets — those with incomes over one million dollars a year — was even more the American thing to do.”

    Yet that “American thing to do” and other anti-growth policies certainly killed incentives for work, investment, and entrepreneurship. As a result, while the U.S. unemployment rate fell sharply during the tax-cutting 1920s, it soared to 25.2 percent in 1933, and remained very high through to 1940 when it was still 14.6 percent.

    CBSnews.com: Our government is in knots over ways to lower the federal budget deficit. Well, what if we told you we found a pot of money – over $60 billion a year – that could be used to help out?

    That bundle is tax money not coming in to the IRS from American corporations. One major way they avoid paying the tax man is by parking their profits overseas. They’ll tell you they’re forced to do that because the corporate 35 percent tax rate is high in relation to other countries, and indeed it seems the tax code actually encourages companies to move businesses out of the country.

    Companies searching out tax havens is nothing new. In the 80s and 90s, there was an exodus to Bermuda and the Cayman Islands, where there are no taxes at all. When President Obama threatened to clamp down on tax dodging, many companies decided to leave the Caribbean, but as we first told you in March, instead of coming back home, they went to safer havens like Switzerland.

    Several of these companies came to a small, quaint medieval town in Switzerland called Zug.

    Hans Marti, who heads Zug’s economic development office, showed off the nearby snow-covered mountains. But Zug’s main selling point isn’t a view of the Alps: he told Lesley Stahl the taxes are somewhere between 15 and 16 percent.

    “And in the United States it’s 35 percent,” Stahl pointed out.

    “I think when people hear that all these companies are moving overseas because of taxes, they think that doesn’t smell right,” Stahl said to Swiss tax attorney Thierry Boitelle.

    “I think many companies in the U.S. would like to keep the jobs in the U.S. if they could, but they also need to keep their shareholders happy. And they are in the U.S. in a corporate tax nightmare because it’s the highest tax rate in the world,” Boitelle explained.

    The U.S. actually has the second highest rate in the developed world after Japan, and they’ve considered lowering theirs.

    “We are dealing with a tax system that is a dinosaur,” Cisco CEO John Chambers told Stahl.
    Cisco is the giant high tech company headquartered in San Jose, Calif. [Its CEO] says our tax rate is insane. It’s forcing companies into these maneuvers, especially when many other industrialized countries including Canada are busy lowering their tax rates in order to lure our companies and our jobs away.

    Washingtontimes.com, August 15, 2011:

    President Obama launched a Midwestern bus tour devoted to the economy Monday by again calling for tax increases and accusing Republicans who oppose his plans of failing to put the “country first.”

    ^ Sort of analogous to FDR saying back during the Great Depression that raising taxes was the “American thing to do.”

    Mark (411533)

  64. Karl,

    Actually, government spending can stimulate an economy. Very easily. It’s called “defense spending.”

    Someone has to buil all those new ships, planes and tanks. Someone has to man the army’s personnel tables. And someone has to feed, clothe and otherwise cater to all those workers and troops.

    But that runs against progressive hatred of all things military and their desire to scrap it altogether. Thus, Obama and his ilk will never try it.

    Jeff Cox (1ee958)

  65. If they would just let krugman talk to the captured space traveler at roswell he could solve the mysteries of the universe and get our stagnant economy moving again. ET phone home.

    dunce (8dd87b)

  66. Man if Only we beamed up krugman and returned him to planet Keynes than all would be well.

    DohBiden (d54602)

  67. Let he who wishes higher taxes be paid be the first to pay them himself.

    MD in Philly (cd9679)

  68. If you’ve ever noticed his darty eyes and unusual speaking cadence those could be signs that Krugman might himself be a space alien. That would explain a lot.

    elissa (ac1977)

  69. President Thin Skin of the Greek Columns loses it on the campaign trail in Iowa:

    President Obama got into a heated back and forth with a Tea Party activist who demanded to know at the end of a town hall meeting here whether or not Vice President Biden had called members of the Tea Party “terrorists” during the debt ceiling debate.

