Deficit Hawks Ignorant



Paul Krugman, Laureate of the Sveriges Riksban...
Paul Krugman, Laureate of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2008 at a press conference at the Swedish Academy of Science in Stockholm (Photo credit: Wikipedia)


Deficit Hawks Ignorant


I’m now 57 years old and the tale of imminent fiscal catastrophe begins with my awareness of its use by Reagan who ran on fixing the deficit and then cut taxes, of course, increasing the debt. And that is how it has always gone. It’s always a apocalyptic event closing in on us like a relentless tsunami, unless there’s an opportunity for a tax cut, in which case, the deficit hawks or deficit scolds (whatever term you prefer) go silent. They are only loud when talking about cutting social programs. They maintain a studious silence when tax increases are discussed. And do you know why, because deficits can be a problem but for these people, it’s a good problem because it’s a club they can pick up or put away as need arises. When there can be tax cuts, the club is put away and when there can be cuts in the safety net, the club can be wielded fiercely and recklessly.


They’re not ignorant. They know exactly what they’re doing. It’s just a tactic.


James Pilant


Krugman: Deficit scolds “literally have no idea what they’re talking about” –


Noting the continued endurance of low levels of inflation and low interest rates, which should contradict the expectations of anyone buying into the looming fiscal catastrophe narrative, Krugman ridicules his opponents for having been so wrong for so long, seemingly without ever giving their beliefs a second thought. “It’s actually awesome, in a way, to realize how long cries of looming disaster have filled our airwaves and op-ed pages,” Krugman writes. He then goes on to cite an Alan Greenspan op-ed in this vein, one that was written nearly three and a half years ago, but that for all intents and purposes could have been published just yesterday.


via Krugman: Deficit scolds “literally have no idea what they’re talking about” –


From around the web.


From the web site, Duane Graham.

I have been watching Ben Bernanke, chairman of the Federal Reserve Board, testify this morning before the Senate Banking Committee.


He has sounded a lot like Paul Krugman.*


Krugman, an economist of distinction who also happens to be a liberal, has been telling anyone who will listen that all the scary talk about the national debt is misplaced, considering that we have a genuine jobs crisis going on right now.


Bernanke said this morning:


High unemployment has substantial costs, including not only the hardship faced by the unemployed and their families, but also the harm done to the vitality and productive potential of our economy as a whole.


Ya think? He also said—again sounding like Paul Krugman:


In terms of the near-term recovery, there is a sense in which monetary and fiscal policy are working at cross purposes. To some extent, the fiscal policy decisions being made are mismatched with the timing of the problem. The problem is a longer-term problem, and should be addressed over a longer time frame in a way that, to the extent possible, it does no harm to the ongoing recovery.


In other words, the actions of Congress (fiscal policy—focusing only on long-term debt) are working against the Fed’s actions (monetary policy—buying government bonds now in order to help stimulate the economic recovery) and the result of those “cross purposes” is sluggish growth and needlessly high unemployment.




Josh Barro Clobbers Niall Ferguson


Josh Barro Clobbers Niall Ferguson


In spite of our dramatically different political views, Josh Barro is beginning to grow on me. Certainly, this is just delightful, some good rhetorical punches are being thrown here!


James Pilant


Panelist Economic Historian Niall Ferguson at ...
Panelist Economic Historian Niall Ferguson at “Special World Debate” (Photo credit: Wikipedia)


Niall Ferguson uses Twitter science to prove he’s better than everyone.


The reason Ferguson wants to talk about civility is that he can\’t talk about not being full of crap. Ferguson trades on his academic credentials to write popular articles that contain misleading and false claims. His writing causes readers to come away with a worse understanding of the economy than they entered with. He is changing the world for the worse.


My contention is not that we haven\’t been uncivil to Ferguson. We definitely have. My contention is that he deserves it.


via Niall Ferguson uses Twitter science to prove he’s better than everyone..

From around the web.

From the web site, The Inverse Square (This is a fun web site – please go visit. jp).

Too much to do today to go all John Foster Dulles on Harvard’s Folly, but I can’t leave this without noting that if Niall’s honestly not scared of Krugman (he is), he should be.


