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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imapopulistnow's picture

I got one "up vote".  Indisputable evidence that Ben Benanke reads ZH!

Ham-bone's picture

Phewwww...the present is never the time to take difficult choices, prioritizations...it will always be an easier, better time to do this in the undtermined "future" (wink, wink)

I'm off to vomit...

Yancey Ward's picture

Krugman won't stop advocating "kick-the-can" on the deficit until a Republican sits in the White House again.  Then his tune will change so fast it will make your head go spinning off into space.  The man is a hack.

AnAnonymous's picture

This man is an 'american'.

Colonel Klink's picture

This man is a 'traitor'.

 

Fixed it for you.

Ham-bone's picture

'traitor'???  This man is saving today...by destroying tomorrow. 

prains's picture

blood, sweat and tears aren't supposed to find the easiest path to travel, they're made from real human misery. Not once did Krugman talk about who benefits and who gets hurt by his ideas.

piceridu's picture

Find the nearest Esso gas station....

yogibear's picture

Krugman as the Fed chairman and Jack Jew would be a perfect combo to take the country's finances down much faster.

Marc Faber:

"The views of the Keynesians like Mr. Krugman is that the fiscal deficits are far too small. One of the problems of the crisis is that it was caused by government intervention with fiscal and monetary measures. Now they tells us we didn't intervene enough. If they really believe that they should go and live in North Korea where you have a communist system. There the government intervenes into every aspect of the economy. "

Colonel Klink's picture

There is no such REAL thing as the Nobel prize in economics.  Feel free to google it!

It's the

The Sveriges Riksbank Prize in Economic Sciences

 

It is sponsored by the worlds oldest central bank.  THERE'S the rub!!!

http://en.wikipedia.org/wiki/Sveriges_Riksbank

Funny he'd get a prize for supporting the system giving him the prize.

And for the record....GO FUCK YOURSELF KRUGMAN!

 

EDIT:  And while you're getting edumacated feel free to read about the founder of the oldest central bank:

http://en.wikipedia.org/wiki/Johan_Palmstruch

Must have been Ponzi's mentor!!  History sure does rhyme and the system of central banking sure hasn't changed it stripes.

I am on to you's picture

Quite right,almost,his name was:Johan Witttmacher not Palmstruch,was Dutch,and lived in Riga,1600 something,and was given the right the form a bank,Stockholm Banco,which he by the way left in Fallencia 1668 ,and was  prisoned in Sweden, 1670.Died the following year

Colonel Klink's picture

Correct it was until he was inducted into "nobility".  Breaking it down into it's root components NOB ility.  The state of being a knob!

NumberNone's picture

In 1949 they gave the Nobel Prize to the guy that invented the lobotomy.  Not sure that I would classify winning one as any big deal.   

http://en.wikipedia.org/wiki/Lobotomy 

 

BlueCheeseBandit's picture

I, for one, am glad for the article. Like his 2002 piece about how we should blow a housing bubble to get out of the slump, this creates another permanent record of Krugman's incompetence, and the general bankruptcy of Keynesianism, for the bond/currency crisis.

Just make sure to get him on record confirming he's serious so he can't claim this was a joke later.

Yellowhoard's picture

Krugman is missing a chance to become very wealthy.

All he needs to do is start a drug rehab clinic where users check in and are given all of the heroin and crack that they desire.

It would be wildly popular and very profitable.

Seasmoke's picture

in Pauls world, tomorrow NEVER comes

earleflorida's picture

in 3... 2... 1... here comes the rebuttal post from ZH's own-- Dr. Paul Krugman

can't wait...

Ian56's picture

Why Paul Krugman is 100% wrong and Nouriel Roubini is right 

 

http://ian56.blogspot.co.uk/2013/01/the-2tn-of-excess-bank-reserves-is.html

 

http://ian56.blogspot.co.uk/2013/01/a-global-economic-summary-why-paul.h...

 

And the ultimate result of too much government debt is of course the loss of the dollar as Global Reserve Currency and economic collapse in the US. 

China is already planning it. 

History writ large in front of our faces.

http://ian56.blogspot.co.uk/2012/02/greek-scenario-and-us.html

George Bush & Dick Cheney's diastrous legacy. 

We haven't seen a disaster of this magnitude hit the West since the Black Death in the 1300's when 30 to 40% of Europe's population were killed. 

http://ian56.blogspot.co.uk/2013/02/george-bush-dick-cheneys-disastrous....

 

Maybe Paul Krugman should spend 30 minutes listening to Dr Benjamin Carson. 

