Biting the hand?

About whom could Krugmaniad be writing?

Celebrity Kiss Cam with David Brooks

Kthug calls him out by name!

My view here is strongly influenced by the story of George W. Bush. Younger readers may not know or remember how it was back in 2000, but back then the universal view of the commentariat was that W was a moderate, amiable, bluff and honest guy. I was pretty much alone taking his economic proposals — on taxes and Social Security — seriously. And what I saw was a level of dishonesty and irresponsibility, plus radicalism, that was unprecedented in a major-party presidential candidate. So I was out there warning that Bush was a bad, dangerous guy no matter how amiable he seemed.

How did that work out?

We don't need no health care

Krugmaniad.

Krugman defends Diocletian economic policies!

Paul vs. Krugman.  Hilarity ensues.

Krugmaniad?

I do believe K-thug is approving of Mr. Obama's recent speech.

Un-governable

Paul Krugman's hair is on fire.

Some explanation: There’s a legal limit to federal debt, which must be raised periodically if the government keeps running deficits; the limit will be reached again this spring. And since nobody, not even the hawkiest of deficit hawks, thinks the budget can be balanced immediately, the debt limit must be raised to avoid a government shutdown. But Republicans will probably try to blackmail the president into policy concessions by, in effect, holding the government hostage; they’ve done it before.

Now, you might think that the prospect of this kind of standoff, which might deny many Americans essential services, wreak havoc in financial markets and undermine America’s role in the world, would worry all men of good will. But no, Mr. Simpson “can’t wait.” And he’s what passes, these days, for a reasonable Republican.

The fact is that one of our two great political parties has made it clear that it has no interest in making America governable, unless it’s doing the governing. And that party now controls one house of Congress, which means that the country will not, in fact, be governable without that party’s cooperation — cooperation that won’t be forthcoming.

Elite opinion has been slow to recognize this reality. Thus on the same day that Mr. Simpson rejoiced in the prospect of chaos, Ben Bernanke, the Federal Reserve chairman, appealed for help in confronting mass unemployment. He asked for “a fiscal program that combines near-term measures to enhance growth with strong, confidence-inducing steps to reduce longer-term structural deficits.”

My immediate thought was, why not ask for a pony, too? After all, the G.O.P. isn’t interested in helping the economy as long as a Democrat is in the White House. Indeed, far from being willing to help Mr. Bernanke’s efforts, Republicans are trying to bully the Fed itself into giving up completely on trying to reduce unemployment.

And on matters fiscal, the G.O.P. program is to do almost exactly the opposite of what Mr. Bernanke called for. On one side, Republicans oppose just about everything that might reduce structural deficits: they demand that the Bush tax cuts be made permanent while demagoguing efforts to limit the rise in Medicare costs, which are essential to any attempts to get the budget under control. On the other, the G.O.P. opposes anything that might help sustain demand in a depressed economy — even aid to small businesses, which the party claims to love.

Railing against the con men

Although in the end Paul Krugman's relentless calling out as bullshit Bush's claims about his tax cuts -- everything from returning the surplus to supply-siding out of the 2003 stock nose dive -- did not stop Congress from passing those tax cut windfalls to the wealthiest.

Still, he was a refreshing blast of honesty in a miasma of clueless punditry.

Today, he sets his aim on the latest darling of Kaplan Test Prep Daily, the ever so hot Paul Ryan.

Mr. Ryan has become the Republican Party’s poster child for new ideas thanks to his “Roadmap for America’s Future,” a plan for a major overhaul of federal spending and taxes. News media coverage has been overwhelmingly favorable; on Monday, The Washington Post put a glowing profile of Mr. Ryan on its front page, portraying him as the G.O.P.’s fiscal conscience. He’s often described with phrases like “intellectually audacious.”

But it’s the audacity of dopes. Mr. Ryan isn’t offering fresh food for thought; he’s serving up leftovers from the 1990s, drenched in flimflam sauce.

