Krugman, the Doctor: I Meant to Say It's Good We're Turning Into Japan II, It's Real Good


The next drink will be the one that makes you sober, Paul.

In Los Tiempos de Nueva York, the economist formerly known as Pauly Krugnuts recalls his 2008 warnings that the United States economy would follow the pattern Japan's economy followed during its post-1980s recession. Most of the stimulative nostrums Paul Krugman prescribed back then have since been tried (though he believes the dosages have been too low), and nothing got better.

So without admitting any wrongdoing, Krugman has changed the question. Previously the Nobel laureate claimed that the failure of Tokyo central planners to provide more expensive stimulus caused Japan's recovery to relapse into recession. Now, however, he accepts Japan's two-decade recession as force majeure, and says that D.C. central planners should be acting more like their Tokyo counterparts:

Why not? For all its flaws, Japanese policy limited and contained the damage from a financial bust. And the question in America now is whether we'll do the same — or whether we will take a hard right turn into economic disaster.

In the 1990s, Japan conducted a dress rehearsal for the crisis that struck much of the world in 2008. Runaway banks fueled a bubble in land prices; when the bubble burst, these banks were severely weakened, as were the balance sheets of everyone who had borrowed in the belief that land prices would stay high. The result was protracted economic weakness.

The fable of the near-recovery foiled by insufficient stimulus comes up repeatedly in Krugman's theology. It's his version of Xenu's genocide.

But now Krugman is willing to claim—without evidence—that Japan's feeble stimulus has left that great nation with an economy that is "grayish rather than pitch black," "depressed, but…not in a depression," and "disappointing but not disastrous."

Krugman also notes that while stimulus fails in reality it works in theory: "The government propped up employment with public works programs, but its efforts were never focused enough to start a self-sustaining recovery."

The rest of his column is political speech and unworthy of note. The above is all the intellectual content, and it is very shabby.

NEXT: Empty Promises, Redux

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  1. Quick, change it to El Times before Old Mexican shows up to correct your Spanglish!

    1. I’d do it but dad only spoke Spanish when he was drunk, so I never understood it any way. With a bit of a slurred wording it looks just right to me.

  2. Would posting the Vapors video be passe?

    Fuck it.

    1. No, never.

    2. Seriously, the most racist video/song ever.

      Goddammit, that word is fucking useless now…

    3. Yo, that ain’t The Vapors. This The Vapors.

      1. Here’s how to embed a link using HTML

  3. You know what gets you a Nobel? It’s not a crystal ball, but in fact a mystical second lateral sight into alternate realities. You and I cannot see the Japan that would have been, or the United States that would have been, for that matter. Krugman can, and they are dark, unstimulated places.

    1. Krugman once met Elric, Corum, and Hawkmoon in the Vanishing Tower.

      1. An obscure Michael Moorcock reference is never out of place.

      2. An obscure Michael Moorcock reference is never out of place.

      3. Fucking double post…

      4. Fucking double post.

    2. If the Avalon Hill company were still in business, there’d be a board game right now, where I could prove that if the do-nothing option had been employed in 2008, Citi and BoA would have collapsed, been cut up and sold off; the FDIC would have needed a cash infusion to cover those liquidations that would have been a fraction of TARP; and we’d already be out of the “liquidity trap.” The number of mortgages modified (by the new mortgage holders) with principal reduction would be higher than the number in this universe. Real estate would be bottoming out right about now. Camp Xray would be closed. You could find the good scissors.

      My alt.universe would be awesome.

      1. This strategy doesn’t involve a Panzer division rolling into DC, does it?

        Why don’t you just toss your 20-sided dice and keep your divergent timeline on the gold standard? What chance would even a level 12 paladin like Krugman have in such a reality?

        1. Do whatever you need to do. Just give me hexagons.

          1. So you’re not deploying the 8-3-8s?

        2. I think Krugman is an anti-Paladin.

      2. Avalon Hill didn’t go out of business. Just got bought out. My inner nerd was scared until my inner nerd googled it.

        According to the polycosmic theory, the good thing about the stimulus is that its effects will filter out to other worlds. Perhaps if you aggregate the effect of our stimulus over an infinite number of alternate universes, it ends up being a raging success.

        On a more serious note, I find it annoying that stimulus supporters can always go with the “if it had been bigger it would have worked.” Yeah bro, that’s what she said.

        1. Everyone who replied (or understood) the references on this comment just exposed themselves as uber-nerds. (Corum? That’s really obscure. Avalon Hill, hexes? You are also dated.)

          1. hahaha. 8-3-8.

            1. I hate inside jokes.

    3. I like those parallel realities, there are always lots of zeppelins floating around.

  4. Damn Tim. You actually referred to him as Pauly Krugnuts…and in the first sentence. These guys around here have corrupted you. I guess you can kiss any chance of working for NBC goodbye…or at least until Comcast takes over.

    1. It wasn’t us, it was the commenters at Zero Hedge-…..treasuries

      But yeah, Krugnuts should be his name forever.

      1. Sure, blame ZH. Everybody else does…well, at least everybody at CNBC does.

        1. When the derision is earned it should be bestowed.

          Dr. Krugnuts has worked damn hard, and in public, to prove his short comings are significant and broad.

          1. You know, you’re right. I hereby turn over the reins to him.

  5. Why is it the economists that want to be famous are the fuckin’ retarded ones? While the smart ones sit back in the corners publishing for a smaller audience.

    1. Because economists like Paul Krugmann tell the politicians and the statists what they want to hear: More government is good for you.

      1. Krugman is not an economist. He is a court astrologer.


        1. What is the difference between an astrologer and a jester? Or is that Hollywood?

          1. Jesters don’t take themselves seriously.


        2. What is the difference between an astrologer and a jester? Or is that Hollywood?

          1. The jester gets a Nobel Peace Prize.

            1. TallDave – I salute you – that is the funniest thing I have seen all day (and I just came from the Bears/Lions game)

    2. In theory I can prove an elephant can hang off a cliff by holding onto a daisy with its trunk.

      However, I will never be found standing under an elephant sustaining it’s z coordinate by affixing it’s proboscis to an Asteraceae plant.

      1. Is that an African or a European daisy?

        1. I…I don’t know.


      2. Interesting fact about 3d shooters. The first generation were not true 3d so the virtual spaces were mapped essentially the same way maps are done along an X&Y axis. When true 3d came along, height had to be accounted for so it became z though that is not the standard accounting of coordinates for mathematics as it is commonly practiced where the z and y are flipped. So, left handed coordinate system, or right?

        1. I was always taught z was the vertical axis for the Cartesian coordinate system.


          1. Give me a big old wedgie for that one. I should have assumed.

        2. You can use either as long as you are consistent. In fact OGL uses a left handed coordinate system and DirectX uses a right handed coordinate system ( or maybe vis versa ). But converting from one to the other is trivial. v.y = -v.y

          1. You’ll also have to remember to flip those normals so the tris don’t look jacked up and inside out.

          2. if memory serves, you count your points to obtain the crossproduct counterclockwise in opengl and clockwise in Directx 😉

      3. pretty good – but you need some maths and equations, which will lend credance to the illusion that economics is a science and not a faith based way of thinking

    3. Possibly because wanting to be famous is a symptom of their mental disorder.

  6. Krugman’s bizarrely short memory has been documented.

    1. He’s safe. The public’s memory is even shorter, and most of the public have never heard of him. How much influence does he really have?

      1. How much influence does he really have?

        If NPR is any gauge, a shitload.

        1. For all the liberal/progressive/socialist/communists that don’t know dick about economics, he is the only economist in this universe that matters. To them, his word is God’s Word.

          1. So how do you have 2 wars and taxcuts?
            And if taxcuts create jobs where are they?And if they pay for themselves why all the debt even before the collapse?

            Too funny you guys pretending you know jack about economics.You wont even ackowledge the indesputable facts of your failure when they are right there for the whole world to see.

            1. This isn’t a neocon site. Try harder.

            2. Dude, you got us guys pegged. We’re all a bunch of neo-con, supply-siders who supported George W Bush, and all of his economic policies.