Cases in point here and here and here and here.  This isn’t a fair fight.  Ferguson has the debate chops and the accent, but nothing else. Krugman has both technical skill and the willingness to engage actual data to gut the Harvard Bully Boy on the actual merits of the argument.  That Ferguson plays better on TV is his reason for being, but not a recommendation.  (BTW — for a devastating synoptic view of Ferguson’s style and (lack of) substance — and his pure nastiness in the service of the 1%, check out this overview.)



Niall Ferguson Gets Return Fire

English: The ten largest economies in the worl...
English: The ten largest economies in the world and the European Union in 2008, measured in GDP PPP (millions of USD), according to the International Monetary Fund. (Photo credit: Wikipedia)




I read the Huffington Post almost every day. Niall Ferguson has written three attacks on Paul Krugman which have appeared in that publication which has me wondering about what’s going on? I was under the impression that Ferguson’s hit piece on Obama has been so awful that his credibility had taken a substantial hit but apparently not a substantial enough hit for the Huffpost not to publish him. I find Ferguson’s beliefs appalling, his attacks on Krugman ridiculous and I am pleased that so many are firing back at Ferguson’s attacks. Here is one from the web site, Beat the Press.

James Pilant

The Ravings of Niall Ferguson, the Real World, and the Needless Suffering of Tens of Millions | Beat the Press

But it is hardly worth wasting time and killing electrons in a tit for tat with Ferguson. What matters is the underlying issues of economic policy. These affect the lives of billions of people. The absurdities pushed by Ferguson and like-minded people in positions of power, in direct defiance of massive evidence to the contrary, have ruined millions of lives and cost the world more than $10 trillion in lost output since the crisis began.

First, contrary to what Ferguson claims, the downturn is not primarily a “financial crisis.” The story of the downturn is a simple story of a collapsed housing bubble. The $8 trillion housing bubble was driving demand in the U.S. economy in the last decade until it collapsed in 2007. When the bubble burst we lost more than 4 percentage points of GDP worth of demand due to a plunge in residential construction. We lost roughly the same amount of demand due to a falloff in consumption associated with the disappearance of $8 trillion in housing wealth. (FWIW, none of this was a surprise to folks who follow the economy with their eyes open. I warned of this disaster beginning in 2002, see also here and here.)

The collapse of the bubble created a hole in annual demand equal to 8 percent of GDP%

via The Ravings of Niall Ferguson, the Real World, and the Needless Suffering of Tens of Millions | Beat the Press.

From around the web.

From the web site, This is Ashok.

As I have documented in detail before,

Niall Ferguson’s grand theory is devoted to a time of big government,

but of a different kind. He yearns for the day when big governments

taxed the poor to finance colonial adventures and fought with each other

for glory and nothing else. Indeed, as he’s written before, he yearns

for the day when “Britannia bestrode the globe”.

We today owe our intellectual and humanitarian heritage to Franklin

Roosevelt. Not because he vindicated principles of easy money or public

finance. Not because he vindicated principles of modern liberalism. But –

for the first time in the history of our nation and all nations – he

demonstrated that government can exist for the great benefit of the many

at the minor cost of the few. For almost a century both political

parties have lived by this end, if disagreeing on the means.

There is an ideology that accommodates the worst of efficient

markets, supply side economics, and neoliberal economists like Milton

Friedman. It is called right wing hackery, with Niall Ferguson as its

high priest.

Alec Foege Calls for Change

Alec Foege Calls for Change

Alec Foege Calls for Change“The Tinkerers”: How corporations kill creativity by Alex Foege –

In August 2010, Paul Krugman published a piece in the New York Times titled “America Goes Dark.” He described how the United States, “a country that once amazed the world with its visionary investments in transportation, from the Erie Canal to the Interstate Highway System” was now dismantling its infrastructure.

Krugman’s main point was that the U.S. government was not investing stimulus funds in the tools needed for our own economic growth. Three decades of antigovernment rhetoric had convinced many Americans that spending taxpayer funds on anything was a waste of taxpayer funds. But government—the US government, specifically—had built this country into an innovative economic powerhouse by investing in “lighted streets, drivable roads and decent schooling for the public as a whole.”

I would take Krugman’s point one step further and argue that the American government and people helped the country grow both by investing in innovation and by committing themselves to the traditional tinkerer spirit. A sophisticated, cutting-edge infrastructure was the perfect crucible for the kind of innovation the United States embodied.

