Paul Krugman and the parallel universes

A great column by the great Paul Krugman – who should have got the Nobel Prize for Journalism.

So the Bunning blockade is over. For days, Senator Jim Bunning of Kentucky exploited Senate rules to block a one-month extension of unemployment benefits. In the end, he gave in, although not soon enough to prevent an interruption of payments to around 100,000 workers.

But while the blockade is over, its lessons remain. Some of those lessons involve the spectacular dysfunctionality of the Senate. What I want to focus on right now, however, is the incredible gap that has opened up between the parties. Today, Democrats and Republicans live in different universes, both intellectually and morally.

Take the question of helping the unemployed in the middle of a deep slump. What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. That’s because the economy’s problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay.

But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending Mr. Bunning’s position (although not joining his blockade): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

In Mr. Kyl’s view, then, what we really need to worry about right now — with more than five unemployed workers for every job opening, and long-term unemployment at its highest level since the Great Depression — is whether we’re reducing the incentive of the unemployed to find jobs. To me, that’s a bizarre point of view — but then, I don’t live in Mr. Kyl’s universe.

And the difference between the two universes isn’t just intellectual, it’s also moral.

Bill Clinton famously told a suffering constituent, “I feel your pain.” But the thing is, he did and does — while many other politicians clearly don’t. Or perhaps it would be fairer to say that the parties feel the pain of different people.

During the debate over unemployment benefits, Senator Jeff Merkley, a Democrat of Oregon, made a plea for action on behalf of those in need. In response, Mr. Bunning blurted out an expletive. That was undignified — but not that different, in substance, from the position of leading Republicans.

Consider, in particular, the position that Mr. Kyl has taken on a proposed bill that would extend unemployment benefits and health insurance subsidies for the jobless for the rest of the year. Republicans will block that bill, said Mr. Kyl, unless they get a “path forward fairly soon” on the estate tax.

Now, the House has already passed a bill that, by exempting the assets of couples up to $7 million, would leave 99.75 percent of estates tax-free. But that doesn’t seem to be enough for Mr. Kyl; he’s willing to hold up desperately needed aid to the unemployed on behalf of the remaining 0.25 percent. That’s a very clear statement of priorities.

So, as I said, the parties now live in different universes, both intellectually and morally. We can ask how that happened; there, too, the parties live in different worlds. Republicans would say that it’s because Democrats have moved sharply left: a Republican National Committee fund-raising plan acquired by Politico suggests motivating donors by promising to “save the country from trending toward socialism.” I’d say that it’s because Republicans have moved hard to the right, furiously rejecting ideas they used to support. Indeed, the Obama health care plan strongly resembles past G.O.P. plans. But again, I don’t live in their universe.

More important, however, what are the implications of this total divergence in views?

The answer, of course, is that bipartisanship is now a foolish dream. How can the parties agree on policy when they have utterly different visions of how the economy works, when one party feels for the unemployed, while the other weeps over affluent victims of the “death tax”?

Which brings us to the central political issue right now: health care reform. If Congress enacts reform in the next few weeks — and the odds are growing that it will — it will do so without any Republican votes. Some people will decry this, insisting that President Obama should have tried harder to gain bipartisan support. But that isn’t going to happen, on health care or anything else, for years to come.

Someday, somehow, we as a nation will once again find ourselves living on the same planet. But for now, we aren’t. And that’s just the way it is.

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11 Responses to Paul Krugman and the parallel universes

  1. Duncan says:

    Krugman for a Pulitzer?

    Are you feeling ok Nicholas, or did you become a closet big Government socialist in the last week? :-)

  2. Tel says:

    I think I mentioned over a year ago that the US has deep structural problems, and all I can see is they are getting worse. To start with, the media never really discuss issues, they just do the “race calling” thing and tend to push one side or the other. The public seems to like it that way, and to some extent Krugman is going right along with the flow and doing it too.

    Krugman sidesteps Jim Bunning’s main complaint which is the debt that can’t keep stacking up forever. If Democrats had been willing to redirect some of the other stimulus money (which hasn’t really stimulated much) towards unemployment benefits they would have had less resistance from the likes of Jim Bunning (although no doubt Jim would have found something). Instead, they decided it was better to play brinkmanship on the issue, and prove they can get their way by toughing it out — which they did, at a cost to someone at the bottom of the pile, and so the debt keeps stacking up.

    The US are losing their lead in high-tech, they are losing their manufacturing base, Hollywood is reduced to turning out reruns, they don’t have hegemony over foreign resources anymore and they have used up a substantial part of their own resources. Even their agriculture is getting shut down as new water restrictions are brought into place and cow farts get taxed.

    The US government has shown its people that there are no limits to what that government is willing to do. Kidnap is OK, torture is OK, phone-taps are OK, no-fly lists are OK, investigations into pretty much anything regularly lead to a stone wall, and protesters gets beaten up until they quiet down again. This is not the recipe for a dynamic world leading economy. Stimulate all you like, slap it with a fish if it makes you feel good, but the problems won’t fix themselves. People now must face the reality that constitutionally limited government is to all intents and purposes dead in the USA.

    Corruption… how is it that the Federal Reserve cannot under any circumstances be subject to even a basic public audit? There’s only one answer that makes sense: something is dodgy. Another problem that won’t fix itself, regardless of stimulus. Partisans are welcome to whack each other while the house falls down around their ears. It seems that Republicans are determined to ensure the Obama presidency is a disaster, and all the indicators are in place that it will indeed deliver to expectations. I’m not quite sure what that’s going to prove.

  3. Nicholas Gruen says:

    Tel,

    In what sense is Krugman racecalling?

