Of course, the cause of the trouble was the fact that the government was rapidly expanding the supply of dollars -- with a predictable result. Flash forward to 40 years later and we see Washington still trying to claim that the government wants to protect our money and our lives.[End Update]
The editors at the NY Times believe that they have discovered something that apparently no one else notices: a lot of people are out of work. Of course, the Grey Lady's perception that in the past year "Congress and the Obama administration have spent the year focused on budget cuts" is a pretty sick joke, considering that the government continues to spend and borrow into oblivion.
Now, the editorial is worth reading if only for its huge leaps in logic. First, the "serious" stuff: "Without more jobs, both the economy and the budget will deteriorate further."
Notice the causality here; the NYT is claiming that "jobs" help create an economy. So, we are supposed to believe that the economy is bad because people are out of work instead of dealing with the logical point that unemployment is high because the economy is bad. This is simple economic logic, something that always seems to escape the people in the august NYT offices.
But, it gets even better, as all of these grandiose jobs projects ("Let's rebuild this and that....") need to be funded, of course. How to do that?
Washington, in thrall to austerity, has abandoned one of the most immediate and powerful tools for supporting growth and jobs, namely, borrowing at today’s low rates to provide direct fiscal aid to states. But Mr. Obama can and should make the case for targeted new jobs today, to be paid for over time by closing tax loopholes.This is hilarious (unfortunately). First, Washington is not "in thrall to austerity" by any stretch, given the explosion not only in government spending, but also in government obligations over the past four years. Washington might be delusional, but "in thrall to austerity" is a product of a fertile imagination.
Second, while the suggestions are couched in the language of capital spending, it is clear that what the editors mean is that the government needs to continue its record borrowing simply to funnel it to certain favored political groups. This basically is the government using the bond markets as a giant credit card to continue a spending spree.
The last one -- "closing tax loopholes" -- also demonstrates utter delusion at the Grey Lady. What constitutes a "loophole"? While the NYT and Paul Krugman seem to believe that the government can balance the budget and end the recession by raising the top rates to, perhaps, 70 percent (a rate Krugman tool me seven years ago was "insane," but I guess Krugman now is re-defining "inanity").
For the past four years, the NYT has shown utter hostility to those industries that are profitable and can lead us out of a recession. Instead, we get the incomprehensible nonsense that if the government borrows at even higher rates, jacks up taxes, and props up favored "green industries" with huge subsidies, that this mishmash will result in a recovering economy.
It seems to me that the editors of the NYT need to spend some time in "recovery" from the delusion of Keynesian thinking. These are people who are laying out the very path to depression and are calling it prosperity. I don't think so.
9 comments:
And before they start up with the 70 percent thing:
http://www.newyorker.com/online/blogs/ask/2010/02/questions-for-macfarquhar.html
"QUESTION FROM SEAN DOYLE: What would be the highest federal marginal income tax rate that you would deem acceptable?
PAUL KRUGMAN: Good question. I don’t advocate a marginal tax rate of 70 percent, but it’s worth noting that we had rates in that range all through the 60s and much of the 70s, without much evidence that effort at top levels was being crippled. So that’s feasible. That said, the truth is that the financing of social insurance is much more important than the progressivity of the tax system—Sweden pays for a lot of its programs with a regressive VAT, but that doesn’t change the fact that it takes much better care of the poor and unlucky than we do."
He says he doesn't advocate it but then turns right around in the next sentence and says its feasible. And then he avoids the actual question asked.
He told me in 2004 that the 70 percent rates were "insane," but now changes his tune. Guess his economic history is being reinterpreted.
It doesn't take an economist to smell something fishy in the Keynesian solutions of:
* hiring people to perform useless tasks such as digging a hole and refilling it is good;
* hiring people to build weapons to blow the world up is even better.
Now Krugman is touting how World War II was such a "beautiful war" which got us out of the depression. I am pretty sure a World War III where millions (or billions) get killed and much of the world (but not the US) is blown to smithereens will ensure economic growth afterwards. What a fine example to use.
