Monday, September 9, 2013

We Should Have Spent More To Bailout The Economy Says Krugman

Paul Krugman has been calling for more government spending to "fix" the economy. He has been hammering this topic for years. However, we do not agree. We think that the way to have fixed the economy is not government spending but rather consumer and business spending.


Had we loosened up tax policy and business regulation and not passed draconian bills like ObamaCrapCare and Dodd Frank, we would have seen a different results. These government programs caused businesses to spend money on non-productive activities  rather than on plant and material and hiring new employees.

As hiring increased, consumer spending (70% of the economy) would also have grown. However, we have seen unproductive spending and employees cut to 29 hours per week to stay away from Obama Care. Neither of these grow the economy.

We believe Krugman is wrong with his remedy but we do agree that the Obama economic model is a failure.  We are willing to listen to your comments should you disagree.

Conservative Tom

Krugman: 'An Immense Failure of Economic Policy'

Sunday, 08 Sep 2013 12:03 PM
By Michael Kling
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The past five years reflect "an immense failure of economic policy," writes economist Paul Krugman in his New York Times column. And economic policies continue to fail, he stresses.

It's been five years since Lehman Brothers collapsed. A second Great Depression was averted. "But, by any objective standard, U.S. economic policy since Lehman has been an astonishing, horrifying failure," Krugman says.

Millions of discouraged Americans, he says, have probably dropped permanently out of the labor force, millions of young Americans have probably seen their lifetime career prospects permanently damaged, cuts in public investment have inflicted long-term damage on our infrastructure and our educational system.


The output gap – the difference between the value of goods and services produced and the potential value – is over $2 trillion.
"That’s trillions of dollars of pure waste, which we will never get back," Krugman writes.
The percentage of adult Americans employed dropped from 63 percent to 59 percent and remains stuck there. Only a small part of that is due to an aging population. It's mostly because of failed economic policy.

It certainly is not because of a "mass outbreak of laziness'' of Americans "living high on food stamps and unemployment benefits," he says, taking a swipe at right-wing claims.

If the U.S. government had postponed fiscal austerity and tax increases until the private sector recovered, the stimulus would have been about three times larger.

"Would such a policy have worked? All the evidence of the past five years says yes," Krugman writes. "Government spending on job creation would, indeed, have created jobs."

The Obama stimulus, while inadequate, stopped the economic plunge in 2009. By contrast, Europe's spending cuts, what Krugman calls an "antistimulus," what Krugman calls an "antistimulus," prompted a severe contraction. That's just what textbook economics predicted.

Such a spending program would have increased the federal debt by about an additional $1 trillion. The ratio of debt to GDP would be a few points higher, nothing that could conceivably cause a fiscal crisis. The nation would be richer and stronger and have a brighter future.

"And it’s not just the politicians who fell short: Many economists, instead of pointing the way toward a solution of the jobs crisis, became part of the problem, fueling exaggerated fears of inflation and debt."

Krugman probably has been the most strident high-profile commentator advocating more government spending to decrease unemployment, but some other pundits agree with him.

"Right now the central challenge is to reignite the economy – getting jobs back, improving wages, and restoring growth," wrote former Labor  Secretary Richard Reich on his blog. "Deficit reduction moves us in the opposite direction."

The government must be "the spender of last resort" because consumer spending, representing the bulk of economic activity, has faltered, he argued.



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