Economics

Austerity Agonistes

Why left-wing economists' warnings against austerity programs are wrong

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Across Europe, governments are announcing new austerity packages of spending cuts and higher taxes rather than Obama-style stimulus spending. In response, American economists such as Paul Krugman and Brad DeLong are warning that these policies will throw Europe back into a depression and should be avoided at all costs in the United States.

"The next time you hear serious-sounding people explaining the need for fiscal austerity," Krugman wrote in The New York Times in July, "try to parse their argument. Almost surely, you'll discover that what sounds like hardheaded realism actually rests on a foundation of fantasy, on the belief that invisible vigilantes will punish us if we're bad and the confidence fairy will reward us if we're good."

One crucial point Krugman leaves out is that most European Union member states have no alternative. Countries that rely heavily on foreign investors—such as Greece, France, Ireland, Italy, and Spain—must cut spending to avoid being shut off from the global capital markets.

Contrary to common belief, investors don't judge sovereign default risks based on public debt as a percentage of gross domestic product. Instead, bond professionals grade on a curve, assessing one country's fiscal behavior against another's. When investors lose confidence in a government's fiscal rectitude relative to its competitors, they withdraw, and the snubbed country suffers. Capital being a scarce good, the result is increased interest rates and a higher price for debt.

One of the key signaling devices for international investors is how a government behaves under financial duress—how it balances the demands of its debtors with those of its welfare recipients. Announcements of lower spending and higher taxes tell investors a country is willing to go to great lengths not to default on its debt obligations. If the government instead focuses on preserving its welfare state and public employee benefits, investors know default is more likely and will shy away from that country's bonds.Japan has the world's biggest debt as a percentage of GDP, at 227 percent, nearly four times the economist-recommended 60 percent ceiling. It has gotten away with its carelessness without risking default because the country relies more heavily than most on domestic investors to fund its follies. The United States, despite a dangerous debt burden relative to GDP (66 percent) and a structural deficit among the highest of developed countries (almost 4 percent), has so far also escaped investor censure, thanks to the perception that the dollar remains the safest currency in the world. European countries don't have that luxury.

But the benefits of austerity go far beyond signaling investors. Goldman Sachs economists Ben Broadbent and Kevin Daly, surveying the data of 44 large fiscal adjustments across the globe since 1975, concluded in a 2010 report that cutting annual spending by 1 percent triggers a net 0.6 percent in economic growth. As we will see below, this is a good deal compared to the $1.10 reduction in GDP we get for each $1 spent by the government to stimulate the economy. Lower spending reduces the fear of higher taxes, which leads to an increase in consumer and business demand and growth. 

The notion that austerity is bad and stimulus is good rests on the Keynesian theory that if government spends a lot of money, that money will create more value in economic growth. This purported increase in gross domestic product is what economists call the "multiplier effect." It's a nice story, but like most fairy tales, it has scant basis in reality. 

In a 2010 paper published by George Mason University's Mercatus Center (where I work), economists Robert Barro and Charles Redlick showed that in the best-case scenario, a dollar of government spending produces much less than a dollar in economic growth—between 40 and 70 cents. If that was the rate of return on our private-sector investments, America would soon cease to be a leading economic force.

Barro and Redlick also looked at the economic impact of raising taxes to pay for spending increases. They found that for every $1 in tax-financed spending, the economy actually shrinks by $1.10. In other words, greater spending financed by tax increases damages the economy. The stimulus isn't working, because the economic theory it is based on is fundamentally flawed.

The findings from my own quarterly reports on stimulus spending (mercatus.org/publication/stimulus-facts-data) further illustrate why these packages don't work. My analysis is based on the tens of thousands of reports from stimulus recipients published on recovery.gov each quarter, along with economic and political data from the Bureau of Labor Statistics, the Census Bureau, GovTrack.us, and other sources. My most recent analysis found that the total number of jobs the government attributed to stimulus spending as of April was 682,000. Factoring in stimulus dollars spent up to that point, the average cost of these jobs was $282,000.

That's a lot of money. Worse, four-fifths of these jobs were in the public sector. This outcome is far afield from the administration's original promise that the stimulus would create 3.5 million jobs over two years, 90 percent of them in the private sector.

A 2002 paper in the Economic Policy Journal, written by the French economists Yann Algan, Pierre Cahuc, and Andre Zylberberg, looked at the impact of public employment on overall labor market performance. Using data for a sample of OECD countries from 1960 to 2000, they found that, on average, the creation of 100 public jobs eliminated about 150 private-sector jobs, decreased by a slight margin overall labor market participation, and increased by about 33 the number of unemployed workers. Their explanation was that public employment crowds out private employment and increases overall unemployment by offering comparatively attractive working conditions. Basically, public jobs, especially ones that also exist in the private sector in fields such as transportation and education, offer higher wages and benefits, require low effort, and therefore crowd out many private jobs. When these new employees are paid with taxes it negatively impacts the economy.

The data released by the Bureau of Labor Statistics in June, then, were bad news. (See the chart.) They showed that since the passage of the stimulus bill, the private sector has lost 2.55 million jobs while the federal government gained 416,000. 

The understandable temptation to take action in a time of recession should not lead lawmakers down unproductive paths. Stimulus by government spending doesn't work. European and American governments have tried it without success. Now is the time to tighten spending, no matter what some American economists might say.

Contributing Editor Veronique de Rugy (vderugy@gmu.edu) is a senior research fellow at the Mercatus Center at George Mason University.

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  1. Have there ever been two bigger douchebags in the history of economics than Krugman and DeLong?

    1. “Douchebags” in the sense that they don’t bother providing any economic reasoning along with their snarky commentary.

    2. Sure, the history of economics is full of douchebags. Economics is about as far as you can get from a science. The only time they’re right is when they’re lucky.

      1. Then the Austrians are the Leprechauns of the economics world.

        1. What, cos of the gold?

          1. Because we are usually right, so we must be very lucky, like leprechauns.

        2. You think economics is science???

          1. No, it’s math.

            1. Really??? Give me an economic equation that always works. You know that predicts reallity.

    3. Rick Perry?

      I’m probably going to end up voting for him. But still, he is like the Jungian Archetype for “douchebag”. If he isn’t a douchebag, then really, nobody is a douchebag.

    4. Veronique de Rugy, for starters: she had the unforgiveable gall to make the old and thoroughly discredited “Treasury Argument” against stimulus not too long ago, as though that would persuade anyone but rubes and ideologues, or as though her readers were nothing but rubes and ideologues.

      Oh, and that great faker Peter Schiff.

      1. Peter Schiff predicted the housing bust when many were saying housing prices could never go down. He has been right when it counted.

    5. Keynes and Marx spring to mind.

      -jcr

  2. Awesome.

  3. According to various sources, the recession is officially over. So we can cut deficit spending way back now and reverse the stimulus.

  4. The data released by the Bureau of Labor Statistics in June, then, were bad news. (See the chart.) They showed that since the passage of the stimulus bill, the private sector has lost 2.55 million jobs while the federal government gained 416,000.

    Clearly, government must do what the private sector cannot and create another two million government jobs.

    1. I’m sure the Army has plenty of KP slots available.

      1. No. We really don’t.

        1. All outsourced?

    2. What we really need is another World War to kick things in the right direction!

  5. Yes, the public sector sure is crowding out all those private transportation companies. We’ve all seen those government-owned cabs and corporate-owned buses… And how many elite private schools are closing their doors because of public education?

    1. Stupid up the butt much?

    2. Any one who belives in public anything is a dumb ass.

    3. Your mind is a wasted one.

    4. Public schools don’t crowd out elite private schools, that’s absurd.

      They crowd out efficient and affordable non-elite private schools by driving up the costs.

      Planned economies rarely if ever impinge on the options of the rich, after all the rich usually do the planning.

      Rather they cripple the opportunities of the poor.

      And cabs and transportation in general are a very bad example. Taxi bureaus drive up costs always and everywhere. And how many people could afford to fly before the CAB was done away with?

