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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John Law Lives's picture

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

The central purpose of government is NOT to create jobs ad infinitum.  If more people of Paul Krugman's mindset get their way, government might expand forever until it consumes everything (a.k.a. a black hole).  This guy needs to be put on the ignore list forevermore.

hooligan2009's picture

taking the other side of this claim..."increasing government spending creates jobs and causes the economy to expand".

hmmm..so increasing government spending by the odd 2 trillion (12% of GDP) in the last four years means (assuming each job for four years costs $200,000 at the current $50,000 p.a. of household income) that 10 million jobs have been created by government

a) that unemployment would have been 10 million higher at 22.3 million instead of 12.3 milllion currently

b) that the premise is a pile of crap

please use the up and down arrows for a) (up) and b) (down) accordingly!

imapopulistnow's picture

They read the comments on ZH?  Just a guess....

Atlantis Consigliore's picture

PAUL FREDO Burn is books, his tv appearances, his Noble BS prize, and all of his propaganda crap;

or

nominate him to head the SEC.  he s smart,  his FREDO,  he can do it....he demands respect.

http://youtu.be/vYabrQrXt4A   quick put him on 60 minutes or ABC 1,2,3 do rai me, for the sheeple

icm63's picture

Whats the differnce : SELL SIDE or BUY SIDE analyst ??

Oldballplayer's picture

Hey, its worked all this time.  What could go wrong.

This time is not different at all.

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Oh, whats that over there, far away.  What a funny looking bird.  Is that a swan?  i thought those were white.

Carl LaFong's picture

You convenienly forgot to mention it was Bill Clinton who gave a big helping hand in setting up today's situation by repealing Glass-Stengal and allowing the quadrillion dollar MBS and CDS derivative bomb to be created and subsequently explode. He may have had "surplusses" by some definitions, but they were all subsequently wiped out when Bush and Obama okay'd QE to bail out their banking buddies on the back of the sheeple.

John Law Lives's picture

I wouldn't assume that Clinton or Bush or Obama actually initiate policy themselves that impacts the financial sector in such ways.  They most likely do what their Wall Street whoremongers pressure them to do.  For example, it was obvious who was banging the drums to pass TARP before TARP was passed.  Wall Street was, and any of those 3 Presidents would have approved TARP.

Spaceman Spiff's picture

There were never real surpluses under Clinton.    Utter lie repeated often enough.  Never once did the debt go down under his budgets.  By law they rolled the new found money into buying US debt while borrowing from the trust funds to operate government.   Never once did they retire any debt.

Clinton's and the 90's congresses' part in this mess:

1)  Repeal glass-steagall

2)  NAFTA leading to crappy service sector jobs replacing real work

3)  Exponential undermining of prudent loaning process via lobbying by the GSEs and private banks... which turned into laws and frivolous, intimidation lawsuits

4) Free money from the fed really ramped up and not reining it in

5)  Treating terrorism lightly after 2 attacks and having 1 war come about from it.

6)  Late Edit:  Changes to how unemployment and cpi (this one might have reagan to blame too) are calculated to allow for more of this fraud and cheating of those who save.

 

FTR, Bush sucks too for continuing/ratifying the bullshit.  

 

BUT can everyone please shut the fuck up about Clinton being an amazing president because the economy was humming along in spite of his policies because of the TECHNOLOGY REVOLUTION!    

hooligan2009's picture

Krugman is a coward, pure and simple. And it is a cowardly thing to stand by while good people suffer by preveting people of good quality to act

Krugman's policy is this "The point, again, is that now is very much not the time to act;.."

Here is another (I took it from here, http://tartarus.org/~martin/essays/burkequote.html:

Perpetrators, collaborators, bystanders, victims: we can be clear about three of these categories. The bystander, however, is the fulcrum. If there are enough notable exceptions, then protest reaches a critical mass. We don’t usually think of history as being shaped by silence, but, as English philosopher Edmund Burke said, ‘The only thing necessary for the triumph [of evil] is for good men to do nothing.’

James-Morrison's picture

Now "is very much not the time to act" never becomes tomorrow

...and that's when we address the problem.

The ultimate "free kick" of the can. 

foxmuldar's picture

Was Krugman advising the Greeks on how to run their economy. Sure sounds like it. I'd bet Krugman is getting a kickback from the Obama regime. We won't know about it just like the Spanish government until the whole thing collapses. 