It might knock some sense into him, but I doubt it.

The look on Obama's face is priceless during the speech :)

http://ian56.blogspot.co.uk/2013/02/everybody-in-america-should-watch-th...

PUD's picture

By putting off chemotherapy one can avoid the awful symptoms of nausea and hair loss....the life threatening cancer can be dealt with in a responsible manner in a few years when you're feeling better about things.

Ham-bone's picture

PUD - u said all that need be said in response to Kruger

Obama4Ever's picture

Even I'm starting to have doubts about Krugman's sanity.

Darth Rayne's picture

'I pity the fool'

Mr T

'He is a prick.'

Darth Rayne

 

Breaking windows is good for the economy. I would be happy to break all my windows by throwing Paul through them. Then Ben. Then whoever.

ISEEIT's picture

This is truly how the progressives 'think'. I suspect that they actually believe this sort of nonsensical drivel. We know for certain however that were a republican to be president ( not to worry, they disgust me also) the progressives would be out in full retard glory demanding that the insanely irresponsible and dangerous fiscal madness of this despicable and morally reprehensible republican administration be halted immediately.

We had precisely this situation while bushy was prez. The rabid left could not scream loudly enough regarding the debt/deficits. Same as with civil liberties/human rights....recall the apoplectic fits of blind fury and unrestrained rage regarding waterboarding/torture?

These 'people' are truly not well.

Mark123's picture

Why not give Krugman, all the staunch Democratic and Republican party members, wall street, the lawyers, and everyone else who believes this drivel some part of the country and build a really big wall around it and let them build their utopia and live with it.

 

Likely in about 2 years they would all starve to death, then we could reclaim the land and live in peace and prosperity.

SoberOne's picture

And if rates cannot be controlled? kablooey. Fuck you Krugboy!

hooligan2009's picture

wonder if Krugman will do a counterfactual for these "facts"

http://www.forbes.com/sites/peterferrara/2013/02/07/the-worst-five-years...

its a good article, pity its on Forbes crappy website..sorry for that

LongSoupLine's picture

Krugman...someone seriously needs to put this stupid fucking Keynesian fucker into a fucking woodchipper.

 

FUcking asshole.  Fuck you Krugman and the New York Times.  Fucking liberal nation destroying pricks

ISEEIT's picture

I'm surprised he didn't somehow work the babysitting co-op into this little wonder of intellectual malfeasance.

Central Wanker's picture

Whenever I feel hesitant to buy more gold and silver, I'll re-read this article.

Kelley's picture

In Les Miz, the constable Javert says "The world is upside down."

In the old days, if a student or cub reporter turned in something like what Krugman wrote, the teacher or editor would hand the paper back with a low grade or in the case of the editor insist on a rewrite.

Today we give out Nobel Prizes to the biggest clowns in the room. What does that say about the people who are supposedly leading the world? IOW, they didn't just give him an "A+." No, they handed him a million dollars plus many millions more worth of publicity and praise.

We have a man in Congress who fears that Guam will flip over. He got reelected. 

We have an usurper in the WH who believes if you take money away from entreprenuers, it helps the economy. We have a Congress that has had ample reasons to toss the usurper out - hell there is a county sheriff that has examined forensic evidence and come to the conclusion that Obama has committed fraud more than once.

Yet not one Representative nor one Senator (535 people) will say a word about it.

Folks, we are kicking the can down the road because the public prefers liars, cheats and stupid people in charge. We have utter corruption in DC and on Wall Street. Meanwhile, DC has zero indictments of any Wall Street crooks.

Jesse James, Butch Cassidy and the rest of the Wild West thieves and killers must marvel at the crookery we live with now. 

over45's picture

The problem is that many people believe him and agree with his position.  Just read some of the comments after the article at the WSJ.  Of course cuts in spending will reduce jobs - but no one wants to face the music because it's just sooo easy to print more.   Sick of his crap.

 

tarsubil's picture

If we stop drinking, we'll get the shakes and that will hurt our job performance. Gotta keep drinking. (Insanity is all too common.)

blindman's picture

cook the frog, kick the can.
.
http://www.potw.org/archive/potw283.html
.....
William Shakespeare (1564-1616)
from Macbeth

A dark Cave. In the middle, a Caldron boiling. Thunder.

Enter the three Witches.