Mr. Ryan’s plan calls for steep cuts in both spending and taxes. He’d have you believe that the combined effect would be much lower budget deficits, and, according to that Washington Post report, he speaks about deficits “in apocalyptic terms.” And The Post also tells us that his plan would, indeed, sharply reduce the flow of red ink: “The Congressional Budget Office has estimated that Rep. Paul Ryan’s plan would cut the budget deficit in half by 2020.”

But the budget office has done no such thing. At Mr. Ryan’s request, it produced an estimate of the budget effects of his proposed spending cuts — period. It didn’t address the revenue losses from his tax cuts.

The nonpartisan Tax Policy Center has, however, stepped into the breach. Its numbers indicate that the Ryan plan would reduce revenue by almost $4 trillion over the next decade. If you add these revenue losses to the numbers The Post cites, you get a much larger deficit in 2020, roughly $1.3 trillion.

And that’s about the same as the budget office’s estimate of the 2020 deficit under the Obama administration’s plans. That is, Mr. Ryan may speak about the deficit in apocalyptic terms, but even if you believe that his proposed spending cuts are feasible — which you shouldn’t — the Roadmap wouldn’t reduce the deficit. All it would do is cut benefits for the middle class while slashing taxes on the rich.

And I do mean slash. The Tax Policy Center finds that the Ryan plan would cut taxes on the richest 1 percent of the population in half, giving them 117 percent of the plan’s total tax cuts. That’s not a misprint. Even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population.

Read the whole thing.

Dis-illusionment

Today's Krugmaniad...

The point is that Mr. Obama’s attempts to avoid confrontation have been counterproductive. His opponents remain filled with a passionate intensity, while his supporters, having received no respect, lack all conviction. And in a midterm election, where turnout is crucial, the “enthusiasm gap” between Republicans and Democrats could spell catastrophe for the Obama agenda.

Which brings me back to Ms. Warren.

The debate over financial reform, in which the G.O.P. has taken the side of the bad guys, should be a political winner for Democrats. Much of the reform, however, is deeply technical: “Maintain the requirement that derivatives be traded on public exchanges!” doesn’t fit on a placard.

But protecting consumers, ensuring that they aren’t the victims of predatory financial practices, is something voters can relate to. And choosing a high-profile consumer advocate to lead the agency providing that protection — someone whose scholarship and advocacy were largely responsible for the agency’s creation — is the natural move, both substantively and politically. Meanwhile, the alternative — disappointing supporters yet again by choosing some little-known technocrat — seems like an obvious error.

So why is this issue still up in the air? Yes, Republicans might well try to filibuster a Warren appointment, but that’s a fight the administration should welcome.

O.K., I don’t really know what’s going on. But I worry that Mr. Obama is still wrapped up in his dream of transcending partisanship, while his aides dislike the idea of having to deal with strong, independent voices. And the end result of this game-playing is an administration that seems determined to alienate its friends.

Just to be clear, progressives would be foolish to sit out this election: Mr. Obama may not be the politician of their dreams, but his enemies are definitely the stuff of their nightmares. But Mr. Obama has a responsibility, too. He can’t expect strong support from people his administration keeps ignoring and insulting.

They can't quit him, man

Today's Krugmaniad.

Again, Republicans aren’t trying to rescue George W. Bush’s reputation for sentimental reasons; they’re trying to clear the way for a return to Bush policies. And this carries a message for anyone hoping that the next time Republicans are in power, they’ll behave differently. If you believe that they’ve learned something — say, about fiscal prudence or the importance of effective regulation — you’re kidding yourself. You might as well face it: they’re addicted to Bush.

Serious people

Krugman reads Brooks and comes to the conclusion that most of us do when we read Brooks -- he loves him some Serious People.

A quick note on David Brooks’s column today. I have no idea what he’s talking about when he says,

The Demand Siders don’t have a good explanation for the past two years

Funny, I thought we had a perfectly good explanation: severe downturn in demand from the financial crisis, and a stimulus which we warned from the beginning wasn’t nearly big enough. And as I’ve been trying to point out, events have strongly confirmed a demand-side view of the world.

