Paul Krugman NYT Op-Ed: “We Should Kick The Can Down The Road. It’s The Responsible Thing To Do”

keynesiansThe NY Time today published an op-ed penned by Nobel Prize winning economist Paul Krugman on the debt/fiscal crisis facing the US.
Krugman practically proved that Keynesian monetary theory results in an intellegence level roughly equal to that of a 30 year LSD/ meth addict, as Krugman made the following eye-opening statement in his piece:

We’re not going to resolve our long-run fiscal issues any time soon, which is O.K. — not ideal, but nothing terrible will happen if we don’t fix everything this year. Meanwhile, we face the imminent threat of severe economic damage from short-term spending cuts. So we should avoid that damage by kicking the can down the road. It’s the responsible thing to do.

Krugman’s full op-ed titled Kick that Can is below:


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Kick That Can

 

By Paul Krugman

John Boehner, the speaker of the House, claims to be exasperated. “At some point, Washington has to deal with its spending problem,” he said Wednesday. “I’ve watched them kick this can down the road for 22 years since I’ve been here. I’ve had enough of it. It’s time to act.”

Actually, Mr. Boehner needs to refresh his memory. During the first decade of his time in Congress, the U.S. government was doing just fine on the fiscal front. In particular, the ratio of federal debt to G.D.P. was a third lower when Bill Clinton left office than it was when he came in. It was only when George W. Bush arrived and squandered the Clinton surplus on tax cuts and unfunded wars that the budget outlook began deteriorating again.

But that’s a secondary issue. The key point is this: While it’s true that we will eventually need some combination of revenue increases and spending cuts to rein in the growth of U.S. government debt, now is very much not the time to act. Given the state we’re in, it would be irresponsible and destructive not to kick that can down the road.

Start with a basic point: Slashing government spending destroys jobs and causes the economy to shrink.

This really isn’t a debatable proposition at this point. The contractionary effects of fiscal austerity have been demonstrated by study after study and overwhelmingly confirmed by recent experience — for example, by the severe and continuing slump in Ireland, which was for a while touted as a shining example of responsible policy, or by the way the Cameron government’s turn to austerity derailed recovery in Britain.

Even Republicans admit, albeit selectively, that spending cuts hurt employment. Thus John McCain warned earlier this week that the defense cuts scheduled to happen under the budget sequester would cause the loss of a million jobs. It’s true that Republicans often seem to believe in “weaponized Keynesianism,” a doctrine under which military spending, and only military spending, creates jobs. But that is, of course, nonsense. By talking about job losses from defense cuts, the G.O.P. has already conceded the principle of the thing.

Still, won’t spending cuts (or tax increases) cost jobs whenever they take place, so we might as well bite the bullet now? The answer is no — given the state of our economy, this is a uniquely bad time for austerity.

One way to see this is to compare today’s economic situation with the environment prevailing during an earlier round of defense cuts: the big winding down of military spending in the late 1980s and early 1990s, following the end of the cold war. Those spending cuts destroyed jobs, too, with especially severe consequences in places like southern California that relied heavily on defense contracts. At the national level, however, the effects were softened by monetary policy: the Federal Reserve cut interest rates more or less in tandem with the spending cuts, helping to boost private spending and minimize the overall adverse effect.

Today, by contrast, we’re still living in the aftermath of the worst financial crisis since the Great Depression, and the Fed, in its effort to fight the slump, has already cut interest rates as far as it can — basically to zero. So the Fed can’t blunt the job-destroying effects of spending cuts, which would hit with full force.

The point, again, is that now is very much not the time to act; fiscal austerity should wait until the economy has recovered, and the Fed can once again cushion the impact.

But aren’t we facing a fiscal crisis? No, not at all. The federal government can borrow more cheaply than at almost any point in history, and medium-term forecasts, like the 10-year projections released Tuesday by the Congressional Budget Office, are distinctly not alarming. Yes, there’s a long-term fiscal problem, but it’s not urgent that we resolve that long-term problem right now. The alleged fiscal crisis exists only in the minds of Beltway insiders.

