Unfortunately, the Republicans are not the only party that is defined by delusion, and the number one academic shill for the Democrats -- Krugman himself -- has penned a column that truly is breathtaking its own web of fantasies. But first his attack on the Republicans. Krugman writes:
By all accounts, Republicans have, so far, offered almost no specifics. They claim that they’re willing to raise $800 billion in revenue by closing loopholes, but they refuse to specify which loopholes they would close; they are demanding large cuts in spending, but the specific cuts they have been willing to lay out wouldn’t come close to delivering the savings they demand..
I have no reason to doubt his claim, although one also has to understand that President Obama and the Democrats have no intention of cutting any spending of their own, so we really do have an example of the worst kind of hypocrisy in which each side's accusations against the other are nothing more than mirrors held up to themselves. In fact, Krugman seems to revel in the huge expansion of the welfare state that has occurred with the Obama presidency.
One would think this to be a problem, given the state of the economy, but Krugman has an answer: We don't need to worry about paying for all of this because we can borrow-and-print our way to prosperity. He writes:
We are not having a debt crisis.
It’s important to make this point, because I keep seeing articles about the “fiscal cliff” that do, in fact, describe it — often in the headline — as a debt crisis. But it isn’t. The U.S. government is having no trouble borrowing to cover its deficit. In fact, its borrowing costs are near historic lows.
Yep. We can just borrow and spend, and if the markets per chance won't readily accept U.S. paper in the future, then the Federal Reserve System can borrow U.S. bonds in the primary market, provided that Krugman's "clever lawyers" can find a way around the Federal Reserve Act that forbids such practices. The financial well is bottomless.
This is delusion, and it is even more delusional than anything we are hearing from Republicans, if that is possible. Yes, Krugman knows that maybe some day in the future, we might have to rein in the spending, but for now, we can pretend we are rich, and if we pretend long enough, we will become rich.
This is nothing more than the MMT nonsense that we have been hearing from James Galbraith and others, that we can take advantage of the fact that the dollar is a reserve currency, so we can print to our heart's content and beyond. It is a free pot of gold.
I don't have to say what nonsense this is. One cannot inflate the dollar forever, and the damage that is being done to the economy right now is such that we will not be able to climb out of this hole at all.
Whether the Republicans are having an "existential crisis," I don't know. However, I do know that if the U.S. Government continues to follow Krugman's advice, an existential crisis will be the least of our worries. Krugman may believe that he is so clever and so brilliant that he can find ways to circumvent the laws of economics, but those laws have a way of asserting themselves in the end.
I think you've hit the nail on the head again about Our Man K. For some time I've thought he's shown signs of being a Crypto-MMTer. The other aspect of his analysis that goes unexpressed is that Krugman really does subscribe to American Exceptionalism and is utterly convinced that if the federal government pours money into the economy in some willy-nilly fashion, "growth" will resume as a matter of course, and the deficits will close and our ship will right itself in the water. Everything he says, on Sunday talk shows, on his blog, everywhere, proclaims his view that his humongous deficits and endless borrowing simply don't matter because they are all short-run problems that will go away "when the economy recovers." Where Krugman may in fact be the Most Dangerous Economist in America is that he appears unaware that the forces militating against such "growth" are growing more formidable, not less, and that his presumed growth may not materialize at all at the far end of the deficit-fest. Unfavorable demographics in the U.S., resource shortages, international competition in trade and in resource use, environmental problems - the future will not be like the past, so his endless citing of "mistakes" made in "1937" are completely off the point. It would be far better now to take stock of where we really are in terms of our standard of living and adjust accordingly. It's not just the laws of economics that Krugman routinely violates - it's the Laws of Thermodynamics.
ReplyDeletePerhaps the delusion exhibited by both parties and their proxies is really a reflection of the delusion of the masses. Whether through economic illiteracy or willful disregard, the masses want to believe the masses want to believe the laws of reality can be suspended ro their immediate gratification and reconciliation will be someone else’s problem.