              1. See what I mean? There’s Krugnuts, then there’s everybody else. And everybody else is a Republican supply-sider. But I guess when they don’t teach Austrian economics in most colleges, you have to expect this.

            3. And if taxcuts create jobs where are they?And if they pay for themselves why all the debt even before the collapse?

              And if government spending creates jobs, we never would have had a recession in the first place.

              George W. Bush has been spending trillions on wars– that money goes to contractors, soldiers in the way of huge re-up bonuses and hazard pay, experts, engineers, the works. FDR supposedly got us out of the depression with WWII.

              So let’s hear it. Government spending improves the economy.

              The government’s been spending like fucking crazy for almost ten years straight. Why are we in a recession? Why do liberals keep lamenting the money we’ve “wasted” on two “illegal wars”?

              Libertarians are consistent on this: We’re against the “stimulus” spending on two illegal wars, and we’re against the “stimulus” spending in the form of “creating or saving” 3 million jobs.

              1. Read the AUMF for the Barbary Wars and the AUMF for Iraq/Afghanistan. Not much difference.

                So the wars are not illegal. At least if you believe St. Jefferson was doing the right thing fighting the Islamics of his day.

                Now whether the wars are a good thing – history will tell us. Get back to me in about 50 years and history will have rendered its verdict.

            4. There’s irony in that thar post.

            5. We certainly wouldn’t want to cut spending or anything. Pauly Krugnuts sez.

        2. A lot of people pay attention to him, but I don’t think he has any influence, as in I doubt he really sways anyone’s opinions, nor does he seem to have effect on any actual policy. The left uses him as evidence they are right, the right uses him as an example of leftist thinking. He seems to have little effect on the administration, since they rarely please him.

          1. That’s what I think. He’s a funny-looking guy who shows up on the Sunday “news” shows as the token economist. He writes a column for a famous paper and he won a famous award. But seriously, why should we acknowledge him? Because lefty media networks do?

        3. If NPR is any gauge, a shitload.

          OK then, how much influence does NPR have?

          1. largest audience of any news organization.

        4. I used to post anti Krugman articles on face book. I stopped. I have a liberal friend who came to me extremely upset as if I said something against Jesus.

          1. Well, they’re both Jewish, and Jesus did have that episode with the Wall Street bankers of his day.

            1. I wish Krugman would go rub some lepers.

  7. You know what’s really weird about Krugnuts (and those who believe him)?

    In addition to the incredible stimulus, which like an object in your rear view mirror, never seem to be large enough, even as it crushes us…

    They think they’re standing in the way of something evil. What terrible evil would befall us if he was wrong? I get the sense that he thinks Zombie Reagan is about to crawl out of his grave and back into the White House–and thank God Krugnuts is here stop that from happening!

    We need deep tax cuts–for the rich–right freakin’ now. Deep, deep tax cuts–for the rich. And wouldn’t it be just horrible if someone did that, and the economy started growing again? Some people would do anything–anything–to avoid giving rich people a tax cut.

    As if the purpose of public policy were to keep taxes on the wealthy as high as possible. They’ll squander $700 billion on bad investments bailing out Wall Street investors, but they won’t give the wealthy a tax cut?

    That really is like a religious bias.

    1. Blasphemy!

      1. Somebody’s gotta start the ball rolling…

        There was a time–not that long ago–when people ran campaigns and won high office on a platform of tax cuts for rich people…

        But we can’t have tax cuts for rich people! …because…because…because then they’d just invest it! Or even worse–they might spend it!

        And we can’t have people investing and spending their money–not on SuperKrugman’s watch!

        1. No, you see they’ll just … um … eat it. And we can’t have that. Not without lots of union-flavored, public-employee-laden condiments.

        2. You know you are just being a dick–the whole point is that tax cuts on the rich are less stimulative than tax cuts on people who are more likely to spend that extra money. People with less money are more likely to spend any money they get. That’s just obvious reality. Oh wait, obvious reality is the opposite of voodoo, so you don’t deal with that.

          1. And we know this, how, Super Tony? One of the principle drivers of the current malaise has been overindebtedness. Rather than spend, spend, spend, people are saving, saving, saving.

            1. Which is exactly the reason government should be spending more. And why tax cuts aren’t that efficient as stimulators during a downturn. If people save that extra money, it’s just wasted as far as stimulus is concerned. And the rich are simply more likely (to be able) to save it.

              1. Contra: the poor are more likely to be worried about their situations, and so will pay down debt as fast as they possibly can.

                1. So how does people paying down debt stimulate the economy? Or what are you saying, exactly?

              2. Government spending is merely a forced transfer payment, Tony.

                It is physically impossible for any benefit to the tranferee to be greater than the detriment to the transferor.

                And it is physically impossible for you to prove the case could ever be otherwise.

                1. It is physically impossible for any benefit to the tranferee to be greater than the detriment to the transferor.

                  Bullshit. What constitutes a pittance in tax dollars taken from a wealthy person–money that he’d spend on a 5th car, say–is much more valuable to someone who’d use it for, say, education or healthcare. Your post is beyond ridiculous.

                  1. Bullshit. What constitutes a pittance in tax dollars taken from a wealthy person–money that he’d spend on a 5th car, say–is much more valuable to someone who’d use it for, say, education or healthcare. Your post is beyond ridiculous.

                    Fuck Christ, you are a public embarrassment to the party. Even your own post should provide you with the clues to why you get it ass backwards. You are not a little wrong. You are spectacularly wrong. The productive value of a quanta of wealth grows through it being redistributed to a poorer person than the original possessor of that wealth? Do you understand what you are missing here? No, of course not, you are Tony, the stupidest fucking dumbass to grace the internet. Hey, dumbass, why don’t we just give all the wealth held by the top quintile of wealth holders to the bottom quintile and just watch the amazing returns unfold as value is added.


                    Get that stupid shit out of your head, pronto, or join another party that is as stupid as you. Good luck finding one.

                  2. What constitutes a pittance in tax dollars taken from a wealthy person–money that he’d spend on a 5th car, say–is much more valuable to someone who’d use it for, say, education or healthcare.

                    You are conflating the subjective value to the individual of the wealth with the economic stimulative effect of the money. These are two separate issues.

                    You can well make the argument that society as a whole is better off if the poor person has education or healthcare. It just isn’t an argument that the *economy* as a whole improves or that new jobs are created as a result. Whether the poor person or the rich person has the money, the dollar amount is unchanged. The rich person may spend it or invest it, which will stimulate the economy in other ways, just as if the poor person spends it it may stimulate the economy. But you can’t argue that the poor person’s identical dollar stimulates the economy more just because the subjective benefit to him of the health insurance is greater than the subjective benefit to the rich person of a new BMW.

                  3. You are confusing morality with economics.


                  4. “And it is physically impossible for you to prove the case could ever be otherwise.”

                    The Keynesians aren’t anywhere near as stupid as Tony seems to be making them out to be.

                    …this is what I was trying to tell you earlier, Tony. The Keynesians don’t even believe what you’re saying. If you knew more about your own brand of economics, you wouldn’t say the things you do.

                    I think you’re trying to say something about multiplier effects, but it just comes out as garbage.

              3. There’s an easy way for the government to spend more — go to war.

                Just think of all the money that would be spent on soldiers’ pay, buying bullets, tanks, planes, etc and, after the war is over, paying construction contractors to rebuild!

              4. Yes, but rich people have less reason to save it (as opposed to investing it) because they have enough money that they aren’t worried about paying the mortgage or feeding their kids if they lose their job.

                1. “Yes, but rich people have less reason to save it (as opposed to investing it) because they have enough money that they aren’t worried about paying the mortgage or feeding their kids if they lose their job.”

                  Even if that were true, more than a hundred banks have failed this year–are you sure people saving their money is such a bad thing?

              5. Riiight. Spend more so that poor people will have to borrow instead of save.

                At least admit you want to tax the rich out of sheer jealousy. At least there’s some logic to that. Taxing the bejeezus out of rich people may be emotionally satisfying and fun but it doesn’t actually improve a poor person’s lot one iota.

                The downturn is actually making some things more affordable for poor people. Tony loves the poor so much he wants to euthanize them.