But there’s something else in David’s column, which I see a lot: the argument that because a lot of important people believe something, it must make sense:

Moreover, the Demand Siders write as if everybody who disagrees with them is immoral or a moron. But, in fact, many prize-festooned economists do not support another stimulus. Most European leaders and central bankers think it’s time to begin reducing debt, not increasing it — as do many economists at the international economic institutions. Are you sure your theorists are right and theirs are wrong?

Yes, I am. It’s called looking at the evidence. I’ve looked hard at the arguments the Pain Caucus is making, the evidence that supposedly supports their case — and there’s no there there.

And you just have to wonder how it’s possible to have lived through the last ten years and still imagine that because a lot of Serious People believe something, you should believe it too. Iraq? Housing bubble? Inflation? (It’s worth remembering that Trichet actually raised rates in June 2008, because he believed that inflation — not the financial crisis — was the big threat facing Europe.)

The moral I’ve taken from recent years isn’t Be Humble — it’s Question Authority. And you should too.

UPDATE: And Dean Baker thinks Brooks is an ill-informed idiot, too.

Keynes 101

K-Thug is perhaps being too kind to Blue Dogs and morons, but he uses his space today to put some learning on Congressmen who "believe" that extending jobless benefits (aka, doing the right thing) will allow the unemployed to be too "choosy," or will have some devastating effect on the deficit.

But there are also, one hopes, at least a few political players who are honestly misinformed about what unemployment benefits do — who believe, for example, that Senator Jon Kyl, Republican of Arizona, was making sense when he declared that extending benefits would make unemployment worse, because “continuing to pay people unemployment compensation is a disincentive for them to seek new work.” So let’s talk about why that belief is dead wrong.

Do unemployment benefits reduce the incentive to seek work? Yes: workers receiving unemployment benefits aren’t quite as desperate as workers without benefits, and are likely to be slightly more choosy about accepting new jobs. The operative word here is “slightly”: recent economic research suggests that the effect of unemployment benefits on worker behavior is much weaker than was previously believed. Still, it’s a real effect when the economy is doing well.

But it’s an effect that is completely irrelevant to our current situation. When the economy is booming, and lack of sufficient willing workers is limiting growth, generous unemployment benefits may keep employment lower than it would have been otherwise. But as you may have noticed, right now the economy isn’t booming — again, there are five unemployed workers for every job opening. Cutting off benefits to the unemployed will make them even more desperate for work — but they can’t take jobs that aren’t there.

Wait: there’s more. One main reason there aren’t enough jobs right now is weak consumer demand. Helping the unemployed, by putting money in the pockets of people who badly need it, helps support consumer spending. That’s why the Congressional Budget Office rates aid to the unemployed as a highly cost-effective form of economic stimulus. And unlike, say, large infrastructure projects, aid to the unemployed creates jobs quickly — while allowing that aid to lapse, which is what is happening right now, is a recipe for even weaker job growth, not in the distant future but over the next few months.

But won’t extending unemployment benefits worsen the budget deficit? Yes, slightly — but as I and others have been arguing at length, penny-pinching in the midst of a severely depressed economy is no way to deal with our long-run budget problems. And penny-pinching at the expense of the unemployed is cruel as well as misguided.

So, is there any chance that these arguments will get through? Not, I fear, to Republicans: “It is difficult to get a man to understand something,” said Upton Sinclair, “when his salary” — or, in this case, his hope of retaking Congress — “depends upon his not understanding it.” But there are also centrist Democrats who have bought into the arguments against helping the unemployed. It’s up to them to step back, realize that they have been misled — and do the right thing by passing extended benefits.

As Krugman writes at the start of his column, extending benefits in the midst of a massive downturn and unemployment used to be taken for granted. Nowadays, as Republicans cynically calculate and far too many Democrats impotently dither, not so much.

Dreams are not reforms

K-thug addresses his commenters who believe that they key to financial reform is to break up the big banks so that there are none "too big to fail." Execs at smaller institutions will know, then, that they won't get bailed out if they run excessive risks. Not gonna happen says Krugman, and besides, it wasn't the big financial institutions that caused the run on the system in the 30s.