ReplyDeleteAs government and private activity cannot be performing the same roles at the same time - how will it be known that the time to "reign in" has arrived. You could end up in a command economy before interest rates or inflation move.
ReplyDeleteThere is a lot of false equivalency here. The Democrats have spent the last two years announcing that they were willing to make compromises on spending, even entertaining the possibility of raising the age requirement for social security. The Republicans, on the other hand, have made it very clear that they are willing to hold the nation's credit rating hostage at gun point and possibly pull the trigger rather than let the Bush tax cuts for the top 2% expire.
ReplyDeleteThe Democrats have their faults, but comparing their failings to the outrageous and nihilistic behavior of the GOP is a false equivalency of the worst kind.
JG, If you want to intellectually honest, and taken seriously on an economic matter, your can’t be a partisan. Your Statement “The Democrats have their faults, but comparing their failings to the outrageous and nihilistic behavior of the GOP is a false equivalency of the worst kind,” reveals your political bias. Making a nominal throw away statement “Democrats have their faults” doesn’t cover it up.
ReplyDeleteLet’s be blunt here. The democrats are not going to materially cut entitlements and the republicans are not going to materially raise taxes. Neither of which matters anyway. A real material cut in entitlements would spark civil disorder and neither party wants that on their watch. There is not enough prospective tax revenue to materially address the deficit issue. On the current path, we are not that far away from all tax revenue going to interest costs at normalized interest rates. And there is no such thing as a “balanced approach.” It a fantasy. Anyone with a 5th grade math skills and a couple of hours can figure that out. They are going to kick the can until the currency breaks and they hope it happens on someone else watch.
What we need is adults crafting sane common sense policy and leading. What we have is children masquerading as adults.
BTW, we all now are watching the tragedy in CT produced by a subhuman piece of garbage. May I suggest we have bigger problems than economics right now. Prayer and reflection are more appropriate
ReplyDeleteJG: The Republicans, on the other hand, have made it very clear that they are willing to hold the nation's credit rating hostage at gun point and possibly pull the trigger rather than let the Bush tax cuts for the top 2% expire.
ReplyDeleteYou know that the Republicans don't really get a choice on letting the tax cuts expire. The law right now is that they expire, end of story.
The Republicans can ask for that law to be changed, that's a request. The President can veto that any time. The Republicans have no power to hold anyone hostage.
Tel, you make a good point. There is no “hostage.” The current tax law expires period. The discussion is about what it should be going forward instead. The debt ceiling is a political distraction. Of course it will be eventually extended. The nation’s debt ceiling is screwed eventually independent of the ceiling.
ReplyDeleteSorry, I meant the nations credit rating is screwed anyway.
ReplyDeleteNormally I'd point out why everything Mike said is incorrect but in light of what happened in Connecticut today I don't really feel it's appropriate. It's probably best to drop this today.
ReplyDeleteWe are not having a debt crisis.
ReplyDeleteIt’s important to make this point, because I keep seeing articles about the “fiscal cliff” that do, in fact, describe it — often in the headline — as a debt crisis. But it isn’t. The U.S. government is having no trouble printing to cover its deficit. In fact, its printing costs are near historic lows.
Mike, there's a famous old saying:
ReplyDelete"He who smiles when things go wrong, has thought of someone to blame it on."
Here's my own comment from March 5, 2011 9:15 PM:
Sounds like Krugman is building the necessary wiggle-room for a failure narrative. I don't think there all that much disagreement (even amongst Austrian economists) that government deficit spending can deliver a short-term boost to the economy (especially as measured in dollar-denominated GDP). The Austrian theory basically says that the short-term boost is highly unlikely to propagate into a long-term virtuous circle unless government just happens to make very excellent resource allocation decisions (please correct me if I'm wrong on the basic theory here).
So if in doubt, just say, "Republicans holding us hostage" and that's the meme to prevent anyone learning from their mistakes. Need bigger mistakes in order to capture that learning. How big? Dunno, sit and find out.
"It's probably best to drop this today."
ReplyDeleteOn that we agree.
We hold those familys in our thoughts and prayers throughtout this season