    5. I take it you don’t believe in China, atoms, or the back of your head either, since you’ve never seen them.

      I’m thinking you must be a product of government schools.

    6. I believe in the case of private urban bus transportation the operative phrase is legally restrict.

  6. Cut spending, and leave tax rates where they are. It’ll take time, but it’ll work itself out.

    Cue Tony in 3…2…

      1. Heretic! Austerity is the devil’s handmaiden! OFF WITH HIS HEAD!!!

        1. Shouldn’t that be Prophet Krugman, interpreter of St John Maynard Keynes?

          1. Speak only when spoken to, Jason! UNCLEAN!!!

          2. Peace be with him.

  7. One can plainly see the failure of the European approach in current data. Germany was the first to adopt “austerity”, so you can just compare its economy, floundering along at something like 8% annual growth, with the US juggernaut, currently flirting with 2% annual growth.

    Q. E. fucking D.

    1. currently flirting with 2% annual growth.

      You haven’t added in the annual growth of government itself. If you do that, our ‘economy’ is probably growing somewhere near to 13.5%

    2. Oh, and don’t tell me that Germany proves that austerity, not stimulus, is the way to go. Germany actually did quite a lot of stimulus ? the austerity is all in the future. Also, it never had a housing bubble that burst. And with all that, German G.D.P. is still further below its precrisis peak than American G.D.P. True, Germany has done better in terms of employment ? but that’s because strong unions and government policy have prevented American-style mass layoffs.

      1. Germany actually did quite a lot of stimulus

        That was not what you were saying when you claimed last year Germany was going down the wrong path.

      2. Considering your so-called “miracle of the 1940s” included a four-year austerity plan imposed by government rationing, you might want to rethink that whole “austerity is from the devil!” thesis of yours.

        Call on Obama to start WW3 with Iran and impose the above program, and your “miracle” is well underway!

    3. i wish this were true, but in fact ireland took up austerity first and most diligently. germany is benefitting from the collapse of the euro in exporting outside the eurozone, as well as winning a game of beggar-thy-neighbor inside the eurozone. they are far more competitive structurally inside the euro thanks to how the euro was constructed and economic development since. the imbalances they ran against other members the zone through the peg of the euro is what caused the euro crisis; what they’re doing now is only aggravating the situation in spain, portugal, greece, italy and ireland. when finally germany drives those countries to collapse or out of the euro, it will be germany’s turn — as the home of a titanic amount of excess capacity built to feed consumer demand augmented by debt expansion, they are faced with a huge industrial unwind (as is china, as is japan). there’s no good news there.

      1. So it’s Germany’s fault that these other countries spend too much? Is Germany bad for being more competitive?

  8. Recession ended in summer of 2009 according to NBER. So we really didn’t need to spend all that stimulus money anyway. Right? Or is this all more political propaganda. Lord, who believes any of these turd burglars anymore.

    1. Thanks for pointing out this amazing NBER announcement dated 9/20/2010!

      http://www.nber.org/

      Amazing! We haven’t been in recession for over a year … it’s all just been in our imaginations! The unemployed graduates of the Class of 2010 will certainly welcome this as good news.

      1. GDP includes government spending. Which may make some sense if you are talking about the government buying an aircraft carrier, but not so much when you’re talking about the government buying everyone 1/4 of a car.

      2. I couldn’t decide whether to laugh or cry when I read the NBER announcement. So I did both and choked a little.

      3. I like how the nber declared in 2008ish that the recession started in 2007 because of low employment…

        Unemployment in December of 2007 (the start of the recession) was 5%

        Today it is over 9%

        The nber is a fucking joke.

  9. twas europe’s folly to throw together a bunch of disparate societies without fiscal policy coordination or true labor mobility into a currency union.

    that doesn’t mean it’s a good idea to repeat the mistakes of US 1937, japan 1995 and japan 2001.

    and just because deficit spending isn’t appropriate at all times doesn’t mean it isn’t appropriate, indeed necessary at some times.

    europe’s weaklings are being punished because they aren’t sovereigns of their currency. if it had anything at all to do with how bond professionals grade fiscal rectitude, japan would’ve collapsed decades ago. that just isn’t how the world works. they can’t float debt because people know they can’t import the euros it will take to service that debt anymore. default risk is large.

    meanwhile, the US ten-year yields under 3%, and japan — not a safe haven, mind you — is under 1%. that has less to do with “safe haven” perceptions than the realization that the US and japan cannot default because it can always print currency to make payments. default risk is very small, and even inflation risk amid a private sector debt collapse is minimal.

    moreover countries like ireland and greece, now advancing the most aggressive austerity packages in the eurozone, are seeing the worst performance in their debt in the eurozone and are being continually surprised by their economic underperformance and concomitantly the largeness of their deficits. why? because they are destroying cash flows in their economy by contracting both private and public sectors simultaneously, which means tax revenues (which are levered to economic performance) fall faster than spending can be cut. welcome to the 1930s.

    and you’re really citing crowding out now? really? in the midst of a balance sheet recession? does anyone sentient now think that too many government jobs is actually why u-6 is approaching 20%?

    listen — the reason austerity is bad now may owe some of its explanation to keynes. but it’s really more of a balance of accounts matter — private savings + public deficits – net exports = 0. it’s an accounting identity that has nothing to do with keynes; it is true if 700 years of double entry bookkeeping is true. if you force both public and private to contract without an offsetting net export boom, you set in motion a deflationary spiral that forces into existance the requisite equilibrium of the identity. tax collections collapse to create the deficit that offsets the private desire and capacity to save. in most cases, these are larger (not smaller) deficits because the balance sheet damage is that much greater.

    i personally can’t believe that this is the horrifying state of understanding that prevails at a “think” tank like reason. it’s no wonder there’s so much stupidity afoot in the political arena.

    1. tax collections collapse to create the deficit that offsets the private desire and capacity to save.

      Tax collections should collapse in an economic downturn. If government revenues and hence spending are completely untethered to the private sector economy, you’ve got a recipe for taxation and the public sector at large to increase its percentage of GDP entirely.

      What better way for a government to realize something bad is afoot in the economy if they see a downturn in their revenues that offsets any tertiary tinkering with the tax code?

      1. there is no “revenues, hence spending” — the budget cannot be balanced. this is the implication of the identity.

        the private sector went from creating large amounts of new debt to destroying large amounts. net exports have improved very little. that means the government *must* — as in, has absolutely no choice but to — create a large amount of new public sector debt.

        if it tries not to — by cutting spending, increasing taxes — the economy will collapse such that revenues collapse to a level low enough to force the required deficit, finding a new equilibrium for the identity at a lower level of economic activity.

        repeated attempts to balance the government budget will drive that spiral all the way down, as was seen in the 1930s before the new deal broke the deflationary spiral.

        people, if you didn’t want big government deficits now, the time to do something about it was back in the 1980s, when reagan teamed up with a democratic congress to loosen financial regulation and agreed to keep the dollar artificially strong against mercantilist powers like japan and china. it’s too late now.

        1. And to think, we used to mildly mock your apocalyptic vision. I, for one, am man enough to say that I was wrong.

          We’re screwed.

          1. LOL — yep. i’ll tell you, though, i’m an optimist. and that’s not just a stock think that doomsayers toss out just before they forecast the end of humanity.

            it will be difficult, but being the repository of excess demand in the aftermath of a massive global debt bubble is better than being the repository of excess capacity. we can devalue the currency; we can deficit spend; we can build out domestic capacity. it may be the end of the american empire, but that had to come anyway.

            if you’re china, on the other hand, you built a million toy factories for an end market that can’t pay anymore and increasingly wants a trade war that will cause the supplier to suffer far more than the demander. all that physical malinvestment has to be unwound in the end. they too are looking at many years of fiscal stimulation and hardship in a country that has trouble feeding itself.

