Krugman Lectures us on Deficits and tells us all is well. Big Government will get Bigger

The New York Times—aka the Walter Duranty Papers [1] has few goals for their paper and this narrow list consists of: [1] apologizing for Communism, [2] propping up losers like Al Gore and his phony EcoNazism[2] or [3] celebrating AIDS and [4] hatching new lies so as to engorge government with honest taxpayer’s money.  They daily struggle to reinvent Marxism as a new-fangled and magical solution to achieve a great society and can apply their wondrous dreams to any problem along with the proper taxes of course. These people are intellectuals—they think of new ways to grunt and grab your money. They have a new paradigm! Tax and spend.

To accomplish this set of freak show parlor tricks, they employ ideological stooges who turn the cranks of the old rusty socialist propaganda machines while offering solace and wealth to losers so as to attract votes. One of their most proficient propaganda chuckers is the resident igNoble Leechette[3][4][5][6], One Paul Krugman, who has monotonously inculcated us with his politically-inspired although reason-deficient insights on recessions and depressions. It seems that he tortures us again with another round of explanations how big government will solve any and all problems.

From today’s tautological screed:

“… Many economists, myself included, are calling for a very large fiscal expansion to keep the economy from going into free fall. Others, however, worry about the burden that large budget deficits will place on future generations.”[7]-- Deficits and the Future By Paul Krugman Op-Ed Columnist Published: December 1, 2008    [Emphasis is mine in all quotes. This link references quotes in this essay unless otherwise indicated.]

Krugman is not an economist as he cannot keep his blood pressure within reasonable limits when the notions of tax cuts and chucking phony government programs into the latrines are presented to  him in any format. A private dollar is a damned dollar as far as he is concerned. He knows how to spend your money better than you do.

“But the deficit worriers have it all wrong. Under current conditions, there’s no trade-off between what’s good in the short run and what’s good for the long run; strong fiscal expansion would actually enhance the economy’s long-run prospects.”

We can all be relieved now. Massive debt is not a problem. Our krugmaniacal one has soothed our worries. Has he read about the source of the Asian debt fiasco from 1997?[8] Does Krugman know about the economic metric: debt-to-GDP ratio? At the end of 2009 our debt will be greater than our GDP.

From 2003 he bashes Greenspan for the deficit:

“Two years ago you [directed at Alan Greenspan] acted as George W. Bush's enabler; you share part of the blame for our plunge into deficit. But now the situation is truly dire. If you waffle now, and take the easy way out, your reputation -- and the country's finances -- will quickly pass the point of no return.

In your initial remarks you more or less acknowledged the grim fiscal outlook. As your discussion of ''accrual'' accounting made clear, you know that if the federal budget took into account the future liabilities of Social Security and Medicare -- as it should -- it wouldn't show the ''modest'' deficits the White House talks about; it would show a government deep in the red.

Moreover, since you advocate accrual accounting, you obviously realize that the ratio of debt to G.D.P. is a highly misleading number. Properly measured, the U.S. fiscal system is already ''unstable'' -- and the new Bush proposals would quickly push it past what you called the ''point of no return.''”[9]-- On the Second Day, Atlas Waffled By Paul Krugman Published: February 14, 2003

Gee, now deficits don’t matter when Democrats want to wield some power. What happened to Krugman’s moaning about the debt ratio? Gone!  Presto! The mealiest utterances of certain mouths apparently shift from cheek to cheek as the political winds drift.

The explanation is now trumpeted forth with song and tinsel:

“The claim that budget deficits make the economy poorer in the long run is based on the belief that government borrowing “crowds out” private investment — that the government, by issuing lots of debt, drives up interest rates, which makes businesses unwilling to spend on new plant and equipment, and that this in turn reduces the economy’s long-run rate of growth. Under normal circumstances there’s a lot to this argument.”

He now soars into the stratosphere with some history on tax increases that seem to now be unwise.

“The first took place in 1937, when Franklin Roosevelt mistakenly heeded the advice of his own era’s deficit worriers. He sharply reduced government spending, among other things cutting the Works Progress Administration in half, and also raised taxes. The result was a severe recession, and a steep fall in private investment.

The second episode took place 60 years later, in Japan. In 1996-97 the Japanese government tried to balance its budget, cutting spending and raising taxes. And again the recession that followed led to a steep fall in private investment.