In fact, we know what a system in which banks are allowed to fail looks like: that’s how the US banking system worked before the creation of the Fed. And you know what? It wasn’t a smoothly functioning system, with sound banking enforced by market discipline; it was a system periodically wracked by “panics” that destroyed peoples’ savings and plunged the economy into recession.

Finally, because that’s what really happens when banks are allowed to fail freely, promises not to bail out banks in the future aren’t credible. Fail to reform finance now, and there will be two, three, many TARPs in our future.

What is true is that there are bailouts and then there are bailouts. What has to be protected in a crisis are bank deposits and things like bank deposits — basically, bank-created money. Money market accounts and “repo” — very short-term loans in which businesses often park their funds — have to be protected to avoid 1930-31-type collapses. On the other hand, bank shareholders and long-term bondholders can be made to pay a price without collapsing the system.

Now, in 2008-2009 the shareholders were not cleaned out, and the bondholders left untouched; in part this was a policy decision, but it was also influenced by the lack of “resolution authority”: there was no clean, well-established route for seizing complex financial institutions. We can fix that, and deal with future Citigroups (one of which, given history, is likely to be … Citigroup) the way the FDIC deals with smaller banks: protect the depositors, clean out the shareholders.

But just letting banks fail isn’t going to happen — nor should it. In practice, talking about doing so is just an excuse to avoid real reform.

Brooks: Amuse me

Two columnists. One paper.

Krugman:

So what did we learn from the summit? What I took away was the arrogance that the success of things like the death-panel smear has obviously engendered in Republican politicians. At this point they obviously believe that they can blandly make utterly misleading assertions, saying things that can be easily refuted, and pay no price. And they may well be right.

But Democrats can have the last laugh. All they have to do — and they have the power to do it — is finish the job, and enact health reform.

Brooks:

Fourth, you got to see how confident Republicans are. Obama’s compromise offer is one the Republicans can happily refuse. In their eyes, he is saying: If you don’t make some concessions now, I’m going to punch myself in the face. If you don’t embrace parts of my bill, I will waste the next three months trying to push an unpopular measure through an ugly reconciliation process that will probably lead to failure anyway.

While the writers don't write their own headlines, in this case, their columns' respective headlines says it all. For Krugman, it really is about "Afflicting the Afflicted." And for Brooks, it's always, always about the show -- "Not as dull as Expected."

I really never appreciated quite how cynical Brooks is. He doesn't seem to have much appreciation for all those Applebee diners he claims to understand so well. Republicans looked pretty good! The bill is going to die! And while he claims that Republicans have a lot of great ideas -- exchanges, market place solutions, etc. -- he doesn't seem to understand what's driving up the cost of health care in this country, and he doesn't care to try. And he's either not been paying attention or he doesn't really care, that, as the president said, much of what Coburn had to say -- who did in fact know what he was talking about -- were valid and addressed in the Senate bill.

And while Brooks claims to understand that the health system is a mess, he sides with Republicans' obstructionism because...well, just because.

Somerby blames "the media" and, most acidly, Maddow, for the stupidity of our discourse and the stunning arrogance of Republican leadership. I'd say the blame falls more squarely on our "serious, thought leaders" like Brooks (not to mention Friedman, Rose, Hiatt, et. al.).

The perils of being understood

I did not know until I read this profile of Krugman that it's his wife, Robin Wells, who adds a lot of the anger and forcefulness in his columns. Other than that, Krugman comes off as you'd expect: cranky, a bit of a nebbish, having the convert's fervor of someone who came late to politics, and someone who doesn't suffer fools...at all. But this made me laugh:

Unlike most well-known academics, Krugman has never had many graduate students. He is unsure why this is so. Is it that his style of thinking, intuitive rather than methodological, is too difficult to imitate? he wonders. Is he too distracted? Too busy? Too short? Whatever the reason, it has become clear that his legacy will not be perpetuated in the usual way by a diaspora of little Krugmans, so, if his name is to survive, it is up to him. His papers and books, of course, are the main thing, but in recent years Krugman has also spent a great deal of time distilling his views into an undergraduate textbook. When he first signed the contract to write it, in 1994, he did it mostly for the money. Then he did no work on it for years. Finally, his publisher told him that he had to get moving, that he should work with a co-author who was better organized and more highly motivated than he was, and suggested his wife. It took them five years of intense work to write the first edition.

