Paul Krugman: "We Should Kick The Can Down The Road. It’s The Responsible Thing To Do"

Tyler Durden's picture

The below article, recreated in its grotesque entirety, is a real, serious Op-Ed written by a supposedly real, non page-view trolling, Nobel-prize winning economist, in a serious paper, the New York Times. It can be classified with one word: jaw-dropping.

We can only hope that some time in the next five years, when the global economy is in ashes following the implosion of the final central bank bubble, that the US department of injustice will prosecute authors of such drivel (and all those sell-side analysts who have had Buy recommendations in the 2009-2013 period) with the same ferocity it has demonstrated toward those US-downgrading rating agencies, which are now supposed to be solely accountable for the Second Great Depression and the $30 trillion or so in misallocated capital in the past five years.

Kick That Can

By Paul Krugman

John Boehner, the speaker of the House, claims to be exasperated. “At some point, Washington has to deal with its spending problem,” he said Wednesday. “I’ve watched them kick this can down the road for 22 years since I’ve been here. I’ve had enough of it. It’s time to act.”

Actually, Mr. Boehner needs to refresh his memory. During the first decade of his time in Congress, the U.S. government was doing just fine on the fiscal front. In particular, the ratio of federal debt to G.D.P. was a third lower when Bill Clinton left office than it was when he came in. It was only when George W. Bush arrived and squandered the Clinton surplus on tax cuts and unfunded wars that the budget outlook began deteriorating again.

But that’s a secondary issue. The key point is this: While it’s true that we will eventually need some combination of revenue increases and spending cuts to rein in the growth of U.S. government debt, now is very much not the time to act. Given the state we’re in, it would be irresponsible and destructive not to kick that can down the road.

Start with a basic point: Slashing government spending destroys jobs and causes the economy to shrink.

This really isn’t a debatable proposition at this point. The contractionary effects of fiscal austerity have been demonstrated by study after study and overwhelmingly confirmed by recent experience — for example, by the severe and continuing slump in Ireland, which was for a while touted as a shining example of responsible policy, or by the way the Cameron government’s turn to austerity derailed recovery in Britain.

Even Republicans admit, albeit selectively, that spending cuts hurt employment. Thus John McCain warned earlier this week that the defense cuts scheduled to happen under the budget sequester would cause the loss of a million jobs. It’s true that Republicans often seem to believe in “weaponized Keynesianism,” a doctrine under which military spending, and only military spending, creates jobs. But that is, of course, nonsense. By talking about job losses from defense cuts, the G.O.P. has already conceded the principle of the thing.

Still, won’t spending cuts (or tax increases) cost jobs whenever they take place, so we might as well bite the bullet now? The answer is no — given the state of our economy, this is a uniquely bad time for austerity.

One way to see this is to compare today’s economic situation with the environment prevailing during an earlier round of defense cuts: the big winding down of military spending in the late 1980s and early 1990s, following the end of the cold war. Those spending cuts destroyed jobs, too, with especially severe consequences in places like southern California that relied heavily on defense contracts. At the national level, however, the effects were softened by monetary policy: the Federal Reserve cut interest rates more or less in tandem with the spending cuts, helping to boost private spending and minimize the overall adverse effect.

Today, by contrast, we’re still living in the aftermath of the worst financial crisis since the Great Depression, and the Fed, in its effort to fight the slump, has already cut interest rates as far as it can — basically to zero. So the Fed can’t blunt the job-destroying effects of spending cuts, which would hit with full force.

The point, again, is that now is very much not the time to act; fiscal austerity should wait until the economy has recovered, and the Fed can once again cushion the impact.

But aren’t we facing a fiscal crisis? No, not at all. The federal government can borrow more cheaply than at almost any point in history, and medium-term forecasts, like the 10-year projections released Tuesday by the Congressional Budget Office, are distinctly not alarming. Yes, there’s a long-term fiscal problem, but it’s not urgent that we resolve that long-term problem right now. The alleged fiscal crisis exists only in the minds of Beltway insiders.

