Krugman: 'Our political culture has become ... deeply corrupt'

Despite the headline, this is not about the state of the economy (we know what state that's in). It's about the state of the Krugman.

As you may know, I've been monitoring the state of the Krugman for a while (the most recent sounding is here, but there's a bunch of them). The key question: When does the Professor call out the full dimensions of the storm he says is coming. When does he accurately describe what's flying toward the fan?

He's sneaking up on it. When last we left our Krugman, he'd moved through two important preliminary stages:

Partial call-out: It's gonna be bad, and I just don't understand why conservative economists and ministers don't understand. 'Cause, you know, I've already explained it.

Semi-partial call-out: Hmm. Maybe something else is going on. What could that be?

As of last week, he seemed to be stuck at the end-with-a-question phase, Semi-partial call-out.

With that in mind, here's new Krugman, talking about the push by "Republicans and conservative Democrats" to extend tax cuts on the "richest 120,000 people in the country" (my emphasis):

So, for example, we’re told that [extending tax cuts for the very rich is] all about helping small business . . . [o]r we’re told that it’s about helping the economy recover. But it’s hard to think of a less cost-effective way to help the economy than giving money to people who already have plenty, and aren’t likely to spend a windfall.

No, this has nothing to do with sound economic policy. Instead, as I said, it’s about a dysfunctional and corrupt political culture, in which Congress won’t take action to revive the economy, pleads poverty when it comes to protecting the jobs of schoolteachers and firefighters, but declares cost no object when it comes to sparing the already wealthy even the slightest financial inconvenience.

So far, the Obama administration is standing firm against this outrage. Let’s hope that it prevails in its fight. Otherwise, it will be hard not to lose all faith in America’s future.

Not bad. Hemi-demi-semi-partial call-out: "The political culture is corrupt" (which it is).

Now if only he would move to Full Call-Out, like that guy, um, Paul Krugman, in his 2003 book, and talk about Movement Conservatives as a "revolutionary force" who are taking us over the way the mafia takes over a manufacturing business and strips it clean.

Or to be more pointed — Yes, the political culture is deeply corrupt. But that's almost passive voice. Talk about the politicians, the actual doers, what they are doing, and why. It's already in your book.

These are radical revolutionaries with radical plans; the Movement is big, organized and very well funded; and we're already in the 3rd quarter of a game that's not going well. Professor, please say so.

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Krugman: Policy elites are like cult priests demanding human sacrifice

Some Friday Krugman for your early morning pleasure (my emphasis):

As I look at what passes for responsible economic policy these days, there’s an analogy that keeps passing through my mind. I know it’s over the top, but here it is anyway: the policy elite — central bankers, finance ministers, politicians who pose as defenders of fiscal virtue — are acting like the priests of some ancient cult, demanding that we engage in human sacrifices to appease the anger of invisible gods.

So how do austerians deal with the reality of interest rates that are plunging, not soaring? The latest fashion is to declare that there’s a bubble in the bond market: investors aren’t really concerned about economic weakness; they’re just getting carried away. It’s hard to convey the sheer audacity of this argument: first we were told that we must ignore economic fundamentals and instead obey the dictates of financial markets; now we’re being told to ignore what those markets are actually saying because they’re confused. . . . It seems almost superfluous, given all that, to mention the final insult: many of the most vocal austerians are, of course, hypocrites.

After his audacious opening analogy (perfectly appropriate, in my view), the Professor closes with his usual soft ending — a question, not an answer. The question:

What will it take to break the hold of this cruel cult on the minds of the policy elite?

The answer: Look at your opening analogy. Priests like these have only one goal, and it's not to please invisible gods. It's to keep the priestly caste in power. The obvious answer is thus to remove them from power.

Someone needs to rid us of these meddlesome priests. If you're not working toward that goal, sir, you're preaching to the deliberately deaf. They won't walk out on their own, based on some stunning argument.

(Psst — Read your own book.)

