America at its worst: Krugman at his best

We’ve just had an election in Australia which was basically very clean, at least as far as one can tell. It was negative. It was empty but there was nothing illegitimate about what either party did or said about the other. Over the pond it isn’t so.  The Republicans are revolutionaries. That is they don’t accept the legitimacy of their opponents. But they’re the worst kind of revolutionaries, which is to say that they are not appealing to any elites who might be able to take over and run the place. They’re appealing to psychoses of various kinds. Mobs used to be left wing, or at least that was the mythology of the French and Russian Revolutions. Not any more.  Over to you Paul.

It’s Witch-Hunt SeasonThe last time a Democrat sat in the White House, he faced a nonstop witch hunt by his political opponents. Prominent figures on the right accused Bill and Hillary Clinton of everything from drug smuggling to murder. And once Republicans took control of Congress, they subjected the Clinton administration to unrelenting harassment — at one point taking 140 hours of sworn testimony over accusations that the White House had misused its Christmas card list.

Now it’s happening again — except that this time it’s even worse. Let’s turn the floor over to Rush Limbaugh: “Imam Hussein Obama,” he recently declared, is “probably the best anti-American president we’ve ever had” …, bear in mind that he’s an utterly mainstream figure within the Republican Party; bear in mind, too, that unless something changes the political dynamics, Republicans will soon control at least one house of Congress. This is going to be very, very ugly. …

What we learned from the Clinton years is that a significant number of Americans just don’t consider government by liberals — even very moderate liberals — legitimate. Mr. Obama’s election would have enraged those people even if he were white. Of course, the fact that he isn’t, and has an alien-sounding name, adds to the rage.

By the way, I’m not talking about the rage of the excluded and the dispossessed: Tea Partiers are relatively affluent, and nobody is angrier these days than the very, very rich. Wall Street has turned on Mr. Obama with a vengeance:… And powerful forces are promoting … this rage…, the superrich Koch brothers and their war against Mr. Obama has generated much-justified attention, but … only the scale of their effort is new: billionaires like Richard Mellon Scaife waged a similar war against Bill Clinton.

Meanwhile, the right-wing media are replaying their greatest hits. …Mr. Limbaugh used innuendo to feed anti-Clinton mythology, notably the insinuation that Hillary Clinton was complicit in the death of Vince Foster. Now … he’s doing his best to insinuate that Mr. Obama is a Muslim. … [And] Mr. Limbaugh is … tame compared with Glenn Beck.

And where, in all of this, are the responsible Republicans, leaders who will stand up and say that some partisans are going too far? Nowhere to be found. To take a prime example: the hysteria over the proposed Islamic center in lower Manhattan… On this issue, as on many others, the G.O.P. establishment is offering a nearly uniform profile in cowardice.

So what will happen if, as expected, Republicans win control of the House? …Politico reports that they’re gearing up for a repeat performance of the 1990s, with a “wave of committee investigations” — several … over supposed scandals that we already know are completely phony. We can expect the G.O.P. to play chicken over the federal budget, too; I’d put even odds on a 1995-type government shutdown sometime over the next couple of years.

It will be an ugly scene, and it will be dangerous, too. The 1990s were a time of peace and prosperity; this … time … we’re still suffering the after-effects of the worst economic crisis since the 1930s, and we can’t afford to have a federal government paralyzed by an opposition with no interest in helping the president govern. But that’s what we’re likely to get.

If I were President Obama, I’d be doing all I could to head off this prospect, offering some major new initiatives on the economic front in particular, if only to shake up the political dynamic. But my guess is that the president will continue to play it safe, all the way into catastrophe.

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observa
observa
11 years ago

Wouldn’t Bush and Howard be chuckling at Krugman’s analysis? Naturally they in cahoots with the CIA, ASIO, MI5 have succeeded in bringing down Kevin07 and Gordon and are now working covertly and overtly on toppling the Obamessiah.

csning
csning
11 years ago

Funnily enough, I did a CTRL+F here, and the only mention of the CIA came from observa – nowhere to be found in Krugman’s article.

He’s not crazy. This isn’t a paranoid conspiracy theory – this has been out and in the open for some time now.

doctorpat
doctorpat
11 years ago

I seem to remember that a fair section of the US population did not consider the G.W.Bush presidency to be legitimate either.

Mack
Mack
11 years ago

Ha, Krugman is hardly a bipartisan observer here and has skin in the game (note the last paragraph is a transparent reaction to the way that his “spend your way out of recession” strategy is wearing thin even with his Democrat friends)

Lots of emotive language, dog whistling all (instead of some) on the other side as racists, class warfare references – he is the head to Fox News’ tail but the same coin..