    In public, Obama did not directly answer the question from Tea Party activist Ryan Rhodes about Biden. But Obama fired back that he knows better than anyone what it’s like to be slammed for his political views and was not about to accept a lecture on the topic.

    “As someone who’s been called a socialist, not born here, taking away freedoms for providing health care, I’m all for lowering the rhetoric,” Obama said.

    Obama did say he would discuss the matter further with Rhodes, founder of the Iowa Tea Party, after the event. And the duo was spotted in an animated conversation a few moments later.

    In an interview later with Fox News, Rhodes claimed that the President insisted that Biden had not made the original comment.

    http://www.thegatewaypundit.com/2011/08/breaking-tea-party-activists-confront-obama-in-iowa-video/

    elissa (ac1977)

  70. If we discovered that, you know, space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months.

    Geez, this is the second piece of wishcasting for global war that Krugnuts has issued in the last year–a few months ago, he was waxing nostalgic for World War 2 because although the debt-to-GDP ratio was sky-high, people were working.

    How sick is this guy that he’s basically wishing for industrialized genocide just to save Obumble’s worthless backside? He really needs to keep his wife away from the “NYT Columns” folder on his computer from now on.

    Another Chris (c983db)

  71. In the Klugman video background effects, different points on the map fly by with wildly shifting longitude / latitude numbers. That’s a nice addition to the Nobel Prize winner’s dizzy incoherent babbling about how preparing for war with imaginary space aliens will save the world’s economy.

    Wesson (e5cf78)

  72. The defense of Boston’s Big Dig insane cost overruns is outrageous in itself. Krugman believes spending $22 billion even for this is too little stimulation.

    Every government official needs to be force-fed Chuck Spinney’s “Defense Facts of Life: The Plans-Reality Mismatch.” Every fiscal trend that he outlines in there isn’t just applying to defense spending anymore; just about every government institution is hitting the point of “bloat” where all the money in the world won’t make it more effective, and will actually result in diminishing returns over time.

    Another Chris (c983db)

  73. –Comment by Jeff Cox — 8/15/2011 @ 7:17 pm–

    No Sir. Defense spending can help local economies by taking money from around the country and concentrating it where politicians want to buy votes but it is a net loss to the economy.

    Could I stimulate my household income by hiring my wife to keep house and paying her a thousand dollars a week, less income and payroll taxes? Would this increase my net household income?

    It would actually reduce my income of course, by the amount the government skimmed off. Like my household, the government can not take money out of the economy, skim off part, pay the rest to favored groups, and see a net increase in that economy. This would be economic perpetual motion and means we should just take and pay 100% of the GDP and double the size of the economy.

    Machinist (b6f7da)

  74. Borrowing money to pay that salary would look nice for a while but would cost even more in time.

    Machinist (b6f7da)

  75. Do you remember the Americorp “volunteers” under Clinton? They made over $13.00 an hour but they actually cost the tax payer over $27.00 an hour. Each hour they worked they made the $13.00, plus and their supervisors and administrators made over $14.00. That puts the governments skim in perspective. Did taking $27.00 out of the economy and putting $13.00 back in make a net gain?

    Machinist (b6f7da)

  76. This would be economic perpetual motion and means we should just take and pay 100% of the GDP and double the size of the economy.
    Comment by Machinist — 8/15/2011 @ 8:12 pm

    When I have grandchildren, I want one of them to be a machinist. Seriously.

    Stashiu3 (601b7d)

  77. Argentina and Venezuela grew like wild fire during WWII also. That is what happens when a world is at war and you are not. Claims on your productivity go up up up …….

    But like Argentina and Venezuela — bad policy ends up destroying / distorting the supply and demand side. Plus once those at war rebuild …..

    Economics is easy once you realise its basic principles. 1) People must work to produce wealth, 2) Better you have a machines do it b/c they do it faster than people, 3) Creative people create new consumption patterns, 4) Paper money has nothing to do with wealth, 5) Money only matters as a more efficient proxy for bartering

    S. Carter aka J-Z (786e37)

  78. “This would be economic perpetual motion and means we should just take and pay 100% of the GDP and double the size of the economy.”