          2. I thought meaningful “stimulation” requires investment, which it would seem those with substantial purses could do directly, as well as spending on designer leisure wear for the family Shih Tzu.

            A tax cut for anyone is good for everyone. No?

            1. But it’s not that efficient or useful even when applied to the non-rich. It’s a good way of increasing the deficit, though.

              1. Obama’s faux “stimulus” added more to the deficit than did Bush’s evil tax cuts.

          3. “You know you are just being a dick–the whole point is that tax cuts on the rich are less stimulative than tax cuts on people who are more likely to spend that extra money.”

            Economic growth comes from efficiency improvements and investment.

            One of the biggest challenges we have right now is that investors are pooling their cash in things like treasuries–that’s one of the big reasons why the yield curve looks the way it does…


            Right now, investors would rather park their money in treasuries for five years and get around a 1.5% return.

            Expand my business by hiring? No.
            Expand by purchasing capital equipment? No.
            Invest in new technology companies? No.

            I’ll just park my money and earn 1.5%

            We need to stop actively discouraging wealthy people from investing their money. It’s stupid.

            Encouraging them to invest their money? Not so stupid–maybe even smart.

            “People with less money are more likely to spend any money they get. That’s just obvious reality. Oh wait, obvious reality is the opposite of voodoo, so you don’t deal with that.”

            Are you familiar with the concept of the liquidity trap at all?

            Marginal propensity to save?

            Does someone need to teach you the basics of Keynesian econ before you can understand enough to see why your thinking is so wrong?

            That’s supposed to be the point of stimulus, isn’t it? Because the government spends every dime it takes in and doesn’t save it–that’s supposed to stimulate the economy…

            Didn’t work. It’s not working. The problem isn’t spending, the problem is efficiency, investment, etc… That comes from people with money (aka “the Rich”) investing their money in various ways–and things will get better the sooner we stop actively discouraging investment…

            And there’s no reason I can see not to! What does anybody lose because marginal tax rates for the wealthy go down? What does anybody lose because the capital gains tax (a tax that discourages investment mind you)–goes down?

            Other than the stupid satisfaction of sticking it to the wealthy, what does anyone lose because the government can’t spend as much of the wealthy’s money? What, the government might have to cut it’s spending…?

            Oh Noes!

            There are 150,000 people working at the Department of Commerce. I hope half of them starve to death.

            1. One of the biggest challenges we have right now is that investors are pooling their cash in things like treasuries–that’s one of the big reasons why the yield curve looks the way it does…

              Are you implying that there’s bond bubble forming? Larry Kudlow told me that there is no bond bubble.

              But who is really buying Treasuries? The banks, that are borrowing at ZIRP? Ahh, we don’t really know that. But those Treasuries would mature about the same time as their shit RMBS and CDO assets mature that are currently marked-to-myth.

              1. I don’t know if there’s a bubble, but 1.5% for 5 years doesn’t sound like much of a retirement plan to me–it’s hard to be bullish on that number, isn’t it?

                You’re not gonna tell me that interest rates are gonna drop like a rock from here, are you? When the worm turns, it’s probably gonna turn sharp, but I don’t know if that’s next week, next year or next decade.

                I am starting to wonder if a little inflation might not be such a bad thing. Might kick some of that money back off of the sidelines… Not that I’m a fan of inflation, but there’s a bright side to everything, right?

                In the meantime, there are worse things than slashing income and corporate rates; there are worse things we could do than slash the capital gains tax…

                …and President Obama seems pretty intent on trying all the worse things first–for no apparent reason other than demagoguery and sheer ignorance.

            2. Just half?

              1. “Just half?”

                1. They moved the patent office over there from the Dept. of Treasury.

                2. I’d like to see the other half find jobs somewhere doing something productive–so call me an optimist!

            3. Whatever intelligent thing you have to say is rendered questionable by the incivility of this last line. Why are all the comments on this thread so ugly? I don’t know much about economics but it sounds so arrogant and basically inhumane. People like Krugman because he projects some values other than money uber alles. Most of the commenters here sound like the kind of undeniably arrogant and greedy types who caused the recent economic collapse. If you’re trying to educate people like Tony, quit the pompous attitude. Is there any wonder why the average person doesn’t trust you know-it-alls after the sheer farce that the banking system led us through in the last twenty or so years. Show some humility. We all know that no one really has a fix on how economics works.

              1. I agree that many of the comments are overly caustic, but I do understand some of the frustration. Economics is a complex endeavor and somewhat akin to weather prediction. Still, when someone tries to claim that rain falls up, it kinda gets yer goat.

                Like your claim that “greedy types caused the recent economic collapse”. Greed is what causes the farmer to get up in the morning and till his fields. Without greed there would be no food and everyone would starve. What caused the recent economic collapse was the government. The government (community re-investment act) pressured banks to lend money to people who couldn’t afford to repay the loans. This put upward pressure on housing prices (more buyers in the housing market) but eventually these bad loans came due and home prices sagged. Other marginal homeowners who were overextended then defaulted and before long the whole market collapsed. That dragged down the banks who had purchased bundled mortgage backed securities. They didn’t know the value of these packages and they didn’t care because Fannie Mae was standing just outside the door to save them. Of course there were greedy individuals at fault as well, but the underlying problem was (and remains) the government distorting markets and altering normal economic behavior by introducing either false risk or false security.

                If you are unaware of this you haven’t read much about the recent economic collapse. If you refuse to aknowlege this then there isn’t much hope for you.

                1. Is the Big Short by Michael Lewis a negligible book? I’m not sure. What about So Damn Much Money or 13 Bankers? It seems to me that whenever government tries to support the hurting underclass, the deregulatory forces in our society use it as an excuse to to exploit the treasury and then blame the government for wasting money when really it was the powerful players ability to distort sensible laws in their favor.
                  Government is not the same as business. Government can’t fire off it’s unproductive members. Government is much more like a tribe or even afamily. All kinds of civilized behavior has been evolving for thousands of years whereby the stronger more economically viable members support the young and elderly and disabled. Might does not necessarily make right except perhaps in extreme circumstances such as war. It seems to me that business with it’s extremely competitive nature has come to dominate our culture at the expense of more civilized behavior and discourse. While it’s true that economics, as Ken Schultz says below, is the study of business behavior, those business’ do not operate in a vacuum. They are both fostered and regulated by politics for the general good. And to Mr. Budkeyeman, I don’t think you’re using the word greed correctly. It’s basically a moral term and it indicates something inappropriate. A farmer working to support the family is not inappropriate. A plantation owner who bullies the slaves, starves them and pockets the profits –that’s greed and that feels like what’s going on when we non-economists hear things like the top 25 hedge fund managers made a billion each last year and now they want a tax break. Maybe that makes sense to an economist, but it rips at the social fabric when modestly paid people like teachers, plumbers, nannies, caregivers etc. realize that they have relatively little say in society compared to these types. A government that has no populist representation pretty quickly devolves to a feudal state. Maybe I’m wrong, but I do know that it ain’t nearly so simple as you pretend it to be. Once again your last paragraph is mighty arrogant and really unnecessary.

              2. “Why are all the comments on this thread so ugly?”

                Part of it is frustration. I don’t know who to vote for to get 75,000 of the 150,000 people who leech off of my paycheck in the employ of the Commerce Department laid off–but I’d vote for that person if I could.

                The fact is that no one running is even advocating firing all of those people. And me saying that I wished they’d all starve to death is only meant to point out that I really don’t think public policy should be run for their benefit. (They wouldn’t starve to death anyway; they’d just have to find productive employment elsewhere.)

                As for economics being such as mystery–it really isn’t mysterious at all. Not what we’re talking about.

                Government uses our resources with such predictable inefficiency, that Keynesians argue we should use that to our advantage when the unemployment rate is high. They know that the government will spend every penny it gets whether they should or shouldn’t…

                Private citizens aren’t like that–and it’s what private citizens do with their money that makes economies grow. That’s why the government should have access to less of it in times when there is so little growth…

                It really is as simple as that. People like Krugman make it seem more complicated than it is…

                If I could leave you with one thought, it would be this–economics is largely the study of what businesses do with their resources and why. In other words, they’re trying to universalize laws and lessons that small business owners have understood and put into practice for thousands of years. It’s the attempt to universalize those laws–and politicize them–that makes them complicated.

