CBS: Paul Krugman: Romney would be worse than Hoover

[Larry]

The problem, from my perspective, is if people aren't spending money partly because they are worried about the debt, then going more into debt might fuel their fear even more and giving them even more money might result in even more money just sitting in the bank.

There are also practical issues with the global money markets and if the US federal government is taking in money that might be taking some money that otherwise would go to (worthwhile) businesses.

I certainly do think that you have to ask yourself "will this money get spent?".

OTOH, my suspicion is that out of all segments of the US economy, the one that's LEAST likely to sit on the money is the American consumer. (Even when you can argue that sitting on the money would be the smart thing for him to do).

[PeterMP]

I certainly do think that you have to ask yourself "will this money get spent?".

OTOH, my suspicion is that out of all segments of the US economy, the one that's LEAST likely to sit on the money is the American consumer. (Even when you can argue that sitting on the money would be the smart thing for him to do).

Right, like I said simplistically.

The real question is will enough of the money be spent in manners that benefit the US economy to offset the increase in debt required to spend it (and every economists that I've ever read seems to believe there is SOME negative associated with our debt).

If you have a low debt, it seems to me that is more likely than our current situation.

[Larry]

Right, like I said simplistically.

The real question is will enough of the money be spent in manners that benefit the US economy to offset the increase in debt required to spend it (and every economists that I've ever read seems to believe there is SOME negative associated with our debt).

If you have a low debt, it seems to me that is more likely than our current situation.

Oh, I think that almost everybody but the most rabid partisan would agree that

Lots of spending is good for the economy.
Low taxes is good for the economy.
Deficits are bad for the economy.

Problem is in how much weight you give to each of them.

[skinsmarydu]

Oh, I think that almost everybody but the most rabid partisan would agree that

Lots of spending is good for the economy.
Low taxes is good for the economy.
Deficits are bad for the economy.

Problem is in how much weight you give to each of them.

Hail, Larry!! It would be nice to see other Americans understand that there must be some sort of balance to the equation. Paul Ryan's budget plan would make 2 million Americans on food stamps lose their benefits ENTIRELY. I surely don't think they want that many MORE homeless, hungry people in the streets.
But I forgot, they can't see them through the heavily tinted glass in their limos.

---------- Post added May-1st-2012 at 09:44 PM ----------

Anybody watching Paul Krugman on Rachel Maddow right now?

[PeterMP]

Oh, I think that almost everybody but the most rabid partisan would agree that

Lots of spending is good for the economy.
Low taxes is good for the economy.
Deficits are bad for the economy.

Problem is in how much weight you give to each of them.

t
I agree. I just don't see anybody putting forward weights on lot's of spending that would make it worthwhile in a manner that I'd say caused a lot of trust on my part.

[twa]

Hail, Larry!! It would be nice to see other Americans understand that there must be some sort of balance to the equation. Paul Ryan's budget plan would make 2 million Americans on food stamps lose their benefits ENTIRELY. I surely don't think they want that many MORE homeless, hungry people in the streets.
But I forgot, they can't see them through the heavily tinted glass in their limos.[COLOR="Gold"]

Only 2 million out of the nearly 50M on them?.....seems imbalanced

[deejaydana]

Only 2 million out of the nearly 50M on them?.....seems imbalanced

Exactly. Ryan's budget is at best modest in addressing our bloated entitlement state but heck, if you can buy off enough of society into thinking they're owed something well, you've won I guess.

[NoVaO]

There is no reason to be cutting food stamps when food stamp use will go down naturally as a result of an improved, growing economy.

[zoony]

Tax cut for the rich and start bombing Iran? Yah I don't see the problem. Sounds like a solid platform for what ails this country

[Larry]

Tax cut for the rich and start bombing Iran? Yah I don't see the problem. Sounds like a solid platform for what ails this country

But it's worked so well, the other times we tried it.

[Tulane Skins Fan]

And when the downturn is historically bad, we spend massive amounts more? I think Krugman wanted another trillion, and I don't think it would have worked because it still wouldn't have gone to the heart of the problem.

I'm not familiar with all of Krugman's positions, but "more spending" needs some details to get my positive attention. As I implied earlier (the liberal side of me), I'd have rather seen another trillion dollars go to a bailout of homeowners (buying down principal) rather than the "stimulus" we had. I think you can flat out waste money in spending, and I think Obama did that to a large degree. Not only that, but it wasn't directed at the problem.

I don't like many Obama economic policies, but IMO things would be much better if we found a way to "correct" the housing inflation problem so that sector didn't grind to a potential decade-long halt. Maybe that was too expensive, I don't know, but the alternative of focusing on nearly everything but a very small part of the housing problem was clearly a mistake, IMO.

I think you are coming from a perspective that the debt caused the economic downturn in 2008. I don't think anyone believes that to be true. Well, anyone with a good economics understanding. The downturn was not caused by government debt. It was caused by private debt leveraged 100 times over, and then a toppling of the housing market.

So, I don't think your question is the right one.

If you give people money, they can use the money anyway they want, including paying off their house.