The point about the devolution of tinkering in American life is not that we have lost a physical connection to the work that we do. It’s that the notion that we can fix any problem or achieve any goal that we set for ourselves has deteriorated into a sanitized, corporatized version of what constitutes achievement.

Corporate America has grown rigid as it has grown larger. Despite the dot-com era’s many images of creative whizzes reweaving the very fabric of innovation, it remains extremely difficult for the freethinking alchemists of today to perform their peculiar strain of magic and thrive while doing it.

“The Tinkerers”: How corporations kill creativity –

This was a great article much longer than the brief excerpt I have placed here. If at all possible, please go to Salon and read the whole thing. The gentleman has several books out, so you might want to look into acquiring those as well.

I have been told by people flying into the United States how run down the place looks. There are reports that say this country needs about 2.2 trillion dollars just to get even in terms of infrastructure. 

Yet, these pressing needs seem to register very little as a governmental concern. We’ve already had collapsing dikes and bridges. What kind of crisis will it take to make this a critical issue that gets addressed?

Maybe the flesh is willing but the spirit is weak? Where’s that “can do” spirit that built buildings, monuments and wonders of technology? Where has that gone?

I like to read yearbooks from the 1960’s, Britannica, World Book, etc. and in them I find a spirit of optimism and a certainty of success that no longer is predominant in our culture. Much of our current angst can be traced to the thought that things are only going to get worse. 

I agree with Mr. Foege, we need change.

We need to act and we can’t wait for the “road fairy” to repair out problems.

James Pilant

P.S. You could argue that there is no business ethics here. After all we aren’t speaking of deliberate sabotage of America’s infrastructure. Certainly I hope not. But business ethics is also a positive force. Good business ethics would embrace creativity and long term growth as manifested in infrastructure development and preservation.

From around the web,

From the web site, ASCE, American Society of Civil Engineers:

In mid-January, the American Society of Civil Engineers (asce) convened a series of five roundtables in Washington, D.C., that were
conceived as in-depth discussions of how best to address the nation’s significant infrastructure deficiencies, which threaten not only the safety
and welfare of the public but also the nation’s economic growth and competitiveness. Each roundtable had its own moderator and slate of
participants, and the participants included well-respected political leaders, policy leaders, and members of asce who are well versed on the
subject of critical infrastructure. The starting points for these discussions were the five key solutions outlined in asce’s 2009 Report Card for
America’s Infrastructure, which was released in March 2009. In essence what these roundtables were striving to achieve was to develop a
framework for giving full dimension to these solutions and securing for them positions of high visibility and high priority on the national agenda.
which was released in 2003. The 2001 report card conferred an overall grade of D+; the 2005 report card, a D; and the 2009 report card, a D. The 2003 progress report
also conferred a grade of D. These assessments have trained a spotlight on the fact that America’s critical infrastructure—principally its roads, bridges, drinking
water systems, mass transit systems, schools, and systems for delivering energy—may soon fail to meet society’s needs. The underlying threats—and these threats are quite significant—are those of deteriorating
economic strength within the global marketplace and a diminished quality of life across the spectrum of American society.

From the web site, Class Warfare Blog:

Now is the time to act to bring up the level of repair of our infrastructure. The reasons?
• the cost of borrowing the money to do this is approximately 0%. We will never get a better deal.
• the number of out-of-work construction workers is huge which has depressed the cost of labor.
• the money paid to the architects and engineers and laborers and suppliers of raw materials and truck drivers will be spent almost immediately by those folks which will stimulate the economy. Plus there is time for the money those folks spend to be spent again (by the subsequent recipients) before the next year is out, amplifying the effect. (Economists call this the multiplier effect. In this case $1 spend on construction creates well over $1 of economic activity.)
• the problems with our infrastructure will only get worse and will cost even more as time goes on. It is not like they will “heal themselves” like a cold will if you just wait.
• all of the expenditures will go to Americans and American companies. The jobs cannot be “outsourced.”

If China is willing to lend us the money to make this nation stronger, creating jobs that generate more than enough tax revenue to pay off those loans, we will be fools if we don’t act. The more we wait the more it costs us in the long run.