1 WITCH. Thrice the brinded cat hath mew'd.
2 WITCH. Thrice and once, the hedge-pig whin'd.
3 WITCH. Harpier cries:—'tis time! 'tis time!
1 WITCH. Round about the caldron go;
In the poison'd entrails throw.—
Toad, that under cold stone,
Days and nights has thirty-one;
Swelter'd venom sleeping got,
Boil thou first i' the charmed pot!
ALL. Double, double toil and trouble;
Fire burn, and caldron bubble.
2 WITCH. Fillet of a fenny snake,
In the caldron boil and bake;
Eye of newt, and toe of frog,
Wool of bat, and tongue of dog,
Adder's fork, and blind-worm's sting,
Lizard's leg, and owlet's wing,—
For a charm of powerful trouble,
Like a hell-broth boil and bubble.
ALL. Double, double toil and trouble;
Fire burn, and caldron bubble.
3 WITCH. Scale of dragon; tooth of wolf;
Witches' mummy; maw and gulf
Of the ravin'd salt-sea shark;
Root of hemlock digg'd i the dark;
Liver of blaspheming Jew;
Gall of goat, and slips of yew
Sliver'd in the moon's eclipse;
Nose of Turk, and Tartar's lips;
Finger of birth-strangled babe
Ditch-deliver'd by a drab,—
Make the gruel thick and slab:
Add thereto a tiger's chaudron,
For the ingrediants of our caldron.
ALL. Double, double toil and trouble;
Fire burn, and caldron bubble.
2 WITCH. Cool it with a baboon's blood,
Then the charm is firm and good.

--------------------------------------------------------------------------------
brinded - having obscure dark streaks or flecks on gray
gulf - the throat
drab - prostitute
chaudron - entrails
The above appears at the beginning of Act IV, Scene 1 as found in:

Shakespeare, William. The Globe Illustrated Shakespeare: The Complete Works Annotated. Howard Staunton ed. New York: Gramercy Books, 1993.

hooligan2009's picture

looks like Willy was an anti-semite, with his "Liver of blaspheming Jew;". perhaps it was specific and not general....hey look i kicked the can!

 

blindman's picture

willy must have been a home grown terrorist.
to think they actually required children read
his stuff back in the day.

Colonel Klink's picture

Most potent part is the tongue.

haskelslocal's picture

So I suppose some of you prefer hidden agendas? First thing to admiting you have a problem is admiting you have a problem.  Hate the guy, but at least he said it.

The issue, as always, has been what makes money. What grows an economy.

If we decide war is no longer the answer, then we give it a replacement.

Sadly, when things are proposed like carbon credits, alternative energies, etc. All anyone does is rip these ideas apart as crap.

Maybe they are bad ideas, but are they worse than war? Maybe war is the best idea, hence, we stay the course.

But if you want to wind down spending you've got to transition to an economic model that has potential to better utilize all resources on the planet. Or don't and STFU.

 

tarsubil's picture

Saying deficits are the problem is like an alcoholic saying hangovers are the problem. No, the need to stay drunk all the time is the problem just as the need to create ever more debt is the problem.

Kelley's picture

We already have an economic model that works when tried.

It's called entreprenurial capitalism.

Here are two true statements...

  1. Lower tax rates increase federal revenues and prosperity.
  2. Crushing debt increases poverty.

So let's increase revenues by lowering taxes and lower government spending. This will reduce the debt and increase jobs and prosperity.

Or we could do what Kruman suggests...

  1. Increase debt by spending and printing more money (this increases poverty by increasing inflation)
  2. Raise taxes (This lowers gvernment revenues therby increasing debt which increases poverty.)
ISEEIT's picture

Your lesser of two evils approach is merely another way of kicking the can. Both choices are evil. The best option is to crash this fucking farce and start from scratch. Get the fucking rat parasite government out of our economy. This mess is due precisely to the failure to allow FAILURE.

War isn't going away anytime soon darlin'...In fact it's very credible to believe that the next big one will be waged against the sane people by the very sociopaths for whom krugman is an apologist/sycophant bitch.

hooligan2009's picture

if you are correct and war is an acceptable economic policy tool, i hope its your family that is the first to suffer from collateral damage. 

Blankenstein's picture

 

"Carbon credits  ...all anyone does is rip these ideas apart as crap.  Maybe they are bad ideas..."

 

So we should just green light bad ideas?   Carbon credits are just a money transfer to the .01%, but we should just go along because some elitel assholes proclaim that their idea wll help the environment but is really just another wealth transfer in disguise?   The extremely weathly will let companies pay them money to buy the credits and the cost will be passed on to the consumers aka the middle class and poor.  Seriously...