Krugman: GOP Austerity Causing Unemployment

[bripat9643]

What wealth does the defense department produce?

None. When did I claim it produced any? However, it does keep the likes of Osama bin Laden from wasting your sorry ass.

 

[Toro]

I don't believe that time fixes it. Time - if anything - makes things worse. The real productive capacity of our nation - our people, and our real capital - doesn't get better by being wasted. People lose skills if they don't use them, and factories and machines don't improve from sitting idle. To the extent that people and businesses are attempting to improve their balance sheets by increasing savings and paying down debt, unemployment only makes things worse. And if people react to unemployment by spending less and saving more (a perfectly natural reaction), that simply drives the economy further into the ground. Since private savings and debt net to zero, only government can create financial savings for the private sector and reduce private sector debt, and only by spending more than it taxes - in other words, by running a deficit.

The Great Depression lasted ten years, and it wasn't until government deficits reached 30% of GDP - during WWII - that it finally ended. (By comparison, current deficits are about 9% - and New Deal deficits ranged from 0% - 6%.)

As far as long-term is concerned, it's worth noting that all that WWII debt had no lasting harmful effects at all. WWII just caused us to do what we could have done ten years earlier, without having to have a war.

I do think that there is a structural problem when people become long-term unemployed. But that is at the edges. Most people who want to work are working. Most of the plant in this country is still being operated.

All economic growth is a function of productivity growth. The structural foundations of productivity growth have not changed. We had an asset bubble which collapsed. Too much capital went into the housing bubble, and now we have anemic growth as the excess capacity gets absorbed back into the economy. It's pretty textbook. Once the excess capacity gets expunged, we will go back to trendline growth, though it will take some time before the output gap is closed.

 

[editec]

First, the source of your chart isn't clear. Government spending is exploding, so I fail to see how government spending on goods and services could be declining.

Second, the empirical evidence has destroyed the theory that government spending improves the economy several times. Keynesian economics is dead. Only idiots and demagogues continue to espouse it. Which brings us to the third point.

Third, Krugman is a proven moron.

First, just because Fox News told you spending was exploding doesn't mean it is. Federal spending went DOWN from 2009 to 2010 and states across the country are cutting back.

Second, there is ZERO "empirical evidence" that disproves Keynesian Economics. In fact, there is the opposite. There are many occasions where it has been proven true. WW2 being the best example.

Third, Krugman has a Nobel Prize. You have your thumb up your ass.

I'm showing the Federal budget in 2009 as 3.107 trillion, in 2010 as 3.552 trillion, and an estimation of 3.82 trillion in 2011.

As for your contention that WW2 provides "empirical evidence" that Keynesian policy works? If that's your "best" example then you might want to rethink your position because all an examination of economics during WW2 does is emphasize the limitations of Keynesian policy during peacetime.

To start with WW2 caused the conscription of over 10 million American workers, dropping unemployment to it's lowest level EVER in this country...somewhere around 1%. That ISN'T going to happen during peace time. The conscription is what accounts for the lowered unemployment not Keynesian policy. If it were otherwise then unemployment would have dropped before the war when FDR was running his New Deal at full bore. That didn't happen.

FDR was not running his new deal at "full bore" before WWII.

Post WWII we had a boom because

1. People had lots and lots of money (thanks to war production work); and

2. There was enormous pent up demand for consumer goods and housing as those demands were not met during WWII


Now note that the first thing above? People had lots of money? In other words the DEMAND side had enough money to make it worthwhile for the SUPPLY side to start producing things.

The 50s were the payoff from the net effect of Keynesian spending.

Then there is the GNP for that time. While it is true that GNP skyrocketed during the war that was only because military goods and services were counted in that total. If you deduct military goods and services from GNP then the GNP actually went down for civilian consumers and investors during the period of the war.

Of course that happened. Spending on consumer goods during the war went down because one COULD NOT buy stuff that WAS NOT BEING PRODUCED.

The real nail in your Keynesian policy "coffin" however is what happened following the war. After WW2 the huge deficits we were running immediately disappeared...I believe we ran a surplus the first year after the war ceased...yet the economy BOOMED.

Post WWII we had a boom because

1. People had lots and lots of money (thanks to war production work); and

2. There was enormous pent up demand for consumer goods and housing as those demands were not met during WWII

Now according to Keynesian theory the economy should have gone into a deep funk as soon as deficit spending was halted.

No, that is according to YOU, not according to Keynesian theory, Lad.