From the web site, Reboot Illinois:

“Over the next several decades, Illinois’ infrastructure needs will likely exceed $300 billion, yet the state does not have a comprehensive plan to address this critical need. There are real costs associated with underfunding of infrastructure: shipping and travel delays, congestion, pollution, and diminished economic growth.” State Budget Crisis Task Force Illinois Report.

And finally, from the web site, Save America’s Infrastructure:

For the U.S. economy to be the most competitive country in the world we need a first class infrastructure system—transport systems that move people and goods efficiently and at reasonable cost by land, water and air; transmission systems that deliver reliable, low-cost power from a wide range of energy sources, and water systems that drive industrial processes as well as the daily functions in our homes. Infrastructure is the foundation that connects the nation’s businesses, communities and people, driving our economy and improving our quality of life.

ASCE urges the administration and Congress to focus on policies that will create jobs and continue to grow the economy. ASCE will work with the new Congress and the President to rebuild and revitalize the very foundation of our national economy. Roads, bridges, levees, and dams not only provide security, but also allow businesses to move goods, reach global markets, grow their market share and create new jobs.

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Liar and Slanderer, Joe Kernen

CNBC Host Joe Kernen: Paul Krugman Is A Communist

“They quoted Paul Krugman and this other idiot, Dean Baker, who’s some guy, I don’t even know who he is, he always writes for The Huffington Post. Basically co-communists in a lot of different economic circles,” Kernen said on Monday. “You know, fact-checkers need fact-checking now. They’re so full of crap. These fact-checkers lie more than the people that they’re fact-checking.”

CNBC Host Joe Kernen: Paul Krugman Is A Communist

Kernan takes CNBC to a new low with his Joe McCarthy antics. I read both Krugman and Baker every day. Their fact checking is solid and even more solid is their status as American Capitalists and patriots. This vicious windbag needs firing. Where would a network find a person like Joe Kernen and believe these kinds of thoughts provide “significant” commentary? They more resemble the rantings of beer soaked bar patron muttering at the television.

It’s the same old thing. When the facts are with you, you cite the facts, when the facts are against you, you pound the table.

This is table pounding, and pathetic table pounding at that.

James Pilant

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David Brooks: To Hell With the Polls! | Video Cafe

We all know that David Brooks is one of those “very serious people” (I owe Paul Krugman for the phrase.) who believe in Centrism. That is a very pretty word that indicates that if we all play nice we will live wonderful lives. We will also have to give up social security, medicare and a host of other programs because unlike the 1%, we less significant people are the ones supposed to compromise and be nice.

I’m not nice. I believe in conflict. I believe that until we make politicians suffer and lose office over their willingness to compromise on social security that the program will be in danger from the “centrists.”

The centrists believe in politicians governing without the influence of the unlettered masses – that would be us. You, when your social security benefits are taken away from you (the ones you’ve already paid for) that is shared sacrifice when the rich get tax cuts that is a spur to the economy and a reward for the “productive” classes.

You see, centrism is a fancy word for elitists and a top down ethos of enlightened philosopher kings keeping the craven, greedy masses (yeah, that would be you) in line.

It’s a precious belief in the virtue of oligarchies. It’s royalism without the royal family just the next enlightened figure to ignore popular opinion and do what is “necessary.”

This is contemptuous of democracy and the hard working, honest American people.

And this is what passes for intelligent comment at the New York Times.

James Pilant

David Brooks: To Hell With the Polls! President Obama Should Not Campaign on Raising Taxes on the Rich | Video Cafe

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What I Am Reading Today – James Pilant – July 18th, 2011

I read Paul Krugman’s columns in the New York Times on a daily basis. In this book, Krugman argues that government policy during the New Deal was responsible for creating a Middle Class society in the 1950’s and 1960’s and that if we so desire we can accomplish this again. He argues and I believe argues successfully that the destruction of American manufacturing, the decline of wages and the stagnation of our job opportunities are neither inevitable or the product of natural forces.

The Conscience of a Liberal

Here’s a nice paragraph –

A Progressive agenda, then, would require major changes in public policy, but it would be anything but radical. Its goal would be to complete the work of the New Deal, including expansion of social insurance to cover avoidable risks that have become vastly more important in recent decades. And as an economic matter, achieving that agenda would be eminently doable. It would amount to giving U.S. citizens no more than the level of protection from financial risk and personal misfortune that citizens of other advanced countries already have.