Still, even if we should put off spending cuts for now, wouldn’t it be a good thing if our politicians could simultaneously agree on a long-term fiscal plan? Indeed, it would. It would also be a good thing if we had peace on earth and universal marital fidelity. In the real world, Republican senators are saying that the situation is desperate — but not desperate enough to justify even a penny in additional taxes. Do these sound like men ready and willing to reach a grand fiscal bargain?

Realistically, we’re not going to resolve our long-run fiscal issues any time soon, which is O.K. — not ideal, but nothing terrible will happen if we don’t fix everything this year. Meanwhile, we face the imminent threat of severe economic damage from short-term spending cuts.

So we should avoid that damage by kicking the can down the road. It’s the responsible thing to do.

 

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Comments

  1. “So we should avoid that damage by kicking the can down the road. It’s the responsible thing to do.”
     
    You’ve got to be kidding me, as I’ve read it and I don’t know much about the economy and such but what he say’s is plain suicide IMO Who is he working for? The Elite?

    • Just when I think that Krugman cannot utter anything more ridiculous or idiotic, he does.  It reminds me of Ronald Reagan’s reaction to uttered stupidity… “Well, there they go again!”.  Krugman reminds me of a lower level bean counter who has been promoted FAR beyond his competency level and is now lost in a world that leaves him completely befuddled on a daily, if not hourly, basis.
       
      I thought that when he suggested that the solution to the US having too much debt was to create even more debt was about as ludicrous as anyone could get but he has managed to top that one with this one.
       
      Yes, Paul, cutting spending WILL hurt someone, no matter what is cut, when it is cut, or how much it is cut.  The thing is, unless DEEP cuts are made and soon, the way that the US economy currently is being mismanaged will hurt EVERYONE… badly.
       

  2. As long as people are stuck in the illusion of what their life is and can’t wake to the truth. Are unwilling or unable to rise up and put an end to their crimminal masters death grip on their lives. We might as well kick the can some more. It gives those who do have a mind, to prepare for “The Event” that will surely wakes the rest up after it happens.  I’m tired of the waiting. TPTB are not ready so it might be better for the collapse to happen sooner rather than later. But time to prepare is precious.



    .

  3. RGR  funny that you should put this Pink Floyd cut. If you took the words to this song, added drones, QE 4, derivatives, it would not just be prophetic, the song would describe our situation today to a tea.
     I was just listening to Dark Side of the Moon yesterday while driving to the local gun show  The CD is always enjoyable.  The GS was a dud. Everything triple the price from November 2012.
    Krugman?  let’s see.  Trillion dollar platinum coins. Space aliens will save the monetary system. An asteroid strike will boost infrastructure spending. 
    Paul is so completely off the reservation he adds nothing to the conversation.  If  there was anything that could further  the bad image of these brain damaged drones already have, it’s Krugman spouting off another solution to this Keynensian nightmare we’re in.
      It’s one thing to try to cover up problems with BS, like cats covering their s***,  but putting off mature decisions for more months while the world burns is beyond reprehensible. 

    • @AGXIIK: What makes all this worse is that as they “print” all these trillions, it’s just given to the banks for free! They don’t put it to use for the very people expected to pay it all back. I’m certain if they did put it directly in work projects such as rebuilding infrastructure it would only be for the select 12% that are unionized and still send the bill to the rest of us. I did make a video one time to music. I took the song SLOW TRAIN COMING by Bob Dylan and turned it into an anti illuminati video. My friends thought it was really good but you tube removed it. To bad about the show. The price of pistals and rifles are going through the roof, the ammo too. The local Wal-Mart has 12 – 223 rifles on order, 6 of them the SIG M400 with 4 power scope and hard case. I’m on the top of the list if they do get them. 900FPS. With all I’ve been reading about out on the shaky side it might be time to try to get out. I left in the early 90s. Wish I had went to Idaho instead of here. Now my mind keeps returning to thinking about sail boats, big sail boats.

    • But the magic fairy is going to come along and all the problems will go away… you know the one he sees while taking whatever drug he is on.

