Paul Krugman Says Big Gov't Saved the Economy

[FourScore]

...A few months ago the possibility of falling into the abyss seemed all too real. The financial panic of late 2008 was as severe, in some ways, as the banking panic of the early 1930s, and for a while key economic indicators — world trade, world industrial production, even stock prices — were falling as fast as or faster than they did in 1929-30.

But in the 1930s the trend lines just kept heading down. This time, the plunge appears to be ending after just one terrible year.

So what saved us from a full replay of the Great Depression? The answer, almost surely, lies in the very different role played by government.

Probably the most important aspect of the government’s role in this crisis isn’t what it has done, but what it hasn’t done: unlike the private sector, the federal government hasn’t slashed spending as its income has fallen. (State and local governments are a different story.) Tax receipts are way down, but Social Security checks are still going out; Medicare is still covering hospital bills; federal employees, from judges to park rangers to soldiers, are still being paid...

http://www.nytimes.com/2009/08/10/opinion/10krugman.html?_r=2&partner=rssnyt&emc=rss

[cbdo2007]

1. Saved or hurt the economy - we just don't know yet.

It's still too early to tell.

[unpossibles]

3. I think I'll trust Krugman on this one. nt

[jpak]

7. Lack of "Big Government" is what got us into this mess - and Big Gov't saved our bacon

Tough Shit Teabaggers

:D

[Cha]

9. Precisely..Big corporate shite

got us into it also.

[Kahuna]

14. I live in an area that has always been devasted during past recessions

I live right outside of Newark, NJ. In the past, we always suffered closed businesses, big and small. Property deterioration, increase in crime stats. That is not happening in my community right now. I'm amazed. Our little downtown doesn't have a lot of empty storefronts. Properties are being maintained. I'm seeing lots of newer cars too. And, every time I go to the mall or shopping districts, there is nearly the same level of activity as before. And, there is no discernable increase in crime. Also, I'm beginning to see NEW small businesses open up. From where I sit, the stimulus is indeed keeping us afloat. :applause:

[sasquatch]

2. As always

[abumbyanyothername]

4. What exactly is this economy that has been saved?

Because as I see it, the government could just pass out consumption credits to everyone. And use something other than consumption credit to motivate people to contribute (work).

[Warpy]

5. The news isn't quite as good at the state level

where a reduction of block grants from Stupid's reckless tax cuts caused spending to slow to a trickle to the loss of revenues due to Stupid's continuation of Reaganism causing some spending to be cut off completely. See California for the most extreme example.

Hiring freezes are the norm and a lot of employees are having unpaid vacation days every month.

The reason the early 30s were such a disaster is that Hoover refused to institute the deficit spending that would have reversed much of the problem.

The reason the Depression was prolonged is that conservatives in Congress wanted a balanced budget in 1936. The 1937 recession was the result, and it was this recession that needed a world war to reverse.

The best predictor of how well a country weathers an economic catastrophe and how soon it exits one is how willing that government is to spend. Deficit whiners need to know that the only reasonable course of action to reduce the deficit is to raise revenue, meaning taxes, and the only place left to do that is on the plutocracy.

[Romulox]

6. Hurray for the Status Quo Ante!

Does Paul Krugman think it's the government's job to make sure that the wealthy never lose money, and if so, how does he square this with his deification of the "free market"? :shrug:

[hedgehog]

8. If something hadn't been done quickly, a major recession would have

evolved into a Depression. The Left Wing is mad because the big banks and brokerage houses were saved, the Right Wing is mad because Stimulus money went to keep school teachers working and to get people to go out and buy a car. My attitude is, when the house is on fire you don't stop to argue about how it started, you put it out as fast as you can. And you certainly don't re-do the kitchen while the living room is burning!

All that is happened so far is a holding action. Obama has made it clear that he intends to further reform the economy by 1. reforming health care (which goes beyond reforming health care insurance!), 2. ensuring college is affordable, 3. move the US to a green economy (get us off oil) and 4. make sure Americans are at the forefront of developing renewable energy resources. This man get it. He understand how A connects to B connects to C.

Some people are disappointed when he tells auto workers that the jobs they had at GM or Ford are not coming back. What I here him saying is that instead, Americans will be designing and building the wind turbines and high speed locomotives we'll be using in the near future.