I am very much enjoying the book. If you want a copy you can go here on Amazon.

James Pilant

Our John Rawls For The Day

In a post in his blog, Paul Krugman channels John Bordley Rawls –

My vision of economic morality is more or less Rawlsian: we should try to create the society each of us would want if we didn’t know in advance who we’d be. And I believe that this vision leads, in practice, to something like the kind of society Western democracies have constructed since World War II — societies in which the hard-working, talented and/or lucky can get rich, but in which some of their wealth is taxed away to pay for a social safety net, because you could have been one of those who strikes out.

From Jomelgamba’s Blog  from his post, John Rawls: A theory of Justice

The author (Rawls) appeals to the social contract. Justice as fairness is thus offered to people who are neither saintly altruists nor greedy egoists. Human beings are, as Rawls puts it, both rational and reasonable. Because we are rational we have ends we want to achieve, but we are reasonable insofar as we are happy to achieve these ends together if we can, in accord with mutually acceptable regulative principles. Rawls gives us a model of a fair situation for making this choice (his argument from the original position and the famous veil of ignorance), and he argues that two principles of justice would be especially attractive.

And from the University of Sydney –

I ran into the name John Rawls while exploring philosophy long before I began blogging. I saw an article in which he was mentioned a few months ago and the next thing you know it’s six degree of John Rawls. He was everywhere. Since then, I have read much more about him and have concluded that he well deserves to be everywhere.

I am at the beginning of my work with Rawls’ theories and I’ll mention interesting steps in the journey as I go along.

James Pilant


Paul Krugman

These days, we’re living in the world of the imperial, very self-interested individual; the man in the gray flannel suit has been replaced by the man in the very expensive Armani suit. Look at the protagonists in the global financial meltdown, and you won’t see faceless corporations subverting individual will; you’ll see avaricious individuals exploiting corporate forms to enrich themselves, often bringing the corporations down in the process. Lehman, AIG, Anglo-Irish, etc. were not cases of immortal hive-minds at work; they were cases of kleptocrats run wild.

I like the word, kleptocrat. It captures the sound of what it is, someone who can’t resist the lure of money, no matter what the cost.

The 21st Century might well be a hundred years devoted to kleptocracy in America. That’s pretty sad.

Do we have choices? Yes, but not the ones most people think of.

There is no return to a simpler moral age. There may be spots in American history where this virtue or another was more predominant than now but I promise you the trade offs are not anything you would want to play with.

What needs to be done is a combination of looking forward and looking backward, a fancy way of saying we should learn from experience but not react identically.

What am I talking about? Well, we’ve had kleptocracy before, roughly 1918 to 1929 maybe as late as 1931. We reacted by changing the balance of power between industry and government, imposing a large regulatory structure so as to never let the disaster happen again. Once that structure was abandoned, we fell into the trap once more. Except this time the force of the financial industry is such that no power moved to the government. We are at a stand still in the same spot where disaster struck in 2007.

There are three things that need to be done.

One – Corporations are creatures of the state, nothing more. They have the same living essence as a can opener if not less. The usurpation of human power by these moble documents is a pathetic farce a child can see through.

Return corporations to organizations under law, not as persons, as contracts. (which is what they are)

Two – Return morality to the law. First enlarge and enforce the duty of fair dealing, honesty and loyalty in business agreements. Those already exist in case law and often in statutory law. Let them be reborn as an integral part of contract law. But more than this, let us also revive the doctrine of unconscionability. The fees and contracts imposed on Americans regularly violate the basic standards of fairness. It is time to rein in those practices. If a practice “shocks the conscience,” a business, a corporation, shouldn’t be doing it.

Three – Give the owners of the corporations some say in what they do. Right now, a CEO and a board of directors are essentially unencumbered by oversight. The actual owners of the corporation have little say in the operation, major decisions and salaries of a company that are supposed to own. Isn’t a basic element of capitalism that the owner of property should be able to exercise rights in it?

That’s a start. Really, we’ve already been through these kinds of crisis before. Generally we know what to do. But there is no willpower, intelligence or wisdom to do it.

James Pilant