    • “If  there was anything that could further  the bad image of these brain damaged drones already have, it’s Krugman spouting off another solution to this Keynensian nightmare we’re in.”

      Note that ending this Keynesian madness is NEVER offered up as a possible solution, yet it IS the 8,000 lb. elephant in the room.
       
      “I did make a video one time to music. I took the song SLOW TRAIN COMING by Bob Dylan and turned it into an anti illuminati video. My friends thought it was really good but you tube removed it.”
       
      Well, then, stuff U-Boob, and ask The Doc if you can post it up here.  I bet that a lot of SDers would love to see it.  I know that I would.
       
       

  4. When has Krugman been right about anything?
    And, why not go out and start some more wars to make things even better?

  5. In addition to never being right about anything, keep in mind that Krugman has a Nobel Prize for economics, as Obama has one for peace.

    • It was when that boob, Al Gore, won one that I lost all respect for the Nobel Prize.  Alfred Nobel is no doubt spinning in his grave over the leftist idiots who are now in charge of the Nobel Committee.

  6. The ONLY difference between these two pieces of pond scum, Obama and Krugman, is that one is white the other half-white.

  7. No, the responsible thing to do is to kick Krugman down the road! He’s an absolute joke!!! Oh, and as far as the Nobel prize, its given as a reward to those that have demonstrated themselves to be good obedient puppets to TPTB.

  8. To make a long story short, all the Democrats want to do is kick the can till after the mid-term elections.

    John Boehner, the speaker of the House, claims to be exasperated. “At some point, Washington has to deal with its spending problem,” “I’ve watched them kick this can down the road for 22 years since I’ve been here. I’ve had enough of it. It’s time to act.”

    Here, Krugman leaves out the last four years of one on one negotiating with Speaker Boehnor. The Democrats squandered real good opportunities to solve some pressing problems. Instead, the Democrats played politics to win elections. The Speaker has stated no more trips to the WH, now the House will be governed by consensus. The consensus is no more kicking the can. Krugman is true to his colors in that he speaks to the false general perceptions his base have attained. Perceptions issued and molded by Matthews, Schultz, Rev Al, and the Alphabet Networks.

    It was only when George W. Bush arrived and squandered the Clinton surplus on tax cuts and unfunded wars that the budget outlook began deteriorating again.

    Here, Krugman ignores 911, the Banking Crisis, and again plays into false perceptions of the seriousness of our situation. Blame the GOP, win elections, blame the GOP again is the game. I would like to refresh his memory. The Budget Control Act of 2011 is how we all agreed to deal with the debt ceiling increases and spending. The Super Committee spoke, we voted, the President signed, and now we follow Federal Law.

  9. nothing terrible will happen if we don’t fix everything this year
    I’m looking forward to quoting that at a later time.

    • Yeah, me too… about the time that the entire planetary Keynesian house of cards is tumbling down in flames.  Krugman, of course, will be nowhere to be found.

  10. Of course Krugman is correct.
     
    The alternative for the power elite is a complete crash of the system. That would leave them utterly responsible and cause a lot of people to die. 
     
    So when a system is created that has an endgame, the goal is always to prevent the endgame.
    As such, the government needs to grow, and it´s spending as well. The more the government grows the less freedom people will have. This is of course one of the reasons why the guns need to be confiscated.
     
    We in the know are fully aware of what kind of economy we should have and are protecting ourselves through the transfer process. The emperor has no clothes.

    • “So when a system is created that has an endgame, the goal is always to prevent the endgame.”
       
      Not necessarily.  There is a variation of The Game wherein the end game IS allowed to happen but is blamed on others who really had nothing to do with it.  They get lynched by mindless mobs with torches and pitchforks while the SOBs who actually caused it get even richer and more powerful.

  11. Krugman very well may be the stupidest smart guy out there.
     
    I like these ideas—



    • I am torn between that and Krugman being the smartest stupid guy out there.
       
      As for the video, not bad… a little weak, but not bad.  lol
       

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