[Romulox]

10. Fine. There was to be ARMAGEDDON. That has passed. Where are the new regulations?

Where is the reflection regarding the unhealthy consequences of the extreme stratification of wealth? Where is the reshuffling of the cards, out of the hands of those who made so many foolish mistakes and into the hands of a new generation of meritocrats?

Oh, that's right. None of that has happened, and none of that is proposed. It turn out that the purported "ARMAGEDDON" was simply that the already rich were suddenly in danger of becoming poor. Now that this so-called "crisis" has clearly passed, the "ARMAGEDDON" happening in downtown Flint, Michigan, say, it not the subject of nearly the same level of concern as the P/L sheets of major European banks.

"Some people are disappointed when he tells auto workers that the jobs they had at GM or Ford are not coming back."

But he moved heaven and earth to save jobs at Citibank, and Goldman Sachs. He never even considered forcing their leadership out of control, or forcing them into reorganization.

Odd. :eyes:

[hedgehog]

12. My husband and son both work for international companies

as field engineers. Eight months ago, everything was coming to a grinding halt as orders fell worldwide. Now, things are back to normal overseas and starting to look better here. That's what I mean when I say we avoided a major depression. Eight months ago I was really concerned that people would die because those at the very bottom have no safety net; when things go bad they starve.

The existing system was collapsing under its own weight. I still say that Obama shored it up using the tools at hand so that we can now address the changes that have to be made. Simply changing the way that college educations are financed is one part of addressing the stratification of wealth. It will make a difference if young people start out their careers without huge debts hanging over them .

[Romulox]

13. Right. Back to 'Hurray for the Status Quo Ante!'

If you're one of the winners under the previous 8 years' economy, then you will no doubt applaud the extraordinary measures the Obama administration took to ensure that those who so mismanaged our economy for so long, and those who hoarded so much for themselves would not only have their positions of power maintained, but their power and opulence was preserved (perhaps even enhanced!) through the taxes of every day Americans.

If you're poor, working class, blue collar, etc., preserving the status quo feels a LOT less like something to celebrate, and the the "hope" that the President might even propose some new regulations of the crooks that supposedly took us to the precipice of ARMAGEDDON! becomes dim by the moment.

[hedgehog]

15. Think of money as the blood flowing through the body. Unless

blood keeps circulating, the body dies. Think of the economy as a body very sick with cancer. The cancer needs to be removed before the body can return to health. What happened last fall was a panic; no one knew if anyone had money, so everyone was afraid to spend money. Think of it as a massive clot thrown off by the cancer that was close to stopping the heart. Yes, the cancer needs to be addressed. First though, the clot has to be removed and the heart kept pumping. Obama successfully conducted a Code blue on the economy and kept it alive. Now he can go after the cancer.

If you pay attention, you'll see that the current effort to reform health care is not only about health care, but about economic reform.

[Romulox]

16. Bad analogy; a body requires that all its parts are healthy for the overall person to be healthy...

One cannot let his foot rot and molder with infection while treating his arm vigorously with all available resources--it would be foolish, because the health of the overall body requires that all constituent components of the body be healthy.

That's not the case in our society--we see quite clearly that the rich can live in opulence while the poor live in squalor, sometimes a few miles away. The presence of poverty is not a pathology to this analogical body at all--in fact, poverty is the prerequisite for the consolidation of wealth in the hands of the few.

[hedgehog]

18. We aren't healthy, but we're still breathing. It's easier to heal a sick man

than a dead one!

[Romulox]

19. Pssst: the foot's still infected. Why aren't we in the Emergency Room?

:hi:

[hedgehog]

21. Because the House and Senate just had to have an August recess?

[Romulox]

24. (I think this "injured body" analogy continues to break down, then...")

A critical patient, and our "physicians" are on a vacation? Again, the metaphor breaks down, unless you position the suffering of the average person as a minor malady... :shrug:

[yowzayowzayowza]

17. To further your analogy ...

When the doctor goes to work on the clot, he cannot spend time inventing the perfect tool for the job, reorganizing the hospital or altering the functions of other professionals already in place.

:hi:

[hedgehog]

20. In this case, the doctor was proposing a treatment back in

January 2007 when a lot of people didn't even think the patient was sick!

[phantom power]

11. Krugman seemed deeply nervous last fall.

Maybe he still is, but his blogging has regained composure. So to speak.