  4. Tel says:

    In the sense that he is having a bit of whoopee over Jim Bunning’s backdown while covering only the Democrat point of view and representing the Republicans as wanting to bash the unemployed instead of explaining the full picture of Bunning’s position. Then he starts off on how bipartisanship would be a good idea, if only someone paid attention to other people’s position, well thank you Mr Pot.

    Not that I’m a great supporter of Bunning mind you, Bunning was happy enough to use debt-finance when the money went to pointless wars in the Middle East so he’s a hypocrite just as much as Krugman is, but if you are going to attack someone’s position at least take a look at what that position is.

    “For the second day in a row Democrats have voted against paying for what they are spending,” said Bunning. “I have offered them three different ways to pay for these bills and they’ve rejected all of my suggestions. It has become obvious to me that the Democrats are not serious about getting our fiscal house in order and will continue to spend our country deeper and deeper into debt with no regard for our children and grandchildren who are going to be stuck with the tab.

    “The Baucus extensions bill we are currently considering on the Senate floor will add over $100 billion more to our already out-of-control debt. My amendments that were rejected today offered two different commonsense solutions on how to pay for the Baucus bill instead of continuing the irresponsible spending that has plagued Washington for too long. Enough is enough. It is time to cut up the national credit card and get serious about paying down our debt. I will continue to oppose spending that is not paid for.”

    That is Bunning’s actual explanation (from his own site) and although he is painted as a heartless SOB in this particular case he was not making war on the unemployed, he was merely trying to redirect Obama’s stimulus funds towards the unemployed. Strangely enough Krugman says, “Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus” but the Democrats were not willing to accept the unemployment benefits as a type of stimulus.

    Maybe Krugman would find himself in a slightly closer parallel universe to Bunning if he was willing to take a bit of time to listen to the man.

  5. Nicholas Gruen says:

    Tel,

    And is Bunning bona fide? Because I take it you’re familiar with the case of people who wiggle around and pose during arguments. Tony Abbot will come up with reasons for opposing the proposed Health reforms and you might be suspicious of his bona fides, just as you’d be suspicious of the ALP’s bona fides, their arguments in opposing John Howard’s GST. I’m sure I could point to things they said that appear reasonable, but which are essentially bogus.

    Are Bunning’s proposals to pay for the extension for real? Or are they tactical?

    And if you’re so keen on budget discipline why would you insist on exempting the top 0.25% of people from estate tax?

  6. Tel says:

    I have no doubt whatsoever that there are a very large number of secret agendas throughout Washington, but I have no reliable means of discovering the details so speculative accusations could apply to anyone. It is quite reasonable to search for inconsistencies that may be signs of duplicitous behaviour or just incompetent mistakes. I mean, Obama pretended to be anti-war for a little while, and Nancy Pelosi promised to “clean the house” and “drain the swamp”. Don’t get me wound up…

    Ultimately Bunning is accountable to the good voters of Kentucky (well, he is retiring, but still somewhat accountable for his party reputation) and he needs to deliver a message that the voters can both understand and respect. It so happens that these voters regularly demonstrate they want government military spending, but don’t like any other kind of government spending. If either Bunning’s rhetoric or his actions betray these voters there will be a number of people willing to smartly call him on that.

    Bunning put forward an amendment to redirect stimulus money into unemployment benefits and Democrats could have accepted that amendment (leaving them with a slightly smaller slush fund). Bunning would have been in a very difficult position trying to block the bill after his amendment was accepted. Maybe it was a delaying tactic, but a tactic that generates a whole lot more delays when the other side wants to sit and fight about it. From Bunning’s point of view it was something he could offer his constituents saying, “Hey I saved you some debt” while letting the unemployment benefits through.

    And if you’re so keen on budget discipline why would you insist on exempting the top 0.25% of people from estate tax?

    To be fair, he is trying to exempt all Americans from estate tax. The Democrats are the ones creating a wedge, driving the thin end into the rich bastards that no one likes, and then inflation and insatiable need for funds will push that wedge steadily downward.

    It’s a consistently stated belief amongst Southern conservatives that tax should be low and federal spending (on matters other than military) should be also be low. You may not agree with them, Krugman certainly doesn’t agree with them, but they aren’t exactly underhanded when it comes to stating their policy.

    Speaking of consistency. Barnaby Joyce is representing a similar rural, sub-tropical old-style Conservative electorate, and delivers much the same comments on debt:

    It shows clearly that the Coalition is a government that pays off debt and that Labor is a government that creates debt and Mr Rudd is creating debt at a faster rate than has been seen in recent history. With gross debt currently in excess of $125 billion one would be foolish if they were not concerned by the trajectory of the growth in debt. How would you feel taking this to your local bank manager as an example of your fiscal prudence, and the ceiling insulation program as an example of your management technique?

    http://www.barnabyjoyce.com.au/Newsroom/MediaReleases/tabid/74/articleType/ArticleView/articleId/1060/If-you-dont-get-the-debt-picture-here-it-is.aspx

  7. Fred Argy says:

    Whether he deserves or not the Nobel Prize for journalism, I confess that Krugman echoes exactly my sentiments. The difference between the two universes is both intellectual and moral. You can’t debate the moral dimension.

  8. sdfc says:

    Who said the US stimulus hasn’t stimluated anything? Certainly not anyone familiar with the US GDP figures. And no I just don’t mean the headline.

  9. Tel says:

    What’s the point of GDP when you are still shedding jobs?

    Is the US economy actually producing more, or just shuffling pretend money back and forth at higher speed? What do those GDP figures even mean? Shadowstats don’t have an optimistic view of GDP (or anything else FWIW):

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