‘He-said-she-said’: this is serious – Krugman

Krugman again:

Think about what’s happening right now. We have a crisis in which the right is making insane demands, while the president and Democrats in Congress are bending over backward to be accommodating — offering plans that are all spending cuts and no taxes, plans that are far to the right of public opinion.

So what do most news reports say? They portray it as a situation in which both sides are equally partisan, equally intransigent — because news reports always do that. And we have influential pundits calling out for a new centrist party, a new centrist president, to get us away from the evils of partisanship.

The reality, of course, is that we already have a centrist president — actually a moderate conservative president. . . .

What all this means is that there is no penalty for extremism; no way for most voters, who get their information on the fly rather than doing careful study of the issues, to understand what’s really going on.

. . .

It’s a terrible thing to watch, and our nation will pay the price.

This entry was posted in Media. Bookmark the permalink.
Subscribe
Notify of
guest
64 Comments
Oldest
Newest Most Voted
Inline Feedbacks
View all comments
Mr Denmore
Mr Denmore
10 years ago

See the CME from this Thursday will impose a 0.5 per cent haircut on formerly risk-free Treasury bills. Formerly unthinkable.

Story here.

Pedro
Pedro
10 years ago

“Think about what’s happening right now. We have a crisis in which the right is making insane demands, while the president and Democrats in Congress are bending over backward to be accommodating — offering plans that are all spending cuts and no taxes, plans that are far to the right of public opinion.

So what do most news reports say? They portray it as a situation in which both sides are equally partisan, equally intransigent — because news reports always do that.”

No, both sides are equally partisan. It just won’t seem that way if your starting point is that the position of your opponents is insane.

TerjeP
TerjeP
10 years ago

OFF TOPIC – HELP

I want to unsubscribe from email notifications for comments. I have clicked on the link for the relevant page to unsubscribe and it fails. I have filled the failure notification feedback form but it does not work. Please remove my subscriptions. Please also fix up these feedback mechanisms.

Ken Parish
Ken Parish
10 years ago

I was under the impression that the comment notification plugin had been disabled. Certainly I’m not now receiving them anyway. I’ll query Jacques C.

Patrick
Patrick
10 years ago

lol Pedro but these are issues on which Nick agrees with Krugman; when he disagrees he just can’t understand what Krugman is on about. This was demonstrated during the last election when Krugman played attack dog on Obama (something about inexperienced hopey-changey flop), but we’ve forgotten that now.

James Farrell
James Farrell
10 years ago

People really need to read Krugman’s whole post (which I’m sure they will), in which he makes the startling but probably true claim that the disease afflicting the media is even more fundamental to America’s problems than that afflicting the Republicans.

For goodness sake, a journalist or commentator with even the tiniiest pretense of objectivity would only have to glance at the graph in your last post to see how absurd the Republicans’ position is. As the author of the New Atlantic article put it:

…the point of the chart really isn’t partisan responsibility. It is the central role of those tax cuts in creating the deficit that is now the focus of such political attention. Call them the “Obama-Extended Tax Cuts” if you’d like: either way, a deficit plan that ignores them fails a basic logic, math, and coherence test.

And yet, even someone like Geoffrey Garret, who is forever being interviewed on ABC radio on the basis of his supposedly extraordinary expertise on US affairs, was yesterday spouting the standard rubbish about the need for compromise, both sides having contributed to the problem…

Patrick: You must be joking. Far from having forgotten his scorn for Obama during the primaries, Krugman is now claiming vindication for that scorn in every second post. Or maybe I misunderstood you.

Wouldn’t it be nice if this thread did’t become another mud-wrestling rink for the Catallxy crowd.

Ken Parish
Admin
10 years ago

I’m hoping to keep the mud-wrestling to defined posts, without completely discouraging them because to some extent some of them add value to discussion

.
.
10 years ago

James,

You can be assured I will not cause any problems.

The reality, of course, is that we already have a centrist president — actually a moderate conservative president. . . .

Obama thinks a 100% debt to GDP is not high enough. Well Prof Krugman if this is conservative, I’m a feminist mud crab.

.
.
10 years ago

The Obama stimulus was both called for and indeed would have been delivered in roughly the same form (though there would have been more tax cuts for the rich) if the Republicans had won the White-house.