(Sort of how all you liberal geniuses are telling us now that cutting spending will hurt the economy?) It didn't. The US economy following WW2 expanded dramatically.

Ojay as you keep sayin gthe same things I guess I'll continue responding with the same responses

Post WWII we had a boom because

1. People had lots and lots of money (thanks to war production work); and

2. There was enormous pent up demand for consumer goods and housing as those demands were not met during WWII

 

[ScienceRocks]

What wealth does the defense department produce?

None. When did I claim it produced any? However, it does keep the likes of Osama bin Laden from wasting your sorry ass.

iF IT WASN'T FOR DEFENSE WE WOULDN'T OWN OUR OWN WEALTH AS ANOTHER NATION WOULD OWN US. Hell, as we have open borders another nation will be owning us pretty fucking soon. Maybe by 2040

 

[Toro]

who is wiping out the excess?

The market is absorbing the excess.

and my question was to cutting the borrowing, but not the current operating budget ( which they can make balance) ? as in no baseline increases.

you think that more deficit spending will do what exactly? stasis? advance us...? if so how?

Cutting borrowing means either cutting spending from the operating budget or raising taxes. Since most of the deficit reduction will come from the spending side, it means cutting the budget.

More deficit spending will keep the economy afloat until there is equilibrium in the housing market and financial markets heal. The deficit is about 10% of GDP. Removing 10% from GDP seems like enormously bad policy when unemployment is 9%. The idea that slashing the deficit is going to cause an increase in private sector demand is nuts, at least to me. That's why it is going to be interesting to watch the Republicans deal with this in 2013.

 

[NYcarbineer]

What wealth does the defense department produce?

None. When did I claim it produced any? However, it does keep the likes of Osama bin Laden from wasting your sorry ass.

 

[NYcarbineer]

What wealth does the defense department produce?

None. When did I claim it produced any? However, it does keep the likes of Osama bin Laden from wasting your sorry ass.

iF IT WASN'T FOR DEFENSE WE WOULDN'T OWN OUR OWN WEALTH AS ANOTHER NATION WOULD OWN US. Hell, as we have open borders another nation will be owning us pretty fucking soon. Maybe by 2040

Really?

Then how come someone doesn't 'own' all these other countries, who spend tiny fractions of what we spend on defense?

 

[edjax1952]

Cool.

Then you are okay with government cutting off it's addiction to the miltary industrial complex.

A little radical..but it's for the best.

What is funny is the defense of this nation is one of the few area's that are within the federal governments power, but you went that area cut. WHY?

Ever read the Constitution, ace?

It's really cool.

Check out section 8..the first clause. It's a doozy!

To have any authortiy and to use that authority in a responsible manner are quite two different things.

 

[ScienceRocks]

What is funny is the defense of this nation is one of the few area's that are within the federal governments power, but you went that area cut. WHY?

Ever read the Constitution, ace?

It's really cool.

Check out section 8..the first clause. It's a doozy!

To have authortiy to borrow money and to use that authority in a responsible manner are quite two different things.

The scary thing is the left believes that as long as they have "money" and can say that it has something to do with state to state business in some way they think they can get away with anything. That is what they base Obamacare on. This is really fucking scary.

Honest truth is the federal government DOESN"T HAVE THE POWER. Even if they did I wouldn't want them to have it anyways for much longer.

 

[Toro]

Our problem isn't that we have too much housing - just like the problem in the Great Depression wasn't too many pigs. Our problem is insufficient supply of money to buy them - that's an artificial problem.

I'm sorry but I think this is just flat out wrong, and is a serious flaw in Keynesian thinking. (And I'm assuming you mean "insufficient demand" as opposed to "insufficient money." There is an enormous amount of money in the system.)

All problems are not caused by insufficient demand. Demand can be unlimited but the constraints around demand are not. Demand is not untethered to the real economy. If the productive capacity of an economy grows by X over time, government cannot sustainably cause demand to increase by 2X or 10X or 100X or whatever at any given point in time without significant effects, such as inflation or eventual sovereign default.

For example, there are roughly 130 million homes in this country. If the government decided that tomorrow that we were going to build 1 billion houses next year and finance it by borrowing, you would create an artificial stimulus with some multiplier effects for some period of time. But eventually, this would cause the economy to collapse because a.) we don't need all those houses, and b.) the government would have driven itself so far into debt, it would default.

