Paul Krugman - New York Times Blog

September 16, 2013, 8:33 am


In Front of Their Noses

Antonio Fatas, like me, is boggled by the OECD's apparent
inability even to contemplate the possibility that Europe's poor
economic performance is the result of fiscal austerity.

At one level, of course, it's perfectly understandable. The OECD
in general, and Pier Carlo Padoan, in particular, as chief
economist, were among the biggest and earliest cheerleaders for
austerity; you can see why they don't want to admit that they
were in fact cheerleading Europe into disaster.

Still, it's kind of depressing. What we've just had in the
eurozone is as close to a natural experiment on fiscal policy as
you're ever likely to see, and the results overwhelmingly
support a Keynesian view. You might expect some acknowledgement,
some revision of views.

But that's not the way the world works. George Orwell knew all
about it:

The point is that we are all capable of believing things
which we know to be untrue, and then, when we are finally
proved wrong, impudently twisting the facts so as to show
that we were right. Intellectually, it is possible to
carry on this process for an indefinite time: the only
check on it is that sooner or later a false belief bumps
up against solid reality, usually on a battlefield … To
see what is in front of one's nose needs a constant
struggle.

And not many influential people are into that kind of struggle.

BOB KLAHN bob.klahn@sev.org http://home.toltbbs.com/bobklahn

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Paul Krugman - New York Times Blog
<http://krugman.blogs.nytimes.com/>

September 16, 2013, 9:11 am

The Political Economy of Bloombergism

Daniel Little has a nice survey essay on Saskia Sassen's concept
of the global city.

These are cities that concentrate high-level coordination
functions for the global economy - finance, in particular - and
exhibit extraordinary concentrations of wealth as a consequence.
New York and London are the prime examples; Tokyo also shows up
on Sassen's list, although I'd say that it's a lot less global
than the others, thanks to the continuing insularity of Japanese
culture. If I had to make a guess, I wouldn't be surprised if
Seoul, rather than Tokyo, ends up becoming the true global city
of East Asia.

If you're interested in this stuff, you should also read John
Quiggin's cynical but plausible take Quiggin suggests that the
reason finance and similar activities concentrate in a handful
of global cities isn't because that produces gains in economic
efficiency, it's because of the enhanced opportunities for
cronyism; it's a lot easier to make implicitly corrupt deals
when you have lunch in the same restaurants and your kids go to
the same expensive private school.

Just as an aside, I love New York, which has become a far
friendlier place than legend has it, which has cultural
resources like noplace else, and is actually a pretty easy place
to live if you have enough money. In a perverse way, it's even a
place where - for someone like me, anyway - the psychological
urge to participate in the money rat race is largely absent. No
matter how much you make, there are people nearby who make so
much more that your income looks ridiculous, so you don't ever
think of measuring yourself that way.

Oh, and the subway is a miraculous form of transportation. Of
course, all these happy thoughts rely on the fact that I have
enough money to afford a comfortable apartment, eat out whenever
I feel like it, and so on. And that seemingly modest lifestyle
requires an income that would be considered very high anywhere
else.

But back to my main point, a further thought: as the Bloomberg
era draws to a close in New York, there has been a fair amount
of speculation on why Bloomberg was such a success but
Bloombergism - his mix of social liberalism and pro-finance
economic policy - has been such a bust on the national political
scene. As Jonathan Chait reminds us, pundits wrote column after
column boosting Bloomerg as a model for the rest of American
politics, urging Bloomberg himself to run as a third-party
candidate, whatever; Bloomberg, they claimed, represented the
kind of centrist, nonpartisan position Americans yearned for.
All of this went precisely nowhere.

And I think the concept of New York as a global city - a hub of
worldwide finance, and worldwide cronyism - explains why.
Bloombergism played well with the global elite, which really
doesn't care what other people do in their bedrooms but cares a
lot about being left free to rake in the moolah, which judges a
man not by the color of his skin but by the size of his
portfolio. The elite wanted, and got, a well-run city, which
included reasonable public services; the cruder forms of
anti-government sentiment never had much home in New York. Even
a bit of redistribution was OK, if it seemed to contribute to a
nicer environment in which to enjoy the remaining 99.9 percent
of one's income. In the end, by the way, de Blasio will probably
be accepted by the 1 percent, since his program will end up
being seen as essentially one of slightly moderating inequality
in everyone's interest.

But the rest of America is nothing like that. And it's a measure
of the insularity of many pundits that they imagined that the
politics of a city that is really like nothing else in America -
and resembles only a couple of other places in the world -
somehow represented the national center.



BOB KLAHN bob.klahn@sev.org http://home.toltbbs.com/bobklahn

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Rebels Without a Clue
By PAUL KRUGMAN
Published: September 29, 2013


This may be the way the world ends, not with a bang but with a
temper tantrum. Paul Krugman Blog: The Conscience of a Liberal

O.K., a temporary government shutdown, which became almost
inevitable after Sunday's House vote to provide government
funding only on unacceptable conditions, wouldn't be the end of
the world. But a U.S. government default, which will happen
unless Congress raises the debt ceiling soon, might cause
financial catastrophe. Unfortunately, many Republicans either
don't understand this or don't care.