Can’t say I agree that bringing down marginal tax rates is the same as cash for clunkers.

murph the surf.
murph the surf.
10 years ago

I wonder about the idea that the average voter will be able to understand the complexities of this matter once the media adopt Krugman’s preferred stance.
As he dscribes it the cult of balance has lead to an assumption that ‘both sides are to blame’ which he feesl is incorrect.
Then other opinions are expressed that while the signal to the markets can be damaging – downgrading of bond status, damage to worth of middle eastern and chinese state investments at the same time other experts state that the US can’t involuntarily default and this is purely a political tussle to discredit and damage the Obama presidency.
Is this the real target of Krugman’s piece- the media should be exposing the dastardly ways of the Republicans? Does he expect better of politicians?
Last minute compromises will allow US government payments to be made.Wasn’t this what happened when a similar stunt was pulled during the Clinton presidency?
There looks to be a grim inevitability about this situation.

Richard Tsukamasa Green

Pedro – To support the point Nicholas makes about Krugman’s late adjustment to the idea of asymmetrical craziness, it’s interesting to note his 1994 book Peddling Prosperity.

There’s a critique of the Supply Side nonsense that was present under Reagan, but then he goes on to say that the current (i.e 1994) charlatans were the Strategic Traders in the Clinton Administration.

The whom you might ask? Good question. They were dodgy, but they also had no lasting legacy. At the time Krugman was clearly seeing himself as an uninterested technocrat prepared to critique the excesses of both sides. Less “both sides have a point” than “both sides are charlatans”. Unfortunately for this posture, the Strategic Traders are lost to history. The Laffer and the Starve the Beast nonsense continued unabated, which left the posture unsustainable if one was actually looking at policy, so it was abandoned in the lead up to the 2000 campaign.

.
.
10 years ago

Now they don’t feed the beast, they let it feed itself…

Richard Tsukamasa Green

That’s more or less my point, though I could have made it better. Krugman was really trying to make villains of them for the sake of the posture of a non-partisan serious person. I’m very glad he gave up on that.

.
.
10 years ago

Come off it, tax reform and tax cuts in Australia can be pay for themselves. This is only because our tax system is so poorly designed. Why do you assume otherwise?

desipis
10 years ago

.,

Do you have any evidence/data to support that claim?

.
.
10 years ago

There is more evidence than you can handle on a blog. Just start researching deadweight losses of Australian taxation. The literature is so voluminous. Ken Henry made 128 recommendations, remember. The deadweight loss of payroll tax has been estimated as highly by reputable sources as $1.70 for every $1.00 of revenue raised.

wizofaus
wizofaus
10 years ago

“.”, that we have inefficient taxes and inefficient means of collecting them is hardly controversial. But if fixing this was straightforward it would have been done long ago. And that ‘tax cuts’ in and of themselves would necessarily improve the efficiency of the tax system (without severely compromising fairness*) is an interesting hypothesis, but do you have much in the way of evidence they would do so?

* ‘fairness’ as perceived by the Australian public, not by someone who starts from the preconceived position that the market has already determined what the fairest wages are.

.
.
10 years ago

“.”, that we have inefficient taxes and inefficient means of collecting them is hardly controversial. But if fixing this was straightforward it would have been done long ago.

Do you believe that industry doesn’t innovate?

There is nothing stopping tax cuts being delivered in an equitable manner. The fact that you don’t realise how unfair income tax is on low income earners implies to me you haven’t looked very far into this other than assuming the tax system does God’s work.

In reality it keeps some people out of work.

That’s not fair at all.

wizofaus
wizofaus
10 years ago

“.”, I’m well aware of the problems of high EMRTs, and I’m also aware of the problems that come from trying to remove them.
I don’t see that they *keep* people out of work, but they certainly significantly reduce the incentive to find it.

.
.
10 years ago

I’m also aware of the problems that come from trying to remove them

What problems?

I don’t see that they *keep* people out of work, but they certainly significantly reduce the incentive to find it.