Currrently, government is stepping into the void of demand caused by the collapse of the credit markets. Debt in the private sector has been transferred to the public sector, and the total quantity of debt has not fallen. But the reason why we are in this mess today is because of this thinking that we have to continuously kick the can down the road. If we had taken our pain after the Tech Bubble, this almost certainly would not have happened. Each bubble has lead to even bigger stimulus to offset the aftermath of the bubble, which has created even bigger distortions in the asset markets and the economy, creating even bigger problems. So drones on the left yell "Not enough government spending!" and drones on the right holler "Cut taxes!" and neither understand the nature of what is occurring.

And in the meantime, gold is at $1880.

 

[Toro]

I have one question. Since no cuts and "austerity" programs have yet been passed or made...

... WHAT Austerity could be causing unemployment?

The austerity at the state and local levels.

Payrolls at the state and local levels are down by something like 300,000 since the recession began.

 

[Toro]

The government creates GDP by doing things like building roads, educating children, and defending the country.

Every dollar anybody ever spends comes from somewhere else. That has nothing to do with anything.

Every expense is also income. If you pay anyone anything it's an expense to you, and income to someone else.

When somebody says such-and-such "consumes" X% of GDP, they're simultaneously it produces that same percent.

No they aren't. People on Social Security aren't producing jack squat. Neither are Medicare recipients, Welfare Queens, etc. When I go to Lowes and buy a lawn tractor, I have received something in exchange for my "expense." When I pay my FICA taxes, I receive nothing.


Furthermore, the government doesn't educate children. It merely warehouses them and indoctrinates them. Now one would pay for the "education" the government provides voluntarily - which means its worthless. It's like calling drilling a hole in your head a "service."

Math and science is left-wing indoctrination.

Outstanding.

 

[editec]

Krugman: GOP Austerity Causing Unemployment

Of course it does.

How could it not?

When governments seeking to reduce spending lay people off, less people are working.

This is rather big

DUH!​

 

[Flopper]

Have you not been paying attention the past month? Our credit rating just got downgraded because we didn't address the deficit. If we continue to borrow money and not address entitlements and spending we WILL be downgraded again. We don't have a choice...spending cuts have to be made. PLEASE...get that through your head. This isn't some Republican plot to take away your "goodies" away...it's a fiscal reality.

Deficit = Spending -Revenue. There are two variables in the equation, something that's often forgotten.

Trust me, I haven't forgotten revenue. But when even Christina Romer is cautioning against raising taxes in as fragile an economy as we have...then it's pretty plain to see that we aren't going to be going that way anytime soon despite all the rhetoric from the Democrats. So if you can't raise taxes, how about we lower spending? Are you seriously telling me there isn't rampant waste in the Federal Government? Come on...you KNOW it has to be done! So let's stop the political game playing and do it!

Of course there is waste. Government by it's very nature is wasteful.

In order to have real deficit reduction, we are going to have to cut into entitlement programs and defense and many of other programs. That's going to require bipartisan support which means a balanced approach. Cutting Medicare, Medicaid, and Social Security will effect over 70 million people. That's nearly 25% of the population. If the cuts are not tempered by tax increases for the wealthy, there would be a huge backlash.

IMHO, the American people are far more likely to support a plan based on shared sacrifice rather than a plan that puts most of the burden on the poor and middle class.

 

[LibocalypseNow]

Only a dimwitted Progressive could think 'Austerity' measures have been enacted by our Government. They just raised our nation's Debt Limit and we're now $16 Trillion in Debt. That's 'Austerity' to Krugman? God,what a dunce. Let me know when our Government starts practicing Austerity. Because that certainly hasn't happened yet. Krugman is just a delusional idiot.

 

[Trajan]

None. When did I claim it produced any? However, it does keep the likes of Osama bin Laden from wasting your sorry ass.

iF IT WASN'T FOR DEFENSE WE WOULDN'T OWN OUR OWN WEALTH AS ANOTHER NATION WOULD OWN US. Hell, as we have open borders another nation will be owning us pretty fucking soon. Maybe by 2040

Really?

Then how come someone doesn't 'own' all these other countries, who spend tiny fractions of what we spend on defense?

ask Truman and Acheson....and I would not go inbto areas in which you have ZERO, and I mean ZERO expertise or inate knowledge, 30 seconds of googling doesn't count.

 

[clevergirl]

None. When did I claim it produced any? However, it does keep the likes of Osama bin Laden from wasting your sorry ass.

iF IT WASN'T FOR DEFENSE WE WOULDN'T OWN OUR OWN WEALTH AS ANOTHER NATION WOULD OWN US. Hell, as we have open borders another nation will be owning us pretty fucking soon. Maybe by 2040

Really?