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Krugman's 'Obama problem'

Seems a lot of people who shouldn't have an Obama problem have one these days.

Krugman identifies his "Obama problem" in a post that provides almost identical quotes about the federal budget from John Boehner in March of 2009 and Obama this week:

John Boehner, March 2009:

It’s time for government to tighten their belts and show the American people that we ‘get’ it

Barack Obama, yesterday:

“At a time when so many families are tightening their belts, he’s going to make sure that the government continues to tighten its own,” Obama said.“

We’ll never know how differently the politics would have played if Obama, instead of systematically echoing and giving credibility to all the arguments of the people who want to destroy him, had actually stood up for a different economic philosophy. But we do know how his actual strategy has worked, and it hasn’t been a success.

No, it hasn't. Read More......

Krugman: I’m pretty close to giving up on Mr. Obama

This is interesting because, in the last month or two, it seems that Obama somehow wooed Paul Krugman, a longtime critic of the administration, onto the reservation. Krugman ended up a big Obama defender on health care reform when many of us were less impressed. It appears Krugman is now off again.

Krugman had this to say about the news that the President is urging the Congress to pass a pared down version of the health care bill:

In short, “Run away, run away”!

Maybe House Democrats can pull this out, even with a gaping hole in White House leadership. Barney Frank seems to have thought better of his initial defeatism. But I have to say, I’m pretty close to giving up on Mr. Obama, who seems determined to confirm every doubt I and others ever had about whether he was ready to fight for what his supporters believed in.

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Will Krugman and Stiglitz get invited to the jobs summit?

President Obama recently announced he'll be holding a jobs summit in early December in order to get the best brains in economists and industry together to help figure out how to turn unemployment around faster. Two faces that absolutely need to be there are America's top two Nobel laureates in Economics, Joe Stiglitz and Paul Krugman. But Krugman already says he hasn't been invited. No word from Stiglitz.

Unfortunately, the administration has a penchant for snubs. The blogs have been snubbed from the beginning - while every other Democratic constituency was invited for meetings with the president, not the blogs. (Unless you consider a conservative blogger, Andrew Sullivan, representative of the liberal blogs. And now that Josh Marshall has turned his site into more a mainstream media presence than a blog, suddenly he's welcome to meet the president, ten months into the presidency.) But it's not just the Netroots, Team Obama started to create early on a list of good gays and bad gays in the LGBT community (the good get invited to cocktail parties, the bad ask the President to keep his promises, and they get ignored by Obama's supposed gay liaison (who isn't a liaison at all - Obama refused to reinstate the Clinton-era position, so a lower-level staffer (Clinton appointed a special assistant to the position) named Brian Bond kind of sort of has the job in addition to other duties, but the 'bad gays" never hear from him)). And so it goes with economic policy as well.

The President famously snubbed Stiglitz and Krugman at the beginning of his administration, when we were desperately trying to figure out how to avoid the country collapsing into a second Great Depression. And while Krugman was a Hillary supporter - as if that should matter when trying to determine how to avoid an economic collapse - Stiglitz was an early, and vocal, Obama supporter. Finally, after much criticism, the President invited Krugman and Stiglitz for dinner. Not that things got better after that.

So what about now? Will the snub continue, or will the Obama White House acknowledge that it needs to start listening to a diversity of views, including the views of progressive Democrats. Read More......

Krugman: Obama faces his own Anzio

Another great read by Paul Krugman. Obama's cautious approach to the economic crisis may lead the way for Democratic losses in 2010. Clearly the situation is better than it was a year ago though as we saw on Friday, employment is still lagging with limited chances of recovery before the mid term elections.

Administration officials would presumably argue that they were constrained by political realities, that a bolder policy couldn’t have passed Congress. But they never tested that assumption, and they also never gave any public indication that they were doing less than they wanted. The official line was that policy was just right, making it hard to explain now why more is needed.