                Using physics as an analogy, it’s the difference between inventing the math to describe the effects of gravity on something hanging from a rope and pulley–and being able to use a rope and pulley to lift a bale of hay into the top of the barn.

                Let the Krugnuts of the world say we need to invent the math first, but me? I don’t need to invent calculus to know how to lift a bale of hay into a barn–people have been using ropes and pulleys for thousands of years!

                Government taking my money and spending it on bureaucrats who don’t make back what they cost plus a return? They don’t make the economy grow like when I make an investment. And no one needs a PhD in Economics to understand that.

                The government bureaucrats are eating our seed corn, the stuff we need to make the economy grow–no one needs Krugman to explain that to them either.

                The government squandered $700 billion of our future discretionary income on Wall Street’s bad investments past–and that will crimp the economy that would have grown with that missing seed corn. There’s nothing confusing about any of this.

                1. Is the Big Short by Michael Lewis a negligible book?

                  Every book by Michael Lewis is a negligible book.

                  1. Did you read the Big Short? What was wrong with it? Was it too shallow? Was the story it told false? The story it told seems to have been confirmed by other writers as well.

          4. So spending and boosting C is better than spending and boosting I?

            Could you explain this to me in macro terms, because I’m not seeing how reducing leakages is bad even if the money is invested and not used to consume. Either way the money is injected back in. Something you argue for all the time with government entitlements.

            1. I’ve never received a paycheck from a poor man with a tax break.

          5. You are presuming that only consumption stimulates the economy. Not investment.

            Apparently, we can mindlessly eat our way to prosperity, as our mindless eating will somehow inspire people (iunknown mysterious forces that don’t require funding) to produce goods which will satisfy our mindless appetites, and magically we will then have jobs producing those goods.

            Just CONSUME, and magic stimulus will occur. Don’t bother to think about saving your money and investing it in producing some useful good. Just CONSUME.

          6. Tony|9.10.10 @ 8:06PM People with less money are more likely to spend any money they get.

            Tony|9.10.10 @ 8:26PM Which is exactly the reason government should be spending more.

            By your two posts here Tony it seems like you’re saying exactly what most posters on Reason are saying. The government (as the richest) should give back all of the money it takes from the citizens (the poorest) and let us spend the money to stimulate the economy. No more oppressive taxing equals a stimulated economy.

    2. We need deep tax cuts–for the rich–right freakin’ now.

      You’re talking out of your ass just as much as Krugman is.

      1. Well why not crank ’em up then?!

        Why settle for a 50% capital gains tax if we could crank it up to 75% or 90%?

        Does raising or lowering the capital gains tax have any effect at all on economic growth?

        Why don’t you tell me–what does economies grow? Do you have any idea?

        1. No, I don’t.

          It’s an extremely complicated question that almost certainly does not have a simple answer…assuming there is an answer, in other words that the economy isn’t going to crash and burn regardless at this point.

          1. Investment and efficiency.

            Efficiency is typically associated with free trade, productivity and technology.

            Technological improvements are typically associated with investment.

            Just for the record, I’ve raised millions from investors, and believe it or not, they really do take their after tax returns into account before they hand over any money. In fact, I haven’t raised a penny yet from investors who weren’t interested in what kind of return they were likely to get.

            It never happens.

            It really isn’t rocket science. When you’re suffering for lack of investment, you need to stop penalizing people so harshly for making investments. When you’re starving for growth, you need to stop doing things that discourage economic growth.

            Taxes discourage growth. Taxing investments discourages investment. As sure as the sun will rise tomorrow. It isn’t brain surgery.

            1. You think private investors are driving the economy?

              1. Their money counts for something.

                Back when Reagan was slashing rates, we didn’t have whole industries we have now. Some people think Al Gore invented the internet, but some of us around remember a slew of private startups laying carbon fiber, inventing the mouse, 3-D games and search engines. …and that was just the beginning.

                It isn’t just IPOs and secondary offering either. Every franchise you drive by every day, all the mom and pop businesses you see out there everyday–the friends and family equity contribution in this country is huge. All driven by expected returns.

                And it’s not just new businesses. Every Accountant that’s thinking about hiring more people and expanding their practice, every restaurant that thinks about adding a new location… They all gotta have a business plan, and it’s got a few variables in there…

                And right now, here’s what they’re doing with their money instead:


                5 years, 1.59% return. It shouldn’t be so hard to beat a return like that in the land of capitalism. But we’ve got a president and an awful lot of other people who think rich people are the problem–and hating on them is the solution. Some day maybe the adults will be back in charge again, but until then? I’m gonna keep calling the amateurs out like I see ’em.

                Barack Obama has no one in his cabinet–no one–with experience in private industry. And it shows. He’s willing to do just about anything to make the economy grow–except the one thing that will work.

                He’s an ideologue–and an especially stupid one at that. He won’t even do the smart thing to save his own ass.

              2. “You think private investors are driving the economy?”

                In short, I think they’re the engines of growth.

                They aren’t right now. And reasonable people should be asking our leaders why.

                I haven’t seen any indication that our current leadership has a clue as to what makes economies grow.

                …and shouldn’t that be the first question everybody asks every politician?

                Mr. President, what makes economies grow?

                Ha! I bet he’d filibuster more than he did when asked to name his favorite baseball player.

                I’ll tell you what–anything the government does that doesn’t generate a return on top of getting our money back?

                Isn’t economic growth–how’s that?

                1. I think many private investors, like you said, are looking for someplace “safe” to park their money, for now. But that’s what got them into bad paper in the first place. Regarding taxes, I’d much rather see a reduction in the corporate rate, as opposed to the individual rate. Many businesses are still over-leveraged. A company called Taubman just walked away from a $135 mil loan on a high end shopping center that’s valued at about $52 mil in AC, but they will be paying dividends at the end of the month. I don’t pretend to know a lot about high finance, but that just doesn’t seem right to me.

                  1. Ahh, Taubman is a REIT. Nevermind.

                    1. Regardless, I’d love to see a cut in the corporate rate. That makes all the sense in the world.

                      It is hard to explain why anyone other than a politician would support squandering $700 billion in taxpayer money to bail out Wall Street, but would absolutely refuse to give wealthy taxpayers a tax cut–on principle.

                      Somehow, in Obama’s twisted circuits, when the government spends the taxpayers’ money, that’s okay, but rich people keeping their own money is somehow morally indefensible.

                      Cutting corporate rates will help too. Any recovery effort that doesn’t include increases in investment and efficiency is a lot less likely to take hold. And cutting the corporate rate makes a lot more sense that way than not cutting the corporate tax rate.

            2. I agree that taxes should be lower.

              However, it is far from clear that a tax cut for the rich is going to make the economy grow. If it was as simple as putting money back in private people’s/corporations’ pockets, then the bailouts would have done the trick! That is where I take issue with your assertion that we need to immediately give the rich a tax cut.

              Especially since tax cuts without spending cuts of equal significance would be fiscal suicide. The elephant in the living room is, as always, the need to cut spending.

              1. The elephant in the living room is, as always, the need to cut spending.

                Unless we are responding to Chony, whose posts I dont see, so I cant respond to them anyway, I think this can be an assumed premise here.

            3. People who hire employees are also taking tax effects into account. By having higher taxes on income from work than capital gains taxes, the tax system is punishing employment.

              No, the tax rates related to different types of income should be the same, and moreover the tax system should not charge taxes on taxes. And, of course, it shouldn’t come with expensive red tape.

              1. I have no idea where taxes should be at any given point in time, and I’m not here to argue about that…

                But if we’re measuring prescriptions for growth against each other? Then bailouts gotta be somewhere near the bottom, stimulus has gotta be not much better, and tax cuts gotta be somewhere near the top.

                If you’re suggesting that lowering the cost of hiring people might have some kind of discernible effect on unemployment? You might be on to something.