    Machinist – Why settle for just doubling?

    You could also toss in another favorite liberal standard for increasing growth – raising the minimum wage. If you pay people more, the economy has to grow, right?

    daleyrocks (bf33e9)

  79. Claims on your = Requests for

    (* actually important difference *)

    S. Carter aka J-Z (786e37)

  80. Comment by daleyrocks — 8/15/2011 @ 9:10 pm–

    It is true, Sir. If we are going to increase our GDP 4 or 5 fold this way there will be plenty to pay everyone $100.00 an hour. With the income tax on those high wages the government can give us all free healthcare and pensions.

    I was trying not to be too greedy. We don’t want to risk inflation.

    Machinist (b6f7da)

  81. –Comment by Stashiu3 — 8/15/2011 @ 8:48 pm–

    Be careful what you wish for, Sir. 😉

    Machinist (b6f7da)

  82. Comment by Machinist — 8/15/2011 @ 9:24 pm

    Always am. Hmmm… wonder what kind of toys stimulate interest in machining? Must think on this. Then start stocking up.

    Stashiu3 (601b7d)

  83. Always am. Hmmm… wonder what kind of toys stimulate interest in machining? Must think on this. Then start stocking up.

    Comment by Stashiu3 — 8/15/2011 @ 9:29 pm

    K’nex building sets http://www.amazon.com/s/ref=nb_sb_ss_i_1_19?url=search-alias%3Dtoys-and-games&field-keywords=k%27nex+building+sets&sprefix=k%27nex+building+sets

    They get addictive…we built a city that stretched from dining room to den, living room into the mud room. Then Dogzilla attacked…

    ppk_pixie (1df0c8)

  84. ==there will be plenty to pay everyone $100.00 an hour.==

    B-b-but after the banks fail we’re going to need large SUVs to carry baskets of cash to the market to buy a loaf of bread. (My father raised me on stories of the horrors of runaway inflation– the million Marks in wheelbarrows Weimar Germans needed to buy a loaf of bread.) I was steeped in it and sort of think it may have affected my politics a little.

    And Obama wants to take away our SUVs so we’re doubly screwed.

    elissa (ac1977)

  85. No problem, Elissa. Mexico has shown us the way. When their inflation got bad they just dropped three zeros so a thousand peso bill was now a one peso bill. Much handier. Of course my Sil was a credentialed teacher and it took two weeks of her salary to buy a pair of simple shoes for her three year old son, but what social justice. Her husband was a white collar accountant and they ate rice and beans so they could buy meat for the two children.

    Machinist (b6f7da)

  86. Mexico has shown us the way. When their inflation got bad they just dropped three zeros so a thousand peso bill was now a one peso bill.
    Comment by Machinist — 8/15/2011 @ 9:51 pm

    Stocking up makes even more sense now than it did 2.5yrs ago…

    ppk_pixie (1df0c8)

  87. Yes Ma’am. Deficit spending just takes value from everyone’s money. A very regressive tax.

    Machinist (b6f7da)

  88. In Argentina they were paying people twice a day and letting them go spend the money because it would lose considerable value by the time half a shift went by.

    Machinist (b6f7da)

  89. Comment by Machinist — 8/15/2011 @ 10:03 pm

    I think I remember my husband talking about something like that- how people would come in to buy coffee and one person would pay (guessing here) 3 bucks, and the next person in line would end up paying 3.50…it ratcheted up just that fast.

    ppk_pixie (1df0c8)

  90. Pixie–

    The early 80’s was also a very scary time. I think we still have about 10 pounds of sugar left from the load we stocked up on during the Carter administration. Fortunately, it never spoils if kept dry. I told you my family is a little squirrelly about inflation :)

    elissa (ac1977)

  91. “…he was waxing nostalgic for World War 2…”

    Yeah, well that was every lefty’s dream come true, with virtually the entire country totally under government control.

