Krugman, debt, and growth

[Darwin333]

The amount of time doesn't change the principles involved.

You also can't expect all government spending to have any positive affect on GDP. There is a lot that ranges from poor ROI to flat out waste. You can't paint it all as stimulating just like you can't pain it all as wasteful. But go ahead and keep trying.

Edit: If this is total public debt, then no wonder. People borrow to live, not necessarily produce at a profit. How many people die at 0 or less dollars? This is really a symptom of credit increases substituting any real wage increase over the past 30 years.

This isn't total public debt and you still haven't addressed the law of exponents.

 

[Darwin333]

Darwin, pick ten predictions/suggestions that have been tested from Krugman - fairly, not from a cherry picked list. Document the results of each. THEN it can be discussed.

Craig, how about we discuss the topic at hand?

 

[Darwin333]

You do realize that the law of exponents is irrelevant in the context of a continually depreciating U.S. dollar, right?

Laws are never irrelevant. That is why they are called "laws".

 

[Craig234]

Craig, how about we discuss the topic at hand?

The topic at hand from your OP:

FACT: Over the last 30 years Krugman's prescription has never worked.

NOT ONCE.

You made the assertion. I'm asking you to support it.

 

[Gonad the Barbarian]

This isn't total public debt and you still haven't addressed the law of exponents.

Maybe you should address why you think that's relevant to this.

 

[Jhhnn]

Heh. Denninger is a twit. Of course Krugman's prescription hasn't worked nay time in the last 30 years, because it's never been implemented, because it wasn't the same situation. We haven't had this magnitude of economic collapse since 1929. It was only the implementation of Keynesian policy by the FRB, the bailout, & the half assed stimulus that prevented it from being any worse than it is.

If you want to understand Krugman, then you have to read Krugman, not a right wing hatchet job directed at him.

http://krugman.blogs.nytimes.com/

He was relentlessly attacked for this, written back in 2005-

http://www.nytimes.com/2005/08/12/opinion/12krugman.html

When it turned out that it was worse than he expected, they shut up for awhile, but now they're back... they always are... they're ideologically opposed to learning anything...

Not all of them- a few can see through the ideological fog bank-

http://www.frumforum.com/were-our-enemies-right

 

[Bitek]

Oh oh, looks like the USS FailThread has hit an iceberg and is taking on water.

Sad to lose an argument against someone when you just make up all the words you'd wished they said in the first place.

 

[ModerateRepZero]

If anything, our experiences in the 20th century until today have proven this line of thinking largely correct. Right now, its the Austrian school that is largely untested. We'll see how all that austerity works in Europe....

So far it's not looking pretty. Conservatives were fawning over Britain after they started taking austerity measures.....but Britain doesn't seem to be doing too well these days (less champagne for example).

And about that austerity idea....cutting spending does not automatically lead to increased job creation, especially when it turns out cutting spending = net loss of jobs and private industry isn't picking up the slack. It's also worth mentioning that government employs alot of people; at least 2.7 million employed by the executive branch of the federal govt alone in 2010. By comparison, Wal-Mart the same year had 2.1 million employees.

I also think the issue with austerity is more basic; austerity works if there's thoughtful, targeted cuts and a solid plan to both reduce spending/debt as well as plan for growth and creating jobs. Cutting government pensions by 50% is all well and good, but if tuition hikes are going on at the same time and eliminating scholarships or closing universities are widespread, how is a nation in the long run able to adequately educate its citizens and also provide research & job opportunities as a result from higher education? Taking a machete to a budget is not so much austerity as incoherent, unnecessarily painful budget trimming, and obsessing about the short-term without taking into account other long-term consequences.

 

[werepossum]

Wasting your time, Darwin. Government is the lefties' version of G-d; it is the answer to all problems. There can never be enough government, much less too much, and government's creation mechanism is spending. Therefore to a lefty there can never be too much government spending, so if debt is necessary then it's good and therefore there can never be too much government debt either. So if increased government spending does not affect the desired and predicted change, the only possible answer is that there was too little of it.

Personally I think government stimuli are a good tool for stopping the bleeding; throw in some artificial GDP and it gives the economy a breather to catch its collective breath. But it should be axiomatic that one can't create a healthy economy by taking money from one pocket and putting into another, let alone by borrowing money and handing it out.

 

[Gonad the Barbarian]

Damn look at all that lefty spending.

 

[Jhhnn]

Damn look at all that lefty spending.