Just to be clear, I’m not arguing that trying to reduce the budget deficit is always bad for private investment. You can make a reasonable case that Bill Clinton’s fiscal restraint in the 1990s helped fuel the great U.S. investment boom of that decade, which in turn helped cause a resurgence in productivity growth.

Slick Willie’s “fiscal restraint” was forced upon his slimy person by Newt Gingrich and a Congress that decapitated his socialized medicine monster and destroyed the cancerous federal welfare machine. That boondoggle was, unfortunately, replaced by ‘education’ where incompetents are paid too well to mangle the basics of education and replace them with leftist and racist anti-white propaganda. Just look at Washington, D.C. What a pitiful mess.

This guy has no shame as he must choke on the reality that the beneficial effects of Ronald Reagan’s tax cuts were ongoing at the time and Clinton’s spending and phony legislating was not big and slimy enough to break down the growth until he left office and then we had a recession.

Krugman on debt:

“Should the government have a permanent policy of running large budget deficits? Of course not. Although public debt isn’t as bad a thing as many people believe — it’s basically money we owe to ourselves — in the long run the government, like private individuals, has to match its spending to its income.”

Here are some numbers to think about: At a current $10.6 trillion debt level the government spent $412 Billion[10] last year on debt service. The budget was $3000 billion so that works out to 312/3000 or just under 14% of the tax revenues. Due to printing money[11] and other follies we seem to have already spent some $4.28 trillion on bailouts according the CNBC.com[12] Unless Krugman has some special arithmetic that allows him to use imaginary numbers in his political counting. He seems to pick out numbers that support these prejudices. His arithmetic is as pathetic as his reasoning power.

He lies when he says — it’s basically money we owe to ourselves- because he conveniently omits the mere $2.8605 trillion of debt the Asians and others hold in our T-bills and other instruments.[13] Here are some:

Source: Department of the Treasury/Federal Reserve Board

November 18, 2008

The breakdown: Treasury Bills   276.8 and T-Bonds & Notes run 1544.9 

Krugman closes with standard, monolithic Keynes:

“But right now we have a fundamental shortfall in private spending: consumers are rediscovering the virtues of saving at the same moment that businesses, burned by past excesses and hamstrung by the troubles of the financial system, are cutting back on investment. That gap will eventually close, but until it does, government spending must take up the slack. Otherwise, private investment, and the economy as a whole, will plunge even more.”

 He fails to mention that the carbon cap taxes might add another 100 bln or more to the cost of just living. He fails to mention that bailing out Detroit, California, New York, New Jersey and Michigan can cost another 100-200 bln in this next year alone. California[14], whose phony drug-crazed society will run a 28 bln dollar deficit will NOT change its phony education, harboring and celebrating illegal aliens, free housing, the phony Global Warming[15] and Carbon Caps[16], and EcoNazism[17]  and that 28 will soar to 40 by 2010.

My analysis [edited from this previous blog[18]]:

What we are looking at here is an ideological socialist who willingly contorts any fundamental tenets anywhere in the theory or history of economics in a manner so as to service the expediency of the far-leftist political vision and echo the elements of the current political crisis. He is a crisis monger. Economic theory aside, he really does hop and clap when he hears his master’s voice. His view of economics is obviously faulty if we read his works and note that tax cuts are never appropriate and government can never be too big or oppressive. He is off tax hikes for the moment as his party sees great danger in this essential socialist maneuver. There is no balance in his views as he omits any reference to market theory or fundamental capitalism. We can only celebrate and acknowledge him for his earned image as a trusty leftist lackey and heap praise upon him for fittingly performing his role as an ideological sycophant who deserves his Nobel Prize if it can be universally accepted for what it really is.

Given his mechanical ideology and immunity from the basics of economics and reason, we can safely check out his noisy screeds as the first place to look for the wrong thing to do in our society.

My prediction:

What we face here is first a depression and then hyperinflation as the printing presses smoke and groan under the pressure to add another zero to the dollar bill about every few months. That will, we understand, lower the national debt and we will be able to pay off china from the proceeds from the sale of a single junked Toyota car or maybe the cost of a dozen pizzas if you leave off the mushrooms. And, this will be a great opportunity for more government to ‘help’ us out with our society. How about a nice 4-5$ tax on a gallon of gasoline so we can ‘save the planet?’

Great work Paul. You are to be celebrated as a Bellwether in Reverse.

rycK

Comments: ryckki@gmail.com