And in This Corner….

Speaking of bloggers interviewing economists, Kevin "CalPundit" Drum has one with Paul Krugman, who blames the Milton Friedmans of the world (or more specifically, Grover Norquist and the Heritage Foundation) of helping create a situation where

we're headed for some kind of collision, and there are three things that can happen. Just by the arithmetic, you can either have big tax increases, roll back the whole Bush program plus some; or you can sharply cut Medicare and Social Security, because that's where the money is; or the U.S. just tootles along until we actually have a financial crisis where the marginal buyer of U.S. treasury bills, which is actually the Reserve Bank of China, says, we don't trust these guys anymore ? and we turn into Argentina.

Comments

[Anonymous]

and his solution is probably to raise taxes and INCREASE spending on Medicare and That Pyramid Scheme.

And when the whole thing falls apart it is still Friedman and Bush's fault.

[james]

If we just avoided Bush's fool war in Iraq, which I've heard has substantial libertarian support, we could afford free beer for the whole country.

[Lefty]

I s'pose yours is to decrease taxes and spend less at home while giving the military a blank check.

And, yes, when it falls apart the blame will be laid at the feet of the folks who did it.

[Anon]

>>I s'pose yours is to decrease taxes and spend less at home while giving the military a blank check.

Not a blank check.

>>And, yes, when it falls apart the blame will be laid at the feet of the folks who did it.

So says yer dogma. I have yet to see you make one cohenent economic argument to support your view (and no linking to econ grad student websites is not an argument).

[Heinz]

I vote for cutting social security and medicare, since I am under 35 years old, and I am likely to witness Elvis step off of a UFO before I see a cent of SocSec or medicare.

I wonder why liberals do not call the "War on poverty" for example, a quagmire? There is no constitutional mandate for it (like there is for the military), and it has being going on for decades...it has cost a lot more than 87 billion too!

[Brad S]

The net result of all of this is that interest rates are going to be very, very high in America at some point in the not too distant future. Huge deficits are covered by selling U.S. Treasuries. If lots and lots of U.S. Treasuries are issued and sold (i.e. supply of Treasuries is HIGH), the price of Treasuries is going to be very low. If the price of Treasuries is low, then the yield on those Treasuries is high. Treasury yields are used as a risk-free benchmark for yields on all sorts of securities - asset-backed securities like mortgages, all sorts of bond securities (secured and unsecured, corporate and municipal, etc), money market rates, even expected returns on equity securities depend to some extent on what the "risk-free" rate of return is. This has lots and lots of implications.

[will]

actually, the current deficit spending might not be that big of a deal if the economist magazine's prediction of a 2.5% annual productivity growth over the long term is accurate. (premium article, unfortunately: http://www.economist.com/printedition/displayStory.cfm?Story_ID=2052033 )

that's a big if, though.

[Justin]

>If we just avoided Bush's fool war in Iraq, which I've heard has substantial libertarian support...

I've heard (or read) quite abit of this kind of stuff lately. Why do people assume the war in Iraq has Libertarian support? Are there libertarians out there advocating the Iraqi invasion that I don't know about? Is it some kind of propoganda perpetrated by the left or right wing? Perhaps there is a splinter group of "libertarians" out there?

Can someone help me out so I may have some ammunition the next time someone brings this up? Feel free to email me if you wish ([e-mail]) Many thanks!

-Justin

[Brad S]

will - the real problem is going to come when the Baby Boom generation hits retirement age and starts sucking money out of Social Security and Medicare instead of paying money into it. There's going to be a massive shortage of workers in this nation to produce things to keep the GDP and the economy going, not to mention to pay into Social Security and Medicare to support the number of retirees sucking at the teat.

At a minimum, the age at which one can receive Social Security benefits is going to have to be raised.

[Citizen]

Matt, I'm not sure where that third link is supposed to be headed.

Do you think Krugman knows how asinine he sounds with his Kissinger-Robespierre quote. I guess it kinda errode the term "moderate" when the wings on either side want to claim it.

My favorite quote is, "I don't want to sound like a Marxist, but there is some of that going on." Sure you don't want to sound like a marxist.

[Brad S]

Justin - most Libertarians I know (myself included) feel that it would be more prudent to secure the borders at home than to go chasing after a few renegade Al Qaeda members all over the squalorous sandbox that is the Middle East.

[Reply]

Justin:
Individual libertarains are divided on this issue. The LP (which is the big L) was probably against it. It is confusing because the anti-war libertarians attempt to purge/denounce pro-war libertarians as non-libertiarians. Pro-war libertarians have stopped giving a shit about that.

[Zathras]

We've been headed for "some kind of collision" for over 20 years. That was one reason for the Reagan administration's efforts to block Social Security and Medicare spending from growing, efforts that were in turn blocked by Congress. All Bush has done is advance the date by which the amount of government people say they must have is well beyond the amount of government people think they should have to pay for.

Actually we have been at this point for some time, but because the American economy has grown faster than the economies of other countries foreigners have been willing to finance our debt. This will not always be the case. I think Paul Krugman is a good economist who for some reason decided to become a run-of-the-mill partisan hack columnist, but he is not the problem here. The numbers are the problem; they are bad now, and they are getting worse.

