This OpEd by Paul Krugman shows that this guy is completely off his rocker. Either that or he's a liar.
February 6, 2009
On the Edge
By PAUL KRUGMAN
A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.
One could argue that the Democrats turned a serious debate, what with their asinine description of contraception funding as just the type of economic stimulus that is timely, targeted, and temporary - not to mention all of the other special interest pork that they threw into the bill.
It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.
I wonder why they have been on the defensive? Perhaps it is because the American people are rejecting what their elected representatives (the Democrats) have decided to put into this porkulus bill and the Democrats realize that the've been caught.
Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.
Again, I would say that the moment someone wrote the pork into the bill and the fact that most of the spending wouldn't hit until 2011 or later - that was a sign that legislators lost any sense of what's at stake.
The debate that is raging now is the first serious debate we've had in a long time!
It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Exports were a strength in the economy in the last 8 years? Huh... thought I would've seen that on the front page of the Times somewhere. Oh, well...
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
I would argue it's in free fall because the government is doing too much. People are uncertain what the future holds and some key political lobbying by this or that group could make or break their company or their industry.
And taxpayers are also uncertain of the future, what with the expectation of high inflation, business and industries being completely nationalized or eliminated, future tax increases, etc, etc. It's the governments action, rather than inaction, that is the major force for uncertainty today.
I would also say that the Mark-To-Market principle for asset valuation - while intended to provide increased transparency into the value of assets has (as usual) actually created additional uncertainty.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”Of course, the CBO also said the stimulus package is a net negative on the economy in the long run, but no need to mention that!
Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.
The probability of this gets higher as we start to enact legislation which mirror that of Hoover or Roosevelt's New Deal.
And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?
The only thing? But I thought the Japanese spent their way out of their "lost decade"?
Oh, that's right... they spent like drunken sailors during the lost decade and it had zero effect except to bankrupt future generations.
Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.We could be on the precipice if ACORN doesn't get it's 2.4billion! We might face another Great Depression if we don't fund contraception to the tune of billions! We might all die if we do not re-sod the Washington Mall!!!
Quick! The sky is falling - Throw some money in the air to keep it from hitting us!
So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh. What matters now, however, is what he does next.
Actually, it wasn't Rush but the actual stupid parts of the bill that made it a farce. Only Nancy Pelosi & Barry "The Novice" Obama get the credit for that. You can't blame Rush, the CBO, or anyone else who can read for pointing those things out, can you?
It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.
The American people are smarter than you, Paulie. They realize that what is being offered is not stimulus.
- It's not timely. (18 months from now?!?!)
- It's not targeted. (At least not in targeted where it should be - Contraceptives? $400 Million for STD research?)
- And none of it is temporary. (How are increased salaries for Federal employees 'temporary'?)
ARC: St Wendeler