So by being rational not to find work it doesn’t keep them out of work? Um okay…

KB Keynes
KB Keynes
10 years ago

low dead weight losses eh. let me quote Derrida Derider who said this at core economics in his comment on Paul’s original weird post.
“As you well know,the dead weight loss from current carbon pricing is very small (claims it will “destroy the economy”, or even any particular industry, are utterly laughable). Indeed the DWL may well be negative compared to the dead weight loss from the income tax it replaces.”

The incidence of a payroll tax is very similar to a GST.

I would have thought if one got rid of those small state taxes (originally targeted but ignored by Costello )and increased the GST we would be all better off.

The old suggestion of the five economists to freeze award wages and boost family tax credits was a good suggestion but it does cost a lot

wizofaus
wizofaus
10 years ago

“.”, if you believe you have problem-free solution to high EMRTs, by all means present your solution to a major political party.

And how is it rational to not find work just because it barely increases your take-home pay? For a start, the marginal value of every extra dollar when that far down the tax scale is not insignificant – but arguably more importantly, it’s hardly as though the extra money is the *only* incentive to work for many people.
Which is not to say I don’t believe high EMRTs are a problem, but I’m not sure I’d argue they were massively ‘unfair’ per se.

.
.
10 years ago

And how is it rational to not find work just because it barely increases your take-home pay?

It can reduce your take home pay.

Solution here:

http://www.cis.org.au/publications/policy-monographs/article/926-reform-3030-rebuilding-australias-tax-and-welfare-systems

Patrick
Patrick
10 years ago

wiz, there is a real issue around EMTRs and finding work, for low-income earners and spouses. The issue is that your EMTR is a factor of your income, including welfare.

I actually agree with KB Keynes’ two last paragraphs.

Pedro
Pedro
10 years ago

Patrick, Homer is wrong to blame Costello for the failure of the states to stick to the tax removals. I would like the States to ditch their shitty little taxes, but I think they should have a tax base they are actually responsible for.

Nicholas, I saw the chart in the other post and commented that decisions about the future are not made right or wrong by how we got to the present. You can be a hypocrite and still be correct.

If you read around then it is easy to find instances of Krugman verballing people. He’s very clever and has a way with words, but rude is rude and misrepresenting is lying. Plus, plenty of the economists critical of Krugman are from the seaboard. You might not like the prescriptions of the tea party types, but that does not make them insane.

wizofaus
wizofaus
10 years ago

“.”, I wasn’t aware there were EMRTs over 100%, if so, that does seem a patent absurdity.
I’ve read plenty of ‘flat tax’ proposals, and been in too many arguments over them to see much point into getting into another one. But I don’t actually see why having a flat tax rate is necessary to solving high EMRTs, seeing as high EMRTs aren’t really a serious problem at higher incomes. Personally I’m more interested in the idea of a logarithmic tax scale (i.e. for every dollar you earn you pay a slightly higher tax percentage).

wizofaus
wizofaus
10 years ago

One point from JH’s proposal:

“no overlap between tax payers and welfare recipients”

I think this fundamentally underestimates the degree to which tax and restributions systems have public support precisely because there is a sense that more or less everybody puts in and everybody takes out – there is no ‘them’ and ‘us’. I’m all for finding ways to reduce the cost of churn, but it doesn’t mean there’s isn’t value in it.

KB Keynes
KB Keynes
10 years ago

Pedro,

you do not know what you are talking about.

I was doing work for the Real Estate Institute at the time. I was trying to get them to do some hard lobbying to get rid of some of those distortionary state taxes Ken Henry showed hardly gained any revenue.

Treasury supported us worried that Costello had forgotten all about the GST agreement indeed didn’t realise it did not have any agreement to get rid of further taxes merely to look at them.

the REI didn’t take up my suggestion and sure enough the States ignored Costello as he had not done his homework. He never did have a good work ethic.

On Krugman it is amazing he is criticised for being consistent. He criticised fiscal stimulus by both Reagan ( whom he worked under for a time) and Bush for correctly stating it wasn’t needed and monetary policy was adequate.

He said it was needed in very late Bush and Obama time because the liquidity trap had made monetary policy impotent.

Of course most of the criticism comes from people who simply have no idea of what Keynesin economics is about.

compare that with the likes of Taylor and Mankiw who were supportive of the Bush fiscal stimulus when there was a mere slowdown and no liquidity trap but now shout about using fiscal policy now.