                Something so obvious that pointing it out to people makes me feel like we’re the new writer for Barney…

                Yes, boys and girls, lowering the cost of employing people…

                I love you.
                You love me.
                We’re not as employed as we can be.

                1. Yes, taxing less will, by itself, help the economy.

                  Spending more will also, by itself, help the economy.

                  Note that my “by itselfs” have been engineered to prevent consideration of the effect on the deficit, debt market, stability of the dollar, etc. That’s where your ohsosimple prescriptions are going to run aground on the shoals of reality.

                2. Bailouts are extra bad because they are funded by debt and create false intensives. At minimum, if there is a bailout, all investments into the company that is being bailed out must be wiped out, to discourage bad investments.

                  Tax cuts are bad because they are funded by debt.

                  A stimulus is bad because it is funded by debt, and because it isn’t really a stimulus, but just some grab-as-much-money-as-you-can pool for those that get to sit at the table.

                  Yes, I claim it is all bad. 😉

                  A good government would have its size balanced such that in bad years the government needs to borrow a bit of money to cover normal government expenses, and in good years there is a budget surplus, so that overall there is no national debt, and thus no taxes need to be collected merely to pay interest on the national debt. I’m thinking about something like a Federal budget of two trillion a year.
                  Look, there is your tax cut after all.

                  Unfortunately, getting there from the current messy state is quite difficult.
                  Any politician who would try to implement the necessary hardships, rather than increase debt further, would probably get voted out of the office at the next opportunity.

                  1. WASH: This landing’s gonna get pretty interesting.

                    MAL: Define “interesting”.

                    WASH: “Oh God, Oh God, we’re all gonna die.”


                    MAL: Just get us on the ground.

                    WASH: That part’ll happen pretty definitely!

                  2. Uh, ever hear of the Laffer curve? There is an optimum rate of taxation. One that generates the most revenue. Most economists think it is in the 20% range.

                    Counting Federal, State, and Local we are well north of 40%.

                    What does that mean? Reduced income from taxes now and much reduced (due to slower than optimum growth) later.

                    The problem with government is not a lack of revenue. It is too much spending.

                    If we went back to 2005 spending (two wars) with today’s income the budget would be balanced.

                    Net: Wars are cheaper than Congress.

                    1. Yes, I’ve heard of it, and I also know there is considerable debate about what the optimal tax rate is with estimates ranging from 25% to 70%. I like that you’ve adopted Obama’s “most economists” trope, though.

                      I suspect you’re thinking of Hauser’s Law for the 20% figure.

                    2. with estimates ranging from 25% to 70%

                      Ive seen estimates as low as 10%. And “consensus” between 20 and 30 percent (throw out the whackadoodles).

                    3. And “consensus” between 20 and 30 percent (throw out the whackadoodles).

                      That requires a link. Wikipedia’s lowest referenced percentage is in the low 30s, so if you can provide a link showing that most economists think it’s lower we can fix that.

                    4. And 10% is totally ridiculous. You’re telling me that GDP gets cut in half when you go from 10% to 20%? That doesn’t pass the smell test.

                      Even 20% sounds dubious to me, as it’s hard to believe going from 20% to 40% halves the GDP as well.

                    5. I would have to research a link, but Ive seen it. Note I put the 10% in with the 70% whackadoodles.

                    6. The tax rate that creates the most revenue is not the optimal tax rate. Who would want to maximize the size of the government?

                    7. The tax rate that creates the most revenue is not the optimal tax rate. Who would want to maximize the size of the government?

                      True, but its freaking stupid to operate with a tax rate above the revenue maximizing one.

                    8. “Uh, ever hear of the Laffer curve?”

                      It really is time to dust it off again.

                      The American people seem to have forgotten everything we used to know.

                      Reagan cut the top rate from 70% to 28% and tax receipts almost doubled during his term.

                      Meanwhile, we were experiencing double-digit inflation, paying hefty double-digit interest on the debt, half the world (in China and the USSR) wasn’t really plugged into the world economy–and we didn’t have the benefit of all the free trade agreements we’re enjoying now…

                      The government still ran massive deficits–but the economy improved dramatically. Which goes to show–no, it ain’t all about the spending.

                      And in terms of arguing back and forth about whether there’s an optimum tax rate, that’s beside the point. The fact is that the anemic growth we’re seeing now indicates that wherever that optimum rate is, it’s a lot lower than where it’s set right now.

                      …and the dummies running this country are talking about letting tax cuts expire–effectively raising rates! The optimum rate sure as hell isn’t higher than where it’s set now.

                      No way.

                      But we can’t have tax cuts for the wealthy–not even if it’s in the interest of economy. …because if you can’t stick it to the rich, then what’s the reason of having a government?!

                      Yeah, time to dust off the Laffer curve–you’re damn straight.

                    9. And you know what else is ridiculous?

                      The suggestion that the government is underfunded.

                      Holy shit. They’re talking about another round of stimulus!

                      What terrible thing happens if we cut taxes too low?

                      Do our marines start starving in the field? Does the electric company turn off the electricity to the White House if they don’t pay the bill?

                      …or does “underfunded” just mean the government has to start making tough priority decisions about what it’s going to cut to make itself smaller?

                      Oh Noes! Smaller government! Oh, if only we’d kept taxes higher!

                      Again, I’m signing on to the Laffer Curve, but even if it’s dead wrong–somebody tell me–why should libertarians be horrified at the prospect of smaller government?

                    10. The Laffer curve *is* dead wrong. Those two local minimums at 0% tax and at 100% tax do not imply that there is only one maximum in between.

                      Smaller government: yes
                      Laffer curve: no

                    11. The Laffer curve *is* dead wrong. Those two local minimums at 0% tax and at 100% tax do not imply that there is only one maximum in between.

                      The fact that the curve is OBVIOUSLY* concave downward does however, imply a single maximum.

                      *I will grant the possibility that it might be very slightly concave upward at very very low tax rates. But not in the range we are discussing.

                    12. My thesis advisor always told me that the best way to find mistakes in papers was to do a search for the string “obviously”.

                    13. My thesis advisor always told me that the best way to find mistakes in papers was to do a search for the string “obviously”.

                      Thats why I put it in all caps, for easier searching. And even footnoted it for you.

                    14. No, it is not “obviously” concave. There exist many nonlinear effects in there, for example corruption, black markets, and tax evasion schemes. Furthermore, people generally do not behave as predicted by various old economic theories.

                      You might want to look at empiric data for tax revenue from tobacco tax before and after tobacco tax increases in various states.

                    15. Yes, Ken, we’ve all heard of the Laffer curve here. Like most things, it is more complicated than you might like to believe.

                    16. No.

                      It really isn’t.

                  3. Tax cuts are bad because they are funded by debt.

                    Bullshit. Tax cuts arent funded at all. They are reducing government revenue, not increasing government spending. You dont fund revenue.

                    1. “Tax cuts arent funded at all. They are reducing government revenue, not increasing government spending. You dont fund revenue.”

                      Now that’s just crazy talk! ; )

                      You know what it is? It’s like one of those Orwellian things that the Ministry of Truth tells people in “1984”–and everyone believes!

                      War is Peace

                      Freedom is Slavery

                      Ignorance is Strength

                      Tax Cuts cost the Taxpayers

                    2. It’s often forgotten that in the long run the most important driver of revenue growth is economic growth, so the level of taxation that produces the most revenue over the next year is almost certainly not the same as the level of taxation that produces the most revenue over the next 10 years.

                      That’s why the 20-30% figure is so important. Once you get past that, you start to impede growth.

                      And of course living standards are a function of GDP per capita, so growth should be a priority anyway.

                    3. “And of course living standards are a function of GDP per capita, so growth should be a priority anyway.”

                      There are at least a dozen people in this thread who would make a better President than Barack Obama, and you’re one of them, TallDave.

                      Hail to the Chief!

                    4. I know I would look better riding a hybrid bike.

                    5. If I cut back from working full time to working 20 hours a week, and don’t reduce my spending by an equal amount…the debt I’m taking on is, essentially, funding my decision to work part time. Even though that technically was not a spending decision.

                    6. Tax cuts funded by debt (rather than by reduced government spending) will on the long run increase government spending.