            1. One thing I’m sure about–China’s more screwed than we are.

              1. I guess we’ll see if Mr. Changs bet will pay off in 2010 or not!

        2. Yes, Ireland started first because they ran out of money you crazy bastard. You can’t continue to spend without limits. You will devalue your currency to the point no one will buy your bonds anymore.

          “as was seen in the 1930s before the new deal broke the deflationary spiral.”

          What planet do you live on? the New Deal did nothing of the sort. And further, the US has about a million different income transfers that didn’t exist even after the New Deal.

          1. where did you folks find this guy?

            1. You are the craziest person I have ever seen post on the internet. You fill up these threads with endless words that almost make sense in isolation. But when taken as a whole make no sense whatsoever.

              I hate to call someone crazy. Personal attacks should generally not be a part of argument. But, there isn’t a single historical event you don’t have a warped and ignorant view of. And your arguments are just bizarre.

              1. Dial it back there, cowboy. You may think gaius’s analysis is about as valid as Krugnuts’s, but he’s ill deserving of such attacks.

            2. To paraphrase Jim Carrey from the film Liar, Liar: John objects to the New Deal because it’s devastating to his case.

              1. Oh yeah, the New Deal that took over a decade and the destruction of our competitors in a World War to work.

                1. Hey, the New Deal worked wonders: it kept America poor, afraid, and FDR in power.

                  1. Sounds like Obama’s plan. Must’ve been taking notes in college.

                  2. Hey, the New Deal worked wonders: it kept America poor, afraid, and FDR in power.

                    It also kept black people from working with white people.

                    it kept racist FDR in power….you forgot the racist part.

              2. The new deal did in fact reverse the deflation, but that’s not necessarily a good thing.

                I’ve always objected the the “deflationary downspiral” proposition. There were several recessions during the 1800’s that rebounded nicely, in the total absence of a central bank, deficit spending (the government ran surpluses), or any “safety nets” for the poor.

          2. The deflationary spiral is a myth.

            1. again, i’ve clearly vastly overestimated the technical knowledge of much of the board. is this the sort of fantasy that carries the water for anticivilizational ideology these days?

              1. again, i’ve clearly vastly overestimated the technical knowledge of much of the board. is this the sort of fantasy that carries the water for anticivilizational ideology these days?

                If the Deflationary spiral is real then why does anyone ever buy a computer when they know 18 months from now they can buy a better one for cheaper?

                Moore’s law killed the deflationary spiral myth.

                Killed it dead.

        3. Bullshit. The US government has created plenty of debt. We heard the same crap hear in Canada when our Liberal government got serious about cutting costs in the ’90s. Worked spectacularly. Witchcraft economics seem fun at first but they are really hard work because they don’t work, just like the Earth-centric model of the solar system.

    2. Hey, I’m not here a lot lately, but how is the baby?

      1. Oh, yeah, I was going to ask that one, too.

    3. If deficit spending is analogous to throwing money down a hole, then why bother?

      If austerity includes slashing regulatory bodies, then why not?

    4. Personally, I’d like to see the US make the same mistakes as they did in 1920.

      http://www.youtube.com/watch?v=czcUmnsprQI

    5. The problem is that you start running into the other constraint imposed by Ricardian equilvalence on deficits. Low interest rates plus high deficits with low inflation makes sitting on cash or near cash attractive, and the higher the defecit to GDP ratio, the more Ricardian preferences get, since it’s less likely that revenue growth will be able to deliver enough to avoid rate hikes. Since the multiplier is determined by the marginal propensity to consume, and increasing the deficit results in savings due to increased Ricardian equivalence, increasing spending past a certain deficit level becomes self-defeating since you pull down the multiplier.

      Furthermore, as more is spent, the merits of the projects it is spent on decline, so you get greater distortionary effects, reducing long term growth, cutting futher into future revenues and starting the whole chain of effects from increased deficits up again.

      Oddly enough, Krugman of all people is one step away from putting this together when he notes in “Japan’s Trap” that Ricardian equivalence limits the effectiveness of tax cuts as stimulus – when you consider that the degree of Ricardian equlivalence will be a function of proximity to a balanced budget, spending becomes futile and eventually counterproductive as you run up the deficit.

      We’re at the point where either bulk monentarization of debt or austerity is a prerequisite of making countercyclical fiscal policy work. The EU doesn’t have the monetarization option open, so they don’t really have a choice, but neither of our options are attractive.

      1. The problem with this is that “Ricardian” Equivalence, being the dumbest idea since homeopathy, doesn’t exist, is theoretically preposterous and has no empirical evidence for its existence. Of course the connection to David Ricardo is Ricardo’s observation that something like it could theoretically happen, but that nobody in the real world ever behaves that way.

        Barro had tremendous cheek coming up with that name. Kind of like calling your new flat-earth theory, the Columbus theorem. And of course “monetizing the debt” would be fine, monetize all of it, take the debt to zero. Nothing, least of all hyperinflation would happen. Could even be deflationary.

        1. exactly, ricardian equivalence is as ridiculous as rational expectations theory in general.

    6. Hi Gaius Marius. Not trying to bait you or argue with you, but just honestly trying to understand what you’re saying. I think you’re probably right that many people reading don’t understand the identity you wrote down. I’m one of them, but if it can be understood, I’d definitely like to.

      Private savings + public deficits – net exports = 0

      First, the net exports thing is confusing and since it’s obviously possible to have no net exports or imports I’m going to make it zero. That means the real identity (changing a sign) is:

      private savings = public deficits

      In order for that to be a real identity the two have to be so intrisically related as to be the exact same thing, possibly just disguised. Can you explain to me or provide a link that will tell me how these are the exact same thing? I’m not seeing it at all. Assuming “public deficits” is the same thing as was being talked about in the article — government spending minus government revenue — I don’t see why that must be intrinsically equal to private savings. If the fed (as opposed to the federal government) controls monetary supply, or if you just live in a society with a rigidly fixed monetary supply, then the government’s deficit isn’t any more intrisically related to the total private savings than my own credit card balance is because it becomes just another actor in the economy. I mean, maybe government spending might be able to influence savings rates more than my own personal spending can, but that’s a matter of policy theory not accounting identity. On the other hand, I feel like I can conceive of a situation where the government spends exactly what it taxes, and yet somehow someone within the economy might choose to save some of their money? In which case 1 = 0 which is not an identity. Clearly I don’t understand how you’re defining the operands.

      Maybe you define private savings as the total amount of currency in private hands and public deficit is the total amount of currency printed by the public bank, in which case I can see something like an identity forming, but in that case “public deficit” no longer seems to be the same as what’s being talked about here. It’s monetary supply, not spending minus revenue, and I don’t think those two things are the same thing as each other either. Am I wrong?

      I don’t know…if you’re saying that when private domestic saving goes down because of negative net exports the government has to borrow money in order to bring the total currency supply back to the original 0 point, that just seems crazy to me, since you’d end up actually reducing the monetary supply in the long term thanks to interest payments. Interest payments to a foreign bank go into the “net exports” term during the next run, no? I assume once that interest is paid back and lost from the supply then the government by identity has no choice but to borrow more money to make up for that loss as well? That doesn’t seem like it will eventually balance the equation. I don’t know….hopefully you’ll explain what you mean a little more clearly. I’m honestly not assuming I’m right here, just telling you how I understand what you’re saying so that hopefully you can better correct me.

