Black Hole....errr The Political Roundtable

[Severn Hoos]

Speaking of GE, check this out from Bob Herbert's March 25 column in the New York Times. It was his last column for the Times after 18 years as a columnist.

A stark example of the fundamental unfairness that is now so widespread was in The New York Times on Friday under the headline: “G.E.’s Strategies Let It Avoid Taxes Altogether.” Despite profits of $14.2 billion — $5.1 billion from its operations in the United States — General Electric did not have to pay any U.S. taxes last year.

As The Times’s David Kocieniewski reported, “Its extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore.”

So much for American corporations being "burdened" by high tax rates.

Dang, Obama should find the CEO who pulled that crap and have a talk with him. Shouldn't be too hard to find him....

http://en.wikipedia.org/wiki/Jeffrey_R._Immelt

[W. Unseld]

I'm curious about the current take on Libya from everyone, this strikes me as something of a rorschach test.

[dobrojim]

I feel the intervention may well be the right thing to have done.

That said, I continue to be troubled by the fact that we have had
no declared wars since WWII, but lots of wars. This is wrong.

we're all against slaughter, we're all against Q/Gaddafi.

I found myself in agreement with much of what Obama said
last night, up to a point.

I think there needs to be a greater recognition that our
"defense" dept has long ago stopped being about defense.
It's been more about the projection of power on behalf of
large economic interests. No one is going to invade the USA.
How can it possibly be in our long term interests to have
military expenditures roughly equivalent to the entire rest
of the world. That puts us at a severe economic disadvantage.
The deficit hawks got eaten by the war hawks.

[dobrojim]

Krugman in the NYTimes writing about how insanity continues to prevail in
DC
http://tinyurl.com/47lzxaw

Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up.

What do these events have in common? They’re all evidence that slashing spending in the face of high unemployment is a mistake. Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong.

It’s too bad, then, that these days you’re not considered serious in Washington unless you profess allegiance to the same doctrine that’s failing so dismally in Europe.

[nate33]

Krugman is a lunatic. If it were up to him, we'd borrow at twice the rate we borrow now. Debts don't matter. Deficits don't matter. All that matters is that government continues to grow.

[montestewart]

Krugman is a lunatic. If it were up to him, we'd borrow at twice the rate we borrow now. Debts don't matter. Deficits don't matter. All that matters is that government continues to grow.

"Debts don't matter. Deficits don't matter. All that matters is that government continues to grow." That's a quote from him right? I didn't see a link.

Then there's also this quote: "Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong." As I recall it, much of the first part of this statement is true. Maybe the real debate is the second part, along with all the waffling and qualifying, anything to avoid admitting being wrong.

Krugman may be a lunatic, but people have a natural self-interest in not paying taxes (I hate paying taxes), an interest quite distinct from the interests of the nation and its economy and security. There's a lot of money behind that self-interest, and the effects of that money on political dialogue are pretty well documented (in case you need to go beyond your own eyes and ears for verification).

The long-established politicization of economic policy (remember "trickle down"? They'll say anything.) coupled with the routine selling out of control to various special interests (through political contributions and surrender of policy making positions to industry loyalists) all seem so obvious that it's hard to see why either party's economic platform is considered in any way sincere.

[dobrojim]

Krugman is a lunatic. If it were up to him, we'd borrow at twice the rate we borrow now. Debts don't matter. Deficits don't matter. All that matters is that government continues to grow.

wait isn't that what pubs said when they were IN power? I think it was.

Then when they're out of power suddenly they get all excited and concerned.
Where were these same pols when things like unpaid for wars and prescription
drug benefits with explicit prohibitions against using volume buying to obtain
price concessions were approved?

And as MS points out, Krugman didn't say what you implied.

Mr Speaker, where are they jobs?

Response - if what we do causes a resumption of job losses, so be it!
ie let them eat cake.

[Spence]

Krugman is a lunatic. If it were up to him, we'd borrow at twice the rate we borrow now. Debts don't matter. Deficits don't matter. All that matters is that government continues to grow.

You don't have the slightest idea what you're talking about, Nate. Apart from correctly predicting just about every mistake of the Bush-Cheney era, Krugman is a Nobel Prize-winning economist who will forget more about the subject than you'll be able to learn if you live to be 300. I've taken classes taught by Dr Krugman and I can tell you he is essentially un-interested in the size of government, so long as the society works and we don't have the Third World type of wealth gap we have right now. Krugman's point, which is accepted by most economists, is that the debt is a much lesser concern right now, what matters is continuing to stimulate the economy so that the economic recovery produces more jobs. His view, that deficits are of much lesser concern during times of economic distress, is widely held among actual economists. Republicans prefer "scholars" who predicted the Dow would be at 36,000 by now, but I suppose that's no more than we should expect from a party that worries about Islamic fundamentalist atheists seizing control of the country.