Yee gods.

Pedro if you make allegations against Krugman then show some evidence. Almost every time I have seen such ‘evidence’ the allegation has been shown to be wrong.

.
.
10 years ago

Pedro is a lawyer working in property development.

you do not know what you are talking about.

I was doing work for the Real Estate Institute at the time

Oh God shut up Homer.

KB Keynes
KB Keynes
10 years ago

you are an imbecile Marky.
he can be doing property development work until the cows come home.

He clearly had no contact with Costello’ office or Treasury.

I did.

go take your blue pills and put your white coat back on.

.
.
10 years ago

Christ, you’re resorting to big noting yourself?

KB Keynes
KB Keynes
10 years ago

you usually have to go to Canberra to lobby old son.

Lobbying is vastly different to property development.

Lobbying is something you had to do to get rid off those state taxes like stamp duty and the rest.

nN it is called working. Something you clearly have no experience of.

JC
JC
10 years ago

you do not know what you are talking about.

The irony alarm just went on my computer. Homer please stop.

KB Keynes
KB Keynes
10 years ago

Yeah JC you probably think that Property Development and lobbying is the same thing too.

Meanwhile a Goldman Sachs’ research note says:

“A review of the spending and tax data at the federal, state, and local level suggests that a significant part of the weakness in economic activity in 2011 so far is due to fiscal retrenchment. In the first quarter, the Commerce Department estimates that spending cuts at the federal, state, and local level subtracted 1.2 percentage points from the annualized pace of real GDP growth; moreover, the expiration of the “Making Work Pay” federal tax cut and hikes in state taxes probably offset most, if not all, of the boost to disposable income from the temporary payroll tax cut.

In the second quarter, the fiscal policy impact was probably smaller, but still negative. Indeed, monthly data on defense spending, state and local employment, and state and local construction all show a clear downward trend for 2011 so far.”

gosh that strategy of fiscal retrenchment boosting growth in a weak economy takes another hit.

jc
jc
10 years ago

Gee homer

Instead of running a deficit of around 11.5% of GDP, it’s gone down to 10.5%.
..a huge retrenchment
With the ratings wolves at the door dying, dying to cut the US credit rating, most of the US federal debt doling over at in the very short term, they certainly have a ton of leverage, don’t they?

As for the states and locals.. They had no choice as the rating agencies would throw them out of the markets.

You seem to exist in a parallel universe when it comes to this stuff.

Deficits of 10% are not sustainable. Fact.

If the government doesn’t retrench the ratong wolves will do it for them.

I think you left out that bit from the excerpt you lifted out of zerohedgw blog… the dark cave of economic insight.

KB Keynes
KB Keynes
10 years ago

No JC the fact is fiscal retrenchment in a weak economy leads to less growth a larger deficit and more debt as we see in Europe.

If your stupid theories held up Ireland etc would be booming instead they are in a depression.

I just love it when people who have NO empirical evidence spout such theories.

the only way to get out of debt and reduce deficits is to get healthy growth.

You simply want the US to replicate Japan who actually tried your theories.

JC
JC
10 years ago

No JC the fact is fiscal retrenchment in a weak economy leads to less growth a larger deficit and more debt as we see in Europe.

Homer, the US is not Europe. Countries that had the stuffing knocked out of them in Europe will have to undergo a traditional type of recession in the same ways experienced under the gold standard through deflation and price adjustments, as they don’t control the currency. The US is a master of its own currency regime.

Having said that, if you think cutting the deficit from 11.5% of GDP to 10.5% is a level frightening retrenchment you are living in some other universe. The debt structure, debt level and the deficit in the US is unsustainable. Their finances are totally screwed.

If your stupid theories held up Ireland etc would be booming instead they are in a depression.

Oh really? We’ve been through this before at the Trop. Ireland was going to have the shit kicked out of it no matter what happened. They had a hugely inflated real estate asset bubble and it burst. They operate under the shared currency too.

I just love it when people who have NO empirical evidence spout such theories.

Which one(s)

the only way to get out of debt and reduce deficits is to get healthy growth.

Any your proposal is what exactly? Keep piling up more debt with contuning deficits of 11.5%?

You simply want the US to replicate Japan who actually tried your theories.