      1. that’s basically correct, don — if imports equaled exports, then public deficits are equal to private sector savings less investment (which includes savings proper as well as debt repayments — in general, the leakage from the private sector income stream).

        you can overview the data and see the physical truth of the identity in practice — the federal government keeps statistical data on all three inputs. i think the identity is often best publicized in modern monetary theory (MMT), but you probably remember at least one of the occurrences in practice: the period when the clinton administration and gingrich’s congress tried to balance the budget, which compelled private savings to collapse, and touched off the boom and deflationary bust which we all remember as the dot-com era. more recently, we saw the government run a material deficit and private savings go negative as the US ran a massive current account deficit.

        in truth, if you go back through american history, there have been a handful of efforts to balance the federal budget or put the government in surplus, of which clinton’s was only the most recent — all have been followed by recessions or depressions for this reason. most famous might be andrew jackson having provoked the bust of 1837 by trying to retire the national debt in his administration.

        conceptually — who can the private sector in aggregate save to? there is no capacity to save to one another; if i save my money to you, the bank of don, you incur a liability, ie dis-save. the net transaction is savings-neutral; my financial asset is your financial liability, and this is true throughout the economy. even when banks increase leverage in the economy, by creating MBS and CDOs for example, every financial asset they create is offset by a liability. the only body to which the private sector in total can save is the creator of the currency — the federal government.

        rather than reiterate the whole mess, i’d suggest reading bill mitchell discussing deficit spending basics here.

  10. Austerity = making the poor and middle class pay for the mistakes of the rich, who are not expected to adopt any austerity measures themselves–who are, in fact, whining like babies over a small potential tax increase.

    1. Austerity TARP/Stimulus/Bailouts = making the poor and middle class pay for the mistakes of the rich, who are not expected to adopt any austerity measures themselves–who are, in fact, whining like babies over a small potential tax increase.

      Fixed.

      1. Done and done.

    2. You’re beyond hope.

    3. Tell us, Tony, how raising taxes on teh evul rich will get us out of debt.

      Hint: It won’t be enough to nearly cover said debt. There, now you don’t need to answer. But it’ll still be fun to see you try.

      1. Tell me how raising taxes on the rich to Clinton or Reagan era levels will hurt the economy.

        Maybe increasing revenue from the top 2% won’t be enough to fill the hole. But leaving the rates where they are won’t do a damn thing.

        1. Maybe increasing revenue from the top 2% won’t be enough to fill the hole

          Then why raise them?

          Oh, wait, I know this one:

          It makes liberals feel better.

          1. Because it would help? Seriously FIFY you have like a mental disorder that prevents you from seeing shades of gray. Every single comment you make is evidence of such a pathology. Raising revenue is one way to work toward balancing the budget. Or did you not make it to addition in kingergarten math?

            1. Raising taxes in 1932 worked for me!

            2. Fuck off, elitist prick.

              Either post proof of my intelligence or educational level, or quit working on the assumption of your supposed, self-described superiority.

              Just because I don’t worship at the altar of St. Keynes doesn’t mean I can’t grasp a simple economic principle: Spending frugally = no need to raise taxes.

              You’re just in it for the fuck of it, Tony – to you, raising taxes “may not be enough to fill the hole”, but it will fill the hole in the pits of liberals’ souls by making them happier because it slakes their unquenchable wealth-envy thirst, if only temporarily.

              If I can’t afford stuff, I don’t buy it. I have virtually zero debt. Why can’t government tighten its goddamned belt like WE have to when times are tough?

              1. Thirty-four cents on the dollar isn’t enough! We demand another nickel!

                1. The science is settled. The only way out is to raise taxes. Suck it up, rich fuckers.

                  1. All the people that will be unemployed due to the tax increases thank you. Unless you really want to argue that the government is better able to allocate resources than the private sector…

                  2. How did science get involved in this?

                  3. How gauche. The movement would do better without the likes of you.

              2. Hey I’m all for the Keynesian argument that we should cut taxes during a downturn (i.e., deficit spend). But if you’re a deficit hawk who doesn’t believe in Keynesian stimulus then you have to allow for tax increases to be part of the equation. You’re just being dogmatic here. The fact is the tax cuts weren’t offset by spending cuts, and I fail to see why it’s more important to keep those rates in place while cutting things like SS and medicare. I’m for both addition and subtraction, you’re just for subtraction, and since you are perfectly willing to go into psychoanalysis then maybe I’ll suggest that you have this opinion because you want all those government programs to disappear so we can achieve your quasi-anarchic paradise. But just for a second if we engage political reality (not to say actual reality), why are tax increases on the wealthiest 2% off the table if your concern is the deficit? You think the middle and working classes haven’t been punished enough?

                1. Cut spending, and there’s no NEED to raise taxes – i.e., leave the rates right where they are.

                  Why is that so hard to grasp, Tony?

                  1. Cut spending on what?

                    If your solution is to decrease the availability of social services for the poor and working class in order to preserve current (historically very low) tax rats for the rich, then your argument simply loses on moral grounds alone.

                    If you can find enough to cut at the Pentagon and food subsidies and the like then fine, but I don’t think you can. The fact is it doesn’t matter what the tax rates are–you will never be for raising them, and that is the stance of a dogmatist.

                    1. No need to raise taxes if we get ALL spending under control, Tony. And that doesn’t mean “just the military spending”.

                      Cut everything across-the-board, eliminate some spending, and keep tax rates reasonable – i.e., right where they are at this moment – and, eventually, we can climb out of the pit dug by the present and previous administrations.

                      Just raising taxes for the fuck of it will only make some people feel like they scored a victory against the schoolyard bully, but it won’t fix anything. You said it earlier, but you conveniently forget it when it doesn’t serve your wealth-envy argument – which is the ONLY reason liberals want to raise taxes.

                    2. My argument for raising taxes is because they were never offset. Find something to offset that’s justifiable, and then we will have a deal. You’re just saying “cut spending across the board.” That is just a slogan.

                      And please put away the psychoanalysis. I want responsible fiscal policy. Morality, payback, or any other emotional motivation has nothing to do with it, I promise.

                      Unlike libertarians who feel that taxing the rich is a form of punishment on people who are morally superior ‘producers,’ I don’t think that way.

                    3. Okay, Tony, just for you, I will make one exception as to your reasoning for tax hikes – after all, you’d be cutting your own throat in the process of cheerleading for said hikes. But so many of your fellow liberals ARE in it *just* for the punish-the-achiever feel-good effect.

                      But what’s “responsible” about THIS administration’s spending policy, let alone Bush’s? In my book, neither gang was in the least way behaving responsibly.

                      But unlike you, I don’t lay the blame solely on the doorstep of Team Red – Team Blue has blood on their hands, as well.

                      And it’s not a slogan: When I say “across the board”, I mean it.

                      Look, the tax hikes on the evil rich are supposedly going to cost us, what, $750 billion? So… cut spending by that amount, and there’s no *need* to raise taxes.

                      Don’t tell me we can’t cut $75 billion a year in spending, because that would be bullshit.

                    4. As long as it’s our war machine and other vastly wasteful things we’re cutting, I’m all for it. I definitely don’t think we should cut all things across the board, certainly not by some arbitrary uniform amount. Some programs are worth spending on, some need to be cut, and some should have their budgets increased, depending on priorities. That’s just sensible.

                      What I won’t accept is cutting back on social safety nets while keeping these tax rates in place. In fact, with more and more people in poverty through no fault of their own, I think the rich ought to pay up to keep that safety net in place. It’s for their own good anyway, or do these morally superior producers not need customers?

                      But you’re refusing to address my central accusation: that tax rates could be half what they are now and you’d still be making the same argument. Tell me when it’s ever acceptable to raise taxes. If there is no such occasion, then you are the dogmatist I’m accusing you of being, and there’s no point to this debate.

                    5. Tony, if Bush and Obama *hadn’t* gotten us ass-deep into debt, would you still be calling for hiking taxes on the rich?

                    6. I long to live in a country where the poor are thin.

                    7. So, are you going to shoot poor and elderly people who show up at hospitals? Or just use bouncers to toss them on the street and film them as they die, and make a few bucks selling the videos? Seriously? What’s your plan?

                      How are you going to make significant cuts in SS? “Privatizing it” doesn’t change the cash flows for decades (and is a stupid idea).

                      And of course, you could attack the “everything else” portion, which isn’t all that much to begin with. Let me guess, you want to abolish the EPA and let polluters run rampant (causing increased health care costs to wipe out the EPA savings ten times over), get rid of the ed department, (I guess you are going to shoot all the special ed children, too, right?), and so forth. Maybe you will get rid of all federal R&D, too, just to keep SURE we fall behind everyone else in science and technology….not that we aren’t losing ground already.