Facts have a Liberal bias and should therefore be ignored in the formation of opinion. They'll poison your mind, and your precious bodily fluids, too. Believe what you want to believe because you want to believe it, because it feels good, because there's nothing better than that glow of smug self righteous satisfaction...

 

[shira]

Many of us have argued this topic before but this article does a great job at explaining the historical results of the fiscal policies that we have been, and currently are, employing.

So those that are banging the drums for even more stimulus, why would it work now when it hasn't worked in 30 years?






Paul Krugman, Jackass


I'm tired of this crap, frankly, but people keep spamming me with it, so here we go.




Bull.

And this isn't a difference of opinion. We're all entitled to our opinions.

We're not entitled to make up our own set of facts.

Here are the facts relating to "more borrowing" to "stimulate the economy" and thus "grow GDP."

FACT: Over the last 30 years Krugman's prescription has never worked.

NOT ONCE.

The facts are that on a historical basis borrowing always produces less GDP growth than debt growth. That is, it is a net negative as you must both pay back the debt some day and pay the interest, which means that in order for it to "work" GDP must expand by more than the debt does, so the interest can be covered along with the principal.

But NEVER did GDP exceed new debt, even for one quarter, at any time during the 1980-2007 time period and the only time you saw that happen during the collapse of 07-08 was when debt defaults pushed outstanding down faster than GDP declined -- a temporary condition as you can see we have resumed our sin.

Read this again:

Not once has "stimulus" actually produced an increase in GDP that exceeds the new debt taken on to prove it.

NOT ONCE.

This is not my opinion or someone else's opinion. It is mathematical fact as documented by both the Federal Reserve and the government's GDP numbers.

Krugman has the same access to these numbers as everyone else. He can thus trivially verify that this is true, if he bothers to look. My sources are listed in the chart.

This cannot, therefore, be an innocent error.

Krugman's policy prescription is wrong. It is wrong on the facts, it is wrong on the mathematics and it is empirically, with more than 30 years of history, wrong in terms of realized results.

source

You're confusing deficit spending with stimulus spending. The chart you've displayed is a deficit chart, which has nothing to do with what Krugman is talking about.

The various stimulus programs put into place by the Bush and Obama administrations are credited by a large majority of economists (not armchair critics) with preventing a devastating economic collapse. Just as I almost always side with a scientific consensus (why on earth would I presume to think I know more than scientists in a given field?), I also side the the strong consensus of economists that the stimulus programs were effective.

Are there economists who disagree and think the stimulus was ineffective? Sure. Just as there are always scientists who disagree with a scientific consensus in their own field. But the question is, why have YOU chosen to side with the minority?

 

[Darwin333]

The amount of time doesn't change the principles involved.

You also can't expect all government spending to have any positive affect on GDP. There is a lot that ranges from poor ROI to flat out waste. You can't paint it all as stimulating just like you can't pain it all as wasteful. But go ahead and keep trying.

Edit: If this is total public debt, then no wonder. People borrow to live, not necessarily produce at a profit. How many people die at 0 or less dollars? This is really a symptom of credit increases substituting any real wage increase over the past 30 years.

Its a symptom of a credit driven society, from Federal, State and local governments to your everyday household. See that huge spike? That is a result from ZIRP type policies that we are continuing to run while the Feds spend well over a trillion more than they make and it. The point is more that it actually decreases our wealth in the long run as the numbers show.

 

[Darwin333]

You're confusing deficit spending with stimulus spending. The chart you've displayed is a deficit chart, which has nothing to do with what Krugman is talking about.

The various stimulus programs put into place by the Bush and Obama administrations are credited by a large majority of economists (not armchair critics) with preventing a devastating economic collapse. Just as I almost always side with a scientific consensus (why on earth would I presume to think I know more than scientists in a given field?), I also side the the strong consensus of economists that the stimulus programs were effective.

Are there economists who disagree and think the stimulus was ineffective? Sure. Just as there are always scientists who disagree with a scientific consensus in their own field. But the question is, why have YOU chosen to side with the minority?

I haven't really sided with anyone. I am simply looking at the math and the math over a 30 year period is pretty obvious.

Now here is the kicker, again a mathematical fact, that when the .gov starts to reduce the trillion+ deficit we are running (being used to "stimulate" the economy) GDP MUST decrease at least $1 for every $1 of deficit spending they decrease. That is the fact that no one seems to be talking about. Even worse is the fact that we must spend roughly 10% of GDP in borrowed money to get a 3% gdp increase.