And more is needed. Yes, the economy grew fairly fast in the third quarter — but not fast enough to make significant progress on jobs. And there’s little reason to expect things to look better going forward. The stimulus has already had its maximum effect on growth. Even Timothy Geithner, the Treasury secretary, admits that banks remain reluctant to lend. Many economists predict that the economy’s growth, such as it is, will fade out over the course of next year.

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Krugman on the politics of the public option -- and how it can prevent a backlash

I do wish someone at the White House (e.g., the President) would heed the advice of Paul Krugman every now and then. Today, he has an excellent post titled, Why the public option matters, which rebuts some of the arguments and excuses used against that proposal. It matters for several reasons, but, importantly, Krugman offers some sage advice on the political need for a public option:

Third — and this is where I am getting a very bad feeling about the idea of throwing in the towel on the public option — is the politics. Remember, to make reform work we have to have an individual mandate. And everything I see says that there will be a major backlash against the idea of forcing people to buy insurance from the existing companies. That backlash was part of what got Obama the nomination! Having the public option offers a defense against that backlash.

What worries me is not so much that the backlash would stop reform from passing, as that it would store up trouble for the not-too-distant future. Imagine that reform passes, but that premiums shoot up (or even keep rising at the rates of the past decade.) Then you could all too easily have many people blaming Obama et al for forcing them into this increasingly unaffordable system. A trigger might fix this — but the funny thing about such triggers is that they almost never get pulled.

Let me add a sort of larger point: aside from the essentially circular political arguments — centrist Democrats insisting that the public option must be dropped to get the votes of centrist Democrats — the argument against the public option boils down to the fact that it’s bad because it is, horrors, a government program. And sooner or later Democrats have to take a stand against Reaganism — against the presumption that if the government does it, it’s bad.

As usual, many of the professional Democrats in D.C. (members, staffers and political consultants) are misreading the politics of the public option issue. In fact, the public option can actually help politically, but that defies the "conventional wisdom" among the D.C. crowd. Too many of the professional Democrats still cower when the GOPers attack and they always try to accommodate the pundits. They're usually wrong. And, on this issue, their mistake could be very costly to Democrats.

The public option polls very well, still, even after all the attacks on it. Yesterday, I posted an excerpt from Markos' latest column in The Hill, the base expects Obama and the Democrats to deliver:

If Democrats abandon the public option, they risk a demoralized, cynical base, one unwilling to do the work to get Democrats elected and which will stay home on Election Day.

That's right.

So, dropping the public option could be a double whammy: It would demoralize the base and there would be nothing in place when insurers start jacking up rates. The political brain trust at the White House and on Capitol Hill should factor that in to their strategy. Read More......

Krugman on Stiglitz and the exclusions of progressives from the Obama team

There is a larger point here, that Joe and I keep harping on. For some reason, the Obama White House, and even back when they were the Obama campaign, doesn't see much of a need for progressives. They don't reach out very much to progressives, they don't effectively use progressives who want to help advance the Obama agenda, and they don't help progressives in return. It's something floating between disdain and indifference, topped with some supreme self-confidence (i.e., masters of the universe need not consult mere mortals).

And in fact, there is some concern that Obama is actually hurting the progressive infrastructure. During the campaign, it was Team Obama that killed the 527 that was formed to take on the Republicans (only to decide with 6 weeks left in the campaign that they did in fact need those 527s). And during the campaign, there were reports that the Obama campaign was telling people not to give to outside groups working the election, like Planned Parenthood and VoteVets. And, even today, I know of progressive groups in DC who are concerned that Obama is directing all big donor money to his own Organizing for America (formerly Obama for America) organization, and away from the traditional groups. Now, I've not always been a fan of the traditional groups, but they're all we've got. When Obama's presidency ends, and he sails off into the sunset with his 12m person email list, who is going to be left in Washington to protect our values, beyond the Netroots, Rachel and Keith?