Krugman's view is that the deficit can easily be tackled by:

-- health care reform that was passed last year;
-- restoration of Clinton-era tax rates;
-- elimination of massive subsidies to agribusiness and petrochemical companies;
-- reform to control the price of pharmaceuticals and medical treatment paid for by Medicare.

These are common sense steps to get long term control of our deficits, which are driven almost entirely health spending. [I know you Republicans think the deficit is caused by foreign aid and NPR, but, as I noted above, you don't have the slightest clue what you are talking about.] Republicans oppose all four of those policies.

[Zonkerbl]

It's amazing that we've learned NOTHING from history. One of the problems in the Great Depression was that government's worldwide responded to it by cutting public spending. Fool me once, shame on me, fool me twice, am I a fricking idiot or what? Unemployment is still above 9% and the Republicans want to cut spending?????? WHAT?!?!??!?!

Krugman is 300% right. We are in a Keynesian liquidity trap right now and we have no choice but to spend spend spend our way out of it. You can't worry about deficits now.

[Severn Hoos]

It's amazing that we've learned NOTHING from history. One of the problems in the Great Depression was that government's worldwide responded to it by cutting public spending. Fool me once, shame on me, fool me twice, am I a fricking idiot or what? Unemployment is still above 9% and the Republicans want to cut spending?????? WHAT?!?!??!?!

Krugman is 300% right. We are in a Keynesian liquidity trap right now and we have no choice but to spend spend spend our way out of it. You can't worry about deficits now.

Or......tight money control + high tariffs + continuous government "experimentation" (read: uncertainty) + punitive tax policies causing businesses to stay on the sideline = stagnant economy and continuous high unemployment.

I don't think it's as easy as saying that the "lessons" were learned from the Great Depression - at least not in the sense that the history books would have you believe. And I still can't see how a 12-year Depression with up to 25% unemployment (worse in '37 than when FDR started his reforms in '33) that was only ended by the largest war man has ever seen is viewed as a great success story that we should use as a model for future economic policy.

[nate33]

Spence, Krugman's solution to every economic problem is more deficit spending. It's a solution that works until we can't deficit spend anymore, at which point we have the mother of all Great Depressions.

A Depression is unavoidable because all of our assets have been bid up to bubble levels due to an influx of credit. Those assets must return to their equilibrium price. The longer we try to and use credit to maintain the illusion of a functioning economy, the worse it'll be when the truth finally hits us. I'd rather have a Small Depression now than a Great Depression later.

[Zonkerbl]

You say tight money control, I say tomahto. Monetary and fiscal policy are two sides of the same coin. The other things you cite are important but secondary issues.

In my economics classes they were careful not to claim to have learned too much from the Great Depression because no one really knows what happened, the Federal government didn't collect the statistics that we need to piece everything together. One of the few things we did learn is there is such a thing as a Keynesian liquidity trap, we were in one during the Great Depression, and the government's tight fiscal and monetary policy made everything worse. Problem is you can't base your macro policy on the existence of a liquidity trap because usually you have to be in a fricking huge recession for it to occur. Well, guess what? That's the situation we're in now.

[Severn Hoos]

Krugman is a Nobel Prize-winning economist who will forget more about the subject than you'll be able to learn if you live to be 300.

Now we find something we can agree on!

From James Taranto:

Former Enron adviser Paul Krugman takes note in his New York Times column of what he calls "the incredible gap that has opened up between the parties":

Today, Democrats and Republicans live in different universes, both intellectually and morally.

"What Democrats believe," he says "is what textbook economics says":

But that's not how Republicans see it. Here's what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning's position (although not joining his blockade): unemployment relief "doesn't create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work."

Krugman scoffs: "To me, that's a bizarre point of view--but then, I don't live in Mr. Kyl's universe."

What does textbook economics have to say about this question? Here is a passage from a textbook called "Macroeconomics":

"Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker's incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of "Eurosclerosis," the persistent high unemployment that affects a number of European countries."

So it turns out that what Krugman calls Sen. Kyl's "bizarre point of view" is, in fact, textbook economics. The authors of that textbook are Paul Krugman and Robin Wells. Miss Wells is also known as Mrs. Paul Krugman.

It seems Krugman himself lives in two different universes--the universe of the academic economist and the universe of the bitter partisan columnist. Or maybe this is like that episode of "Star Trek" in which crewmen from the Enterprise switched places with their counterparts from a universe in which everyone was the same, only evil.

Like Spock, the evil Krugman is the one with the beard.

I think the first statement is pretty self-evident. If you give money to people who are unemployed, no matter how well-intentioned it is, the result will inevitably be that some portion of them will choose not to go back to work, or will delay the return. Thus, higher unemployment. When Krugman viewed that dynamic from a purely economic viewpoint, this was obvious. But when he views it from his perch as a NYT columnist with a political angle, he sees it differently.

And even that I could accept, if he wasn't so nasty to those whose position differs from his. Well, at least his as he tells it today...

