When Zombies Win
By PAUL KRUGMAN
NYT
When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything — yet they now dominate the political scene more thoroughly than ever.
How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed? How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?
The answer from the right is that the economic failures of the Obama administration show that big-government policies don’t work. But the response should be, what big-government policies?
For the fact is that the Obama stimulus — which itself was almost 40 percent tax cuts — was far too cautious to turn the economy around. And that’s not 20-20 hindsight: many economists, myself included, warned from the beginning that the plan was grossly inadequate. Put it this way: A policy under which government employment actually fell, under which government spending on goods and services grew more slowly than during the Bush years, hardly constitutes a test of Keynesian economics.
(More here.)
NYT
When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything — yet they now dominate the political scene more thoroughly than ever.
How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed? How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?
The answer from the right is that the economic failures of the Obama administration show that big-government policies don’t work. But the response should be, what big-government policies?
For the fact is that the Obama stimulus — which itself was almost 40 percent tax cuts — was far too cautious to turn the economy around. And that’s not 20-20 hindsight: many economists, myself included, warned from the beginning that the plan was grossly inadequate. Put it this way: A policy under which government employment actually fell, under which government spending on goods and services grew more slowly than during the Bush years, hardly constitutes a test of Keynesian economics.
(More here.)
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1 Comments:
how could Krugman possibly know that we free-market fundamentalists are wrong - we haven't tried free-market economics in this country since the 1800s. Every single entity of our economy is on the state drip feed to one extent or another. we have had so much government meddling in the economy and we have stimulated with borrowed money for 20 years, markets don't even know what is reality anymore. thus, the markets are frozen and not likely to thaw as long as government continues to meddle in the economy and remain an activist player in economic affairs.
You tell me what would do more to regulate the economy: the massive
Obama financial regulatory bill that Obama himself claimed 'will put an end to the bailouts', stimulus packages for wasteful projects and government tax credits to induce certain behavious or the free-market fundamentalist approach which is no bailouts, no tax payer backed enterprises and little regulation?
We would be so much furhter along in our recovery if we allowed the markets to hit bottom, shed the malinvestment and start growing again.
instead, we see that government is in the economy trying to reinflate all the bubbles that got us in this mess in the first place. we already had a massive stimulus package called the housing market and the free money and low interest rates that went along with it. not to mention the government backing of mortgages that prevented the mortgage writers from having to be on the hook for the mortgages they wrote.
Serioulsy, if you were a mortgage writer and you knew you could write a mortgage to anyone and everyone for cars, boats, homes, cabins, business...whatever...and you knew you could collect the fees, but pass the note along to the federal government and not have to be on the hook for collecting the mortgage, who wouldn't do that????
the crux of the problem is that the government is in there guaranteeing everything which removes the moral hazard of writing bad mortgages. Why would I care if someone can't pay the mortgage when I'm not responsible for collecting the payments? I just collect the fees to write it and pass the note along the Freddie Mac or Fannie Mae - c'mon, who wouldn't do this?
and Krugman blames the banks for this? I don't care that Krugman doesn't get it, but he's just flat out lying in placing the blame with the banks or wall street. Government enabled this behaviour and then guaranteed they wouldn't fail. and this is where we are today. the financial regulatory bill passed this spring will do precisely when we shouldn't do - it will regulate an entity ensuring it wont' fail. But how will government know which activities will be risky any better than the entity will know? And if the entity should fail anyway - ANOTHER BAILOUT!
This isn't rocket science, professor Krugman. It's as plain as the sun in the sky. I just can't believe this guy doesn't understand the core of the problem.
The rest of the country understands this, Professor Krugman. Obviously, you don't. And by your own admission, you never will. It boils down to this - either you think government hasn't borrowed enough and hasn't spent enough (Paul Krugman) or you think the government has borrowed too much and spent too much (the rest of the country).
I'll put my faith in the rest of the country.
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