Here's Krugman, talking about the Newsweek Stiglitz profile I posted this morning:

[T]he larger story is the absence of a progressive-economist wing. A lot of people supported Obama over Clinton in the primaries because they thought Clinton would bring back the Rubin team; and what Obama has done is … bring back the Rubin team. Even the advisory council, which is supposed to bring in skeptical views, does so by bringing in, um, Marty Feldstein.

The point is that even if you think the leftish wing of economics doesn’t have all the answers, you’d expect some people from that wing to be at the table. Yet I don’t see Larry Mishel, or Jamie Galbraith … Jared Bernstein is it.

Joe Stiglitz stands out because in addition to being on the progressive wing, he’s also, as I said, a giant among academic economists. But I think the real story is more about excluded points of view than excluded people.

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Krugman: an unknown country

Some days I love the guy even more than others. Short and sweet:

A correspondent writes in, denouncing my latest column, and says that if things go my way we’ll end up with the government providing health care to everyone, which will “destroy the American way of life.”

Hmm. There’s a country this correspondent — and many others who denounce “socialized medicine” — should look at. It’s a country where there is, indeed, a substantial private health insurance industry, which pays 35 percent of medical bills. But the government pays a larger share — 46 percent. (Most of the rest is out-of-pocket spending.)

The country is called the United States of America.

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Krugman: Reagan did it

Or at least, Reagan started the process that others - Democrats and Republicans - continued and extended. None of this could have been possible without the assistance of large numbers on both sides. Krugman on opening up debt during the Reagan years:

All this, we were assured, was a good thing: sure, Americans were piling up debt, and they weren’t putting aside any of their income, but their finances looked fine once you took into account the rising values of their houses and their stock portfolios. Oops.

Now, the proximate causes of today’s economic crisis lie in events that took place long after Reagan left office — in the global savings glut created by surpluses in China and elsewhere, and in the giant housing bubble that savings glut helped inflate.

But it was the explosion of debt over the previous quarter-century that made the U.S. economy so vulnerable. Overstretched borrowers were bound to start defaulting in large numbers once the housing bubble burst and unemployment began to rise.

These defaults in turn wreaked havoc with a financial system that — also mainly thanks to Reagan-era deregulation — took on too much risk with too little capital.

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Krugman: Recovery years away

There's a big difference between the economy bottoming out and actual recovery or growth. The cheerleaders and some in Washington are flogging the big news about the bottom coming soon. Finding the bottom is good news but in no way does that mean that happy days are here again so go back to spending like it is 2006. Hardly. Tough days are ahead including higher unemployment and slow (or flat) corporate earnings. More Krugman via the AP:

Krugman said that he would not be surprised if the U.S. recession, which began in December 2007, ended in August or September this year. But job losses were likely to continue into 2011, meaning "the period of a depressed economy" could last until 2013 or 2014, he said.

Krugman, who teaches at Princeton University, won the Nobel Memorial Prize in Economic Sciences last year for his analysis of how economies of scale can affect international trade patterns. He also writes columns for The New York Times.

The U.S. economy, the world's largest, contracted a worse-than-expected 6.1 percent on an annualized basis in the first quarter. Americans increased purchases of cars, furniture and appliances, but businesses cut back spending and exports had their biggest drop in 40 years. The U.S. unemployment rate hit 8.9 percent in April and many economists expect it to reach 10 percent by year's end.

NOTE FROM JOHN: This is why the stimulus package was necessary. This is why the Republican arguments, that a lot of the stimulus pending won't happen until after this year, and thus it's really wasteful pork, are specious. Read More......

It's time for Obama to meet Krugman

If Obama can reach out to nasty conservatives, he can certainly reach out to one of our own who is simply trying to help. And in any case, you can only be so successful at freezing out a Nobel laureate with his own weekly column in the NYT. Newsweek had this little tidbit:

But the administration does not seek to cultivate him. Obama aides have invited commentators of all persuasions to the White House for some off-the-record stroking; in February, after Krugman's fellow Times op-ed columnist David Brooks wrote a critical column accusing Obama of overreaching, Brooks, a moderate Republican, was cajoled by three different aides and by the president himself, who just happened to drop by. But, says Krugman, "the White House has done very little by way of serious outreach. I've never met Obama. He pronounced my name wrong"—when, at a press conference, the president, with a slight note of irritation in his voice, invited Krugman (pronounced with an "oo," not an "uh" sound) to offer a better plan for fixing the banking system.

