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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Sat, 02/09/2013 - 20:29 | 3229592 Chartist
Chartist's picture

C'mon...ZeroHedge is so blindingly bearish, they've cost you 200 S&P points.  For chrissakes, show me something that Zero Hedge has done to win admiration!   I feel confident that the posters to this forum are smack in the middle of the IQ bell shaped curve near 100....Tyler doesn't have a Nobel prize in any discipline.   

Sat, 02/09/2013 - 20:38 | 3229606 notadouche
notadouche's picture

How do you know?  I thought everyone was anonymous.

Sat, 02/09/2013 - 20:49 | 3229618 khakuda
khakuda's picture

I thought most here were bullish on nominal stock, gold and other asset prices as the currency debases. Weimar and Zimbabwe were great equity markets as has been the US since 666 on the S&P.

It's the damage to the economy and the underlying capital misallocation being caused by Krugman types that is problematic, potentially HUGELY in the years ahead. At some point, that is problematic for asset markets, too, just not yet.

Sat, 02/09/2013 - 20:56 | 3229631 goldenbuddha454
goldenbuddha454's picture

The Nobel bunch are a group of backslappers who've basically made their award a laughing stock by awarding the Nobel "Peace" Prize to none other than our illustrious Assassin-in-Chief.  Love them drones!

Sat, 02/09/2013 - 21:09 | 3229653 Chartist
Chartist's picture

I like drones...I just wish they replaced the standard armaments with neutron bombs.

Sat, 02/09/2013 - 20:29 | 3229593 FreedomCostsaBu...
FreedomCostsaBuck-o-Five's picture

YGTBSM!!!!!!
Krugman=D.Bag

Sat, 02/09/2013 - 20:45 | 3229611 Atomizer
Atomizer's picture

 

 

Krugman eats taxpayer after mating. Krugman declares, all insects must kick the can down the road 

‘We must suck from our host to survive’

-Paul Krugman 2013

Sat, 02/09/2013 - 20:56 | 3229621 notadouche
notadouche's picture

Didn't Obama sort of make the phrase "kicking the can down the road" famous while running for office emphatically stating he would in fact NO LONGER kick the can down the road?

Sat, 02/09/2013 - 20:52 | 3229623 sbenard
sbenard's picture

Crazy Krugman! What is he smoking?

There is a day of reckoning coming, and it's going to happen sooner, rather than later! I think we have (at most) 2-3 years before the debt debacle of a generation!

Sat, 02/09/2013 - 22:55 | 3229770 Manipuflation
Manipuflation's picture

I would rather have some time to smoke some legally.  Not much interested in any of the mountain of "you can't do this" laws out there because they do not matter anyway. 

Sat, 02/09/2013 - 20:58 | 3229640 alagon
alagon's picture

Krugman wants gentiles to keep digging holes in the middle of a desert. No questions asked. Just do it.

Sat, 02/09/2013 - 22:02 | 3229718 cornflakesdisease
cornflakesdisease's picture

My thoughts about Krugman:

 

https://www.youtube.com/watch?v=UyOaTo_MiFE

Sat, 02/09/2013 - 22:25 | 3229738 silverdragon
silverdragon's picture

Krugman is a traitor, charge and convict him for treason, then hang him from a tree in front of the white house.

 

Sat, 02/09/2013 - 22:44 | 3229742 dolph9
dolph9's picture

In theory what people like this mean is "kick the can down the road until I'm retired."  In practice, it means kicking the can down the road forever, because each next person believes the same thing.

Which means we are in crisis FOREVER.

We print money FOREVER.

We go into more debt FOREVER.

We have immigration and population growth FOREVER.

We try to keep old people alive FOREVER.

We have wars and a police state FOREVER.

 

A whole generation of people has grown up with the idea of infinite everything, without consequences.  A more corrupt and degenerate group of cowards I cannot imagine.

Sat, 02/09/2013 - 23:20 | 3229799 tongue.stan
tongue.stan's picture

I'm glad to see Paulie K getting into the spirit of Irony with this op ed. He has really caught on to ZH way. And his sycophant flunkys too.

Sat, 02/09/2013 - 23:43 | 3229822 rustymason
rustymason's picture

Can anyone tell the difference between Jim Kramer, Cosmo Kramer, or Paul Krugman?

Sun, 02/10/2013 - 00:09 | 3229847 Yes We Can. But...
Yes We Can. But Lets Not.'s picture

LATE 2009

WOODS: Paul, I know you are a wise man, because you've said so.  So I seek your advice. 

KRUGMAN: Anything for you, Tiger.

WOODS: I've been cheating on my gorgeous wife for years, have slept with an array of hookers.

KRUGMAN: Wow, that must have been some FINE tail.

WOODS: It sure was.  But my wife doesn't know about it.  If I come clean with her, she'll dump me.  My persona will be destroyed.  My commercial sponsorships in jeopardy.  My kids impacted.  She'll clean me out.  My life will be hell for a while.  What should I do.