Let's talk first about the economics.

After the government shutdowns of 1995 and 1996 many observers
concluded that such events, while clearly bad, aren't
catastrophes: essential services continue, and the result is a
major nuisance but no lasting harm. That's still partly true,
but it's important to note that the Clinton-era shutdowns took
place against the background of a booming economy. Today we
have a weak economy, with falling government spending one main
cause of that weakness. A shutdown would amount to a further
economic hit, which could become a big deal if the shutdown
went on for a long time.

Still, a government shutdown looks benign compared with the
possibility that Congress might refuse to raise the debt
ceiling.

First of all, hitting the ceiling would force a huge, immediate
spending cut, almost surely pushing America back into recession.
Beyond that, failure to raise the ceiling would mean missed
payments on existing U.S. government debt. And that might have
terrifying consequences.

Why? Financial markets have long treated U.S. bonds as the
ultimate safe asset; the assumption that America will always
honor its debts is the bedrock on which the world financial
system rests. In particular, Treasury bills, short-term U.S.
bonds, are what investors demand when they want absolutely
solid collateral against loans. Treasury bills are so essential
for this role that in times of severe stress they sometimes pay
slightly negative interest rates, that is, they're treated as
being better than cash.

Now suppose it became clear that U.S. bonds weren't safe, that
America couldn't be counted on to honor its debts after all.
Suddenly, the whole system would be disrupted. Maybe, if we were
lucky, financial institutions would quickly cobble together
alternative arrangements. But it looks quite possible that
default would create a huge financial crisis, dwarfing the
crisis set off by the failure of Lehman Brothers five years ago.

No sane political system would run this kind of risk. But we
don't have a sane political system; we have a system in which a
substantial number of Republicans believe that they can force
President Obama to cancel health reform by threatening a
government shutdown, a debt default, or both, and in which
Republican leaders who know better are afraid to level with the
party's delusional wing. For they are delusional, about both the
economics and the politics.

On the economics: Republican radicals generally reject the
scientific consensus on climate change; many of them reject the
theory of evolution, too. So why expect them to believe expert
warnings about the dangers of default? Sure enough, they don't:
the G.O.P. caucus contains a significant number of "default
deniers," who simply dismiss warnings about the dangers of
failing to honor our debts.

Meanwhile, on the politics, reasonable people know that Mr.
Obama can't and won't let himself be blackmailed in this way,
and not just because health reform is his key policy legacy.
After all, once he starts making concessions to people who
threaten to low up the world economy unless they get what they
want, he might as well tear up the Constitution. But Republican
radicals, and even some leaders, still insist that Mr. Obama
will cave in to their demands.

So how does this end? The votes to fund the government and raise
the debt ceiling are there, and always have been: every Democrat
in the House would vote for the necessary measures, and so would
enough Republicans. The problem is that G.O.P. leaders, fearing
the wrath of the radicals, haven't been willing to allow such
votes. What would change their minds?

Ironically, considering who got us into our economic mess, the
most plausible answer is that Wall Street will come to the
rescue, that the big money will tell Republican leaders that
they have to put an end to the nonsense.

But what if even the plutocrats lack the power to rein in the
radicals? In that case, Mr. Obama will either let default happen
or find some way of defying the blackmailers, trading a
financial crisis for a constitutional crisis.

This all sounds crazy, because it is. But the craziness,
ultimately, resides not in the situation but in the minds of
our politicians and the people who vote for them. Default is
not in our stars, but in ourselves.


BOB KLAHN bob.klahn@sev.org http://home.toltbbs.com/bobklahn

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While on the subject of Paul Krugman, some interesting comments from John C. Goodman at the Health Policy Blog:

"Since Barack Obama took office almost 10 million people have dropped out of the labor force. More than half a million dropped out in the last month alone. Today, a record 90 million people ∙ almost one third of the entire population ∙
are not working and not even looking for a job.

⌠How did that happen?÷ Krugman asks. One answer is supplied by University of Chicago economist Casey Mulligan ∙ one of the top labor market economists in the country and a regular contributor to The New York Times economics blog. In a new book, Mulligan estimates that roughly half of the excess unemployment we have been experiencing is due to the lure of entitlement benefits ∙ food stamps, unemployment compensation, disability benefits, etc. In other words, we
are paying people not to work. In a separate analysis, Mulligan estimates that much of the remaining unemployment may be due to other Obama administration policies, especially the Affordable Care Act.

So what does Krugman have to say about Mulligan╞s study? Nothing. Nothing? Not a thing. Not about Casey╞s study or any other serious study. But he rejects Mulligan╞s conclusion by claiming that the fall in labor force participation

'wasn╞t a mass outbreak of laziness, and right-wing claims that jobless Americans aren╞t trying hard enough to find work because they╞re living high on
food stamps and unemployment benefits should be treated with the contempt they deserve.'