                    8. And here comes Chad with his predictable “shoot poor and elderly people” rhetoric…

                      You never fail to amuse, Chad.

                    9. Here comes Mr. Fify, with is predicable “I won’t answer the frickin’ question, because I don’t have one”.

                      The amusement isn’t mutual.

                    10. I did answer it, Chad. You’re just too busy licking Krugman’s ass to see it.

                    11. Spending during the Bush years increased by over $1 Trillion a year. It’s gone up by over an additional $1 Trillion since.

                      The entire GDP of the country is only about $14 Trillion and you think we can’t find something to cut?

                      Yikes! Cato wrote a book filled with ideas.

                    12. From where I sit it appears these vaunted Social Services serve largely as poverty factories.

                      So yes, cut them.

                    13. Cut spending on what?

                      How about abandoning the policy of spending more on our military than the rest of the world, combined? Then for an encore, we could abolish every unconstitutional Federal agency, which should bring the spending down to 10% or less of current tax revenues.

                      -jcr

              3. The problem, IFFY, is that you worship at the altar of St. Rand.

                I (and Tony, as far as I can tell) are empericists, and take the data where it lies. There is rarely any relationship between tax rates and economic performance that stands out from the noise in any significant manner, and when it does, it’s just as likely to point in the “higher taxes = better economy” direction as the reverse. Therefore, there is no reason to worry about this factor, within reasonable limits (ie, quit whining about communism…no one is suggesting 90% tax rates).

                1. no one is suggesting 90% tax rates

                  http://www.truth-out.org/fourt…..untry59104

                  http://www.thefoxnation.com/bu…..ax-rate-90

                  “Nobody”, eh?

                  1. http://www.thomhartmann.com/fo…..me-poor-al

                    http://openleft.com/diary/1426…..p-tax-rate

                    Yep, no one is calling for a 90% tax rate. It’s all a ruse perpetuated by the right-wing. In fact, they created all four of the above links. Rove typed ’em all up.

                    1. FIFY I will admit that if I wanted to spend my days mentally masturbating to my own version of utopia, I would want tax rates on the rich to be significantly higher than is politically feasible right now.

                      But I don’t see much point in living in fantasy worlds. We’re talking about a small increase, back to only like the second-lowest rates for the wealthy in generations.

                      The problem with libertarians is they only want to discuss their fantasy utopias and never political reality.

                    2. How is another nickel on the dollar going to help, Tony, other than to make SOME people feel better about themselves?

                    3. By reducing the deficit… Unless you don’t think that’s important.

                    4. Another nickel on the dollar is going to reduce the deficit?

                    5. The political reality is that Bush and Obama together have doubles the expenditures of the Federal government and they are next and neck for the title of “Most Hated President.”

                      In New Jersey, Christie is actually cutting, meaning less expenditures this year than last, combined with his political enemies spending $500 million in attack ads and his numbers are off the chart.

                      True budget cutters are always wildly popular and their governments thrive.

                      Oh, or do you mean the political reality that goes like this: “Won’t someone please think of the children?”

                      BTW I’m not a Libertarian.

                    6. No matter what we do with our taxes, we only raise 18% of GDP in revenue, so no that won’t work. I’m sure Tony’s hard on will go soft as soon as he remembers that.

                    7. tax rates on the rich to be significantly higher than is politically feasible right now.

                      Why? Do they have something you want? Do they not need the things you have? Do you feel “the wealthy” by their mere existence must have acquired their riches through some manner of oppression and thus must be punished?

                      Really, why?

                    8. I stand by my argument, despite this evidence to the contrary.

                2. Do not equate your ideas with mine. My posts use correct grammar and are not cluttered with too many parentheses, questions, quotations and the like. They also use more sophisticated language, thus presenting the correct image of the enlightened progressives. On occasion, you stray from the accepted progressive norm. Argue on the Reason threads if you must, but leave me out of your posts.

                  1. Gosh, Tony, you sure don’t sound like an elitist in that post. I was wrong about you.

                    Aaaahhhh, I’m just yankin’ ya. You’re an egocentric schmuck, just like always.

                3. I love the “nobody is asking for 90% rates” argument.

                  Yeah, like if rates aren’t raised to about 40%, and the governement still doesn’t cut spending, we’re not going to have more quacks screaming that “the rich should pay their fair share” and ask for taxes to be raised again.

                  It never stops. What you fail to realize is that government is a pit that sucks as much money as it can. Stop trying to shovel it the government’s way.

            3. “Because it would help? Seriously FIFY you have like a mental disorder that prevents you from seeing shades of gray.”

              You’re on crack–a 2% increase is a piss stream in the Grand Canyon.

              Let’s bring up the data again, since you hate it so. We are currently running a structural deficit of $1.5 trillion dollars. That means even if you cut EVERY SINGLE PENNY of defense spending, you’re still about $500 billion (that’s billion with a “b”) in the hole. And that’s just what’s building ANNUALLY–we haven’t even brought up the overall public debt outstanding, which is rapidly approaching $14 trillion and hasn’t been paid down since 1957. In other words, you could take every penny from every person in this country and it STILL wouldn’t pay off the national debt.

              You honestly think a 2% increase, in the teeth of a depression where the U3 has stayed above 9.5% for well over a year, and the U6 is at the worst spread it’s been in 30 years, is going to have any discernable impact at all? Get real.

              Pick your poison, Tony–cutting defense spending isn’t going to be enough. One of your socialist sacred cows is going to have to get bled out to get us back to solvency, even IF all the people who lost their jobs starting in 2007 PLUS the 150K new hires entering the market every month are able to find work.

              http://www.zerohedge.com/artic…..evels-2021

              Even Rome, one of the most well-organized empires in history, wasn’t able to provide bread and circuses forever.

              1. Nice try, Red, but the liberals only see an opportunity to raise taxes and hike spending – then have the gall to say “don’t call us tax-and-spenders!”.

                It would be funny, if it weren’t so pathetically sad.

            4. “Because it would help?”

              Would it? Money is a tool in the hands of business owners and investors. I’m not sure how taking tools out of the hands of the workers that use them and giving those tools to government to redistribute to their unskilled buddies helps society.

              If your complaint is that rich people have too many nice things, then the most accurate way to achieve your goals would be a progressive consumption tax, presumably.

              1. If your complaint is that rich people have too many nice things

                If?

                1. Raise Taxes on me will ya?
                  Well shoot, I guess I am going to have to layoff some people since I am no longer making a profit.

      2. Raising taxes on the rich will invoke the animal spirits!

        1. All economics is voodoo.

    4. The people without money are the ones who are supposed to watch their spending. Only in left-wing fantasy land would the rich curtail their spending while the poor continue to borrow.

      1. Government can’t be run like a household. It’s okay for government to go into debt, whereas it’s wrong for a household to do so.

        Don’t you ignorant inbred hillbillies understand ECONOMICS?

    5. Austerity = making the poor and middle class pay for the mistakes of the rich, who are not expected to adopt any austerity measures themselves–who are, in fact, whining like babies over a small potential tax increase.

      It’s the rich who has been the recipient of the lion’s share of the additional government spending, you fucking tool!

      1. Not under Obama (tax cuts for people under $250,000) and certainly not under any plan Krugman or other liberals would support.

        Of course the rich are usually the biggest beneficiaries of any government program, service, or spending (kind of by definition). That’s why they pay more in taxes.

        1. As you yourself said, raising the tax rates on those rich people won’t fill the void… but it will make you feel better. And that’s all that counts, right?

          1. It will fill some of the void. The cuts are a large contributor to that void, and they were economically useless, so if they’ve got a big fat target on them then I think that’s a good thing.

            1. The gov’t could confiscate all accumulated wealth, and it still wouldn’t get us out of the hole.

              But it would make a lot of left-wingers happy, until the next thing pisses ’em off.