 

[Atreus21]

Facts have a Liberal bias and should therefore be ignored in the formation of opinion. They'll poison your mind, and your precious bodily fluids, too. Believe what you want to believe because you want to believe it, because it feels good, because there's nothing better than that glow of smug self righteous satisfaction...

Unless of course they don't, and we post graphs with data massaged to indicate a desired outcome. Anybody can do that.

 

[Darwin333]

Wasting your time, Darwin. Government is the lefties' version of G-d; it is the answer to all problems. There can never be enough government, much less too much, and government's creation mechanism is spending. Therefore to a lefty there can never be too much government spending, so if debt is necessary then it's good and therefore there can never be too much government debt either. So if increased government spending does not affect the desired and predicted change, the only possible answer is that there was too little of it.

No offense bud, but I don't see this as a right versus left issue. The right doesn't have a very good track record on deficits either. They may talk a good game but their actions have yet to back up their talk.

Personally I think government stimuli are a good tool for stopping the bleeding; throw in some artificial GDP and it gives the economy a breather to catch its collective breath. But it should be axiomatic that one can't create a healthy economy by taking money from one pocket and putting into another, let alone by borrowing money and handing it out.

The problem is that eventually you have to pull that artificial GDP out (its not really artificial, its very real but I understand the point your making). If its something to actually kick start the economy I can see the usefulness but it hasn't. We are spending 10% of GDP a year more than we take in and only showing a 3% GDP gain right now. As you start extracting that 10% GDP will, as a mathematical fact, be reduced and as it is reduced the .gov has less revenue........

Yes, the economists say that we would not be seeing economic growth without the deficit spending, that is simple math. The problem that we have gotten ourself into is that we don't, and won't, have a pain free way to start truly reducing the deficit and as long as the deficit is as high as it is we must continue our ZIRP policy which is bad for all kinds of reasons.

 

[woolfe9999]

Unless of course they don't, and we post graphs with data massaged to indicate a desired outcome. Anybody can do that.

How much of Obama's spending is an automatic increase in mandatory spending due to recession?

More importantly, you need to source that chart so we can determine if it is inflation adjusted. If it isn't inflation adjusted, it's worthless propaganda. Do you seriously think the federal government under either Obama or Bush spent triple what it spent under Reagan after adjusting for inflation?

 

[werepossum]

No offense bud, but I don't see this as a right versus left issue. The right doesn't have a very good track record on deficits either. They may talk a good game but their actions have yet to back up their talk.



The problem is that eventually you have to pull that artificial GDP out (its not really artificial, its very real but I understand the point your making). If its something to actually kick start the economy I can see the usefulness but it hasn't. We are spending 10% of GDP a year more than we take in and only showing a 3% GDP gain right now. As you start extracting that 10% GDP will, as a mathematical fact, be reduced and as it is reduced the .gov has less revenue........

Yes, the economists say that we would not be seeing economic growth without the deficit spending, that is simple math. The problem that we have gotten ourself into is that we don't, and won't, have a pain free way to start truly reducing the deficit and as long as the deficit is as high as it is we must continue our ZIRP policy which is bad for all kinds of reasons.

No offense taken, you're absolutely right. Most Republicans sent to D.C. effectively become Democrats in six years or so, the only difference being the direction (and recipients) of the pork shoveling. The difference between left and right here is that Republicans have to keep paying lip service to fiscal conservatism because their voting base wants fiscal conservatism (technically meaning cutting OTHER people's pork) whilst Democrats' voting base wants as much government spending as possible.

I agree with you about stimulus spending not kickstarting the economy. My point was that a stimulus can still be useful for other things. A lot of layoffs are due to fears that the economy is going to tank; stimulus spending gives them reason to keep employees on. The economy will recover either way even if no action is taken, but without some stimulus spending it will likely drop deeper into recession as companies try to get ahead of the economic cycle to preserve scarce capital and credit. Or so I think. It's true that you have to remove that stimulus, but at least then business leaders understand why the economy takes a hit and can predict (to some degree) the extent of the hit.

 

[xBiffx]

How much of Obama's spending is an automatic increase in mandatory spending due to recession?

More importantly, you need to source that chart so we can determine if it is inflation adjusted. If it isn't inflation adjusted, it's worthless propaganda. Do you seriously think the federal government under either Obama or Bush spent triple what it spent under Reagan after adjusting for inflation?

Dunno but how much is due to discretionary spending due to wars, declared or otherwise?

What difference does inflation make when looking at the ratio of GDP to expenditures? Wouldn't it be the same if inflation was counted? Both the light and dark colors of the chart would just change by the same amount for each year right?

