paul krugman

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Keynes Florida 20 minutes ago

In macroeconomic terms, an increase in taxes followed by an equivalent increase in spending (and that therefore does not increase the deficit) increases the GDP. It is called “the balanced budget multiplier” (you can Google it!), BBM.

Conversely, a reduction in taxes followed by a reduction in spending reduces the GDP, and therefore increases unemployment.

In this particular case (repeal of the ACA), the reduction in taxes benefits higher income people who have a relatively low “marginal propensity to consume” (Google it!), MPC, and negatively affects lower income people, who have a relatively higher MPC. The net effect is that a reduction in taxes and an equal reduction in spending will decrease the GDP by an amount larger than the reduction in taxes. The effect on the unemployment rate will be larger than predicted by the BBM.

Will the repeal of the ACA be the trigger for the next recession/depression?

How long will it take for the country to be plunged into a depression? (a) two years (b) four years (c) eight years.

It will depend on how large are the tax and spending cuts.

GWB managed to do it in eight years, but he started with a stronger economy and made no significant spending cuts.

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gemli is a trusted commenter Boston

The real perpetrators of this scam are the people who voted for this transparent lying billionaire buffoon. Anyone who could have listened to this man and thought he was on the side of the downtrodden deserves to be trodden upon, and heavily. The only pleasure I feel these days is in knowing that they’ll feel the pain, first and longest.

That may seem like a pointless exercise, but so is flailing your arms when you fall off of a cliff. It doesn’t help, but it’s something you do when there’s nothing that can be done. Lemmings marched into voting booths all across America, and stepped over the edge. They handed the government to people who despise them. No matter how trenchant the post-apocalyptic analysis of people like Krugman turns out to be, the lemmings won’t get it. They’ll just blame the ground for rushing toward them.

While it may be useful to criticize a president or an individual cabinet appointment for this or that questionable decision, what purpose does it serve when every decision and every appointment is questionable, or even treasonous? Whom do we call when Gotham falls? Batman?

The country hasn’t merely made a bad decision. It’s gone down a bad road, and there’s no exit in sight. Buckle up. It’s going to be a bumpy ride.

For maximum enjoyment, be sure to look down. The only satisfaction to be had will be watching the lemmings below you hit the ground first.

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Here’s a comment this morning by “Reality Based” on Paul Krugman’s article. It about sums up what our problem has been in this country for many years.

Reality Based: Flyover Country

We now have thirty five years of financial/economic history that should have destroyed forever the Great Lie that Voodoo economics creates anything but deficit bubbles, which are then used to attack and destroy social programs for the poor and middle class. Reagan tripled federal deficits in order to cut taxes in half for the wealthy, while weaponry expenditures exploded. Bush One left office with historic deficits and a sinking economy, which Bill Clinton remedied by returning to progressive taxation on high incomes. Every Republican in Congress said it would destroy the economy, and instead we had 20 million new jobs and zero deficits by 2000. Republicans responded with smears and impeachment. Bush2 insisted upon a return to Voodoo Economics combined with huge upper end tax cuts and two wars, which along with a financial de-regulation frenzy re-created the same enormous deficits, which were then used to try and destroy Social Security. This idiocy nearly brought down the world financial system. Obama’s sane economic advisers restored job growth and eliminated most of the deficits, but sixteen Republicans are all ready to return to the same policies that have been failing for a third of a century.

The Republican Party exists to enrich the wealthy, and empower a tiny elite. It has been concentrating income and wealth, by redistributing it upwards for thirty five years. This, of course, is only possible with a politics based totally on deceit, which is the whole point.

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Taken from the NYT comments on Paul Krugman’s Op-Ed of Jan. 18, 2013.
Note that she’s just my age. So I thought it would be interesting to give her point of view.

Maggie, Brattleboro, VT

I am an 84 year old retiree, still independent. I am a retired internist who has cared for thousands of people. What can we old people do to help our national economic situation? Increasing numbers will live beyond 65 and depend on Medicare and Social Security. How many die after age 65?
Someone knows.
I have made personal decisions to reduce health care costs for myself and the nation. The last year of life is the most costly for Medicare and other simultaneous insurers.
1. I have eliminated all unnecessary drugs, taken to excess by most seniors.
2. At 84, in the twilight of an interesting life, I do not want to die in an expensive hospital, with “interventions.”
3. If I suddenly become unresponsive or seemingly in distress, I want NO CPR, no paramedics, no hospitalization, no life sustaining measures such as CPR, dialysis, respiratory assist, feeding tubes and the like. My advanced directives say this.
4. While not a religious person, I trust that God would agree with my choices for a great way to go: painless, low cost, and quiet. What a relief to me and the family and the economy. I hope that others respect my wishes.
Jan. 18, 2013 at 8:59 a.m.REPLY You recommended this 25

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Paul Krugman has been berating against austerity hawks for years now to little effect. His latest rant, a good one as usual, is here. He gives excellent arguments, always has, for why austerity doesn’t work in a time of high unemployment and low growth. Maybe there are many of these austerity hawks who know this but as long as they themselves benefit, why change their cash cow?

Oh, and is there anyone out there who can give counter arguments as to why austerity might work? I doubt I’ll get an answer because during the last week this blog received only 15 unique visits. The chance that one of those might be willing, or especially, even interested in taking on Paul Krugman, is pretty slim indeed.