“It’s excruciatingly hard,” Wells says.

“You have to put yourself back in the mind of an eighteen-year-old,” Krugman says. “And it has to be impeccable. If you’re writing an academic paper, if you have some stuff that’s blurrily written, that won’t do too much harm. If you write a newspaper article and a third of the readers don’t get it, that’s a success. But a textbook has to be perfect.”

A third? I'm happy if one-fifth of my meager readership has any idea what I'm talking about.

The Senate we have, not the Senate we wish we had

From today's Krugmaniad:

Bear in mind also the lessons of history: social insurance programs tend to start out highly imperfect and incomplete, but get better and more comprehensive as the years go by. Thus Social Security originally had huge gaps in coverage — and a majority of African-Americans, in particular, fell through those gaps. But it was improved over time, and it’s now the bedrock of retirement stability for the vast majority of Americans.

Look, I understand the anger here: supporting this weakened bill feels like giving in to blackmail — because it is. Or to use an even more accurate metaphor suggested by Ezra Klein of The Washington Post, we’re paying a ransom to hostage-takers. Some of us, including a majority of senators, really, really want to cover the uninsured; but to make that happen we need the votes of a handful of senators who see failure of reform as an acceptable outcome, and demand a steep price for their support.

The question, then, is whether to pay the ransom by giving in to the demands of those senators, accepting a flawed bill, or hang tough and let the hostage — that is, health reform — die.

Again, history suggests the answer. Whereas flawed social insurance programs have tended to get better over time, the story of health reform suggests that rejecting an imperfect deal in the hope of eventually getting something better is a recipe for getting nothing at all. Not to put too fine a point on it, America would be in much better shape today if Democrats had cut a deal on health care with Richard Nixon, or if Bill Clinton had cut a deal with moderate Republicans back when they still existed.

As Krugman rightly points out, only a few years ago G.W. Bush and Senate Republicans were able to block a modest expansion of health care for children.

Our moral decay

David Brooks wrote this week that our current debtor nation is the result of our loss of virtue. Paul Krugman notes that this state of affairs began in 1980. And who was sworn in as president that year? "Did we lose our economic morality?" Krugman asks. "No," he answers, "we were the victims of politics."

Clinton, CBO projections and the danger of Blue Dogs

No one can take a complicated subject and thoughtfully explain it the way Barack Obama can. On the other hand, no one can take a complicated subject and do this with it the way Bill Clinton can.

Speaking a few days after the CBO estimated that the White House's latest "gamechanger," an independent Medicare Advisory Commission to set prices, would save little money over 10 years, Clinton urged policy-makers -- and here he means Democrats -- to not accept the CBO's scores without adding a dollop of common sense. " I recognize that if you're in that budget office, you've got to project the future," Clinton said. But certain programs would realize savings "regardless of whether the mathematical rules they are now up with will prove it or not." He said that those with a stake in changing the system "almost always get the short end of the stick" when it comes to budget projections. "In Washington, we strain a lot of gnats while we''re swallowing camels." Lost in the debate about how much health care reform will cost, Clinton said, is the debate about whether the reforms will work. (I took this to be an implicit criticism of Blue Dog Democrats who focus near-obsessively with the impact of health reform on the deficit and of committee chairs who have imbued the CBO with near mystical powers.)

My emphasis. I'm not entirely clear what straining gnats means, but it's a great image.

Meanwhile, in a true Krugmaniad, Paul Krugman does not even begin to think that the so-called Blue Dogs are anything but honest, if incoherent, in their criticisms of the various health care proposals.

One interpretation, then, is that the Blue Dogs are basically following in Mr. Tauzin’s footsteps: if their position is incoherent, it’s because they’re nothing but corporate tools, defending special interests. And as the Center for Responsive Politics pointed out in a recent report, drug and insurance companies have lately been pouring money into Blue Dog coffers.