Nicholas, you have been regularly plugging Krugman here but was strangely silent recently when he shut down his NYT blog after being repeatedly shown up

Mack
Mack
11 years ago

Apologies Nicholas, I missed a word, “Blog comments” have been severely curtailed as per http://www.americanthinker.com/2010/08/paul_krugman_gives_up_1.html

Of course, I don’t need to remind you (?) to play the ball not the man – and a snide critique on the political nature of the hosting site the article is written on doesn’t substitute for addressing the content of the actual article… I found it on Catallaxy – it’s not a common site I visit for the record

P.S – “socialist” reply above is hardly the way anyone would describe Krugman as you well know – a cheap attempt to smear a counter point to your own opinion, I expect better of you…

Mel
Mel
11 years ago

“I found it on Catallaxy …”

Thank God it’s Friday.

Patrick
Patrick
11 years ago

Yep, I can. It’s because your adopted side is just as ‘nuts’ or ‘batshit crazy’ or whatever you want to use, as your nominated opponents.

Mack
Mack
11 years ago

Thanks for the link, read the whole thing and all the comments. Could have tit-for-tatted with an “I didn’t read past this stupid passage” when I had to read something as snide and emotive as “if he came out for motherhood, the G.O.P. would declare motherhood un-American.” but I have a genuine interest to read both sides of every argument so I plowed on.

One of the reader comments certainly stuck with me the most with me RE both US and Australian stimulus
“The problem , Paul, was not with the size of Obama’s “stimulus”; it was with the way the money was spent. Almost all went for political payoffs for democratic special interest groups — primarily public employee unions. We are tired of states like new York and California taking federal taxpayer’s “stimulus” money to pay for the bloated salaries of their huge state beauracracies. The states will never cut the size of their governments as long as the Democrats in Washington D.C. keep bailing them out. Obama spent almost a TRILLION dollars for “stimulus”. What is there to show for that enormous sea of money? There are no Hoover Dams or Nuclear plants or massive interstae projects; Nothing. Just an ocean of money funnelled to state government beauracracies. That is the problem and that is why the Democrats are going to lose Congress, this November.”

We find ourselves in a similar situation here RE the results of our own stimulus (our much better financial position going into GFC notwithstanding). I might link to another Catalaxy article critiquing your Lateral Economics last week of election cheerleading (sorry press release) but enough for one day..

I simply am not a big fan of embedding the engine room of economic recovery in government led solutions Vs the efficiencies of the market. I certainly can understand the notion that stimulus was a possible strategy – but strongly disagree with the theorey that its size and implementation was well executed.

RE your first aside – I am fine with debt (and have certainly taken it on myself) when it is invested prudently for future return and a realistic path to repayment is in place.

RE your last two asides, pity you cant help but be condescending and try to typecast. Certainly don’t disagree the US has mass delusional people but you seem to selectively focus only on one side of the political spectrum – Australia has them too, from Wilson Tuckey all the way through to Christine Milne. And Krugman’s rudeness and arrogance doesn’t preclude me/you to ignore him, it just shows his partisanship, which in turn results in him listening selectively (judging things on only some of the evidence), which in turn reduces the quality of his output.

Keen for any more references, I genuinely enjoy reading your posts, just don’t agree with you all the time..

Tel
Tel
11 years ago

Krugman likes to say “I told you so”, but if you thumb back into his blog a few years you find that he used to be a great believer in Gordon Brown.

http://krugman.blogs.nytimes.com/2008/10/08/to-do-not-to-do/

Readers ask what I think should be done about the financial crisis. The answer is, what Gordon Brown in doing in Britain: a bailout, yes, but one that gives the government an ownership stake in the bailed-out institutions. That plus a serious fiscal stimulus plan that includes emergency aid to state and local government.

The Brown plan, by the way, is 50 billion pounds; scaled by GDP, that would be the equivalent of a $500 billion plan here. The headline number would be smaller than the Paulson plan, but the probable effectiveness much, much greater.

So that was October 2008 when we all knew there was a problem and argued about what to do about it. I vaguely remember saying something myself along the lines that if you decide to go rewarding incompetence and failure what you are buying is more incompetence and failure. Krugman never liked the Paulson plan because Paulson shied away from nationalization. OK, well we haven’t heard Krugman saying much lately about how wonderful Gordon Brown is, he is back to gushing over Keynes. What did happen with that Gordon Brown 50 billion pound plan?

http://news.bbc.co.uk/2/hi/business/8571999.stm

The UK government has provided nearly £1 trillion of support to the banking sector since the onset of the financial crisis.

