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The President Surrenders?
Nobel-Prize winning economist Paul Krugman isn't happy with the $2.4 trillion debt deal that just passed the US House. In his NYT's op-ed piece, he opines, The President Surrenders:
A deal to raise the federal debt ceiling is in the works. If it goes through, many commentators will declare that disaster was avoided. But they will be wrong.
For the deal itself, given the available information, is a disaster, and not just for President Obama and his party. It will damage an already depressed economy; it will probably make America’s long-run deficit problem worse, not better; and most important, by demonstrating that raw extortion works and carries no political cost, it will take America a long way down the road to banana-republic status.
Start with the economics. We currently have a deeply depressed economy. We will almost certainly continue to have a depressed economy all through next year. And we will probably have a depressed economy through 2013 as well, if not beyond.
The worst thing you can do in these circumstances is slash government spending, since that will depress the economy even further. Pay no attention to those who invoke the confidence fairy, claiming that tough action on the budget will reassure businesses and consumers, leading them to spend more. It doesn’t work that way, a fact confirmed by many studies of the historical record.
Indeed, slashing spending while the economy is depressed won’t even help the budget situation much, and might well make it worse. On one side, interest rates on federal borrowing are currently very low, so spending cuts now will do little to reduce future interest costs. On the other side, making the economy weaker now will also hurt its long-run prospects, which will in turn reduce future revenue. So those demanding spending cuts now are like medieval doctors who treated the sick by bleeding them, and thereby made them even sicker.
And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president. First, there will be big spending cuts, with no increase in revenue. Then a panel will make recommendations for further deficit reduction — and if these recommendations aren’t accepted, there will be more spending cuts.
Republicans will supposedly have an incentive to make concessions the next time around, because defense spending will be among the areas cut. But the G.O.P. has just demonstrated its willingness to risk financial collapse unless it gets everything its most extreme members want. Why expect it to be more reasonable in the next round?
In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats. He surrendered last December, extending all the Bush tax cuts; he surrendered in the spring when they threatened to shut down the government; and he has now surrendered on a grand scale to raw extortion over the debt ceiling. Maybe it’s just me, but I see a pattern here.
Did the president have any alternative this time around? Yes.
First of all, he could and should have demanded an increase in the debt ceiling back in December. When asked why he didn’t, he replied that he was sure that Republicans would act responsibly. Great call.
And even now, the Obama administration could have resorted to legal maneuvering to sidestep the debt ceiling, using any of several options. In ordinary circumstances, this might have been an extreme step. But faced with the reality of what is happening, namely raw extortion on the part of a party that, after all, only controls one house of Congress, it would have been totally justifiable.
At the very least, Mr. Obama could have used the possibility of a legal end run to strengthen his bargaining position. Instead, however, he ruled all such options out from the beginning.
But wouldn’t taking a tough stance have worried markets? Probably not. In fact, if I were an investor I would be reassured, not dismayed, by a demonstration that the president is willing and able to stand up to blackmail on the part of right-wing extremists. Instead, he has chosen to demonstrate the opposite.
Make no mistake about it, what we’re witnessing here is a catastrophe on multiple levels.
It is, of course, a political catastrophe for Democrats, who just a few weeks ago seemed to have Republicans on the run over their plan to dismantle Medicare; now Mr. Obama has thrown all that away. And the damage isn’t over: there will be more choke points where Republicans can threaten to create a crisis unless the president surrenders, and they can now act with the confident expectation that he will.
In the long run, however, Democrats won’t be the only losers. What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless, to threaten the nation’s economic security, gets to dictate policy? And the answer is, maybe it can’t.
Love him or hate him, Krugman has a point. You can listen to him below speaking with Carol Massar and Matt Miller on Bloomberg Television's "Street Smart." I also think this deal is a huge success for Republicans because there was no compromise: it's all about cuts in spending with no increase in taxes.
