Krugman on the serious people and austerity economics – Defeatism
Martin Wolf is getting frantic, as well he should. The austerians have brought us to the brink of a vast disaster. A recession in Europe looks more likely than not; and the question for the United States is not whether a lost decade is possible, but whether there is any plausible way to avoid one.
Wolf directs us to a recent speech by Adam Posen (pdf), which opens with a passage that very much mirrors my own thoughts:
Both the UK and the global economy are facing a familiar foe at present: policy defeatism. Throughout modern economic history, whether in Western Europe in the 1920s, in the US and elsewhere in the 1930s, or in Japan in the 1990s, every major financial crisis-driven downturn has been followed by premature abandonment—if not reversal—of the macroeconomic stimulus policies that are necessary to sustained recovery. Every time, this was due to unduly influential voices claiming some combination of the destructiveness of further policy stimulus, the ineffectiveness of further policy stimulus, or the political corruption from further policy stimulus. Every time those voices were wrong on each and every count. Those voices are being heard again today, much too loudly. It is the duty of economic policymakers including central bankers to rebut these false claims head on. It is even more important that we do the right thing for the economy rather than be slowed, confused, or intimidated by such false claims.
Indeed. Posen’s “unduly influential voices” are my Very Serious People.
The serious people include some of the conservatives of course, and the European Central Bank, the Organization for Economic Cooperation and Development, the Bank for International Settlements. It has never been the case that a nation has cut spending to the bone to spur an economic recovery. Yet here we are caught in some weird bubble of disinformation, half-truths, distortions and plain old lazy thinking which says times are bad so slash and burn. Krugman, Posen and Wolf are not the only ones. In yet another recycling of the facts a new post by the CBPP notes – “Supercommittee” Should Develop Balanced Package of Tax Increases and Spending Cuts
The new congressional committee on deficit reduction (the so-called “supercommittee”) not only can consider revenue increases, but must consider them — as well as spending cuts — if it’s going to produce a balanced plan. 
There are five main reasons why.
Spending cuts alone can’t do the job. The key fiscal policy goal is to reduce deficits sufficiently to stabilize the debt relative to the size of the economy. The only way to accomplish this without severe cuts that would hit low- and middle-income Americans hard — in areas ranging from Medicare, Medicaid, and possibly Social Security to basic assistance for the poor — and weaken core government functions like education, scientific research, and ensuring safe food and water, is through revenue increases.
The 2001-2003 tax cuts are a significant contributor to projected deficits. Letting some or all of those tax cuts expire would make a significant contribution to reducing the deficit.
Higher-income people can and should share in the sacrifices needed to reduce long-term deficits. Low- and moderate-income households shouldn’t be forced to bear a disproportionate share of the burden through cuts in Medicare, Medicaid, Social Security, and programs targeted on people who are poor or near-poor.
Taxes are low both in historical terms and in comparison with other countries. By either standard, the United States has significant room for increasing tax revenues.
Higher taxes are not an inherent barrier to economic growth. In fact, the Congressional Budget Office (CBO) has said that tax increases used to reduce budget deficits can improve long-term economic growth and job creation. The experience of the 1990s shows that claims that reasonable revenue increases will sink the economy largely reflect politics and ideology, not solid analysis.
That last sentence says it all. Democratic and progressive bloggers, the few national pundits we have, can all put up all the charts, graphs and studies they like. The Serious People have battened down the bunker latches and no amount of ‘solid analysis” is going to penetrate. Too bad we can’t materialize their “philosophical” arguments into solid material and make actual bunkers out of it. Would make good helmets and flak vests as well. As an economic tool however it is pushing us into the Great Recession part 2. Passing Obama’s Jobs Bill would help, but the U.S. economy is not an island.
Global investors overwhelmingly support President Barack Obama’s proposed tax increase for those earning annual incomes of $1 million or more in an effort to reduce the deficit.
By a margin of 63 percent to 32 percent, respondents in a Bloomberg Global Poll approved of the president’s proposal, known as the “Buffett rule” in a nod to Warren Buffett, the chairman of Berkshire Hathaway Inc., who has said it is wrong that he pays a smaller share of his income in taxes than does his secretary.
Obama said Sept. 19 that making sure that the wealthy pay at least the same tax rate as the middle class was “just the right thing to do.” House Speaker John Boehner accused the president of practicing “class warfare,” saying any new tax would hurt job creation and Buffett’s situation was not typical.
The Bloomberg story makes an interesting contrast with how co-founder of Home Depot Bernie Marcus sees things – Bernie Marcus on Obama White House: ‘Amateurs Surrounded by Amateurs’
The Georgian who every Republican presidential candidate wants in his camp still hasn’t decided who he’s going to back. But although Bernie Marcus believes in abortion and gun control, he knows who he won’t support: Barack Obama.
In an interview at the Georgia Public Policy Foundation meeting here, the billionaire philanthropist and Home Depot co-founder lambasted the “amateurs in the White House” as “amateurs surrounded by amateurs.”