Krugman at various times has given more detail to his more spending. This is one piece by him. For example, I know that Krugman was very much against the auto bailouts and thought that money should have gone to smaller companies w/ a heavy emphasis on the high-tech sector.

There isn't much that could be done with the housing sector. To many people bought houses for too much. To bring houses back in line w/ historical norms, the sector had to grind to halt for about a decade unless there was a large jump in the medial family income.

The housing sector drove the economy for quite a while. It literally had to take a break. It is no different every farmer planted corn one year. We'd end up w/ too much corn.

I think, especially from Krugman's point of view, the surplus should have been dumped into those industries that might provide relatively rapid and longer term large growth in the US economy- like high tech industries.

**EDIT**
I worry about the Keynesian solution to our current problem because I'm not sure they properly take into account the role of the debt in the problem.

Somewhat simplistically, the Keynesian solution is to give people money to spend and then they will spend it. If people feel secure about their economic situation, then they will spend money and that will encourage job growth.

If people don't, they won't spend money and that can even drive good companies out of business. People don't always act rationally and so will pass on purchases that long term make sense for them.

The problem, from my perspective, is if people aren't spending money partly because they are worried about the debt, then going more into debt might fuel their fear even more and giving them even more money might result in even more money just sitting in the bank.

There are also practical issues with the global money markets and if the US federal government is taking in money that might be taking some money that otherwise would go to (worthwhile) businesses.

It sounds like you know a lot more about this then I do, but I have to ask a question. Isn't the flip side of the Keynesian theory that when the economy is humming, the government will pay down its debt? So, don't they "worry" about debt and paying it off in the long run, though admittedly not in the short run of an economic disaster? I think in a Keynesian's perfect world, the government would have had a huge surplus in 2008 (after 8 years of good economy) and would have been well positioned to pass a massive stimulus without taking on huge debt. Right?

[PeterMP]

It sounds like you know a lot more about this then I do, but I have to ask a question. Isn't the flip side of the Keynesian theory that when the economy is humming, the government will pay down its debt? So, don't they "worry" about debt and paying it off in the long run, though admittedly not in the short run of an economic disaster? I think in a Keynesian's perfect world, the government would have had a huge surplus in 2008 (after 8 years of good economy) and would have been well positioned to pass a massive stimulus without taking on huge debt. Right?

I believe most economists believe the government running some debt is actually a good thing. That government running a surplus is bad. You want to give citizens low risks ways to invest money, and government debt is a good way to do that. The government can than use that money, on which it is paying low interest rates, to fund projects that are large and long term projects that wouldn't be done by industry that long term have relatively large positive affects on the economy essentially making the government money.

However, certainly in 2008 the debt should have been lower in ideal circumstances.

I would make the point though how much of the "humming" economy was due to the governments debt.

From my perspective, I think generally Keynesian economics works, and I think the evidence has been that we have essentially been practicing Keynesian economoics (i.e. goverment deficit spending to prop up the economy) since the 1980's (and really probably even before that), and we have had the world's best economy.

For all of the talk about Reaganomics, I would contend that Regean essentially practiced Keynesian economics. His build up of the military through deficiet spending was essentially a Keyneisan-style public works program, and we've essentially been doing it ever since (and realistically we were doing it to small amounts before).

However, you can't practice the deficeit spending part of Keynesian economics indefinitely.

I'm just not sure that a mature economy should really grow the way most Americans seem to think our economy should be growing (though I'm less sure of that).

[Thiebear]

I'm saying if you deficit spend a trillion dollars in a10 trillion dollar economy (gdp in 2003)... You would feel that difference pretty fast if all you are looking at is total income as your chart does...
It's much more likely Bush's huge defict spending as he invaded Iraq played a larger role in incomes going up in 2004 than did the 2001 tax breaks which yeilded 3 sucessive years of income contractions..

I thought we were talking Tax cuts, not the money giveaway "original movie" followed by 3 sequels? that was for the 80k and below?

[PeterMP]

I thought we were talking Tax cuts, not the money giveaway "original movie" followed by 3 sequels? that was for the 80k and below?

Even if it is admitted that the economy doesn't turn on a dime w/ respect to such a stimulus, if you want to claim the tax cuts did it, it is still incumbent on you to provide evidence that the magic period of time is a 3 lag year for a duration of 2 years affect (or whatever the actual time spans were).

If you claim is after we do X then Y will happen at some point in time that isn't a very convincing argument as Larry pointed out to you.

[Thiebear]

Even if it is admitted that the economy doesn't turn on a dime w/ respect to such a stimulus, if you want to claim the tax cuts did it, it is still incumbent on you to provide evidence that the magic period of time is a 3 lag year for a duration of 2 years affect (or whatever the actual time spans were).

If you claim is after we do X then Y will happen at some point in time that isn't a very convincing argument as Larry pointed out to you.

i dont have to "Prove" anything.
I said, the government is taking in more receipts during the Bush tax cuts in record numbers. The Chart agrees.
You might disagree and say it was a minor player only that caused the receipts, but I don't have to prove why you disagree with me.

My numbers are correct in billions/trillions/gdp. You just believe they are unrelated.