That is more than half the entire annual economic output of the UK.

And the reason? Banks, the government insists, provide access to money, without which individuals and businesses cannot spend and invest, and without which the UK economy cannot grow.

The budget blew out in all directions… but the banks sure went home happy, and what about the lending, the stimulus, the recovery?

http://blogs.ft.com/westminster/2010/07/the-very-green-bank-lending-paper/

But the real problem facing both men is that there are no simple answers. They both accept that lending targets proved largely unsuccessful (RBS and Lloyds failed to meet them, without penalty). But there isn’t a great deal more they can do apart from tinkering on the margins. And each minor lever available to ministers carries its own risks, as the carefully-hedged language of the green paper shows.

So the UK is making a fresh start with a new government, new ideas, a candid report to start dealing with the issue and they have finally reached the stage where they are asking themselves, “What the hell are we going to do?” If only Americans had listened to Krugman back in 2008 they could be facing the same problems right now.

Actually, none of you will believe me, but the Paulson plan was rather similar to the Brown plan. In the UK the government took over the banks to deliver an ineffective outcome, in the USA a handful of big banks took over the government to deliver an ineffective outcome. Central planning socialist style vs central planning corporatist style — with the almost identical result that a handful of people get to impose their decisions on the rest of the country, largely to suit themselves at the expense of everyone else.

In the USA over 100 banks closed during 2009 and I believe 2010 has already seen another 100 close as well, could be 200 by the end of the year… but they are small local banks, the kind that don’t get bailouts, the kind that can’t get their ex-employees into Federal Treasury and these small banks just waste time getting to know their customers, taking an interest in the local community, stupid stuff like that. I’m sure Krugman and Paulson would agree we are all better off without small banks (hey, might as well get rid of all small business while we are at it).

Tel
Tel
11 years ago

Sorry guys, can’t resist the black cat, along “told you so” lines…

An economic arrangement can continue for quite some time after it becomes untenable, through sheer inertia. But at some point a tide of broken promises and invalidated assumptions sweeps it all out to sea. One such untenable arrangement rests on the notion that it is possible to perpetually borrow more and more money from abroad, to pay for more and more energy imports, while the price of these imports continues to double every few years. Free money with which to buy energy equals free energy, and free energy does not occur in nature. This must therefore be a transient condition.

http://www.energybulletin.net/node/23259

Of course, the worst hasn’t happened yet, but then again, recovery hasn’t happened either.

Tel
Tel
11 years ago

My argument is that if you run a blog like Krugman does with several hundred comments per year containing ideas, suggestions, and criticisms of whatever happens to be going on at the time; then you can almost universally scrape up out of that a few “told you so” moments where something you predicted came true. Someone else going through the exact same blog can generally find a few “oh my God” moments right in there too.

If you scan the wider space and thumb through predictions from all over the field, then you can find plenty of people with a valid “I told you so” pointing out the extreme danger of pushing a nation up to the verge of debt default. For example in, “What Are the Origins of Freddie Mac and Fannie Mae?”, Rob Alford was warning of the danger of very large GSE’s (government sponsored enterprises) holding a major proportion of the national debt and only being held to very loose accounting standards — back in 2003. The general response to these warnings was much along the lines of your “Sure, whatever!” comment.

Even while the mortgage-centered disaster has yet to run its course (with another 12 months of rate-resets on the cards I believe), Krugman is on the one hand still out there plugging for even more of the artificial FM liquidity pumping, while busily running around telling everyone that earlier rounds of FM buying up risky loans were in no way a bubble-blowing exercise and in no way contributed to the GFC. I’d love to stumble across Krugman’s explanation of how all the junk loans ended up on the FM books.

http://www.nytimes.com/2010/06/20/business/20foreclose.html

For all the focus on the historic federal rescue of the banking industry, it is the government’s decision to seize Fannie Mae and Freddie Mac in September 2008 that is likely to cost taxpayers the most money. So far the tab stands at $145.9 billion, and it grows with every foreclosure of a three-bedroom home with a two-car garage one hour from Phoenix. The Congressional Budget Office predicts that the final bill could reach $389 billion.

Not that any of this debt discussion really matters for the USA anymore, their line of credit is running to an end. China has gently reduced it’s US treasury holding for two months now (with absolute minimal fanfare, as they very slowly shuffle toward the theater exit). Naturally we will never see a rapid dumping of treasuries from China, but you can forget about generosity from that quarter.