            2. The money of the wealthy isn’t economically useless. They may not spend their entire income but it’s not like they bury the remainder in their backyard. What isn’t spent is invested, which is even more important than spending because it goes towards long-term growth.

              Essentially, your argument is that the government can spend/invest better than the rich, right? I understand that after watching the housing bubble implode, that might make sense to many people. However, you have to consider all the government intervention that went along with the misallocation of resources.

              The housing bubble couldn’t have happened without low interest rates and programs that encouraged sub-prime loans. Therefore, it is insanity to me to insist the solution is giving the same people even more of our money to misallocate.

              1. Unfortunately, the rich usually use their money in one of two ways:

                1: Indulging themselves

                2: “Investing” in better ways to ship American jobs offshore. Their is little private-sector investment going on here in America.

                1. Indulging themselves, well we can’t have that.

                  When rich guy Lawrence T. Covington III, (best said with out moving your upper lip) decides that he wants to go out on his yacht and have a champagne hot tub party with a caviar eating contest. Where pray-tell does Master Covington get all of the various goods and services to put on such a shin-dig?

                  It must be magic, because everyone know that the rich keep their money in a big vault a swim around in it.

                  1. Stupid joke names.

                2. “2: “Investing” in better ways to ship American jobs offshore. Their is little private-sector investment going on here in America.”

                  DEY TUK UR JOBS!

                3. …ship American jobs offshore.

                  This is just silly.

                  1) Good. I hope they have a fabulous time.

                  2) This makes no sense as plenty of new local businesses need capital too. There is in fact plenty of investment going on. And even if “the rich” were conniving to send jobs overseas so what?

                  1. According to Chad, there are virtually zero small businesses in America.

        2. No wonder WIC doesn’t have enough money, the rich get it all.

          1. Well, there IS corporate welfare, and that is a sin against humanity… but another argument entirely.

          2. Funny how I always get turned down for welfare…

        3. Of course the rich are usually the biggest beneficiaries of any government program, service, or spending

          Yeah? Name one.

          You can access the Federal budget here:

          http://www.gpoaccess.gov/usbudget/

          Point to the page in this budget where you find some $150 billion program targeted to those who make over, say, $100,000 per year.

          1. You have more stuff, you need more police.

            The more your community resembles Bangladesh, the less it matters to you whether the country fails. So the armed forces and economic controls increasingly benefit the rich, who have the biggest stake in their country’s existence and prosperity. User fee upcharge.

            1. Jesus, Tony, lay off the double espressos. That’s the most hare-brained shit I’ve ever heard.

            2. “You have more stuff, you need more police.”

              Uh, huh. That’s why C.O.P.S. is always filmed in those wealthy upper-class neighborhoods. That’s where all the action is…

              1. No, it’s where the action isn’t, which is my point.

                1. Only if your point was that the poor don’t have any respect for private property.

          2. AG department 25 Billion – Corporate welfare that causes higher food prices

            Dept of Education
            Bloated pay for “educators” throughout the land – side effect ever escalating tuition for colleges and universities

            NASA – the agency that now is in charge of making moslems feel better about themselves.

            Dept of Transportation
            Billions to “study” high speed rail. Billions more for environmental impact studies so that we can repave roads.

            HUD – Billions for slum lords

            Commerce Department – Straight up political graft for connected business owners

            EPA – Billions for assholes that cripple the economy.

            ETC, ETC, ETC.

            Yeah there’s no waste in that budget.

        4. “Of course the rich are usually the biggest beneficiaries of any government program, service, or spending (kind of by definition). That’s why they pay more in taxes.”

          So true, Tony. That’s why everyone hates the rich. The collect welfare checks and food stamps, run up a huge tab on programs like Medicaid, and then hypocritically bitch about paying high taxes.

          1. Don’t forget, the rich just love sending their kids to public schools, putting a strain on the system.

    6. They should take all the money the poor and middle class has and shoot’em!

    7. Yes, the poor and middle class “pay for” austerity by getting fewer free services from the rich.

    8. Tony|9.20.10 @ 4:17PM|#
      “Austerity = making the poor and middle class pay for the mistakes of the rich,…”

      Tony, I have a hint for you: Brain-dead assertions really don’t make you look brighter than, oh, a pile of dirt.
      In fact, they do the opposite.

  11. You can tell God hates Tony ’cause he made him so stupid.

  12. Sadly, this piece misses the main thrust of Krugman’s article; strangely not linked to here ? perhaps Veronique was referring to this, in which he writes

    Nonetheless, every few months we’re told that the bond vigilantes have arrived, and we must impose austerity now now now to appease them. Three months ago, a slight uptick in long-term interest rates was greeted with near hysteria: “Debt Fears Send Rates Up,” was the headline at The Wall Street Journal, although there was no actual evidence of such fears, and Alan Greenspan pronounced the rise a “canary in the mine.”

    Since then, long-term rates have plunged again. Far from fleeing U.S. government debt, investors evidently see it as their safest bet in a stumbling economy. Yet the advocates of austerity still assure us that bond vigilantes will attack any day now if we don’t slash spending immediately.

    (More of this sort of thing here.) Now, I agree Krugman is a short-bus-special kind of dimwit, but it would be nice to see Reason go after his main argument rather than dancing around the edges of it. That is, if there really, truly is a market response amounting to “no confidence”, why is it that we’re not seeing it, at least as expressed in demanded risk premium for long-term bonds? It seems to me that the obvious answer is China doesn’t care, but that’s just speculation on my part.

    1. it’s not happening because demand for treasuries domestically is through the roof. net loan demand is negative; people are paying back loans. banks cannot increase the amount of credit in the system for this reason, and are therefore faced with either employing cash by buying no-risk assets or unwinding their balance sheets. they’ve been told not to unwind (highly deflationary) and so sink all that excess cash — which equals the increase in the savings rate — into treasuries. this is, by no coincidence, the same amount of new debt the government has to create to offset private sector debt collapse.

      in a balance sheet recession this is how it works. demand for treasuries from outside is less than it once was as the trade deficit declines, but domestic demand is gangbusters. so rates stay very low.

      china, for its part, can’t really hurt us. selling is hard — witness its foray into JGBs last week, which was all about compelling japan to buy treasuries for it in order to stabilize the yen. they can’t really dump without utterly ending trade with the US. they made their deal with the mercantilist devil, and now they’re just holding a bunch of paper. even if there was a run on treasuries, the fed could buy everything on the market and create a pile of useless excess reserves in order to keep rates low.

      1. china, for its part, can’t really hurt us.

        you know, that’s an oversimplification. the US would hurt in a sudden stop where foreign funding fled, a la korea 1997. it’s just that china would very likely be even worse off, deprived of its largest end market by far. the china-US relationship is really rather analogous to the US-UK relationship of the 1930s.

      2. Right, which is basically what Krugman is saying: there’s no negative repercussions for ramping up spending even more, because the debt markets are buying everything in sight.

        Veronique’s argument is that Greece or the PIGS countries more generally could be in trouble, but the consensus of the investing class seems to be that the U.S. isn’t a problem.

        Yet.

        1. I’m not one who thinks there will be no repercussions for the bond market. The US is highly dependent on foreign funding, and the possibility of yield volatility exists for us the same as it did for britain in 1931. But the net result of that chaos will be improved terms of trade and a path to real economic growth. That is in stark contrast to, say, ireland, which is really faced with national bankruptc and default.

      3. If domestic demand for treasuries is up, doesn’t that just indicate a lack of confidence in the stock market? Back in the 1990’s we were told the stock market would go up forever, so it seems possible the bond market could face the same fate.

        Psychology is what is keeping the United States solvent. Psychology could just as easily destroy it…

        1. See, that’s exactly where I think this article should have gone, or somewhere in its vicinity. Or, that this represents another kind of dementia by markets that have yet to be kneecapped by sovereign default. It’s almost like they expect libertarians to not even bother reading Krugman.