Hmmm. Last time I looked, economics is a science. Statements about the economic
system are either true or not true. Their validity is not affected one whit by the political views of economists or other people. And facts of reality do not mysteriously become untrue even if they are treated with contempt. . . .

Krugman, who hasn╞t done serious research for years, clearly doesn╞t care what his fellow economists think. He can, without the slightest evidence of embarrassment, pretend that an entire body of empirical research doesn╞t even exist. That╞s his choice. However, The New York Times bills him as a Nobel Laureate in economics. So when Hollywood types read Krugman, they think they are reading economics.

This is bad for the entire profession. Krugman rarely writes a column without including a venomous attack on those who disagree with him ∙ questioning their ethics, their honesty and their motives. But in economics, as in the other sciences, arguments ad hominem aren╞t legitimate arguments. . . .

As I╞ve pointed out more than once, when it comes to health policy Krugman is almost always wrong. That by itself is not remarkable. Most health policy wonks
are also usually wrong in the way they think about health economics. But Krugman is the only person I know who can╞t resist insulting an entire political party or the 40% of the population that calls itself ⌠conservative÷ or other scholars who disagree with him in the process of being wrong.

Once in a while I refer to him as Paul (if-you-disagree-with me-you-must-be-evil) Krugman. But on the whole, we usually pull our punches at this blog (as do most other bloggers). On balance, Krugman gets off lightly. He
deserves much worse."



http://healthblog.ncpa.org/are-we-being-unfair-to-paul-krugman/


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While on the subject of Paul Krugman, some interesting
comments from John C. Goodman at the Health Policy Blog:

Your message got cross posted again.

BOB KLAHN bob.klahn@sev.org http://home.toltbbs.com/bobklahn

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While on the subject of Paul Krugman, some interesting
comments from John C. Goodman at the Health Policy Blog:

Notice, this is a blog, not an economist's report.

"Since Barack Obama took office almost 10 million people
have dropped out of the labor force. More than half a
million dropped out in the last month alone. Today, a
record 90 million people ∙ almost one third of the entire
population ∙ are not working and not even looking for a job.

I will assume that Krugman is talking about those listed in the
govt employment stats, not the total population. Since 90
million of the total population could be accounted for by
children alone, that seems likely.

...

Mulligan estimates that roughly half of the excess
unemployment we have been experiencing is due to the lure
of entitlement benefits ∙ food stamps, unemployment
compensation, disability benefits, etc. In other words, we
are paying people not to work. In a separate analysis,

That is easily disproved by the simple mentioning of the fact
that the unemployment rate, those looking for jobs, is still at
7%, and the real unemployment rate is more like 15%. When the
numbers who need a job now but are not looking are about 6
million, and the number unemployed or under-employed is
somewhere around 25 million, then you can't ascribe any
unemployment to govt benefits. Also, notice Krugman was talking
about those not in the labor force, not those unemployed.

Look back at the stats on working age in America not in the work
force. That 90 million record can be accounted for largely
because there is a record number of people in this country.

Then look at the numbers, which I found on the Dept of Labor
site. I downloaded my copy in 2010, so it's not quite up to
date, but it goes back to 1947. From 1947 the number not in the
workforce was about 42 million. In 2010 it hit 85 million. A
whole lot of that is just the increase in population.

Then you add in those who have retired, after all, when someone
is laid off at age 60, and can't find a job by age 62,
retirement may be the only option.

I have downloaded the CBO report he cited, but what he said and
what is supported by the material he provided is widely
seperate.

Mulligan estimates that much of the remaining unemployment
may be due to other Obama administration policies,
especially the Affordable Care Act.

Mulligan can estimate until the cows come home, but it's all BS
until proven. Esp since most of the ACA, the part that might
affect employment that way, hasn't taken effect yet.

So what does Krugman have to say about Mulligan╞s study?
Nothing. Nothing? Not a thing. Not about Casey╞s study or
any other serious study. But he rejects Mulligan╞s
conclusion by claiming that the fall in labor force
participation

'wasn╞t a mass outbreak of laziness, and right-wing claims
that jobless Americans aren╞t trying hard enough to find
work because they╞re living high on food stamps and
unemployment benefits should be treated with the contempt
they deserve.'

And he's right. Recently I got involved in researching some
programs for a young man who is clearly handicapped, and unable
to find work he is capable of doing. In doing the research I got
a good idea just how poor the benefits are.

When I was working I also learned about how poor unemployment
benefits are from some of my co-workers who were laid off at
varying periods.

So, I am not impressed with anyone claiming that people are
unemployed deliberately because of government benefits.

Hell, food stamps and medicaid should not even be mentioned when
right wing supporting Wallmart is the biggest corporate food
stamp and medicaid parasite in the country. Recently I learned
they hired consultants to help their employees sign up for food
stamps and medicaid. Seems a decent pay check is unreasonable to
expect.

The reason so many people are out of the workforce is the jobs
just aren't there.

Hmmm. Last time I looked, economics is a science.

No, it isn't.



BOB KLAHN bob.klahn@sev.org http://home.toltbbs.com/bobklahn

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