KRUGMAN: You can't tell her now, can't let her catch you.  You've too much to lose.  Keep seeing the hookers, keep living the lie, keep acting like superman, keep having it all.  We'll ease you out of these bad habits over time, and eventually, all will be well, with no damage done, no implosion.  Tiger, we'll kick the can down the road.  It is the moral thing to do.  Do it for the kids.  Do it for the fans.  Don't crush Elin.  And do it for yourself Tiger.  Get that incredible tail, like only you can Tiger.  You can have it all, Tiger.  Worry not.

WOODS: You're right, Paul!  I love you man.  You really ARE a friggin' genius.  Uh, holy shit, where's my 'B' cell phone.  Damn, I think I left it at home.  Damn, damn, damn.  Gotta run........................

Sun, 02/10/2013 - 00:30 | 3229883 Moon Pie
Moon Pie's picture

You can't unfuck this.   Its like a pregnant cockroach.  The only way is to kill it before more are hatched.

Sun, 02/10/2013 - 01:11 | 3229975 tony bonn
tony bonn's picture

krugman is a bush crime syndicate nazi masquerading as a rockefeller axis of evil muppet who is under cia mind control....

Sun, 02/10/2013 - 05:20 | 3230201 falak pema
falak pema's picture

wow, you are really showing how deep you are in the mire of the NWO conspiracy cobweb theory.

Pax Americana cobweb according to you is so seemless and intricate it would make the Bayeux tapestry look like a feudal amateur joke; the Ardabil carpet of Iran a ham attempt at oriental design and the Vatican's frescos of Michael Angelo and Raphael wasted colour in creationist pantomimes.  

Sun, 02/10/2013 - 01:23 | 3229999 pfairley
pfairley's picture

Krugman's main argument is that WW2's massive govt spending on a wasteful war ....proves that massive govt spending no matter how wasteful one thinks it today...will still SAVE the economy.  People call Krugman names or don't believe him...but I never hear anyone go into detail about WHAT A BAD ANALOGY Krugman is making.  

USA was more like China in 1945 and more like an EU country or Japan today,  enough so that the analogy should not be so casually made and accepted.  

Note details of: savings rate, exports/imports, Real estate collapse vs Real estate healing period, peacetime size of govt and entitlements, real wage growth, personal debt,  etc.

Globalized corporations is another huge difference, but this may be more  a Bernanke issue of  expensive stimulation of corporations & banks overseas than a fiscal topic about  US govt spending.

 

Sun, 02/10/2013 - 01:36 | 3230021 MedTechEntrepreneur
MedTechEntrepreneur's picture

Krugman is just a filthy progressive Keynesian. Death to Keynesianism.

Sun, 02/10/2013 - 03:46 | 3230140 nestle
nestle's picture

Krugman should really stop taking CRAZY-PILLS!!!!

 

Sun, 02/10/2013 - 04:17 | 3230161 Troy Ounce
Troy Ounce's picture

 

 

So, if the US can create money out of nothing at zero interest rates, why do Americans pay taxes?

Sun, 02/10/2013 - 13:50 | 3230807 Vooter
Vooter's picture

Because prison sucks...

Sun, 02/10/2013 - 08:58 | 3230280 SilverMoneyBags
SilverMoneyBags's picture

Someone should kick this derp in the nutsack.

Sun, 02/10/2013 - 09:05 | 3230290 orangegeek
orangegeek's picture
"We Should Kick The Can Down The Road. It’s The Responsible Thing To Do"

 

Fuck you Mr Kotter.

Sun, 02/10/2013 - 09:32 | 3230315 DutchR
DutchR's picture

Krugman is just a lightning rod, well paid i would say.

 

ps. there is no nobel prize for economics, go figure....

Sun, 02/10/2013 - 09:50 | 3230337 enloe creek
enloe creek's picture

there is nothing to be done with golbalisation,   populations moving up economically are using resources at a faster clip now. we need energy to keep productivity rising which is where wealth comes from. it isn't shale oil or tar sands.  no replacement for the fossil fuels exists.

Sun, 02/10/2013 - 10:03 | 3230347 TWSceptic
TWSceptic's picture

Krugman must be some Austrian economist sarcastic joke. I expect him to come out any moment now screaming 'HAHAHAHA fooled you all !!!'

Those Austrians sure have a good sense of humor. But seriously, thanks for the laugh Kruggy.

Sun, 02/10/2013 - 10:07 | 3230358 Ghordius
Ghordius's picture

you mean the worst nightmare an Austrian could come with?

in defence of Krugman the NeoKeynesian: no defence from me

in defence of Krugman the Keynesian: it's part of (and consistent) of Keynesianism to advocate soft monetary policies and big state spending programs when the economy is in trouble. He is just admitting to the big shit by this. The only thing would be that Keynes advocated reduced spending and paying back debt during the "jolly good times" - and in this Krugman was not very consistent while he saw only limitless blue skies

so perhaps not a big defence, after all

Sun, 02/10/2013 - 10:20 | 3230373 3rivers
3rivers's picture

I don't see a need to pay much attention to Krugman.  Except for folks who are both marginally employable as well as unemployed, because for them, kicking the can means forever until you see a job come your way.  For everyone else it's just the same old same old.  No problem.   