[Lefty]

Tell me what your solution is, Anon. I'm assuming you will rein back the military sometime. When?

If my "dogma", as you call it, is populist, pro-New Deal and extremely suspicious of the failed plutocratic, trickle down, militaristic policies I'm seeing now, you're dead on. Link to Krugman, if you like. He sees it, too.

[Steve Skutnik]

Um, where's the actual link to the Krugman interview? The third link just links back to Hit&Run's item on the Milton Friedman interview.

[Citizen]

Steve, use the second link - the one to calpundit. He includes the intro on the homepage and you need to click "See more" at the bottom to get the whole thing. Sideways scrolling is doing nothing for his website BTW.

[Jean Bart]

Oh no, this thread has turned into a flame war. 🙂

[Matt Welch]

Third link fixed; thanks, all, and sorry!

[Nicholas Weininger]

Y'know, it's hard for me to believe Krugman's conspiracy theories when there's a much more mundane explanation that fits the facts just as well. Namely, that Bush is like every other politician in the modern world: he has a very strong incentive to spend as much as he can get away with and tax as little as he can get away with, and leave the next guy holding the bag for the resultant fiscal disaster. After all, no matter what happens, he'll be outta there no later than 1/21/2009.

Clinton's way of doing the fiscal two-step was to base budget planning on completely bogus projections of future surpluses. Bush's way is to distract people from the deficit situation with All War, All the Time. Same basic deal, either way. No evilly cackling gnomes required.

[Mark A.]

Boy, Lefty, you sure are catching hell today! 🙂

[Jean Bart]

Lefty,

Just ignore the trolling.

BTW, I think the idea that somehow if the New Deal never happened, etc. that the U.S. would be a paradise (as many libertarians appear to believe) is a bit of wishful thinking. The U.S. without the New Deal would be a different place, with its own different set of crises, problems, etc.

[Anonymous]

>>as many libertarians appear to believe

name one

[Anonymous]

See lefty is learning the quicker way to respond to a post!

[Brad S]

Nicholas hit the nail right on the head. If you are President, there is a tremendous incentive to spend as much as you can while in office, simultaneously reduce taxes as much as you can (i.e. make people think that they are getting a lot of bang for their buck while you are in office), and then send the bill for all the national debt that you ran up to your successor. Simple motivation, folks. Very simple.

[Mark A.]

Indeed, Jean Bart. Reality is their strawman. Since reality is not perfect (I won't even attempt to qualify or quantify that), it is easy to knock down and compare favorably with their idealized world.

This is not to pick on libertarians -- everyone who cleaves to some particular worldview tends to do the same thing. C'est le vie (sp?)...

[Flem Snopes]

Gentlemen, I give you Professor Paul Krugman. A serious man with serious ideas.

"What are the three biggest problems the United States faces right now?

The budget deficit, joblessness, and, ultimately, what really, really scares me, even though I can't write about it all the time, is the environment. That's more important than anything."

Mahahahahaha! Quit it Paul, quit it! You're tickling me with that "really really scares me" thing. HAH! Say that again, that was a good one.

[Phil]

Jean Bart,

I think you're attacking a straw man. Of course the U.S. wouldn't be a paradise if the New Deal hadn't happened. It would, however, be a freer country.

[Warren]

Pre New Deal, US was purgatory.
Post New Deal, US firmly on 'the road to serfdom'. We're 70 years farther down that road now. My guess is that we got another 50-150 (depending largely on whether and how much we roll back the accesses of the current administration) before we try to save the republic by crowning an emperor.

[joe]

So by Brad S's theory, Bill Clinton stands out as particularly honest, decent, responsible president for his commitment to debt reduction and spending limits.

Brad, do you believe in a place called Hope? 😉

Seriously, conservative pundits from the Wall Street Journal to National Review have written about the strategy of growing the national debt as a way to hamstring the government from being able to enact new programs.

I guess this is what you do when you know your party's going to be out of power for decades. If you can't win the game, take your ball and go home.

[Pete Guither]

As a fiscal conservative, anti-war, far-left libertarian, I'm offended by all the name-calling in these comments.

Just kidding. I'm also in favor of being offended.

[Anonymous]

>>we try to save the republic by crowning an emperor.

>>I guess this is what you do when you know your party's going to be out of power for decades.

guess which party has the crown?

[Lefty]

Well, I can agree that it's much easier to spend other people's money than not and politicians are especially good at it. I think the record going back to Reagan, though, is that the Repubs are worse at it than the Dems - allthewhile clinging to the "conservative" mantle.

Look. This fiscal we will spend about 2 trillion dollars. Half a trillion of that will be borrowed. It doesn't take an economist to see something's seriously out of whack.

[Jason Ligon]

Krugman is usually just a marxist. Now he is a disingenuous marxist.

'Just by the arithmetic, you can either have big tax increases, roll back the whole Bush program plus some; or you can sharply cut Medicare and Social Security, because that's where the money is; or the U.S. just tootles along until we actually have a financial crisis where the marginal buyer of U.S. treasury bills, which is actually the Reserve Bank of China, says, we don't trust these guys anymore ? and we turn into Argentina.'