                      Take a simple economy, ignore inflation.
                      In year 0:
                      government expenses: $2,000
                      tax revenue: $2,000
                      debt: $0

                      Now you half the taxes, but fail to cut expenses.
                      Year 1:
                      government expenses: $2,000
                      tax revenue: $1,000
                      debt at the end of the year: $1,000
                      (ignoring interest during the year)

                      Now interest kicks in, to keep numbers simple, lets say 5%:
                      Year 2:
                      government expenses: $2,000
                      interest: $50
                      total: $2,050
                      tax revenue: $1,000
                      debt at the end of the year: $2,050

                      If you go on like that, debt at the end of year three will be $3,152.50,
                      and at the end of year four debt will be $4,310.125. By that point, more than 20% of your tax revenue are spent on interest.

                      You probably are thinking that this isn’t correct, as with the lower tax rates the economy will grow faster.
                      That effect exists, but the interest rates the government has to pay on the debt will always be a bit higher than economic growth – an investor would have to be pretty insane to borrow money to the government at 5% if he could invest the money elsewhere, collect some profit for the year, *and* enjoy growth rates of higher than 5%.

                      You could also see this from a different angle: there is no way the government spends those $2,000 smart enough and efficient enough that they return $2,050 at the end of the year.

                    7. Once again, tax cuts cant be funded by debt, because they are reveneue and revenue isnt funded. PERIOD. If you fail to cut spending, the debt is funding the failure to cut spending, not the tax cut.

                      And Tulpa, the debt is funding your failure to cut spending, not your part time work.

                      Funding is an expense side issue. PERIOD.

                    8. robc, this seems to be an article of faith for you.

                    9. robc, this seems to be an article of faith for you.

                      Its not faith, its definition. I know how financial documents work. Revenue is one section, expenses are another.

                      A cut in revenue does not change the expenses at all. Selling your widget for 50% less lowers revenue, it does not raise expenses. PERIOD. Its fucking textbook definition.

                    10. Even if you think that, then a tax refund check is still an expense.

                    11. Even if you think that, then a tax refund check is still an expense.

                      The 1 cent is costs the government to make a direct deposit of my refund is an expense. That is correct. The tax refund check (which isnt what we are talking about, we are talking about a tax cut, which would cause you to send in less to begin with) is not an expense, it would be a deduction on the revenue side.

                      Its been nearly 25 years since I took a couple of basic accounting classes but this stuff isnt that hard.

                    12. Your memory on how accounting works let you down, then.
                      The actual tax cut, where taxpayers only pay a reduced tax, should indeed be accounted as less revenue. The tax refund check, however, is first a tax revenue, and then a government expense.

                      That much said, I don’t care how you account that. But I want people to understand that reducing taxes without reducing government spending does not work.

    3. Why, that idea is just crazy.

      So crazy…that it just…might…WORK!

    4. They’ll squander $700 billion on bad investments bailing out Wall Street investors, but they won’t give the wealthy a tax cut?

      Wallstreet Investors = rich, check.
      Bailout = transfer of taxes payed back to the rich (with some extra thrown in from the not so rich), check.
      Result of bailout/tax cuts for the rich = rich guys with more money in their pocket.

      How would giving them a reduced income tax break be different again?

      1. Hmmmm…
        I invest on wallstreet, hence Im a wallstreet investor. And Im not rich.


        1. robc,

          You got a bailout?

          1. I didnt comment on the bailout part, did I?

            However, Im sure some company that one of my mutual funds invests in got a bailout. So Yes, I got a bailout.

            1. And do you think any of the wealthier folks at that company ended up with more money in their pocket as a result of that bailout money?

              If so, how is them getting the money this way different than a tax cut for them?

              1. Im not arguing with your point at all, I was arguing that only the rich are wall street investors. Stick with my tangent here.

                1. arguing with your point that only the rich …

                  blah. Damn lack of preview button.

                  1. OK.
                    I was imprecise.

              2. “And do you think any of the wealthier folks at that company ended up with more money in their pocket as a result of that bailout money?”

                Are you suggesting that the problem with the bailouts was that it benefited the wealthy?

                Because that’s not my problem with it at all. I have a number of problems with the bailouts, including that it was negative for the economy generally, that it makes people like me fund things that I didn’t want to…

                Sticking with the latter point, reading your comment makes me feel like someone who just woke up in the hospital after getting mugged. Finding out that the man who mugged me was rich isn’t what makes me mad about getting mugged–it’s the getting mugged that pisses me off.

                I couldn’t care less if the mugger was as rich as Bill Gates or as poor as poor can be–and laying in the hospital, I’d think anybody who thought that was my issue must have a screw loose.

                1. Ken,
                  I was responding to the underlying concept that more money in the hands of wealthier folks is good for the economy because they are the job creators. If it gets there through taxes or the bailout, it still gets there, so the premise that these are the people who are gonna create jobs and save the economy doesn’t care whether you were mugged or not. And, indeed, transferring wealth from the non-job-creating class to the job-creating class should have a multiplier effect…if the original premise had a sound basis.

                  I am not arguing that it does,
                  The idea of: bailout = ineffective; while tax cut for the rich = effective just doesn’t hold water as far as I can tell.

                  1. Are you suggesting that the problem with the bailouts was that it benefited the wealthy?


                    They may have, however, rewarded bad behavior among the folks that created the problem…and those rewards went to a wealthy class of folks at the expense of a less wealthy class of folks.

                    So to re-spin your mugging tale. Would it make you more angry to find out that your mugger was working for a rich guy sitting at the top of an organization designed to mug you and thousands like you?

  8. John Boehner is the Devil incarnate, because he won’t agree with me.

  9. If I ever see this jagoff in public I’m throwing punches.

  10. I’m always skeeved and confused by the mismatched-shape fingernails in that picture. It’s not like he accidentally belt-sanded one of them or got it caught in his motorcycle chain or something. Krugnuts isn’t a doing shit guy. So, I mean, what the fuck, man? Is he just gross?

    1. eff you. Any man with a sweater tied around his neck is a doing shit kind of guy. A real man of action.

      1. oh wow – i always looked at it and thought it was a fleece vest. but, you’re right. it’s a sweater.

        ew. he IS just gross.

        1. Every time I see that fucking picture, my affection for stout drops a little bit more.

      2. All the cool kids wore those in the 70’s.

  11. Remember, even though capitulation and liquidation always worked before, that is the one option that is not on the table.

    Because people who own leveraged assets that are currently overpriced must be protected. At all costs.

  12. Perversely, coming after a devastating financial crisis caused by companies and households that feasted on borrowing, ultralow interest rates are penalizing people who have paid down their debt and are now trying to save. It is also punishing those who rely on the proceeds of their nest eggs to pay the bills.

    “It’s the whole point of low rates, to entice borrowing and discourage saving, but it means a massive wealth transfer from savers to borrowers,” said Greg McBride, a senior financial analyst at “It is a trend on steroids now because interest rates have been cut to the bone.”

    Nothing gets by those eagle-eyed observers at the NYT

    1. Sharp as a bowling ball, those NYTers.

  13. Heck yeah dude, Life is good. Makes sense to me dude.


    1. I guess everything is good then.

    2. You’ve lost your touch.

  14. I can’t wait for Austan Goolsbee to become Chief Economic Advisor to Obama and repudiate everything he has written as an economist.

  15. The entire world is bankrupt. The Feds Qualitative Easing has failed. A second round will not save us. All of the banks will begin failing the first quarter of 2011. There are still trillions of dollars worth of toxic assets on their books. Get your money out before the runs start. You have been warned.

    1. Change that to “Quantitative”. Sorry I was doing a line off this male hookers ass with a freshly minted 100 I created out of thin air when I posted.

      1. It is the qualitativeness of the quantitative that really matters when you are easing it in.

  16. Krugman is one of, if not the most dangerous persons in Amerika. He is an economic terrorist that will leave a wake of disaster for decades to come.

    1. No, terrorists use bombs and guns. Pauly Krugnuts is just an idiot. Unfortunately he happens to be a very popular idiot.