Still, even if we should put off spending cuts for now, wouldn’t it be a good thing if our politicians could simultaneously agree on a long-term fiscal plan? Indeed, it would. It would also be a good thing if we had peace on earth and universal marital fidelity. In the real world, Republican senators are saying that the situation is desperate — but not desperate enough to justify even a penny in additional taxes. Do these sound like men ready and willing to reach a grand fiscal bargain?

Realistically, we’re not going to resolve our long-run fiscal issues any time soon, which is O.K. — not ideal, but nothing terrible will happen if we don’t fix everything this year. Meanwhile, we face the imminent threat of severe economic damage from short-term spending cuts.

So we should avoid that damage by kicking the can down the road. It’s the responsible thing to do.

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Handyman's picture

"A little pain now or a lot of pain later?  A knee scrape now or a leg amputation later"

I think we're past that. At this point it's more like "Agony and chaos now or agony and chaos later" either way it's agony chaos. At the huge risk of getting flamed here, is it fair to ask why not? It's more time to get ready.

Many on this site have commented that they have benefited by the cankick in order to prepare. I know I'll be better off if it comes in 3 years instead of this fall. If it's to the point where' it's a guaranteed bloodbath, I'll take 2-3 years from now thanks.

ATM's picture

I think it could still be a managed default with plenty of pain, agony, and chaos if done now.

When it does collapse in 5 - 10 yrs it will be death and destruction. That's what devils like Krugman want. They want the slate to be wiped completely clean of personal liberty and a Republican form of government so that it can once and for all be vilified and stigmatized never to return. 

That is what I see as the goal. Kill this crazy idea that people have souls and personal rights. Replac it with the greater good where fuckwads like Krugman decide what is best for everyone. Because, you know, he's sooo smart!

CompassionateFascist's picture

The Jews have outsmarted themselves many a time in their somewhat checkered 3,000 years. And they're about to do it again. 

juslen's picture

I suggest you study Austrian Business Cycle Theory. The longer we wait the bigger the crisis will be. So yes, it may benefit you to have a few more years to prepare but if everyone was doing the same thing as you there wouldn't be more time to prepare. We would be exeriencing intense pain already. The problem is, the longer we wait the bigger the bond, debt, and stock market bubble will inflate and when it pops you will see masive economic destruction if they do the right thing and let it deflate and even more destruction if they do the wrong thing and inflate. It's will be the difference between savers being able to weather the storm and savers getting whiped out through hyperinflation. Now just imagien what will happen to people who don't have a pot to piss in, they are going to suffer either way. Suffering now would mean less severe casualties, suffering latter will mean more sever casualties. The longer we wait the greater the number of people there will be that are properly prepared, but the people who are not will have even more problems. So from a moral perspective, we need to end it now because if we wait, anyone who prepared for 2-3 extra years will be the targets of desperate individuals who have nothing left to lose.

xtop23's picture

Absolutely Paul. Lets keep kicking the can so when the inevitable unraveling occurs we can have a 600 megaton financial explosion rather than 100. Go big or go home, right buddy? Drink drain cleaner already ya frigging hack.

Silver Bug's picture

WHAT IS WRONG with this guy??! He can't be this dumb, or am I giving him too much credit?

 

http://schiffblog.blogspot.ca/

Cyrano de Bivouac's picture

What's really scary is that he won a Nobel Prize.

FEDbuster's picture

So did Obama (for Peace).  The Nobel Prize isn't what it used to be.

Skateboarder's picture

Sure it is. It's just the categories for prize-giving have changed a bit... Replace 'peace' with 'war,' 'economics' with 'global market rigging,' etc.