Marcus reminds me of most, though not all the CEOs of large companies that I have either meet or read about – they have crossed the line from confident to arrogant. This is largely because they live in a bubble where no one tells them they’re wrong. Everyone kisses their ass. They become disconnected from the realities of working class America. Bernie Marcus was part of a big call by some large corporate powers to stop unionizing efforts – Bailout Recipients Hosted Call To Defeat Key Labor Bill
“This is the demise of a civilization,” said Marcus. “This is how a civilization disappears. I am sitting here as an elder statesman and I’m watching this happen and I don’t believe it.”
Setting aside guilds for the moment, American workers have been unionizing since the 1800s. The country not only survived but unions are largely responsible for all the workplace niceties such as lunch breaks, sick leave, fair pay and safer working conditions that most Americans now take as standards. A self-described elder statesman who a billionaire thinks people like him should have all the rights and privileges in the world, while workers should be careful about getting uppity. What other group of people in American history thought like that. As anyone who has shopped there knows a good portion of Home Depots products are made in China. Creating American jobs is not exactly a priority at Home Depot in other words. They cannot even sell American goods to government – Home Depot Facing Lawsuit for Violating the Buy American Act; Lists Chinese-made Products on GSA Schedule. Marcus is not so much evil as another clueless hypocritical member of the elite who loves the sound of his own voice.
While it is a very good idea for Congress to pass some legislation for dealing with American citizens who move out of the country and help foreign enemies I find it difficult to say that the killing of al-Awlaki was completely wrong based solely on “due process”. What Process is Due?
A corollary to Bobby’s second point in this post is that it is not enough to say the words “due process” by way of denouncing the Al Aulaqi strike, as though those words represent a discussion-ending argument. One has to specify what process is due to someone being targeted in a particular circumstance before one concludes that the targeting violates due process. If targeting Al Aulaqi were really an assertion of the power to kill any U.S. citizen anywhere based on his speech, I would find it alarming indeed. But I am, in fact, quite certain that Bobby is correct that it is no such thing. I am sure that if the internal legal arguments emerged, they would reflect–and, indeed, those legal arguments that are public do reflect–a dramatically narrower assertion of the power to target a U.S. citizen, one with which I have no deep-seated discomfort.
In the flurry of al-Awlaki coverage today, there are two points that I think are particularly worthy of attention.
First, does this show that the U.S. government asserts authority to target based on speech alone? One might get that impression from some of the coverage, but it is worth recalling what the government had to say about al-Awlaki in the ACLU lawsuit last year: he was involved in violent plots as an operational leader, not just as an idealogue. In my paper addressing al-Awlaki, I summarized the government’s description of his role as follows:
In a declaration filed by the government in connection with the aforementioned ACLU lawsuit, the Director of National Intelligence asserts that “Anwar Al-Aulaqi has pledged an oath of loyalty to AQAP emir Nasir al-Wahishi, and is playing a key role in setting the strategic direction for AQAP. Al-Aulaqi has also recruited individuals to join AQAP, facilitated training at camps in Yemen in support of acts of terrorism, and helped focus AQAP‘s attention on planning attacks on U.S. interests.”23 The declaration adds that al-Awlaki personally instructed Abdulmuttalab “to detonate an explosive device aboard a U.S. airplane,” as part of a larger shift toward an operational leadership role with AQAP.24
al-Awlaki did not just declare war on the U.S. he declared war on civilian men, women and children around the world whether they be Christian or Muslim.
Democratic strategist Cornell Belcher was on CNN and made this comment on Herman Cain’s claim that most African-Americans have been brainwashed by Democrats – ‘One of My Best Friends is Black’
So great job there. Really sensible, Herman Cain.
The second part here is, it’s really a teachable moment. You know, if I came on your show, Anderson, and I said, all Jewish people are brainwashed, I probably wouldn’t be invited back to CNN and I assure you the condemnation would be swift and it’d be powerful and be strong.
What Herman Cain said was a racist, bigoted statement and it should treated like a racist and bigoted person who makes those racist and bigoted statements.
Every side thinks the other side has been listening to too much trash. Many Democrats, such as myself believe that part of the problem with conservative polices and the people who vote for them, is those people have had certain cultural issues and beliefs exploited. Thus they vote against their own best interests. Brainwashed? Probably not so much. Most conservatives come to issues with a certain psychology that predisposes them to be a little paranoid, to be xenophobic, to not be able to make the connections between issues like taxing the very wealthy and how that affects the quality of their kids education, the readiness of their fire department and America’s technological edge. As a southern I find it especially telling that the far Right’s last stronghold ( and that is changing because of demographic trends) is the south. These are states who generally get more of that federal money they say they hate than they contribute. It is where wages are lower and there are higher percentage of uninsured. The south is where there is some income redistribution. It is to Red states from Blue states. And at least through the secondary level that education achievements are below average. Abet slowly, things are changing. They might more readily identify with being called “conservative”, but if you ask them about individual issues like Social Security, workers having rights, women having the last say over their own medical decisions…well a sizable number come out looking kinda liberal.