Mark123's picture

Krugman would have made a great WW1 general....endless charges into German machine gun fire.

 

Does this pathetic dim-wit ever ask what the money already spent has achieved - who has benefited?  All I see is continued speculation by wall street and their crony friends....not one year of massive, obscene wall street bonus' were ever missed at least!!!

 

I wonder if Paul K would gladly hand over his own money to the government?  Of course not, that would just be silly.

hooligan2009's picture

hear, hear...well said..bravo

lunaticfringe's picture

If you really want a mind numbing experience, just read the comment thread below Krugman's piece. It is so full of misinformation, partisan politics, and absolute bullshit that I actually got angry reading what these dumb fucks have to say.

 

How do you get as stupid as Krugman? I cannot fathom it. He has become the pied piper of idiocy.

ebworthen's picture

If the bearded potato has true conviction for endless can-kicking he should support the following without hesitation:

  1. Donate every penny of his income to the FED for said can-kicking.
  2. Advocate for every citizen the IRS expects a tax return from getting $1 million dollars tax free (talk about stimulus!).

How about it Dr. French Fries?

Happy Meal coming my way?

If not, why not?

Atomizer's picture

 

 

George Orwell 1984 Newspeak Appendix

Milton Friedman - Orwellian Newspeak  <--- During Carter era. Make this go viral.  

 

BTW, Fuck you Krugman.

TNTARG's picture

It's good to see you're starting to understand these things. Theach to your children, my friends. (By "you" I mean US citizens. Most of europeans are so fucking far yet...)

 

Be aware, anyway. Those are trickier mother fuckers.

booboo's picture

"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?"

I am beginning to think these guys live on another planet or that they don't have SS numbers.

IridiumRebel's picture

"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."

 

When do we stop, asshole?

Quinvarius's picture

And it isn't borrowing it is printing.  Krugman is just a straight up LIAR and a fraud.  If the Fed is buying it all, it is printing.  Enjoy gold at 10k Krughole. 

shovelhead's picture

Krugman is right.

We need to take money out of whats left of the productive economy and have Govt. 'Invest in winners' like this:

http://blog.heritage.org/2012/10/18/president-obamas-taxpayer-backed-gre...

seek's picture

Is it too much to hope for a post-apocalypse tribunal featuring PK and others of his ilk?

Shell Game's picture

ilk like:

 

Greenspan
Bernanke
Paulson
Dimon
Blankfein
Liesman
Geithner
Obama
Bush
Pelosi
Reid
McCain
Boehner
and on, and on...

 

It is a good hope indeed..

Yen Cross's picture

 Paul Krugman is officially certifiable... That piece of shit should be shipped off to Guantanamo Bay. That scum sucking financial terrorist belongs in cuba.

Accounting101's picture

Isn't Krugman correct? Doesn't the negative 2012 4th quarter GDP print prove his point? Government spending dropped 12.5% and the result was a depressed economy.

Look we can all agree on the problems of misplaced investment and the problems of yearly trillion dollar deficits, but to suggest that the government can get to a balanced budget or better yet a surplus without massive private debt is pure economic garbage. It is economically impossible unless you are running a trade surplus. Basic stuff!

Clowns on Acid's picture

Accounting 101 is about the level of your argument. Keep going...get to 102...then start Austroian economics 101.

Accounting101's picture

Disprove my economic fact. While you are at it, prove the Earth is flat.

optimator's picture

His confession on the way down to Guantanamo would make interesting reading.

Quinvarius's picture

Keynesianism is an excuse to be a thief and fool.  It is just a religion with no basis in economics.  If you really read up on it, you will see it is complete nonsense and self contradicting at every turn.  It makes no GD sense except as an excuse for collectivism.  It is not economics at all.  It is just idiocy.  Krugman needs to be shot out of cannon into a brick wall.

moron counter's picture

      Makes perfect sense, let the liberals spend like crazy when they are in charge, and then blame the conservitives when they try to pay the bills.  Even when times were good, unemployment was very low, you couldn't cut spending because it would cause a recession they would say. Perhaps they should just tax wealth. If you are worth more than a million dollars just send it all in. And no exclusions for polititions or Buffets or anyone. I'm curious what the vote would be. 