      4. They can’t hurt us until they decide we can’t pay them back. Until then, they need us more than we need them. But, eventually, we’ll default and they’ll then convert debt into equity.

        Then Kathleen Sebelius’ “reeducation” will appear as a pleasant dream during an afternoon nap.

      5. That massive demand for treasuries is called a ‘bubble’. You should look it up.

      6. One day gauis will speak English and we will understand what the fuck he is saying….

        Of course it will still be entirely wrong but at least we will understand what he is saying.

    2. Well people called the bust of the housing bubble years before it happened. It might just need a few more huge upticks in the deficit for the bond panic to happen. War with Iran maybe?

    3. That is, if there really, truly is a market response amounting to “no confidence”, why is it that we’re not seeing it, at least as expressed in demanded risk premium for long-term bonds?

      Ask yourself why home sales didn’t tumble before the housing market collapsed, or why Lehman Brothers and AIG seemed (at least in public) perfectly sound right up until the moment of reckoning. The answer in these cases is clearly that it’s in the nature of bubbles to pop suddenly. If there was some clear tocsin call that signaled to even stupidheads that an asset was absurdly overvalued — well, it wouldn’t be overvalued, would it? People do watch the evening news, you know.

      Does this apply to Treasuries? No one knows — yet. That’s the problem here. If investing in the Federal debt is a bubble, then it’s going to pop like all bubbles, suddenly. There won’t be any warning signs. One day Treasuries will be paying 3.75 and the next no one will buy them at all and investors will be freaking out trying to sell them as fast as they can, and four days later the Federal government will be writing IOUs for tax refunds and stiffing its contractors like California.

      It’s also relevant to point out that the Federal Reserve system has been propping up the market in Treasuries for a while by “buying” them with money it prints:

      http://www.hussmanfunds.com/wmc/wmc100823.htm

      Right now I believe the Fed “owns” $1 trillion in assets for which it paid “money” that it created out of nothing. That’s why the money supply has exploded:

      http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D=AMB

      Now that’s a “hockey stick” graph. These are the scary uncharted waters of “climate” experimentation, in this case the financial climate that allows the modern economy to run smoothly.

      Will the Fed be able to re-absorb all that money safely when people start wanting (or needing) to spend it? Or, keeping in mind that inflation is the friend of debtors, and the US Federal government is the planet’s largest debtor, does the Fed and the Obama Administration even care very much if it can?

      Me, I think anyone who enthusiastically buys Treasuries in 2010 is either betting on a takeover of the US economy by the government the likes of which hasn’t been seen since Hitler came to power in 1933, or is a complete starry-eyed fool. Either way, if the crump comes and these maniacs have their entire life savings disappear into the government maw — end up as clipped as Government Motors bondholders — I’m going to laugh. I hope George Soros has 40% of his portfolio in US Treasuries, but I doubt he’s that dumb.

      1. That’s a good response. Thanks.

      2. … however, your second link doesn’t work.

  13. From another thread…

    Off topic link:

    Just got done reading an excellent mma style take down of Pauly “Stimulate Me One More Time” Krugnuts in Foreign Policy online magazine.

    It was a four page beat down; blood, teeth and feathers littered the web site.

    A taste for everyone:

    I agree there is room for legitimate differences of opinion on the quality of data, and the extent of government responsibility, but to argue that the government had no role in directing credit, or in the subsequent bust, is simply ideological myopia.

    Oh, snap!

    1. Does anyone actually read Krugman. I mean, he’s in the New York Times for chrissake. I think his wife writes his stuff.

      1. You can usually tell when Krugman’s wife has been bogarting his laptop–there tends to be a lot more of the “social justice” and “the rich don’t deserve to keep any of their money” type of comments.

  14. Here’s the new Freddy Krugger article, though only if you high tolerance for rage(if you’re a libertarian, then I suspect you do).

    I have to run, discuss.

      1. Undeniable truth!

        1. ARFARFARFARFARFARFARFARFARFARFARFARF

    1. Peace be with him.

  15. “Capital being a scarce good, the result is increased interest rates and a higher price for debt.”

    You haven’t been paying attention: to the likes of Krugman and Bernanke, capital is not at all scarce. You just print up some more or, if that’s too much trouble, just add some zeroes to selected account balances at the Federal Reserve Banks.

  16. Dick licker!

  17. Wealth is not a pizza where, if I have too many slices, you have to eat the Domino’s box. My wealth does not create your poverty. Your wealth does not create my poverty. They’re separate questions. And we can generate more wealth.

      1. The externalities!

        1. O’Rightwinger can go suck Ron Pual’s cock!

          I’m NEVER coming back to this websight!

      2. Not true! That’s why we still live in caves.

    1. If it’s Domino’s the box if probably better.

      1. True, but the analogy still stands – except for acolytes of Keynes, who think we can tax and spend our way to prosperity.

        1. Or borrow and spend.

          (Those 0% interest rates do come in handy.)

        2. They have devised an elaborate pulley system to lift the bucket they’re standing in, by the handle. Trouble is, they ran out of rope hanging the capitalist who make it and, the rope made in China isn’t strong enough to pull up the bucket without giving way.

          “We contend that for a nation to try and tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” -Winston Churchill

      2. To their credit, the new Domino’s is quite tasty.

        1. I love the taste of the new box.

  18. Oh, please, spare that anorexic cunt’s lectures on economics. Either find a right winger of Paul Krugman’s stature, or stick to aplogetics for the Tea party.

    1. Someone of Krugman’s stature??? hahaharoflmfao

      +1

      1. Can you see light through your belly button? From inside, I mean.

        1. C’mon. Krugman surrendered whatever tiny bit of credibility he had when he elected to shill for the left in the NY Times.

          He’s made dozens of predictions in the last five years and he’s batting .000

          Even if I were inclined to give him the benefit of the doubt, there are numerous economists on the right that far exceed his “stature.” Primarily, that’s because he has no stature whatsoever. He’s a fabulously incorrect, humourless, partisan hack and a bad one.

          1. The NY Times, unlike this fucked-up little rag, has opinion from a variety of perspectives, and Krugman offers a center-left perspective. That is not shilling for the left, you fucking moron.

            1. Center left? Center left!!! And I’m the fucking moron.

              Yeah, for chatting you up.

              Please stop now.

              1. “Center” is code for “Establishment”

            2. Max, so your answer is, “Is not, and you’re a booger head!”

              Compelling argument. […]

            3. “has opinion from a variety of perspectives.”

              Yep, cover the full range of Socialist, Social Democratic, and Democratic Socialist, with the occasional Fascist thrown in to make it interesting.

              1. with the occasional Fascist thrown in to make it interesting.

                Is that Brooks or Friedman? Both?

              2. We got both kinds. We got country and western.

            4. Max|9.20.10 @ 7:56PM|#
              “…unlike this fucked-up little rag,…”
              You stupid fucking fucker, go fucking fuck yourself in the ear, you stupid fucking fucker, fuck-head.
              Oh, and try to learn a vocabulary that won’t embarrass a third-grader.
              ASSHOLE!

              1. Go stick your dick in Ron Paul’s ass with no lubricant, you sorry piece of dog shit.

                1. Go suck your own fucking asshole, asshole sucker.
                  Oh, and learn a vocabulary that won’t embarrass a third-grader.
                  ASSHOLE!

                2. And I’m promising AGAIN to never come to this websight, just like I did a couple of months ago!

                  1. We can only “hope” that you might “change”….

                    1. Go suck Ron Pual’s cock!

                    2. Go fuck yourself in the fucking ass, fucking fucker and suck somebody’s cock you fucking fucker.
                      Oh, and earn a vocabulary that won’t embarrass a third-grader.
                      ASSHOLE!