[dobrojim]

How much do they get in unemployment benefits?
How much would they get from a real job?
And you believe what?

[Zonkerbl]

Spence, Krugman's solution to every economic problem is more deficit spending. It's a solution that works until we can't deficit spend anymore, at which point we have the mother of all Great Depressions.

A Depression is unavoidable because all of our assets have been bid up to bubble levels due to an influx of credit. Those assets must return to their equilibrium price. The longer we try to and use credit to maintain the illusion of a functioning economy, the worse it'll be when the truth finally hits us. I'd rather have a Small Depression now than a Great Depression later.

Meh, Nate, that's not true at all, really. The U.S. economy is kind of a weird place. We have the strongest and most stable economy in the world, so foreigners are willing to pay a premium to invest in the US vs other countries. So we use that premium to fund a lot of stuff that other countries have to use savings on. It's weird but oddly sustainable.

I should look up this data for you, it's amazing. Basically, we pay something like $200 billion a year of interest on the debt we owe to other countries, which is, for the sake of argument, $2 trillion total. But we earn something like $300 billion off of $1.5 trillion worth of liabilities owed to us by foreign countries. So despite owing more to other countries, we end up $100 billion in the black because of the premium foreign investors pay to own US assets. I have a ppt somewhere with the exact figures, but that's the general story. That's why we have a negative savings rate, the rest of the world is subsidizing our investment.

Well, that was the story before 2009 anyway, I'd be curious to see if that's still true. Probably is because all that matters is the US be relatively stronger than everybody else, and there are a lot of messed up economies out there. China may take over that role someday, who knows.

[Zonkerbl]

D'oh, Krugman, come on.

Being without a job sucks because you have no money. That's why you go out looking for a job. If the government gives you money conditional on your being unemployed, it's going to make it easier to hold out for a better job. Yes, it is a disincentive to accept the first crappy job that comes along (or to be precise, to accept the first job that comes along if it is crappy). Not necessarily a bad thing, but Krugman is flat out wrong to deny the disincentive exists.

Love quoting from his own textbook. Hilarious! And I love Krugman and like that he comes out and says what a lot of economists would say. But he takes it too far sometimes. A lot of times, really.

[nate33]

Krugman's Insanity and the Hard Mathematical Truth

[Severn Hoos]

How much do they get in unemployment benefits?
How much would they get from a real job?
And you believe what?

Well, zonker said it better than I could, but here goes.

I was furloughed for a week last year. That made me eligible for unemployment for that one week. The total benefit was something like $350 per week. Now, that wouldn't be enough to replace my salary, so if I had been permanently unemployed, I would have been looking as fast as I could to find a job comparable to the one I now have.

But if I was working retail, or at a lower hourly wage, it would be a different story. Say I made $10 per hour. That's $400 per week. The unemployment benefit is indexed to actual salaries, so let's say in that scenario the check is more like $250 per week. Well, that's still over $6 per hour.

Then, I go out looking for work. The best offer I can find is $8 per hour. On the face of it, that's more than the $6 per hour. But the marginal rate is a mere $2 per hour, compared to what I would have if I decide not to take the job and watch Oprah all day. (in other words, don't accept the first job that comes along if it is crappy.) And even if I am a self-starter, go-getter type, I will conclude that my time is better spent collecting the $250 per week while looking full time for that non-crappy job out there.

In either case, unemployment will be higher than it would have been otherwise, even if only for the month it takes me to find my preferred job. And as zonk says, that's not necessarily a bad thing. It's also not a political statement. But Krugman just can't let pass a chance to slam Republicans. So for the sake of a column, the fundamental economic principles are out the window.

[dobrojim]

Is there a disincentive? OK, but it's MARGINAL AT BEST! (which was my point)

I think the fundamental principle is that it is better for our economy
for skilled, intelligent people to have jobs that actually take advantage
of the skills that they have. So why go for the short term marginal advantage
of forcing someone into the first lousy job they can find? Penny wise and
pound foolish, not to mention lacking basic human compassion.

Republican's deserve to be criticized for what they have done to our
economy beginning with Reagan.

[Spence]

Spence, Krugman's solution to every economic problem is more deficit spending. It's a solution that works until we can't deficit spend anymore, at which point we have the mother of all Great Depressions.

This is just false. More spending is absolutely not Krugman's solution to every economic problem. I don't know where you get this, but it certainly isn't from reading his columns or books or attending any of his classes. Krugman is a classic Keynsian economist who believe in government stimulus of the economy during times of economic distress and high unemployment. This is not, as you put it, "insane." This is the overwhelming opinion of economists the world over, including many who call themselves Republicans.

Also, the Great Depression was not caused by excessive government spending. The Great Depression occurred during a time of extremely low federal and state government spending. Massive government stimulus, in the form of infrastructure and defense spending, is what pulled the United States out of the Great Depression.