    Dave Surls (d12fb8)

  92. Elissa,

    Your family has just cause, I’d say. And great wisdom to pull from.

    What did y’all put that sugar in, btw? Its so humid here…I’m looking for any/all ideas (sorry for the O/T)

    ppk_pixie (1df0c8)

  93. I think I have a years worth of Scotch set by, maybe two if I ration it.

    Machinist (b6f7da)

  94. Elissa, I must agree with PPK Pixie about your wisdom and prudence.

    Machinist (b6f7da)

  95. Pixie–My family is not even German. But a battered Mark note that he waved around and using Weimar Germany’s example was my dad’s impassioned instructional narrative about inflation and how it happens. It definitely sunk in!

    To answer your question: We’ve used, and still have, a couple big old metal foot lockers in the garage that seal tight. But now for storing food I use this kind of heavy plastic stuff in various sizes. It’s not just for pet food, is light weight, really airtight, and keeps out bugs from bagged sugar, rice, cornmeal, flour, cereal, etc.

    http://www.nationalpetpharmacy.com/product/14918/Gamma-Vittles-Vault-Plus-Airtight-Pet-Food-Storage-Container?utm_source=shopzilla&utm_medium=cse

    elissa (ac1977)

  96. Machinist–if you have the space you prolly should think about putting away some more Scotch at today’s prices. It keeps. (If you’re relatively prudent.)

    elissa (ac1977)

  97. It’s not just for pet food
    Comment by elissa — 8/15/2011 @ 10:56 pm

    Ye suffering gawds know I have a metric buttload of those for *that* (dog food). But I go through the kibble so fast, I had no clue how well (and long) staples would keep. Thank you, Elissa!

    And Sir Mac- we have ‘shine set back…for medicinal purposes, only 😉

    ppk_pixie (1df0c8)

  98. And Sir Mac- we have ‘shine set back…for medicinal purposes, only 😉
    Comment by ppk_pixie — 8/15/2011 @ 11:10 pm

    Heh, she said “Sir Mac”. Love it when a meme backfires. 😉

    Stashiu3 (601b7d)

  99. :)

    Machinist (b6f7da)

  100. Argentina…
    One-Hundred years ago it was the most prosperous country south of the Rio Grande.
    The combination of the Depression and Peronista Populism created a condition that it has yet to recover from.

    Another Drew - Restore the Republic / Obama Sucks! (61abdc)

  101. Just as Seinfeld’s Tim Whatley character converted to Judaism for the jokes, I suspect that Krugman chose economics for the political clout it would bring.

    He is a politician in an economist’s clothing.

    norcal (660629)

  102. Case study in the joy of socialism.

    Argentina

    Machinist (b6f7da)

  103. joy of socialism
    Comment by Machinist — 8/15/2011 @ 11:26 pm

    Dearest Sir Mac (gonna call you this forever )

    it might be just me, but I’m sensing…sarcasm 😉

    ppk_pixie (1df0c8)

  104. From me??

    Machinist (b6f7da)

  105. From me??

    Comment by Machinist — 8/15/2011 @ 11:38 pm

    touche`

    ppk_pixie (1df0c8)

  106. “(gonna call you this forever )”

    Why do I hear a hint of accent of Stash in this? I am just the fool around here. Heck, I stood up for Summit before he told me to stick it. Not a good reference.

    Machinist (b6f7da)

  107. Comment by Machinist — 8/15/2011 @ 11:43 pm

    I am just the fool around here.
    no you’re not!

    Heck, I stood up for Summit before he told me to stick it.
    You’re kind and generous. Even to those who can’t appreciate that.

    Not a good reference.
    Good enough for me, so… ;-P

    ppk_pixie (1df0c8)

  108. You are most kind, Ma’am. I am very glad you have been joining in. You have a wonderful wit that goes so well here.

    Machinist (b6f7da)

  109. Responding to a question about the Federal Reserve at a campaign event in Cedar Rapids, Perry said: “If this guy prints more money between now and the election, I don’t know what y’all would do to him in Iowa, but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treacherous, or treasonous, in my opinion.”