            5. Hey Max, why don’t you go home and put your mom’s pussy on one leg at a time.

              1. Oh, honey, I’m still tight. Poor Max, though, he’s not very well… um, let’s just say he has his shortcomings.

          2. William…Dear, dear, dear William….

            Krugman predicted that deflation would reign despite the bailouts. You guys and your pet “Austrians” were screaming “hyperinflation”

            The actual score is Krugman 1, libertarians a big fat zero.

            1. You’re an idiot, Chad.

              Libertarians don’t predict hyperinflation INSTEAD OF deflation, they predict it as a result of the Fed/Gov’t policies TOWARD deflation.

              So of course there’s deflation…first. Almost all historical hyperinflationary episodes are preceded by deflation.

              Weimar Republic ring a bell?

              1. We’re right because we’re wrong. We’re right no matter what, in fact. We are, by definition, right.

                1. Uh, you’re confusing lefties with libertarians. Krugman is right when he’s wrong since he was crossing his fingers when he was wrong.

            2. Score: Chad = zero.

            3. Krugman predicted that deflation would reign despite the bailouts. You guys and your pet “Austrians” were screaming “hyperinflation”

              Price of Gold? up
              Price of Oil? up
              Value of the dollar in the world market? down
              Price of food? up

              Might not be “hyper” but it sure is inflation.

              Krugman: 0
              Chad: -1
              libertarian by the name of Joshua: 1

            4. ARFARFARFARFARFARFARFARFARFARFARFARF

              1. I like tentacle rape.

                1. STEVE SMITH NOT HAVE TENTACLES FOR MAKE RAPE! IS DISCRIMINATION!

                  STEVE SMITH GET ACLU TO FILE LAWSUIT!

            5. Only idiots were screaming hyperinflation.

              Libertarian != Austrian.

              Austrians are, almost to a man, not real economists. Ideologues and fakers. Not all libertarians fall for it.

  19. Maybe they are all drunk. Last time I got drunk I somehow rationalized the purchase of a $500 Tommy Bahama leather jacket. It’s a nice jacket, I’m just not sure my bank account appreciates it as much as I do.

    1. Was it “The Jacket”(tm)? There appears to be several Tommy Bahama jackets that resemble “The Jacket”(tm).

  20. Alt-text: Krugman finally discovers the nature of the odd substance in the glass we have so frequently seen him hoisting.

    1. What a dour, humorless man Krugman is. The picture says it all.

  21. From Wapo “Estimates show letting [Bush] cuts expire would put U.S. within striking distance of balancing budget.”

    1. Of course the WaPo is going to say that, Tony. They’re in the bag for tax-and-spendenomics, just like you pathetic Keynesians.

      1. Hahahaha. Pathetic.

        1. What’s pathetic is thinking that jacking up taxes just on one group of people, will raise enough revenue to get us out of the hole being dug presently by Obama and his gang of thugs.

          Of course, it isn’t enough revenue, so you fuckers will hold your hands out for MORE tax hikes/new taxes/taxes taxes taxes. And fees. Lots of fees.

          God forbid we expect government to tighten its collective belt, like we regular people.

          1. What’s pathetic is you resorted to the typical ostrich-like stance of invoking the liberal media conspiracy because you didn’t want to bother refuting anything in the article. For a right-wing rag like Wapo, at that.

            1. Your idea of a right-wing rag includes the WaPo? Jesus, that’s a fucking joke.

              1. BTW, I read the fucking article. Pathetic doesn’t even begin to cover how awful it really is, and it’s not an adequate word to describe anyone who read it AND believes it to be accurate and helpful.

            2. Anything a cunt-hair to the right of The New Republic is a right-wing rag.

              1. ARFARFARFARFARFARFARFARFARFARFARFARF

              2. Anything to the left of FOX News isn’t fair and balanced. And they actually believe that!

                1. The ONLY unbiased source of news is MSNBC. Those fuckers at CNN are all right-wingers.

                  1. ARFARFARFARFARFARFARFARFARFARFARFARF

                  2. Nah, CNN is nonideological. That’s why it’s so boring.

                    1. Behold! The first apolitical cable news channel!

                      You’re a laugh riot, Tony.

    2. But why on Earth would we want to balance the budget? A constant deficit of 3-7% is going to be necessary to fuel growth in the money supply to cover a growing economy, which I would hope that even you, Tony, would want us to experience again one day.

      The “balanced budget” (at the Federal level) is the rube’s panacea.

  22. if I wanted to spend my days mentally masturbating to my own version of utopia

    If?

    1. I usually prefer twinks. When I want to indulge my utopian fantasies I watch star trek.

  23. “typical ostrich-like stance”

    Shit, Tony, if I wanted to be ostrich-like, I’d just go along with the idea that we can tax and spend our way to paradise.

    Sorry, but I just can’t blindly believe that tax hikes will always cure our fiduciary ills. If THAT worked, we’d have seen it a long time ago.

    1. Nobody said it would cure all our ills. Again, you’re engaging in an episode of projection combined with a black/white view of the world as well as erecting a strawman. And for most of my life taxes have been cut. THAT hasn’t worked either.

      1. So… if cutting taxes doesn’t work… and raising taxes doesn’t work… what the fuck DOES work?

      2. “Nobody said it would cure all our ills”

        True enough, perhaps, but the way most Dems have been bleating about it the past few years, one would get the impression that some of them DO believe all ills are/were created by Bush’s evil tax cuts on the evil rich.

        If I heard it right, keeping all of the tax cuts – but specifically, that evil tax cut for the evil rich, which would “cost” us $75 billion a year for the next decade – let’s focus on that:

        Is there *no* way to cut $75 billion in spending a year? Out of a trillion-plus budget?

        Hell, there’s probably that much held in reserve from the first stimulus – that wasn’t spent on what we were told it would be spent upon – to cover at least two years of that horrible, baby-strangling tax cut for the evil rich.

        Now… freeze spending for two years, and only minimal, single-digit budget increases (okay, I’ll go to 9.99%) for two years after that… AND keep the tax rates right where they are, with no extra (and unnecessary, I might add) new taxes… sure, it might take a long time, but why not give it a shot?

        Or is it preferable to go into hock on “shovel-ready” projects like, oh, say… a liberal film festival in Missouri, paid for with stimulus money, and other frivolous NON-stimulating spending?

        When we ordinary people have to cut the budget, we scrimp and clip coupons and FUCKING DO WITHOUT once in a while.

        Sure, government can’t clip coupons… but it sure as fuck doesn’t have to spend imaginary money borrowed from The Future. Hint hint.

      3. “And among the undeniably rich, a belligerent sense of entitlement has taken hold: it’s their money, and they have the right to keep it.” – Krugman NYT:
        http://www.nytimes.com/2010/09…..ef=general

        Imagine that. People thinking that something that belongs to them actually BELONGS to them and not to the state. This says it all about Krugman – he is a Fascist in his bones. Just too bad those bones are on the topside of the turf.

  24. Looks like I missed the real party while I was over on the Christine O’Donnell thread! gaius marius was there too, though, so it was a hell of a good time.

    However, this from Mr. FIFY demands a thought-provoking response:

    …doesn’t have to spend imaginary money borrowed from The Future

    This is fallacious thinking, which you share with most people (so don’t feel so bad).

    When you say “money” it helps hide the fallacy. But let’s think in real terms. The only thing that matters, really, is the production and consumption of real goods and services. Ultimately, we are all consumers. We produce so that we (or others) can consume.

    And there is no way to send future goods back into the past! There is simply no way that “our grandchildren” can be forced to labor like slaves to produce houses and dishes and computers and hammers to be sent back into our time to somehow make up for our profligate ways. They’ll be busy happily producing goods and services for their own generation (all those living at that time) to consume.

    You’re mind is going to want to rebel when you read these words. But remain calm, and think it through.

    Then maybe you will see how foolish it is to worry about our grandchildren needing to pay back our debts.

    1. “They’ll be busy happily producing goods and services for their own generation (all those living at that time) to consume.”

      I doubt the future will be a happy time. The present is pretty fucking grim, and it isn’t getting better.

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