Keynes said "In the long term we are all dead". Just maybe, his prophecy is finally coming due after all these years of "kicking the can down the road"...
We should all be aware (and constantly teach) that Keynesianism is an essential and original part of the war machine:
And it was Keynes, himself, in collaboration with a few other economists and statisticians at the beginning of World War II, who invented the national accounting constructs that would give rise to GNP and GDP. All for the purpose of justifying a protracted, expensive war. Writes Judo Cuyvers in the Economic Journal:
The elaboration of national economic accounts and detailed national income estimates is generally considered to be a direct result of Keynes's emphasis on the main macroeconomic determinants of employment and aggregate demand.
Scholars have repeatedly stressed Keynes's impact in the course of the first few years of the Second World War, or have pointed to Colin Clark's pioneering calculations during the 1930s. However, as we shall show in the following pages, it was at the very beginning of the Second World War, not in 1937 nor in 1941, that British national income accounting entered a critical phase. Determined to convince the authorities and public opinion of the necessity of financing the war effort properly, Keynes immediately set himself the task of elaborating a proposal based on statistical evidence. It was during the period between Octboer-November 1939 and February 1940, when Keynes was working on his December 1939 article in this JOURNAL and subsequently on his pamphlet How to Pay for the War, in close statistical collaboration with Erwin Rothbarth, that the first double-entry national accounts were developed and the still very crude accounting and estimation procedures became essential steps in economic policy making.
Gee, I wonder why there wasn’t much opposition to Keynes during the times of war-hysteria?
http://english.economicpolicyjournal.com/2011/07/sorry-mmters-economy-doesnt-exist-and.html
I recall that 8-15-71 was a Sunday and I had spent all day waterskiing. My friends and I were sitting by the edge of the lake listening to WRIF when Tommy Chong announced "Hey man, da president of the United States, man". I thought they were going to play a comedy sketch. But then the real Nixon came on with "My fellow Americans etc...." That was real funny.
And we're all Keynesians now:
http://www.flickr.com/photos/bob_roddis/3520131008/in/set-72157600951970959
In regard to strategy for approaching the debt problem, i.e.
a) Emphasis more taxes
or
b) Emphasis less spending
have you seen this math post?
Have you seen this math?
http://iowahawk.typepad.com/iowahawk/2011/03/feed-your-family-on-10-billion-a-day.html
On a sid note, good thing we have MMT guru Warren Mosler writing letters to congressman Paul Ryan “informing” him that the printing press is our salvation. If only Ryan knew we could print money, but I guess he’s to dense to realize that having a printing press removes the threat of default. Every time and always! Except for Zimbabwe right? Diddnt they have a printing press too?
We can print money. Electronically. The coast is clear folks! No need to worry, ever.
Anyone raising concerns about whether or not the U.S can pay its bills are ill advised and needs to realize that printing money is forever and always a get out of jail free card. If only people knew!
Oh, and don’t worry, if inflation kicks in, just raise taxes and cut spending to stop the inflation right? Inflation is never a monetary phenomenon!
I have hard time believing this people are serious. This stuff is so rich, I can’t resist posting it.
From the whole alien invasion thing with Krugman, to these MMT’ers claiming the printing press is our salvation, I’m not sure what is more laughable.
http://moslereconomics.com/2011/08/15/mmt-to-ryan-apologize-now-about-the-us-being-the-next-greece/
Bob, I heard MMT’ers are in Canada now? Wow, good news for Canada! MMT will bless them with the operational reality that is electronic money printing.
Let’s just hope MMT makes its way to Zimbabwe. They’ll turn that place around in a heartbeat.
Step one would be to raise taxes to stop inflation and then step two would be to print money to fund more “stimulus” to create “full employment.” Also, make sure the deficit is not too small, you wouldnt want to take away all their savings!
MMT would surley do wonders for the Zimbabweans.
They should write a piece in the Onion about MMT coming to Zimbabwe. But I think people may actually it?
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