What is the alternative Krugman is proposing? Instead of having a big tax increase, we have high levels of taxation that remain high.

What astounds me in neo Keysian analysis is the complete disregard for idea that government can function leaner. The same people that demand legislated increases in gasoline efficiency believe that the engine of government should simply be given as much fuel as it can burn. The same people who complain that Microsoft as a 'monopoly' is a costly and inefficient software provider to the public, argue for greater and greater inefficiency in programs run by the government.

I wish the left were merely something to scratch my head over instead of something to fear ...

[bennett]

Picture what happened in Poland.

[Dan]

If my "dogma", as you call it, is populist, pro-New Deal and [yadda yadda] you're dead on.

Is there even a point in talking to people who think the New Deal was a good idea? I mean, really -- it's economically indefensible. Still:

Just to name one of the horrendous flaws of the New Deal: had people been permitted to retain the money they paid in social security taxes, and to invest it, retirees would be far richer (they'd have a huge nest egg, to do with as they please, rather than a paltry government payment stretched out over years, vanishing on their death). That money could be passed to their children upon their death, as opposed to being claimed by the government. The economy as a whole would have grown at a vastly improved rate, thanks to hundreds of billions of dollars in additional private investment. Etc, etc...

[TC]

Wait, so noone can dispute Krugboy on the merits of his argument? How typically sad. Cuz he is wrong. The only reason we're not another Argentina yet is that our debt is conveniently denominated in dollars, which the gov't can always print more of. It's still a recipe for disaster. I'm doing what any other third-worlder of means would do: sending my money abroad to some other fiscally responsible nation.

Or if you don't have the means, buy gold. The writing's on the wall. There's no reason to keep financial assets in dollar denominated paper at all unless you live under the illusion that the US is a first-world country, or run like it is. There just hasn't been a run on the dollar yet, because people don't think it's possible. Shit, pros don't think it's possible, yet every element is there. Everyone believes the aura of US invincibility, that America is somehow immune. Well, if anything disproved America is exceptional 9/11 took care of that. It's fumes baby, and when belief fades, America's out o' luck.

I don't see why people here give Repuglicans a fiscal free pass, much less come to their defence so readily. The Demorats (or the last administruation at least) at least gave it lipservice. Heh. There's a reason why they call them parties. Think about it. Oh and fuck Washington.

[Ron Hardin]

Krugman is an economist? I wonder what he thinks China will do with the dollars. They can only spend them in the US or invest them in the US.

If they don't return to the US, it has no effect on the US economy. It's an increase in some other country's money supply, and the Fed just replaces it by printing some more for the US, with exactly the same result as if China sent the dollars to the Fed to buy Treasuries.

[Plutarck]

There are fiscally responsible nations? Where?

[TC]

Well, that's more speculation on my part. Heh. Like Eastern Europe has been trying like mad to get into the EU, nevermind that France and Germany are blowing their budgets. Czech muni bonds for instance offer decent returns. But you really don't have to go so far afield, just look at Canada and the UK. Still, gold is the safe bet, although you don't get paid to hold.

[Bill Hoshor]

I have seen many posts claiming the unfund SS and medicare are in treasury debt. LOL are you people really that clueless 90% of the unfunded future payments are just iou's. The is no foriegn gov't or bond fund holding this debt.
It will have to be raised with future taxes or newly issued debt. There is still time to privatize. Though people like krugman hate the idea on people no longer being poor and ignorant or POORANDSTUPID as Donald Luskin's website is called.

[Sir Real]

If you're going to blame Bill Clinton for "imaginary surpluses", you're also going to have to blame the legislature that spent that imaginary money.

[Argyles]

Sir Real: Yup. Them too. Plenty of blame to go around . . .

[joe]

"Look. This fiscal we will spend about 2 trillion dollars. Half a trillion of that will be borrowed. It doesn't take an economist to see something's seriously out of whack."

I've got nothing against deficits during recessions. Economy picks up, debt gets paid, we muddled through some tough times by putting the groceries on a low interest credit card. No real harm done. What scares me is how far into the good times those deficits continue.

[Johnathan Pearce]

Jean Bart, the US, and for that matter, other parts of the world would indeed be different without the New Deal. Not necessarily better, but different. Fact - unemployment in the US was higher at the end of the 1930s than it was after the Great Crash, and the economy only really recovered during the Second World War.

The New Deal, and the mythology surrounding it, remains one of the great collective self-delusions of 20th Century history. I urge anyone with a serious interest to read Murray Rothbard's account of the Great Crash.

As for libertarians being anti-war, well, yes and no. I supported the Afghan campaign and have initially supported overthrowing Saddam on the WMD/terror link argument, but I now feel that I was wrong on the latter point, and am not agnostic on the Iraq war.

I dunno whether the Iraqi war really has spawned a whole new wave of terror, but I am not persuaded of the neo-cons' "flypaper" thesis either.

[Don]

"If my "dogma", as you call it, is populist, pro-New Deal . . ."

The New Deal. That fascist program that destroyed the 10th Amendment.