 

[bfdd]

You....do know that Krugman was a 20th/21st century economist, right? :\

Krugman is a Keynesian economist mostly. If anything, our experiences in the 20th century until today have proven this line of thinking largely correct. Right now, its the Austrian school that is largely untested. We'll see how all that austerity works in Europe....

But Krugman says right there that the EU is not trying to get to much austerity so how will we see it work in Europe?

Also, Krugman is a fucking idiot. Of course the prime suspects are in here pimping his plan. Why must you force me and others into more debt we don't want? Fucking wannabe slave owners.

 

[Mxylplyx]

I think you have completely misrepresented Krugman. Krugman doesn't argue for deficit spending in itself as a means of stimulus. Krugman argues AGAINST pure austerity as a means of fighting a recession, stating deficit spending on stimulus is a far more effective alternative. When government spending accounts for a significant portion of GDP, you dont quickly pull the rug out from under your economy right at the moment the economy is tipping into recession. That is completely counterproductive, especially for the US which can borrow for next to nothing.

How long have we been hearing now that massive inflation is right around the corner?

 

[Anarchist420]

pick ten predictions/suggestions that have been tested from Krugman - fairly, not from a cherry picked list. Document the results of each. THEN it can be discussed.

Krugman is a died-in-the- wool Keynesian. Keynes was a mercantilist. Mercantilist econ theory was disproven time and time again with the earliest time being more than 300 years ago.

There is a reason most people thought Jefferson was smarter than Hamilton. It's because Hamilton was a supporter of discredited economic theory and it never even occurred to him that it was discredited. The few times Austrian economic theory has been public policy, it has worked. The biggest problem the Austrian School has faced is too many retards who confuse it with the Chicago School/neoliberalism. Neoliberalism is Keynesian-lite.

What are we not following that Keynes recommended other than going to an outright greenback system and doubling the money supply each year instead of increasing it by 20%? The Fed, especially under Bernanke, may as well be greenbackism, 50 percent of every dollar publicly spent is borrowed, taxes haven't gone down, and so on and so forth.

 

[Atreus21]

How much of Obama's spending is an automatic increase in mandatory spending due to recession?

More importantly, you need to source that chart so we can determine if it is inflation adjusted. If it isn't inflation adjusted, it's worthless propaganda. Do you seriously think the federal government under either Obama or Bush spent triple what it spent under Reagan after adjusting for inflation?

I sourced it in the same way that Gonad's chart was sourced.

What does it matter if it's adjusted for inflation or not? It's put in terms of a % of GDP. Even if you did adjust both spending and GDP for inflation (which may or may not have already happened), the relationships as a percentage wouldn't change.

 

[Anarchist420]

I think you have completely misrepresented Krugman. Krugman doesn't argue for deficit spending in itself as a means of stimulus. Krugman argues AGAINST pure austerity as a means of fighting a recession, stating deficit spending on stimulus is a far more effective alternative. When government spending accounts for a significant portion of GDP, you dont quickly pull the rug out from under your economy right at the moment the economy is tipping into recession. That is completely counterproductive, especially for the US which can borrow for next to nothing.

How long have we been hearing now that massive inflation is right around the corner?

There is NO fucking austerity taking place.

Do you know how much is being spent on the military, on public education, on the public police forces in Virginia, etc., etc.? Do you know that the federal government is spending almost twice as much as it takes in? Do you know that the Federal funds rate has been at historical lows for a year or longer now? Do you know how many banks are loaning at zero percent interest? How much more stimulus spending do you want?

 

[Munky]

I think you have completely misrepresented Krugman. Krugman doesn't argue for deficit spending in itself as a means of stimulus. Krugman argues AGAINST pure austerity as a means of fighting a recession, stating deficit spending on stimulus is a far more effective alternative. When government spending accounts for a significant portion of GDP, you dont quickly pull the rug out from under your economy right at the moment the economy is tipping into recession. That is completely counterproductive, especially for the US which can borrow for next to nothing.

How long have we been hearing now that massive inflation is right around the corner?

How does Krugman cope with the reality that we are digging ourselves deeper and deeper into the debt hole with every passing day of deficit spending? Whatever the painful contraction we might have endured by writing off the loss after the bubble collapse of 2000 or 2008, we are even more screwed now. It's easy to say "use deficit spending until the economy recovers" when no one is asking how exactly is it supposed to recover, and why hasn't is it recovered by now, and what is your plan if 10 years from now it still has not recovered after you've increased the debt exponentially.