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I watched it last night and was impressed with his strong delivery and the high resonant pitch of his voice. Quite an oration. He seemed to be saying something too, not enough to fill the economic hole we’re in, but sufficient to create 1.9 million jobs according to Mark Zandi, chief economist at Moody’s Analytics. His hair might not be on fire, but it’s definitely smoking according to Paul Krugman. Oh I know, he’s done a lot of bad things like not closing Gitmo, not approving the new EPA standards, and many more: see Drew Westen’s NYT article What Happened to Obama?. Of course the Republicans won’t pass his Jobs bill, but at least he seems to be going down fighting. Let’s be optimistic and hope that his efforts might at least keep the senate from going Republican in 2012. Fat chance?

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Paul Krugman hits the nail on the head again with his Op-Ed this morning, This Is Not a Recovery. He points out we need 2.5% GDP growth just to keep unemployment from rising, and instead, the latest figure out this morning for the second quarter is 1.6%! Instead of treading water with a 2.5% growth we’re being swept backwards, as though in a Pakistan flood, with a mere 1.6% growth.

Here’s the most popular comment, twice as many votes as the next most popular, on Krugman’s article:

As enlightening as your commentary always is, it assumes that policy makers have the interest of the average American, and in particular the unemployed, at heart.

The name of your blog is quite revealing here: you indeed appear to have a conscience, and as a liberal (and further as one freely admitting to the same) you possess a small healthy dose of naivete about your fellow man, generally believing in good intentions. I’m afraid the same can not be said about the majority of those at the Fed or otherwise controlling the reigns of the broader economy.

As an economist, you really should know better than anyone: whenever an inexplicable behavior arises, the best way to find an explanation is always to simply “follow the money”. So who stands to benefit from high unemployment?

If you look at the last ten years of US economic history, you see repeated rises and falls that all follow a similar pattern: when the economy is growing, the average worker fails to benefit. When the economy falls, the worker always loses the most, in terms of both buying power and job security. The benefit to large business owners, who control the majority of wealth and political power in the US, is substantial. The shakier the labor market, the more workers worry about their job security and the less compensation they are willing to work for. Eventually most workers are simply happy to have a job at all and are forced to settle for less and less.

What other explanation, for example, in the government’s complicity in allowing US jobs to be shipped increasingly overseas?

The political and the wealthy in the US are well enough intertwined to form a well-oiled machine. The working class is increasingly powerless. The federal officials you seem to hope for see things in terms of what is most beneficial for them, and increasingly this is to work in alignment with the very wealthy, who contribute most to their election and who stand to offer most in the private sector when they cycle back out of government.

As long as labor is weak and nervous, with the promise of better times always around the corner, unrest is kept at bay enough to permit the rich to keep getting richer with little or no downside.

As nice as it would be to believe in a government with the interests of the little guy at heart, it’s about as much based on hard evidence as Santa Clause. Let’s grow up and either decide to stop complaining about it or talk about some way to fight back.
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Yes, this is a pretty cynical comment, but unfortunately it may in very large part be true. The question is, How do we fight back?

Thanks to “Klark, New York, NY” for the comment in red.

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While reading Paul Krugman’s excellent piece, Sex & Drugs & the Spill, in the NYT this morning, I came across this comment. It pretty much sums up the way I feel. But it’ll probably take another hundred years, if we make it, before it’s realized in this increasingly right wing country. Thanks, Dim from Texas, whoever you are.

It has become clear that we need much stronger regulations of many industries and to make those regulations work we need a good competent government, I completely agree with you there. When the Soviet Union collapsed this was portrayed as a definitive proof that capitalism, or market economy, is superior to socialism. Of course, Soviet Union was rotten from the inside by over-regulation much much earlier, but events in recent years indicate that market economy is not that superior. Russia was just a wrong country to set an example. If socialism, or even communism, first took root in a country like Germany or Japan the result would have been quite different (no, I didn’t not forget about East Germany which was forced into a soviet type system). I feel Karl Max was right and we will all eventually end up in an economic system that is a healthy hybrid of socialism and market economy. And the role of socialism will be played by strong regulations, channeling the energy of the market economy toward common good, a system which is more fair for all, with checks and balances, not rigged so much to benefit the insiders – Wall Street, corporations, politicians – as it is now.

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Most popular comment on Paul Krugman’s Op-Ed this morning:

I’m beginning to believe that George W Bush was the president the American people deserved. I can’t believe the take away from President Obama’s press conference was his comment about the idiocy in Cambridge. The American people’s brains have been turned to mush. Too much Fox News, American Idol, etc…has rendered people into easily duped dolts. We now have a chance to take a positive step towards fixing our Health Care embarrassment, and the debate is off the charts ridiculous. In a simple nutshell: do you want to keep being screwed by the Corporate Health Insurance Companies, or do you want to move towards fair, moral, universally accessible Health Care. It’s that simple.

Thank you Mark C. from San Francisco.

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Here are the best arguments for Single Payer Health Insurance I’ve come across yet:


We’re lucky we have that great journalist, Bill Moyers, around. Here he’s interviewing two strong advocates of Single Payer, David Himmelstein, MD, co-founder of Physicians for a National Health Program, and Sidney Wolfe, MD, director of Public Citizen’s Health Research Group.

What chance in Hell does Single Payer have in this country?

I’ll answer my own question. It has NO CHANCE.

So what do we do? Stand with Dr. Dean and go all out for the Public Option. He explains this in the following:


This piece by Bernie Horn convinced me that Single Payer can’t work politically, and that our only option is the Public Option.

Right now, members of congress, including Olympia Snowe in the Senate are watering down the Public Option so that it will end up not being a Public Option. Read Paul Krugman on the Snowe “trigger”.

That’s why we’ve got to Stand with Dr. Dean. Sign his petition!

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