      But an oxymoron from a moron, you gotta love it! This also brings into mind these awards they give out. Like the Nobel prize for economists and the Nobel peace prize. Maybe someone here will nominate me. I certainly deserve it more than they do.

mikeurl's picture

The type of spending Paul is recommending is a drop in the bucket. The Stimulus spending is almost completely gone. People are falling off extended unemployment benefits. The wars are ending. The deficit is set to shrink all on its own as these things go away.

If we also simultaneously enact deep spending cuts in the context of elevated unemployment levels it would be too much all at once. I don't think anyone expects a big spending bill to pass congress right now. Nor should anyone expect big spending cuts right now.

Would it make sense to have a time-limited additional stimulus bill focused on infrastructure? Yes. Will we get it? No. And that is at least partially due to the ZOMG crew at ZH. So, congratulations, I guess.

Yen Cross's picture

 $5trillion of bailouts later, and now he want's a few trillion more for the infrastructure. Hey Einstein, the Fed. is pumping $85 billion into the system every month!

Accounting101's picture

Right, by taking toxic investments off the Big Bank's books. They are not rebuilding infrastructure. Oh, and the bailouts, whether liquid cash injections or securing debt, is $23 trillion. None of that was used for food stamps or unemployment benefits.

moron counter's picture

   Cutting the spending will be very painful perhaps even disasterious for many. It would have been less painful and a lesser of a disaster if they had done it sooner. Therefore logic dictates that it will be much more painful and a disaster squared if we wait longer.

   Let me ask you a question... a certain family I know who got in spending trouble couldn't pay their bills, then took out more credit cards to pay the ones they coundn't pay, an borrowed from everyone and everywhere possible with the hope that someday they would get a higher paying job. Wouldn't it had been better for them to face reality before getting the added debt if only because at a certain point my friend realized there was no way out and they may as well spend till they were stopped.

new guy's picture

UN-FUCKING-BELIEVABLE

Krugman appears to be completely indifferent to the pain these tax and spend policies are inflicting on the common man. He is either PURE EVIL or a WORLD CLASS ASSHOLE

 

Chupacabra-322's picture

@ new guy,

No, I beg to differ.

a fucking garganchuan mother fucking Asshole.

new guy's picture

my apologies, I was trying to sugar coat it.

SunRise's picture

Notice to Paul - I want my dream and I refuse to pay for yours!

Missiondweller's picture

"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"

I guessed he missed the recent research showing the "multiplier" of deficit spending is point two. indicating we could cut a dollar of spending and only lose 20 cents of economic activity. There is so much money and debt that each additional dollar has virtually no impact in stimulating the economy.

http://macrowealthpreservation.blogspot.com/2012/09/money-going-down-bla...

over45's picture

He is playing to the masses as a mouthpiece of the administration and it is working.  Some people love this type of thinking.  The reality is the Obama administration knows how to play the electorate and it's bread and circus's for everyone.

stant's picture

aliens and trillion dollar platinum coins. cant wait for whats next. and theres always something next

Marley's picture

"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"

http://www.nakedcapitalism.com/2013/02/philip-pilkington-the-fear-indust...

errrr.... yeah I agree!

Tom of the Missouri's picture

When Krugman was listing all the wars where post war spendng cuts caused a recession I was waiting for him to list the biggest post war spending cuts of all - those after WWII.   I think this is an example of Krugman using selective data.   After WWII when there were drastic cuts in military spending and a huge increase of new entrants into the workforce - i.e., returning veterns,  and the American economy took off on the biggest economic expansion in history.    At the time the Keynesian economists of their day predicted doom from all the spending cuts and advocated a huge expansion of government to compensate.   Due to either less socialist views or sheer dumb luck Truman and the congress failed to follow their advice, thus unleashing a torrent of economic growth like the world had never seen.

Krugman is such an idiot or simply a dishonest fuck.

Here are some more details:  http://www.independent.org/newsroom/article.asp?id=138

PAWNMAN's picture

Exactly who does this jackass have any credibility with? He must be blowing someone at the NY Times to still be collecting a paycheck. What an utter joke!

MrMorden's picture

His logic is inescapable: if the politicians are not serious about fixing this problem, then it can't really be a problem...

Riiiight.

Racer's picture

That's has as much sense to it  as Biden's spend money to stop going bankrupt idea