The Japanese chose this economic direction. They chose the deflationary course because the largest voting bloc are oldsters who prefer to seeing falling prices. Their attempts at quantitative easing has always been pathetic.

It’s the fed’s job to raise NGDP, not through debt.

Pedro
Pedro
10 years ago

Homer, I’ve seen Greg Mankiw comment on Krugman’s rudeness and mispresprentation, David Henderson just to immediately think of two who have blogs you can look up. Here’s another recent example.

http://www.themoneyillusion.com/?p=10165

I see you agree that the States welshed on the deal but somehow you put the blame on the promisee not the promisor.

KB Keynes
KB Keynes
10 years ago

I see Nicholas has beaten me to it again.

Costello was the pointman to see the States did more than ‘review’ their taxes. He didn’t want to know about them.

JC,

your claim, without any evidence, is that in a poorly performing economy fiscal retrenchment wil boost growth via the confidence fairy.

In each case we see it doesn’t. Japan got deflation because it didn’t continue with fiscal stimulus long enough and introduced your policies way too early and consequently got err higher deficits and higher debt.

Ireland’s spending didn’t accelerate until they undertook contractionary polices After getting hit by the GFC. That worked didn’t it.

.
.
10 years ago

Homer you are lying about Irish fiscal policy.

KB Keynes
KB Keynes
10 years ago

yikes that should be this.

I hope

JC
JC
10 years ago

your claim, without any evidence, is that in a poorly performing economy fiscal retrenchment wil boost growth via the confidence fairy.

Homer

There was no fiscal retrenchment in the US that brought down the deficit from 11.5% to 10.5% in the current year. The recovery did that. The only cut the recent GDP congress and the administration agreed to was $300 billion spread over 10 years. The impact was $30 billion in the present year, which no one would call fiscal retrenchment.

There’s no more room for the US other than to cut spending or at least present a plan that the rating agencies will accept. As I mentioned before, the level of debt, the short term duration of the debt and the size of the deficit does not give them any leeway. You think they have though. Interesting.

Japan got deflation because it didn’t continue with fiscal stimulus long enough and introduced your policies way too early and consequently got err higher deficits and higher debt.

No, Japan choose deflation.

Ireland’s spending didn’t accelerate until they undertook contractionary polices After getting hit by the GFC. That worked didn’t it.

Ireland was clocked because its banking system collapsed and the government was then forced to write off losses through it budget.

KB Keynes
KB Keynes
10 years ago

The US can choose growth which will reduce the deficit and debt over time.

no Japan chose contractionary policies and that gave them deflation. If they had stimulated enough no deflation.

you do not have deflation and a healthy economy. As Adam Posen has said combating deflation has proved much harder than inflation.

Pedro
Pedro
10 years ago

Nicholas, yes, I’ve read lots of Krugman on the GFC. I didn’t say his opponents are partisan, I said he was rude and misrepresents people. The guy sure can write though. Kinda like Paul Keating (but written), you might not agree with everything, but you can’t help laugh.

But I gave you the wrong link
http://www.themoneyillusion.com/?p=10124
It seems to me Sumner is more respectful of both sides than tendentious.

.
.
10 years ago

The US can choose growth which will reduce the deficit and debt over time.

Um yeah sure Homer. They’ll grow with 100% debt to GDP ratio will they?

Ireland’s spending didn’t accelerate until they undertook contractionary polices After getting hit by the GFC. That worked didn’t it.

Bollocks Homer. By virtue of the budget deficit they weren’t contractionary. Unless you reckon the Government ought to spend until a positive GDP number magically appears.

KB Keynes
KB Keynes
10 years ago

Marky ,

you are completely clueless. Just because it is a deficit doesn’t mean it is contractionary.Just like a Surplus isn’t always contractionary as we observed in Asutralia.

Try and learn some basic macro-economics. Here is the IMF on Ireland.
‘For example, in the case
of Ireland in 2009, the collapse in stock and
housing prices induced a sharp reduction in the
CAPB despite the implementation of tax hikes
and spending cuts totaling 4.5 percent of GDP’

yes it is from a working paper I linked previously. you don’t read, you simply want to remain ignorant

as I said it gets boring showing how many times you are wrong