And Krugman is right, unemployment will get worse and so will the debt and deficit as more and more people enter the ranks of permanently unemployed. It's a disaster for the real economy but probably good for the stock market. I watched today's action and it played out like a perfect script. They sold the news, hedge funds and bank prop desks had their algorithmic trading computers working overtime, scooping up shares on the cheap, and by the end of the day, the stock market recovered all its losses.
And what about that ISM manufacturing report? Everyone made a huge stink about it dropping to a lower-than-expected 50.9. I say big deal, it's still over the critical threshold of 50, which signals expansion in manufacturing activity. Analysts want to paint doom and gloom everywhere but I think people need to take a step back and analyze economic data more carefully. The ISM report wasn't as bad as the bears made it out to be.
Finally, President Obama caved in to the Republicans, pissing off extreme left-wing and right-wing factions. He probably did not want to take a chance that a US debt default would take place under his watch. I don't blame him but now he and Congress have more pressing issues to deal with, namely, the jobs crisis. Unless that is dealt with forcefully, this deal will come back to haunt them.
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http://www.youtube.com/watch?v=swkq2E8mswI
Uploaded by bstill3 on Feb 2, 2011
This version finally cuts several bogus quotes which have festered in the monetary reform literature for decades.
The world economy is doomed to spiral downwards until we do 2 things: outlaw government borrowing; 2. outlaw fractional reserve lending. Banks should only be allowed to lend out money they actually have and nations do not have to run up a "National Debt". Remember: It's not what backs the money, it's who controls its quantity.
Krugman is a bought-&-paid-for banker-cock-sucking pervert ...as are most "respected economists" these days, completely sold out to keeping the government and Wall Street going at all cost ...and it will cost all, everything Americans have ..which these bought-&-pais-for economists never mention.
Present day academia produces these treasonous predators who gladly sell out their country for a cushy salary and peer recognition.
Leo in his soulless insanity woships them ...in a most personal way I suspect.
Ahhh... "Treasonous predators", has a nice ring to it old geezer. WTF is it going to take to get people to realize what is going on?
One small step for Republicans, one giant step for the Ponzi game.
I'M KIND TIRED OF LEO' BULLSHIT , SO ONLY WAY TO MAKE LEO DISAPPEAR FROM ZH IS ...
DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ...
ALX
I'M KIND TIRED OF LEO' BULLSHIT , SO ONLY WAY TO MAKE LEO DISAPPEAR FROM ZH IS ...
DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ...
ALX
Smart government spending may be a good thing in a bad economy.
We just went through record government spending and only have a huge debt to show for it.
Allowing the crackheads to have more crack at our expense is a bad idea.
I'M KIND TIRED OF LEO' BULLSHIT , SO ONLY WAY TO MAKE LEO DISAPPEAR FROM ZH IS ...
DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ... DO NOT COMMENT ...
ALX
what is he right about? if i spend more at the store today, I will walk away with more items than otherwise? sure, that is correct. that is common sense. But what I spend today impacts what I have tomorrow. That is simple and is only solved by him being wedded to some form of mean reversion where the mean we revert to is better than today's situation.
This president had total control of the govenment for two years having majorities in both houses. It's his own fault, not republicans for not doing whatever he wanted to do. He blew his wad on helathcare which should have told everyone he wasn't concerned about govt debt. Why is he so worried now? He should've thought about that before all the Obamacare, auto industry bailout, homebuyer bailouts and so forth and so on. Republicans had no way to stop whatever he wanted to do so don't go blaming anyone else but him for this last so called fight. Obama's just looking for someone else to blame. He may start blaming LBJ or Carter or Nixon before it's all said and done.
the biggest problem I have with Krugman is his framing of the word "stimulus". if it's a bill from congress that spends $1 trillion we borrow or print that says "stimulus" on top, then its "stimulus". if it's a bill from congress that spends $1.6 trillion we borrow or print but doesn't say "stimulus" on top, then it's baseline government. it's just not honest.
Krugman is preparing his "I told you so". He can already see that the all the fiscal and monetary stimulus failed, and he needs his alibi. He now has it. He is an intellectual fraud of the highest order.