FEDbuster's picture

I propose that Zerohedge start an annual "Charles Ponzi Awards for Economics and Banking".  The voting shall be done through an online poll of registered users in several key categories.  The prize shall be a gold plated tungsten medal with Charles Ponzi's image on the front and Zerohedge logo on the back.  In addition to the medal, the winners shall receive a $100 trillion dollar Zimbabwe banknote.  Max Keiser could host the awards show that could be aired on RT and posted to Youtube.

Any additional thoughts or suggestions?

ATM's picture

Krugman isn't stupid. What he's doing is part of the plan!

And the Nobel communists are part of the deal as is the UN and so many ther NGO's. In fact I'm not sure there is one that isn't part of the scam.

FEDbuster's picture

Say Krugman wins a Zerohedge Ponzi Award.  He could then be introduced on TV as Dr. Paul Krugman, Nobel and Ponzi Prize winning economist....

MustacheCashStash's picture

I think it should be called the William F. Miller Award for Monetary Excellence.  Have to make it a little more obscure.  Maybe those that win in their respective categories might even show up to accept said award.  We can only dream....

FEDbuster's picture

I like "The Ponzis", in the same spirit as "The Razzies" are to Hollywood.  Perhaps some of the winners would show up to claim their prize, you never know with these egos?  If not, life sized cutouts with Max doing a bio and summary of why they were nominated prior to announcing the winners.  Which accounting firm would be used to certify the results?  Could we get some hot Wall St. strippers to bring Max the envelopes, you know to make it entertaining?  

Turin Turambar's picture

I prefer The Richard Cranium Award for Economic Fraud. Krugman can be immortalized appropriately with a special Lifetime Achievement Award.

jimijon's picture

I have started a Facebook page you could like (nominate Charles Ponzi for a Nobel):

http://www.facebook.com/CharlesPonziForANobel?ref=hl

cheers

mightycluck's picture

This guy puts it into perspective. Krugman is following the Argentina and Venezuela socialist model that kills. He is wealthy. What does he care?

http://confoundedinterest.wordpress.com/2013/02/09/devaluation-nations-a...

Schmuck Raker's picture

Snakeeyes wasn't drawing enough clicks to his blog, so he got you to shill for him?

[You guys are giving GMU a bad name.]

Blankenstein's picture

When I see PhD economists trying to run real-world operations, I can't help but think of LTCM.  Things started veering off course and they stepped on the gas pedal instead of pulling back and reexamining their strategies, thus greatly increasing their losses.   I hope we aren't going the same route, but it seems like we are being lead to calimity by a bunch of eggheads in the dismal science. 

Missiondweller's picture

He's been more politician than economist for years now. He's a useful idiot of the left.

optimator's picture

He's not as stupid as he looks.  Nobody could be that stupid.

Laser Shark's picture

Why not just have him debate himself?

Paul Krugman in 2003: Don't Look Down

What will that plunge look like? It will certainly involve a sharp fall in the dollar and a sharp rise in interest rates. In the worst-case scenario, the government's access to borrowing will be cut off, creating a cash crisis that throws the nation into chaos.

disabledvet's picture

"which is a good thing now and what we want." the Kroogman is only debating himself now. This is "esoterica" in the extreme. What can are we kicking again? The one that says "don't pay for anything" thus "having to pay for everything"? I mean anytime he wants to create an Army or Navy from scratch using his policies and given our current economic reality i say "go right ahead." We will ignore the current war as an existential reality lest it "tax" him too much. Too much to ask? Too little? Count me as confused...

ATM's picture

"Lehman Brothers has a mathematical model known as Damocles that it calls ''an early warning system to identify the likelihood of countries entering into financial crises."

Too bad they didnt run the model on themselves!

Jacque Itch's picture

Textbook Krugman.  Write an article in 2003 saying how bad the spending and deficits are with a Republican Prez.  Then when your boy is running the country everything is fine... just keep can kicking. 

Stoploss's picture

===========================AND FUCK PAUL KRUGMAN========================

IridiumRebel's picture

Who the fuck redarrowed? What? You don't want the guy to fucking debate? Fuck you. 