    2. I’m pretty sure the Fed, etc would be pursuing the same disastrous policies even if Krugman were scrubbing toilets at Chick-fil-A. All he does is provide rationalization for planners and their supporters to feel better about what they would do anyway.

      1. I would like Pauly Krugnuts a lot more if he were scrubbing toilets at Chick-fil-A.

        Damn, Chick-fil-A for lunch sounds good, although now that I’m picturing Pauly in their loo, I’m suddenly not hungry…

        1. But would you use the toilets at Chick-fil-A if you knew that Pauly Krugnuts is scrubbing them?

  17. Economists, regardless of their political preferences, typically are too unskilled at math to make any reliable statements on the economy.

    1. It’s not so much the math skills they need to worry about, so much as it’s their basic understanding of human behavior – which guys like Krugman don’t seem to possess even a bit.

      1. Yes, they are clueless on basic understanding of human behavior, too.
        “Homo economicus” bwahahahahaha


    “The 2008-2009 Chinese economic stimulus plan (simplified Chinese: ????????; traditional Chinese: ????????; pinyin: Ku?d? N?ix? Sh?xi?ng Cu?sh?) is a RMB? 4 trillion (US$ 586 billion) stimulus package announced by the central government of the People’s Republic of China on 9 November 2008 in its biggest move to stop the global financial crisis from hitting the world’s second largest economy.[2][3]

    On June 2009, the World Bank raised its growth forecast in China for 2009 from 6.5% to 7.2% amid signs that the economy is doing better than expected, which has been helped by the stimulus package.”

    1. Japan? Did I say “Japan?”

      Hahahahahaha! Cause I totally meant CHINA! CHINA! Hahaha!

      See, Wikipedia has this kickass thing that proves that China’s stimulus worked…and I’d been drinking…so, China, Japan, Japan, China…

      Anyway, like Casey Stengel said, you could look it up.

      Who’s buyin’ the next round? I’m tapped.




    2. its biggest move to stop the global financial crisis from hitting the world’s second largest economy

      That screams for an edit. I seriously doubt either of those references supports the implication that the stimulus will be effective in stopping the crisis from affecting China.

      1. Done! Let’s see if some schmuck comes along and reverts it.

    3. Their GDP numbers are a sham. 60% of GDP is construction. They are building whole cities that no one may ever live in.

      1. Pretty much making all the public driven artificial stimulus demand mistakes of the Japanese of the late 1980’s, plus a few unique ones of their own. I would bet some highly localized areas do well for the next twenty years because the governance differs greatly from canton to canton but most of the rest of the country will resemble 70’s era Bras?lia. You study enough developmental economics you know the mistakes that are bound to happen a decade before they occur.

      2. Roughly 30% of the US GDP is fake, for example because of the effect of the hedonic price index added to US GDP computation during the 1980s.

        In simple words: if you buy a modern smartphone in a US store for $300, it counts as $600 towards US GDP, rather than as $300. But it counts as $150 in the CPI. Insane.

  19. The Republicans cut taxes, especially for millionaires and billionaires. Cut regulations for special interests. Cut trade deals even if they didn’t benefit our workers. Cut back on investments in our people and our future ? in education and clean energy, in research and technology. The idea was that if we had blind faith in the market, if we let corporations play by their own rules, if we left everyone else to fend for themselves, America would grow and prosper.

  20. “The idea was that if we had blind faith in the market, if we let corporations play by their own rules, if we left everyone else to fend for themselves, America would grow and prosper.”

    So when you decided to squander $700 billion of our future earnings on bailing out Wall Street’s bad investments past, was that your idea of saving us from fending for ourselves?

    When you decided to buy out two-thirds of the American auto industry and put us on the hook for the bill–because the UAW couldn’t get the contract it wanted–was that your idea of saving us from fending for ourselves?

    Thanks for the help, Mr. President. Next time, instead of putting us on the hook for Wall Street and the UAW, how ’bout just leaving us to fend for ourselves?

    1. Don’t give in to fear. Let’s reach for hope. The worst thing we could do is to go back to the very same policies that created this mess in the first place. In November, you’re going to have that choice.

      1. “In November, you’re going to have that choice.”

        See you in November.

  21. Am I the only one who things Paul Krugman needs to be rounded up and sent to a forced labor camp?

    1. I’ll settle for witnessing a flying roundhouse kick administered to the side of his head.

    2. I am fine with merely sending him back to 1st grade.

  22. Krugman needs to sober up.

  23. The fable of the near-recovery foiled by insufficient stimulus comes up repeatedly in Krugman’s theology. It’s his version of Xenu’s genocide.

    Obviously the problem with this theory is that it ignores the fact economies usually seem to grow at around 3% a year without massive government stimulus.

    The notion we need to expand gov’t far beyond the 45% of GDP it already sits at is fairly insane.

  24. Lefty policies are like how a primitive shaman brings rain. You sacrifice a virgin. If it still doesn’t rain, that just means that you should have sacrificied two virgins. And anyone who disagrees is a heretic.

  25. I’ve said it before–right-wing hacks like Cavanaugh aren’t worth the peanuts in Krugman’s shit.

    1. And we’ve laughed heartily at it before.

    2. I know because I buy those peanuts on eBay to add to my Krugnuts shrine.

      It’s the only way I can attain orgasm.

    3. Stop sucking Pual Krugman’s dick!

      1. Now. Now. Hunny. Be nice to Max or I wont let you play find the little man in the boat when we take a bath tonight.

    4. How do those peanuts taste Max?

  26. I might be wrong about this, but I don’t think anyone’s ever called Cavanaugh a right-wing hack before.

    I think I’ve seen right-wing hacks call Cavanaugh a left-wing hack, but never anybody calling him a right-wing hack.

    I guess it had to happen eventually.

    1. Its the new Democrat meme, everyone is a cog in the NeoCon Right Wing Extremist Machine for 15 minutes …

      1. I prefer to be the spindle or axle in the machine.

      2. The heart of the problem with the Republicans is they practice the politics of division, like an exclusive old boys network. It is true we Democrats only allow idiots to join our ranks, but you really can’t get any more inclusive than that, now can you?

    2. I’d dig up the Who’s Getting Your Vote article from 08 I think you can put this one to bed.

      However, the face palm for the reasoning might not be worth winning the argument.

  27. Last Winter, the Democrats and their enablers in the media were expressing dismay at the popular ‘myth’ that Obama raised taxes. They even made the counter claim that Obama cut taxes on 90% of the people? Recall that? Where did that line of argumentation go? Oh, right, April 15th happened.

  28. I think every economist should be licensed. God knows their advice can cause more harm than a physicians. Part of that license should require that they publicly disclose all personal investments and a running report on their returns. It would be very interesting to see if they really follow their own philosophies in their personal investing.

  29. My economist is better than your economist. His equations agree with my gut instincts.


    The “alternate reality” meme identified above works both ways, of course. This is really an angels on the head of a pin kind of debate.

  30. Skipping down because threading sucks, especially when we get to the idiotic limit:

    Tulpa questioned lowering the tax rate from 40% to 20% causing the GDP to double, lets test it.

    Hypothetical assumptions in order to do the math:
    1. With 40% tax rate, GDP grows at 2% a year.
    2. With 20% tax rate, GDP grows at
    A: 3% per year
    B: 2.1% per year

    #2 follows on the assumption that the curve is concave downward, at least between 20 and 40. GDP growth will be faster with a lower tax rate.

    GDP will have doubled at year 72 (Huh, big surprise a 1% increase leads that in year 72). For scenario B, it takes until year 706, but it still occurs.

    This explains some stuff I saw from some economists as I was googling around, some said that it doesnt matter where the peak is, the deadweight loss as you approach it (from the left) limits growth and thus we should be operating nowhere near the peak of the curve anyway.

    So, I guess the question is what time frame is the laffer curve supposed to be measuring.

    1. Anyway, where this leads me is to the question of at what taxation percent GDP growth is maximized – that is the point that will lead to the largest economy in the long term, because in the long term compounding always wins.

      I would suggest the answer is somewhere under 10%. Its some minarchist point. High enough to avoid anarchy, low enough to not inhibit growth.