Sun, 02/10/2013 - 11:15 | 3230423 DeFeralCat
DeFeralCat's picture

I actually thought it was a well written essay arguing that austerity should not take place NOW for the damage in the short-term it would cause the economy. My life is tough enough as it is. What is someone proposing we cut in the short-term that would not do damage to the economy in the short-run? Everyone rambles on about how we are skirting depression so if the line is so thin then why would this not be the trigger to throw us over into depression? Or is that the point?

Sun, 02/10/2013 - 12:20 | 3230504 mark mchugh
mark mchugh's picture

DC,

Krugnuts writes well, I have to give him that.  The problem I think most of us here have is we're drifting further and further from the concepts of independence and liberty that the country was founded on.  Aside from the moral aspects of that, a government that is constantly filling the trough invariably produces a weak nation of mush-minded drones, whose "ambitions" are to borrow government money to get enough "education" to land either a government job or a high-paying job with a defense contractor so they can pay off their government-backed mortgage.  

Ironically, these people will also bitch about taxes without realizing that they are not, in fact, taxpayers.  They are parasites and every dollar they ever "earned" was actually a debt incurred by the next generation.  

What Krugnuts suggests is, to me, that we're too out of shape to walk, so the government should drive us wherever we want to go.  And in a few years he'll be arguing that we need a heart transplant...

I hope this makes sense.  All this "government support" makes us weaker and stupider as a nation and sells our children into slavery.  I want it to stop.

 

Mon, 02/11/2013 - 09:46 | 3232797 Magically Delicious
Magically Delicious's picture

Well said!

Sun, 02/10/2013 - 13:48 | 3230796 Vooter
Vooter's picture

That's the point. We REQUIRE a depression. I really don't know why so many people have so much trouble understanding that. WE'RE NOT SPECIAL. We will lose everything we have and suffer horribly, just like other human societies have lost everything and suffered horribly throughout history. Why would you think it's going to be ANY different for us? Why?

Sun, 02/10/2013 - 12:41 | 3230596 Stud Duck
Stud Duck's picture

I ran into my old Econ professor in a grocery store last Friday. He is in his 80's now but still has a sharp mind, I advised him that I had turned my back on the Keysian theory he had taught me 40 years ago, that I thought "Keyesian theory was for the intellectually lazy and greedy".

 I was suprised that he somewhat agreed with me.

Sun, 02/10/2013 - 12:49 | 3230622 Stud Duck
Stud Duck's picture

But,but, but, didn;t Dick Chenney say deficits don;t matter???

Sun, 02/10/2013 - 13:50 | 3230806 evernewecon
evernewecon's picture

 

 

Obviously the next bailout is already being

used by the present one.

 

http://www.marketwatch.com/story/no-money-down-home-loans-are-back-2013-...

 

Weird.   Veritably weird.

 

I suppose that's supposed to be everyone's grandchildren

waking up in the morning, going to the bank, seeing they're

getting no interest, so mortgages can be extended to 

unqualilfied buyers so that they can be shorted.

 

That's like the Easter Islanders not simply eating their

trees but incentivizing doing that.    Maybe someone

then made out well and skipped to Ecuador.

 

The alternative to government as risk filter is empowerment,

education, bootstrap programs tied to direct support for

homeownership, health care rationalized economically and

clinically, and banking, ag, Wal Mart, energy-transportation,

etc. required to show public benefit and not allowed to 

monopolistically destroy the American breadbasket, etc.

Sun, 02/10/2013 - 14:14 | 3230856 not a twin
not a twin's picture

"There's no fiscal crisis because the CBO said so."  This is exactly why the CBO needs blogs like ZH to be all over it.  Krugman hides behind their shit forecasts and gets away with it because there's no one putting out real numbers to show how delusional the CBO's figures are.  ZH has done more than anyone on this - whenever the forecasts come out, another one I remember that looked at the debt/interest rate link, and giving Lan Pham a platform last year when everyone else ignored her.  So, job well done, but you guys should be on the CBO all the time - like white on rice and stink on shit.  Here are two posts on the topic from a brand new site.  Give CYNICONOMICS some love (or better, just have a quick look), they're on the same side:

http://www.cyniconomics.com/2013/02/09/seven-deadly-sins-of-the-government-debt-debate-2/

http://www.cyniconomics.com/2013/02/06/the-cbos-rules-for-economic-forecasting-a-primer/

Sun, 02/10/2013 - 15:39 | 3231020 Problem Is
Problem Is's picture

Can somebody take that picture of the Krug and photoshop "FAIL" on his forehead??

Sun, 02/10/2013 - 15:47 | 3231038 SokPOTUS
SokPOTUS's picture

As long as Paul is *in* the can; I have no problem with this....

Sun, 02/10/2013 - 16:16 | 3231088 Catflappo
Catflappo's picture

Yeah fair enough to talk of the Congressional Budget Office's 10 year forecasts mate..... they have been soooooooooo accurate in the past.

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