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Abandon hope all ye who enter here

It's from Dante. Paul Krugman might want to add it to the banner of his blog.

I’m detecting a trend in commentary that I find slightly ominous. Some of the economic news lately has been slightly better than expected, which was bound to happen at some point (on average, after all, half the news should be better than expected). Mostly this is in the form of things getting worse more slowly, but it wouldn’t be surprising if we see, say, an uptick in industrial production in a few months, as the inventory cycle runs its course.

If so, that doesn’t mean the worst is over. There was a pause in the plunge in early 1931, and many people started to breathe easier. They were wrong.

So far, there’s nothing pointing to a fundamental turnaround this year, or next, or for that matter as far as the eye can see.

I don't think Krugman's necessarily wrong. In fact, I fear he's right. I also fear that not enough people are listening. Not to make too many literary allusions in one post, but Krugman can take heart (or not) from a character in Greek mythology named Cassandra:

In Greek mythology, Cassandra (Greek: Κασσάνδρα "she who entangles men"[1]) (also known as Alexandra[2]) was the daughter of King Priam and Queen Hecuba of Troy. Her beauty caused Apollo to grant her the gift of prophecy. However, when she did not return his love, Apollo placed a curse on her so that no one would ever believe her predictions....

While Cassandra foresaw the destruction of Troy (she warned the Trojans about the Trojan Horse, the death of Agamemnon, and her own demise), she was unable to do anything to forestall these tragedies since they did not believe her.

The recent Newsweek cover story on Krugman contained the following that, I think, describes the Krugman phenomenon perfectly:

If you are of the establishment persuasion (and I am), reading Krugman makes you uneasy. You hope he's wrong, and you sense he's being a little harsh (especially about Geithner), but you have a creeping feeling that he knows something that others cannot, or will not, see.

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Krugman makes the cover of Newsweek

Newsweek's new cover story. Read More......

Krugman is still at it

I give the guy points for persistence. And to those who say he should be in the administration, first, he'd slit his wrists working in a bureaucracy, and second, he's far more helpful on the outside where his opinions won't be neutered. Here's his latest, via ABC:

"For people who felt that Obama was going to bring change, a real difference, it somehow feels quite a lot as if we've got the same old gang still making the policy decisions, despite how discredited they are in the eyes of the public..."

"We've got the greatest economic crisis since the Great Depression and we've got a set of half-measures in terms of economic policy and a general sense that the Treasury Department and Obama think if they can do a little more on the technical side, we'd wake up and realize it's two years ago all over again."...

"The buck stops with Obama. He makes the decisions. In a way, I think I've got as much input as anyone can reasonably hope to have," Krugman said. "I'm rooting for him. I hope I'm wrong in being pessimistic about this plan."

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Krugman is freaking me out again

Not all happy with Geithner's new (old) bank rescue plan:

It’s as if the president were determined to confirm the growing perception that he and his economic team are out of touch, that their economic vision is clouded by excessively close ties to Wall Street. And by the time Mr. Obama realizes that he needs to change course, his political capital may be gone....

T]here’s something strange going on here. By my count, this is the third time Obama administration officials have floated a scheme that is essentially a rehash of the Paulson plan, each time adding a new set of bells and whistles and claiming that they’re doing something completely different. This is starting to look obsessive.

Whether or not the administration likes or respects Krugman, a lot of other people do (including the Nobel committee). And his incessant criticism of the administration's economic plans is increasingly disturbing. I'm willing to believe that Krugman is not right about everything. But at this point, are we really to believe that the guy who just won the Nobel prize in economics is wrong about everything? Read More......