      1. Im going to arbitrarily suggest that that point is at ~6% of the unimproved value of land. 🙂 🙂 🙂

            1. Hmmmm…that didn’t work.

              The theory is theoretically sound and elegant, but do economists actually know what the tax rate which maximizes government revenue will be?

              The mathematician Martin Gardner claims not. His satirical construct called the neo-Laffer curve (see image). According to Wikipedia, “The neo-Laffer curve matches the original curve near the two extremes of 0% and 100%, but rapidly collapses into an incomprehensible snarl of chaos at the middle. Gardner based his curve on actual US economic data collected in a fifty year period by statistician Persi Diaconis.”

              Gardner makes the sound point that the Laffer curves is very appropriate for theoretical analysis and as a pedagogical tool, but it does not sufficiently reflect reality in order for politicians to make tax policy based on the construct.


              1. We had this argument 1 or 2 years ago and its bullshit. Their is no chaotic regime for tax rates. He just doesnt no how to curve fit.

                I agree with Gardner though, it shouldnt be used for making tax policy. Taxes should be so low that its never an issue.

                1. Or, more appropriately, this is Austrian’s avoid data – you cant hold the other things constant and do proper experiments.

                2. Of course, he thinks its bullshit too, hence it being a “satirical construct”.

  31. Another gedanken experiment:

    There are a series of investors and a series of possible investments with a wide range of risk-adjusted pre-tax rates of return.

    The investors also have the option of investing in tax-free muni bonds at 3% (risk adjusted).

    If the tax rate is 0% then they will ignore the muni bonds and invest in the business opps at all rates above 3%. If their tax rate is 39.6% then they will need at least 5% pre-tax to invest in the opportunity instead of the bonds. At a tax rate of 25% then they would only need 4%.

    So, if those were the two options for the top marginal rate then the GDP would increase faster at 25% than 39.6% if their are ANY opps between 4 and 5%.

    Was does this say about the Laffer curve? Absolutely nothing, in the short run. Does it increase or decrease revenues? Dont know, I just said GDP went up, I didnt say if it went up enough to offset the lower tax rate. However, as I showed in my 12:02 post, with a higher GDP growth rate, compounding always wins and the tax revenue would eventually be larger in the 25% case.

    1. As to the compounding of GDP growth, you would also have to account for compounding in government revenue (mainly by way of lack of interest paid on debt) and that extra revenue for the government hypothetically could be used to decrease the deficit, and for every dollar paid down, the government would have ~3% less interest to pay the next year.
      By the time the increase in the rate of GDP leads to an extra doubling, the benefits of paid down debt could still be much greater.

      1. See the elephant in the room comments above. Of course in all my scenarios the government is running a balanced budget and/or surplus, because to do otherwise would be insanity. In other words, two separate issues. Im only concerned with GDP growth/eventual government revenue, not how they fucking screw up using it.

  32. Paul Krugman, former ENRON adviser, says all you need to know about his financial prescriptions.

  33. Good God Man! Do you even read the stuff you write?! Krugman said the first stimulus wasn’t going to be big enough enough to work? he used facts to make his argument: size relative to GDP, employment figures, historical comps, etc? and he was right!

    NOW he’s saying that with the radical, America-hating right-wing in charge the best we can hope for is a Japan-sytle “lost decade”.

    I understand you really get-off on humping Krugman’s leg (don’t what it is with you GOPers and your closeted homo-erotic self-loathing wet dreams), but in this case Krugman’s points are pretty clear: 1. Stimulus wasn’t big enough. 2. With the right-wing running the country, we’re screwed.

    You may not agree with him, but twisting sh*t around in order to lie to your readers is, well…. just what I’d expect from right-wing hacks, actually. Keep up the good work.

    1. 6/10 because Im not sure.

  34. Japan’s stimulus consists of their government spending the quiet high savings of the Japanese. The government is eating the capital that is suppose to support them in old age.

  35. Came here from RCP link. After reading this piece and these comments I wonder how this place calls itself “Reason”. I was hoping for something incisive; got drivel.

  36. dang! that’s it?

    I thought you were going to really lay into him….

    this is like a slap on the wrist.

  37. Well having stayed up well past my bedtime to read all this I will chime in with my two cents.

    First, the use of profanity is a sign of a limited vocabulary.

    Second, even if a person is truly stupid, telling them they’re stupid is probably the least effective way of persuading them.

    Third, one should never argue with a fool as an observer may be unable to tell the difference.

    Now some thoughts. Low interest rates encourages indebtedness and discourages savings. Well the same can be said of fractional banking and inflation which are inseperably entwined.

    Someone mentioned hausers law which shows over 65 years federal revenue has never reached 19% of GDP while tax rates have ranged all over the place. So logically the best way to generate more revenue is to grow the economy. The question becomes how best to do this.

    I would venture to say lowering taxes. But the recent series on Slate, “The Great Divergence”, includes a study, assuming a one year delay between policy and effect, that shows the economy has grown better on average under Democratic administrations than Repuplican ones from 1948 to 2005. Now this conveniently leaves out the post war recession, not to mention the depression. Also, is a 1 year assumed lag right, or should it be 2 or 4 years. There is no consideration given to war years, Korea or Vietnam or the fact that Kennedy was the first supply sider and cut taxes. One thing is for certain though. Federal spending should not exceed 18% GDP except in emergencies because we have 65 years of data telling us if we spend more than that we’ll run a deficit.

    It is possible Keynesian economics work. I say this because we raised taxes during the Clinton boom and the economy chugged right along, paying down debt and creating a virtuous cycle. With that said, Clinton fought balancing the budget tooth and nail, as has any other politician of the Keynesian school at all times even though raising taxes and paying off the debt incurred to prime the pump is the other half of the Keynesian model. It may work but politicians have shown that they only follow it when it suits their purposes. Furthermore it relies on politicians making investment decisions. They must spend the money where it will provide a multiplier effect. Most politicians are obviously of middling intellect at best. Even Obama is only a towering intellect to Journalist majors. A case in point is the famous so called bridge to nowhere in Anchorage, AK. Is it a bridge to nowhere? Well, yes, but only because you have to drive an hour around the inlet to get to Anchorage from there and with the winter weather up there few are willing to do so. However, with the bridge it would have been 15 minutes to down town Anchorage. And with the views of the water and the mountains it would have been an instant upscale suburb. Additionally, it would have eased pressure on Anchorage real estate prices as the supply of real estate available to those working in Anchorage would have increased. This was an infrastructure program that would have had a multiplier effect and our imbicile politicians killed it.

    Well that’s enough of my rant for tonight. Have at me boys and girls.

    1. The “bridge to nowhere” is nowhere near Anchorage. It was intended to be part of a road connection from Ketchikan to its airport on a different island.

      Ketchikan is nearly 800 miles from Anchorage so building a bridge there has as much to do with the morning commute in Anchorage as your muddled and fact-free comment does with anything in this thread.

  38. Krugman is no longer talking about the size of the Obama Stimulus. He’s maybe talking about Japan. Now, in the New York Times, he’s talking about China. And he’s looking for walls to bang his head against.

  39. Am I the only one who realizes that Cavanaugh has completely misrepresented Krugman’s position? I only read like half of the comments so maybe not. I hope not.

    The article claiims that there is some contradiction between Krugman’s older statements, “Japan’s Economic Response Sucked” and his current assertion that, “Japan’s Economic Response Sucked But It Could Be Worse (And Will Be Here If Republicans Get Their Way)”.

    You can agree or not with Krugman’s economics but the fact is, Cavanaugh’s critique is pitifully inept. At best.

  40. Krugman long ago gave up any pretense of being anthing more than a liberal hack columnist. His Nobelbprize was for a very arcane work of small micro-economic theory. As a columnist when he’s not bashing Republicans for everything under the sun he’s making idiotic pronouncements about macroeconomic theory. What’s worse is that I have seen the jackass excoriate Bush for some of the same stupid spending ideas he’s lauding the Democrats for now. Krugman is a living cartoon characterature of the blovialting buffoon. The New York Times lose credibility every time Krugman opens his mouth or sits down in front of a keyboard.

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