Then how come someone doesn't 'own' all these other countries, who spend tiny fractions of what we spend on defense?

Our military complex is a complicated thing. Understanding its budget is the beginning of understanding- For instance, are you aware that when it comes to foreign aid, that the US ranks quite low in our contribution per capita, according to UN tracking of nations? The only reason for this is that they, the UN, refuse to include how much we spend militarily? That's right, our military that fly and protect and deliver foreign aid sent not only by ourselves, but by those other nations, is not figured into foreign aid giving by the UN. The reason those other nations can afford to have such small military budgets is because they depend on us to do so- and in their gratitude, they, don't acknowledge that cost in our favor.

What do these other nations do with their budgets- they spend it on social programs. How nice of them and how modern of them you may say. Except their nations are failing to thrive- They have social unrest; falling populations; and are left with no future path to keep funding these programs. So now they have a dependent population of mediocre ambitions who are growing angry because all those free social programs have turned out to be not free at all.

I support massive military reductions in foreign aid and foreign protection unless it serves the people of the US.

 

[Trajan]

who is wiping out the excess?

The market is absorbing the excess.

if tjhey are Toro it is infinitesimal, imho. I am not ever sure we have accurate figures on what homes a) are IN foreclosure, b) have been foreclosed, c) how many short sales are extent, e) how much damage this law suites vs. the banks et al are going to cause, what the banks are hiding as it applies to the a b and c....

and my question was to cutting the borrowing, but not the current operating budget ( which they can make balance) ? as in no baseline increases.

you think that more deficit spending will do what exactly? stasis? advance us...? if so how?

Cutting borrowing means either cutting spending from the operating budget or raising taxes. Since most of the deficit reduction will come from the spending side, it means cutting the budget.

OK, so it appears that it is a positive in your opinion to continue as we are, borrowing money to pay for baseline increases and commitments, well, I am sorry but not spending money scheduled to be spent say jan 2012 on, won't have a huge effect imho, yes there will be some employment issues becasue these very same orgs. have become bloated and are committed to spending that is bloated. It appears that you assume that gov. borrowing and spending will decrease as the economy ramps up, but yet the baselines enacted for years down the road, and being enacted NOW, don't allow for that.


this rejuvenation that you speak of becomes infinitely harder and further down the road the more load we add, that we have to go back and buy back when this big ramp of gdp and revenues we are waiting on occurs. I am sorry but this just sounds like more kicking the can down the road. If we keep saying we'll do it when the economy gets better, well, imho, the balance between sensible deficit spending, borrowing and thrift has been destroyed, the hole gets deeper for very slim returns that puts the economy on that track of explosive sustained growth, so it may not happen for a lost decade, so; death of a thousand cuts or just take our medicine, now...I vote take our medicine.

More deficit spending will keep the economy afloat until there is equilibrium in the housing market and financial markets heal. The deficit is about 10% of GDP. Removing 10% from GDP seems like enormously bad policy when unemployment is 9%. The idea that slashing the deficit is going to cause an increase in private sector demand is nuts, at least to me. That's why it is going to be interesting to watch the Republicans deal with this in 2013.

the deficit spending adds to the debt. does it not? eventually the trade down as to debt servicing vs. keeping the economy afloat eats itself, just driving more of the same.

 

[bripat9643]

No they aren't. People on Social Security aren't producing jack squat. Neither are Medicare recipients, Welfare Queens, etc. When I go to Lowes and buy a lawn tractor, I have received something in exchange for my "expense." When I pay my FICA taxes, I receive nothing.


Furthermore, the government doesn't educate children. It merely warehouses them and indoctrinates them. Now one would pay for the "education" the government provides voluntarily - which means its worthless. It's like calling drilling a hole in your head a "service."

Math and science is left-wing indoctrination.

Outstanding.

These days, so-called "science class" is just indoctrination in left wing environmental extremism.

Schools don't teach math and science. That's why McDonald's has cash registers that don't have numbers. They just have buttons with a picture of a Big Max and a Quarter Pounder. I've watched these morons try to figure your change in their heads, and they couldn't do it if their life depended on it.

 

[bripat9643]

Krugman: GOP Austerity Causing Unemployment

Of course it does.

How could it not?

When governments seeking to reduce spending lay people off, less people are working.

This is rather big

When fewer parasites are sucking on the government tit, that means taxpayers have more money to spend. That translates into more private sector jobs. It also means the tics will actually have to produce something of value if they want to get paid.