Paul Krugman: "we're doing a 1937"

"Premature Exit

While looking at the Economic Report of the President, I was inspired to make this chart, which actually doesn’t come from the ERP (more ERP blogging in a day or two). It shows the contribution of the ARRA, aka the Obama stimulus, to the deficit — a rough measure of the amount of stimulus — with the CBO’s projection of the unemployment rate, by fiscal year:



Congressional Budget Office

Basically, the stimulus fades out fast starting in fiscal 2011, which starts in October 2010. Yet the consensus view is that unemployment will be around as high as it is now.

The point is that we’re doing a 1937 — or actually worse, since unemployment had in fact fallen dramatically before FDR made his big mistake. Fiscal support for the economy will be pulled away with the economy having barely begun to recover."

http://krugman.blogs.nytimes.com/2010/02/13/premature-exit/

This is the time for a 'stay the course' speech.

People are mainly worried about finding or keeping their jobs, their homes,their health care.

who brought the recession, of course.

they'll do well.

government programs like social security and medicare. IMO.

government layoffs = more unemployed.

more unemployed = less consumption

less consumption = less production

rinse, repeat, spiraling depression, vicious circle.

you don't do "deficit reduction" in a depression.

(Can I just come out and say that? Will anyone die of shock if I do?)

No, every proposed solution will be to make the lower and middle classes pay - they will be squeezed even harder.

i'm confused about the status of that.

holiday....do they have 2010 to solidify their holdings?

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=433x68129

which gets me back to HCR and how Obama still wants the excise tax on "cadillac" plans, despite many, many dems now arguing against that

i think O himself, sad to say

and, sadly, Kissinger is advising Obama/White House!!!

Conyers obviously cares about MEDICARE FOR ALL --

Obama and Rahm Emmanuel/DLC don't --

That's clear --



And giving Kissinger access to obama's ear and the White House is

thoroughly disgusting!

snip

"....Many economists take a much calmer view of budget deficits than anything you’ll see on TV. Nor do investors seem unduly concerned: U.S. government bonds continue to find ready buyers, even at historically low interest rates. The long-run budget outlook is problematic, but short-term deficits aren’t — and even the long-term outlook is much less frightening than the public is being led to believe.

So why the sudden ubiquity of deficit scare stories? It isn’t being driven by any actual news. It has been obvious for at least a year that the U.S. government would face an extended period of large deficits, and projections of those deficits haven’t changed much since last summer. Yet the drumbeat of dire fiscal warnings has grown vastly louder.

To me — and I’m not alone in this — the sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war. Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt. Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn’t been any new information to justify this sudden urgency. Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized.

And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction.

Let’s talk for a moment about budget reality. Contrary to what you often hear, the large deficit the federal government is running right now isn’t the result of runaway spending growth. Instead, well more than half of the deficit was caused by the ongoing economic crisis, which has led to a plunge in tax receipts, required federal bailouts of financial institutions, and been met — appropriately — with temporary measures to stimulate growth and support employment.

The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs.

True, there is a longer-term budget problem. Even a full economic recovery wouldn’t balance the budget, and it probably wouldn’t even reduce the deficit to a permanently sustainable level. So once the economic crisis is past, the U.S. government will have to increase its revenue and control its costs. And in the long run there’s no way to make the budget math work unless something is done about health care costs.

But there’s no reason to panic about budget prospects for the next few years, or even for the next decade. Consider, for example, what the latest budget proposal from the Obama administration says about interest payments on federal debt; according to the projections, a decade from now they’ll have risen to 3.5 percent of G.D.P. How scary is that? It’s about the same as interest costs under the first President Bush."

snip

http://www.nytimes.com/2010/02/05/opinion/05krugman.html?partner=rssnyt&emc=rss

on the contrary, the hype about deficits is a very conscious agenda choice made by the republicans and right-wingers. they railed about the deficit when clinton was in power, the had not one peep to say about it when shrub was in the white house, and as soon as obama is in office it once again returns to its issue number one status.

anyone see a pattern here?

republicans are all for fiscal responsibility when it prevents democrats from spending money and enacting pet programs. but they don't give a crap about it when it interferes with THEIR ability to spend money and enact pet tax cuts.

Its possible that Obama and his economics team know full well the history of the Great Depression and how deficit reduction in the midst of it damaged that recovery, but what if damaging the possibility of a recovery now was the goal so the tax base would remain low, creating the perfect opportunity to slash (or eliminate) those damned entitlement programs the conservatives have long wanted to end?

Have you seen PBS Frontline, "The Warning"?
http://www.pbs.org/wgbh/pages/frontline/warning/view/

Same crew that sailed us into the Banking and finance storm. The strong-armed Brooksley Burn and made her STFU when she tried to prevent it. Obama did not learn from recent history, or didn't care to. So distant history is a more distant dream.

And we propped up our manufacturing and trade. Now we worship the destruction of it.

They didn't listen when he said the stimulus was too small and they won't listen now when he tells them the stimulus is being cut off too soon.