But I guess I’m not quite that cynical. After all, today’s Blue Dogs are politicians who didn’t go the Tauzin route — they didn’t switch parties even when the G.O.P. seemed to hold all the cards and pundits were declaring the Republican majority permanent. So these are Democrats who, despite their relative conservatism, have shown some commitment to their party and its values.

Now, however, they face their moment of truth. For they can’t extract major concessions on the shape of health care reform without dooming the whole project: knock away any of the four main pillars of reform, and the whole thing will collapse — and probably take the Obama presidency down with it.

Is that what the Blue Dogs really want to see happen? We’ll soon find out.

I think what motivates the Blue Dogs on health care is nothing more than a knee jerk fear that their more conservative constituents will throw them out if they go along with anything that can be branded by potential oppenents as "tax and spend." I think those fears are obsolete, but there you have it. Having a safe seat is more important than being effective legislators -- and also more important than the relative success of their party. Right now, they have nothing to lose by opposing both health care reform and the deficit-neutral proposals that would help pay for it.

Krugman's housing bubble

From The Corner of Obliviousness and Laziness:

'Things I'm Glad I Never Said' [Mark Hemingway]

Arnold Kling digs up this Paul Krugman chestnut from 2002:

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

Oy. Might want to remeber that sentence next time you consider any of Krugman's economic advice.

(via Moynihan via McArdle)

Um, Krugman, in his actual 2002 column (which Hemingway does not bother to link to), does not say the U.S. needs a housing bubble. He says Alan Greenspan needs one in order to explain The Sage's optimism about the economy in the face of the NASDAQ bubble bursting and the likelihood of "double dip" inflation during the Bush II years.

Indeed, Krugman was quite prophetic as Greenspan did drive down interest rates and encouraged variable rate mortgages, thus pouring gasoline on a burning housing sector.

But the best part: Hemingway is too lazy to even come up with his own post title.

UPDATED to get rid of some annoying NRO html coding, fix spelling...the usual, ya know.

UPDATED II: Arnold Kling reconsiders.

Change? We don't need no stinkin' change

EJ Dionne marvels at the short term memory loss.

Among other things, the Chamber promises "legal action to challenge unconstitutional and unlawful government regulations." Might that presage -- again, the New Deal parallels are striking -- a battle between a progressive president and a conservative Supreme Court?

Obama's preference is to transcend conflict, not confront it. He has been careful to present himself as a defender of free enterprise (as FDR did) and to insist that only unfortunate chance has made him the arbiter of the fate of banks and car companies.

Yet the paradox is that if the recovery continues, as Obama hopes it does, support for change will weaken, those threatened by change will be emboldened and slogans only recently discredited will be revived. The greatest danger to Obama's plans comes not from the Republican Party but from how short our memories are.

In the same paper, Summers and Geithners outline their proposal to not let a good financial crisis go to waste.

And, over at the Times, Krugman warns that it's starting to look a little like 1937.

Kindler, gentler Krugman?

Do ya think that dinner at the White House convinced Professor Krugman to soften his demands for policy perfection?

If we’re going to get real action on climate change any time soon, it will be via some version of legislation proposed by Representatives Henry Waxman and Edward Markey. Their bill would limit greenhouse gases by requiring polluters to receive or buy emission permits, with the number of available permits — the “cap” in “cap and trade” — gradually falling over time.

It goes without saying that the usual suspects on the right have denounced Waxman-Markey: global warming isn’t real, emission limits will destroy the economy, yada yada. But the bill also faces opposition from some environmentalists, who are balking at the compromises the sponsors made to gain political support.

So is Waxman-Markey — whose language was released last week — good enough?

Well, Al Gore has praised the bill, and plans to organize a grass-roots campaign on its behalf. A number of environmental organizations, ranging from the League of Conservation Voters to the Environmental Defense Fund, have also come out in strong support.

But Greenpeace has declared that it “cannot support this bill in its current state.” And some influential environmental figures — most notably James Hansen, the NASA scientist who first drew the public’s attention to global warming — oppose the whole idea of cap and trade, arguing for a carbon tax instead.

I’m with Mr. Gore. The legislation now on the table isn’t the bill we’d ideally want, but it’s the bill we can get — and it’s vastly better than no bill at all.