No matter what happens, he will say it would have been better if we had spent more money
All part of the orchestrated attempt to force the GOP to "own" this economy. The donks know the wheels are falling off and their only option is to start the mantra of blaming the republicans. It will get louder.
In a few more short years we will be on the other side of the demographic spending curve. Krugman cannot stop the tide and lax standards to border security for new voters and have over run the viable reality for decades. The world is finite. We already "GET" Keynasian thought. Yea we have a moral reality to face also. We are planning, they are spending is the issue. There poor planning is our daily emergency we seen before already. I reminded more than few "mail more to them and see what happens." If you do not want pay some tax and get a real card please leave already also. Over the decades we watched hard working people work for half a year and go home. Michigan did pass enhanced social benifits and we lived what happened to fiscal reality's we are still trying to repair. If we fail to think locally first there is no option for later. We trended since the mid sixty's the global capital movement and even in 1968 our area suffered but most local men still had the farm to get by and then Nixon august 15th slammed the window. We could go on for decades but you get more people who do get it! You must have a means test and that requires voter to tell em like it is. They will not change on the hill unless you do. If you cannot see there definition of creative destuction you just do not get it! Good luck...
""seemed to have Republicans on the run over their plan to dismantle Medicare; now Mr. Obama has thrown all that away. And the damage isn’t over: there will be more choke points where Republicans can threaten to create a crisis unless the president surrenders, and they can now act with the confident expectation that he will.In the long run, however, Democrats won’t be the only losers. What Republicans have just gotten away with calls our whole system of government into question. After all, how can American democracy work if whichever party is most prepared to be ruthless,""
The process of passing the Health Care Bill was behind closed doors, and ruthless certainly applies. The Democrats do well with both Houses and the WH------ except where was the budget and control of spending. RUTHLESS?? yes indeed.
Funny how the democrats keep saying the republicans want to dismantle medicarw when 0bamacare cut $500 billion from medicare and now there are even more cuts to medicare. 0bama is throwing the grannies under the bus
LK,
Krugman is another parinoid New York Jew who thinks republicans are Nazi stormtroopers
Paul look in the mirror and repeat:
Spending more than GDP IS BAD
GIVE AWAYS ARE BAD
WASTEFULL STIMULUS IS BAD
BAILOUTS ARE BAD
RAISING TAXES DURING A DEPRESSION IS BAD
SPENDING MORE ON DEFENSE THAN ALL COUNTRIES ON EARTH IS BAD
GREATING MORE DEBT JUST BECAUSE INTREST RATES ARE LOW IS BAD
NOW SHUT THE FUCK UP PRICK
+1
Krugman gladly took that Enron cash when he was a board advisor getting the big bucks. He sucks as an economist and is a dishonest partisan. Jom Rogers and Jim Grant run circles around the fraud. The whole media is shit - run by the bilderbergers with Saudi/Al Waleed money.
Ruprecht Mordeci is bankrolled by the Saudis - ditto all the other networks. Who was the one who said Rebekah Brooks at News of The World/News International had to go? Al Waleed aka from his uncle King Fahd or Faisal or whatever. Al Waleed is just the errand boy nephew.
Leo, what are your thoughts on Ron Paul's beliefs.
Leo asked me to respond that Ron Paul is a very bad man who is not welcome in Canada.
But Leo's Daddy is an amazing guy. Mommy not so much...
Does this guy still teach classes? I wonder what it costs per credit hour. Princeton students would be better off saving their money and getting a full frontal lobotomy. That's what I'd do if I had to listen to that bullshit for an entire semester.
Edit: Leo, please stop the video from playing every time the page loads. It was painful enough listening to Krugman once.
dupe
.
This "deal" brings debt/GDP to 120% (Greece levels) by 2013, and this guy says that is not enough. Idiot.
This "deal" brings debt/GDP to 120% (Greece levels) by 2013, and this guy says that is not enough. Idiot.