Hey Paul Krugman

Blah, blah, blah...on a good day. Read More......

Krugman pans new Obama toxic asset plan

From NYT writer, and Nobel economist, Paul Krugman:

So now we have a bank crisis. Is it the result of fundamentally bad investment, or is it because of a self-fulfilling panic?...

Now, early on in this crisis, it was possible to argue that it was mainly a panic. But at this point, that’s an indefensible position. Banks and other highly leveraged institutions collectively made a huge bet that the normal rules for house prices and sustainable levels of consumer debt no longer applied; they were wrong....

Why am I so vehement about this? Because I’m afraid that this will be the administration’s only shot — that if the first bank plan is an abject failure, it won’t have the political capital for a second. So it’s just horrifying that Obama — and yes, the buck stops there — has decided to base his financial plan on the fantasy that a bit of financial hocus-pocus will turn the clock back to 2006.

What's most disturbing isn't that Krugman may be right. It's that we can't name a single senior Obama economic adviser who represents the Krugman/Stiglitz wing of economic theory and policy. It's not a matter of expecting Obama to buy, and implement as policy, every single thing that Krugman and Stiglitz say. But it's not clear that anyone is even listening to what they have to say, or representing their philosophy at the table when options are being discussed. That is scary. And it's what the last guys who messed up our economy used to do. Read More......

Europe with its head in the sand

Ah, Europe. Love em to death - in fact, some of my best family and cats are European. But Chris has been saying for a long time that European governments like to think of the economic crisis as an American problem that won't really affect them. I'd written the other day about the French Finance Minister scolding the US about being so late to the stimulus package game, and thus implying that France and Europe have the higher ground when it comes to confronting the economic crisis, and about how the minister suggested that the crisis was really an American problem.

It seems Nobel laureate in economics Paul Krugman n'est pas d'accord.

Krugman's article today walks you through Europe's handling of the crisis - shorter Krugman: they haven't done much, and have done a hell of a lot less than we have - and notes, repeatedly, that Europe's economic slump will be "at least" as bad as the US'. Krugman says that the European Central bank has refused to low interest rates sufficiently, and that monetary integration (adopting the Euro) has taken away the ability of individual countries to devalue their currency. What about stimulus? The European governments have spent far less, as a percentage of GDP, than we have, but just as bad, they have little incentive to spend any more. Because their economies are so interwoven, no government wants to be the lone actor paying for everyone else's stimulus (since France's stimulus, for example, would help Italy and Spain and Greece and everyone else in the EU). The other countries would be freeloaders. So, better to do nothing than offer your neighbors a little goodwill, or worse - eh gads! - actually put that "European nationality" to work and carve out a stimulus package with requirements for each EU country.

And of course, this affects us too. All of our economies are intertwined. A weak Europe will slow our recovery just as much as a weak American economy will slow the world. It seems the French Finance Minister, along with her Germany counterpart, are hell-bent on taking the rest of us down with them. I guess that's one way to reclaim your global leadership role - being at the front of the pack as we all plunge down the abyss. Read More......

Boehner botches economic talk

As Krugman points out, Boehner is the "second most influential member of the GOP (after Rush Limbaugh)." Seriously though, the top Republican in the House thinks that what America needs now is for the government to cut spending; to tighten its belt, just like all Americans are having to do. Considering that part of our current problem is that consumer demand is too low, one of the worst things we could do is to suck even more demand from the economy by cutting back on government spending. That's the entire idea behind the stimulus bill - use government demand, aka government spending, to make up for anemic consumer demand. Boehner's statement isn't just idiotic, it's downright dangerous (it's equally ludicrous for Boehner to praise consumers cutting back on their spending as though it's admirable and necessary - in fact, it's making things worse). When will Republicans hold their leaders accountable? And when will they stop choosing blithering idiots, tax cheats, drug addicts, and himbos as their leaders? Yes, Boehner has nice hair and pretty eyes. But can you people ever elect a brain too? Read More......