[wininboy]

23. Krugmans' position hasn't changed

I don't understand why some people think he's made a u-turn. His position was that Obama's plans were going to lead to a stagnant economy, and now he's saying that we've arrived at a stagnant economy.

[janx]

22. kick

[LeftHandPath]

25. We gave 19 insolvent banks $4.3 Trillion dollars...

to pump up the stock market.

This is not a recovery folks, this is the greatest theft in our civilization's history.

Krugman is a Keynesian idiot who has bought the myth that debt equals production.

You cannot borrow your way out of a debt crisis. Math, like gravity, will win every time. The service on this debt will soon lead to the end of this nation, Krugman be damned.

[HiFructosePronSyrup]

26. Soon lead to the end of this nation, eh?

So what are you going to do, like all the silly doomsday cultists, when your prophecy fails to come true?

I guess we'll find out "soon."

[LeftHandPath]

28. Riiight... doomsday cultists

Again, and you can ignore this all you want, debt does not equal production.

We can borrow from our children's and grandchildren's future future production, but there is an extremely large cost to serving that debt.

The only hope for the Keynesians like Krugman is that we, the dolts, are dumb enough to sink our money into the creation of another asset bubble. Its happening right now in the stock market.

We will continue to borrow until we cant, at which point the service on our debt becomes astronomical. Its easy math, and you go through it every month, just like I do.

So tell me what happens to you when you can no longer afford to pay the interest on your debt? Answer- you default.

Me? I'm saving my money and paying off all my debts. Worst case I have small debt service and increased savings.

What are you doing in case my 'prophecy' comes true?

That which cannot be sustained wont be.

[HiFructosePronSyrup]

29. What'll I do if your prophecy comes true?

Well I guess I'll drive around the wasteland in my black firebird with my aussie shepard and my buddy flying around in his gyrocopter.

What are you going to do with all that canned meat and Tang?

[LeftHandPath]

30. What are you going to do with all that canned meat and Tang?

I'll be selling it to you for the car and the dog.

;-)

[HiFructosePronSyrup]

31. I mean what'll you do when the country won't collapse?

Because it ain't gonna happen, Kreskin.

[LeftHandPath]

33. Its happening as we speak...

We are borrowing $2.1 trillion this year alone, with another $2.1 trillion slated for next year.

Go look up the Wiemar Republic, Zimbabwe, Argentina, or Iceland and tell me how it worked out for them.

You can only ignore reality for so long.

[trotsky]

32. Let me guess...

you're a gold bug, aren't you?

[LeftHandPath]

34. Nope. I dont own any gold.

Not even jewelry.

Gold is non-liquid, and it cant be eaten or easily used as a commodity. I said above, I'm a cash bug. I invest in cash, in my hand and out of the insolvent banks. (I put most of it in my local credit union - http://www.ncua.gov/)

I'm a saver, the bane of the Federal Reserve and the Keynesian debt monsters like Krugman.

My goal is simple, get out of debt and out of indentured servitude to the banking oligarchy.

[trotsky]

35. The Federal Reserve helps determine the value of your cash, you know.

You're no rebel, sticking it to the evil "debt monsters" - you're a stooge in the system just like you think the rest of us are. :rofl:

[LeftHandPath]

36. Your point?

The Federal Reserve does not 'help' determine anything. They control the lending rates between banks and work as a conduit for the Treasury to distribute debt (treasury notes) through the primary dealers.

Through the emergency provision section of the federal reserve act of 1913, they have been lending trillions to these same primary dealers using the same function of treasury issuance I mention above.

Eventually the Fed will have to roll these loans or take a loss, which decreases the value of the dollar against other currencies.

What happens when the cost to service our debt increases beyond our means to pay? What happens when China, Japan, etc demand higher interest for all this lending, and we are force to roll all these treasury notes at increasingly higher rates?

What happens when the lending stops all together?

Glad you find it amusing. I dont.

[trotsky]

37. Hehehe

The Federal Reserve does not 'help' determine anything.

You really have no clue how the Federal Reserve works, do you?

Glad you find it amusing.

Oh I don't really find it amusing, I just find YOU amusing. Thanks for the laughs.

[The2ndWheel]

27. We're still running away from physical reality

We really can't allow it to catch us at this point. All we did was stretch the tightrope a little longer, and push it up a little higher. That's why we need such a big safety net.