    Oops!

    Spartacvs (2d9449)

  110. Integrity check for spurty – I know, I know …. How many names have yu commented under here?

    JD (318f81)

  111. Maybe spurty can explain, in his own words, what he thinks Perry meant, and the reasoning behind it?

    JD (318f81)

  112. Again, it is not the least bit surprising that spurty and Krugman think a war against imaginary aliens and high inflation would be a good thing for the US.

    JD (318f81)

  113. Your faux indignation about the lack of civility is comical, given your teabagger terrorist rhetoric from you and yours.

    JD (318f81)

  114. Maybe spurty can explain, in his own words, what he thinks Perry meant, and the reasoning behind it?

    Sparty cant even do basic math; how on earth is Sparty going to explain the reasoning of a political soundbite?

    Another Chris (c04459)

  115. Treasonous, coming from the guy who has flirted with secession. Priceless!

    Spartacvs (2d9449)

  116. Yeah, I didn’t think you could.

    JD (0d2ffc)

  117. After all ‘treat him pretty ugly’ in Texas means not talking pickup trucks with him at the gas station and telling him you’re all out of sweet tea at the roadhouse.

    luagha (5cbe06)

  118. but we would treat him pretty ugly down in Texas

    Is “Tar and Feathering” still legal in Texas?

    Yah-Hoo!
    Pitchforks, torches, and long-necks.
    Let’s Pahr-Teee!

    Another Drew - Restore the Republic / Obama Sucks! (ce6d84)

  119. -Comment by East Bay Jay — 8/15/2011 @ 2:12 pm

    Correct, Sammy. Everyone knows FDR saved America by heading off the Great Depression by his lonesome. And that’s not a talking point, that’s science.

    Comment by Sammy Finkelman — 8/15/2011 @ 2:08 pm-

    Comment by Machinist — 8/15/2011 @ 2:22 pm

    Between 1929 and 1939 unemployment averaged over 13%, over 11 million Americans in 1932. In 1940 it was still over 5 million Americans. The GDP just past 1929 levels in 1936. Progress had been made but I would hardly say that we had recovered before we started selling war material to others.

    I was quoting Karl quoting Christina Romer approvinmgly and against Paul Krugman as saying that WWII helped the recovery from the Depression, but the economy was improving long before military spending increased.

    This is true.

    I have a chart from a book that may show you that there was virtually a complete recovery really before World War II. GNP for 1929, 1936 and 1938 (as whole years) were about the same and by 1940 (whole year) things were a lot better and this was simply too early.

    Now what about 1937 or so? We all know taht FDR cut soending and raised taxes and interest rates were raised and then they backtracked.

    But this is what William M. Isaac wrote in his book “Senseless Panic” (John Wiley 2010) on page 120:

    “Bank regulators had imposed mark-to-market accounting on banks before 1938 with very poor results. In that year, President Franklin Delano Roosevelt asked Treasury Secretary Henry Morganthau to convene bank regulators to determine why the country was mnired in an economic depression for eight years. They concluded that mark-to-market accounting was inhibiting bank lending and abolished it in favor of historical cost accounting”

    And that, according to the Chairman of the FDIC during the 1980s, if I read him correctly, is what finally ended the Great Depression.

    Not World War II military spending.

    Sammy Finkelman (d3daeb)

  120. sammy, there’s been a lot of new scholarship since the 80’s on the underlying causes, and prolonging, of The Great Depression;
    please try to keep up.

    And, if the abolition of “mark to market” was so vital to “ending” the Depression, why did the Left bring it back in Sarbannes-Oxley?
    Are you saying that the current difficulty can be laid at the feet of “mark to market”?
    If so, why didn’t the Pelosi-Reid Congress repeal it in ’09?

    Another Drew - Restore the Republic / Obama Sucks! (ce6d84)

  121. Spartacvs is a joke.

    DohBiden (d54602)


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