MelvilleSaysNo's picture

Is 'jaw-dropping' one word, or two?

Clayton Bigsby's picture

Fuck you Krugman, and your bullshit nobel prize.  With two dicks.  Maybe even three.

rehypothecator's picture

Irresponsibility: it's the responsible thing to do.  

Seasmoke's picture

i hope thats a noose around the traitors neck

Svendblaaskaeg's picture

Paul poop-eye Krugman: "I'll gladly kick the can forever for a hamburger today"

Just Ice's picture

what in the hell is that?  kill it before it multiplies

Parrotile's picture

Relocate organism to Wildfire Level 5, and prepare for nuclear device "sanitization"

Seeing as Dr Krugman seems to pose considerably more danger to the entire Planetary Economoy than the fictitious Andromeda organism . . . .

AnAnonymous's picture

That is the 'american' thing to do. And what will be done by the way.

prains's picture

No AnAnlogous Anus the american thing to do is start a war on lies and deceit, break some windows and poof the MIC and infrastructure play generates huge profits.

Wait a minute they tried that in Iraq but Haliburton just took the pallets of money instead. Bleed down economics didn't work that time.

Maybe yu guys will be next on the list.

HurricaneSeason's picture

They should have already had a war started, Mali ain't cutting it. Bolivia would be good. They have a military so it would be a fair fight for the next 20 years. They could blame it being drawn out on the mountains or something. Wars are always good for the economy, that's why deficits don't really matter. It's closer to home, so it should be cheaper.

NidStyles's picture

We were in Bolivia in the 80's and 90's so the sheep won't fall for that one.

Lord Of Finance's picture

Darn YOU! Why did you have to show that picture? I wont be able to get any arousal for the remainder of Febuary.

imapopulistnow's picture

He is both right and wrong. 

He is correct that the real economy is still too small to go it alone without life support that needs to be reduced gradually, not all at once.  He is wrong in that he thinks government is the real economy.

Ham-bone's picture

Sure, by all means continue to grow government spending as a % of the economy to avoid a "slow down".  And this will again be the answer tomorrow, and on and on.  Geez, wonder what that leads to? 

Long live Dr. Krugmans' land of the misconceptions, misinformation, propaganda, and "lie we will" when things get serious.  Apparently, things have been quite serious for quite some time now.

I would love to hear under what circumstances, under what UE levels or GDP or whatever metric Krugman likes that he would say is the right time to reduce deficit spending, reduce reliance on government, and let the economy fly under it's own power (ie, free market capitalism)...won't hold my breath on this reply.

imapopulistnow's picture

First of all, I agree with you that Krugman is an idiot.  But so to is Santelli and those who say "just let the markets clear and everything will be AOK".  You let the markets clear when you have a typical business cycle recession, but not when you are in an atypical depression.  We are in a depression.

 

Totentänzerlied's picture

Wrong. Markets will clear one way or another. All the idiot fucking sycophant PhD. crowd is doing is ensuring, guaranteeing, and vouch-safing that the clearing will be as violent, destructive, and terrible as possible.

I am inclined to believe that statist eCONomists such as Krugman are, perhaps without even being aware of it, attempting to destroy what they perceive as and honestly believe to be an outdated, backward, sub-optimal political-economic system. They truly believe they know better, and can create a better system to replace it. It's is a thin line between intellectual, idealist, and ideologue. It's politic-economic sabotage, Fabian-style, and Keynesianism is its perfect cover.

HurricaneSeason's picture

The atypical part is $250 a month, total,  for a Chinese worker's wages.  Giving away free houses and 10 year wars that should take 3 weeks and filling up the colleges helped keep the curtain pulled while the corporations got rich without even paying any taxes on their profits. Now it's time to pay the bill or repave all the roads again or build enough prisons to employ and incarcerate many millions and pretend nobody knew that that wouldn't work.