Ok, ok, ok....looks like Krugman has been reading Mises after hours. He finally gets it!
Reporter: Why do you think POTUS caved in?
Krugman: Because POTUS is a wusss.
QE3 already began with the Fed buying the Treasury Debt coming out of the Treasury with "Hi Powered Money."
Krugman bashes Moddy's and S&P..."these are the same people who rated subprime mortgages triple AAA..." Awe, come on, "Nobody could have seen this coming".....
"Nobody...."
The real Leo is back. I am sorry you are mentally handicapped but I am resigning as your Big Brother Leo. Your only hope are drugs not yet invented. And stop the incessant whacking off to Krugman photos. Everybody knows about it. Awkward...
Krugman looks shifty and irate in this interview. He's obviously angry, just not for the right reasons.
Edit: apologies for the triple post - erred.
Krugman looks shifty and irate in this interview. He's obviously angry, just not for the right reasons.
Krugman looks shifty and irate in this video. Obviously he is very angry about this. But, methinks, not angry for the right reason.
First of all we are still going to be running HUGE fiscal deficits, the largest peacetime ones in our history. We've been doing so for over 3 years. It isn't working. Didn't work for Greece either. Deficits don't build anything if they are simply squandered into mindless consumption and that is what Obama did with his $800 billion stimulus. Too bad but we are not about to give him a 'mulligan' to waste again. Second, after the November 08 election Krugman was calling for a $600 billion stimulus because Bush's spring 08 $160 billion one was too small. He got what he wanted and then some. It didn't work. We aren't going to give a him a mulligan either.
Can anybody think of anything positive to come out of the stimulus?
No depression was pretty good.
Sorry to inform you, but we ARE in a depression.
a) Profits to big business,
b) More funds to 'friends' overseas, including the EU, Japan and China,
c) You are able to keep driving your car for another year or so.
Right now it looks like the two automobile parties in Washington have become confused.
The coffin corner: USA needs ever-greater deficits to keep imported fuel flowing, USA cannot afford the deficits in needs to keep imported fuel flowing.
Asshole.
It's long past time to fire up the guillotines.
Wasn't Krugmann one of the talking heads who were squealing with joy at the prospect of painting the R's into a political corner by delaying the debt ceiling until the next (current) congress.
It's a shame when political sock-it-to-em backfires on you, although as is well documented, the spending cuts are in the out years (which we all know means they ain't happening).
Krugman: "Japan is not a terrible place". "We need more spending". "We need more tax revenue, not necessarily from the rich".
Which planet is this guy on?
Anyway, for all the faux-woes of the president not getting his way, isn't it odd that he won't have to worry about going through this debt ceiling crisis again until after the elections next year? Me thinks the president protests too much.
Its ALL he ever wanted out of the "deal".
BTW, Leo, for future reference please turn auto-play off. There should be some html setting that you can change autoplay from 1 to 0.
Thx, just edited html to turn autoplay off.
Keynesian Credo: "They didn't spend enough." Cue QE4.
Krugman does NOT have a point. Krugman is wrong. You don't raise taxes on an economy that is collapsing literally by the hour. When you have thousands being laid off each week, who do you plan on having pay those taxes? The rich? We've been through that dog and pony show before. There aren't enough of them to go around.Cut spending. Cut regulations. Not ONE penny of new deficit. Get us out of any or all of the SIX conflicts our troops are wallowing in right now. Every single government program and agency should see cuts, with many being eliminated completely. I loved Rand Paul's idea of cutting one penny from every government dollar of spending. Let's see the Left argue against THAT.
Yes, slash stimulative spending in the middle of a borderline depression. You must have studied at the Herbert Hoover school of finance.
GOP didn't win, POTUS didn't lose. We lost.
Let's see who gets appointed to the commission / Super Congress.
Sure he has a point...Pointing us to the wrong direction, covering up the agenda-complete.
Professor Krugman, great to have you here...
dammit, beavis!