It’s a Floor Wax and a Dessert Topping

Paul Krugman takes to his New York Times column to urge more federal spending:

Let’s get one thing straight: America is not facing a fiscal crisis. It is, however, still very much experiencing a job crisis.

It’s easy to get confused about the fiscal thing, since everyone’s talking about the “fiscal cliff.” Indeed, one recent poll suggests that a large plurality of the public believes that the budget deficit will go up if we go off that cliff.

In fact, of course, it’s just the opposite: The danger is that the deficit will come down too much, too fast. And the reasons that might happen are purely political; we may be about to slash spending and raise taxes not because markets demand it, but because Republicans have been using blackmail as a bargaining strategy, and the president seems ready to call their bluff.

I fully endorse Dr. Krugman’s concern about the lack of jobs. We are experiencing the sad fruit of a grab bag of economically inefficient policies imposed by a triumphant Democratic Congress in 2009.

Over the period of the last 60 years we have never paid down debt. We have grown past it. We have rarely cut real spending. We have relied on growth to buoy us. What policies will produce the level of growth necessary to grow past the level of debt we’ve incurred over the last several years? As a consequence of feckless policies over the period of generations we have a jobs crisis and a fiscal crisis.

Dr. Krugman gives a nod to the Chartalists:

Remember, the U.S. government can’t run out of cash (it prints the stuff), so the worst that could happen would be a fall in the dollar, which wouldn’t be a terrible thing and might actually help the economy.

How fast can the dollar fall without a loss of confidence in it? That’s a question not an answer. Isn’t there some level? What is it? If you don’t know, I think that caution is advised. I think it’s also worth mentioning that rising prices hurts the poor most. The worst case scenario is no jobs with rising prices and without great care that’s exactly what Dr. Krugman is proposing.

Here’s my proposal: stop doing things that are inefficient in favor of doing things that are more efficient. Examples: Davis-Bacon rules, agricultural subsidies.

63 comments… add one
  • Jimbino

    How about we pay down the debt by selling off the national parks and forests. Almost no Black or Hispanic Amerikans ever visit them.

  • Icepick

    One last comment, and then I’m gone. I just can’t resist a new jobs report.

    As of today, the Civilian Non-farm Payroll report indicates that we are still 4,130,000 jobs short of where we were when the recession started in December of 2007. That’s 59 months since the thing started, and 42 months since the start of the vaunted recovery.

    4,130,000 jobs short of where we were five years ago. That’s not even taking into account the nature of the jobs lost and gained, which makes things look even worse. That’s not taking into account the part-time, temporary and contract status of so many of the new jobs, which make things look even worse. That’s not counting the decline in median income, which makes things look even worse. That doesn’t count increased costs in pretty much everything but housing, which make things look even worse. This doesn’t take into account the growth in population, which makes things look even worse. (Do that math and we’re at least ten million jobs short of where we need to be to put the people that want to work back to work.)

    We are 4,130,000 jobs short of where we were, and probably over 10,000,000 jobs short of where we need to be.

    That’s not political spin, those are the government’s own numbers. Personally I believe those numbers have been cooked to make things look less terrible than they are, but this is what they’ll cop to.

    We are 4,130,000 jobs short of where we were. This government counts that as a great success. And this electorate counts that as a great success – to the extent that they want even more of this kind of recovery.

    To my fellow unemployed, should any of you have occasion to read this, I have only one thing to tell you: You are fucked. Furthermore the American government and the American electorate WANT you to be fucked. They’ll say they don’t, they’ll protest that they care. But when it comes right down to it they have voted for this, twice, and this is the outcome they consider a success – for themselves. You simply don’t rate the trouble of giving a shit.

    So don’t bother playing by the rules, because they have voted to void the social contract. A state of natural law now exists, so grab what you can and never mind having a conscience. The only dictum that matters now is “don’t get caught”. Hey, it worked for all the banksters, why not make it work for us?

  • Roy Lofquist

    Krugman is advocating a course that, in flying, is called “chasing the needles”. This rarely ends well. His needles are numbers of dubious reliability whose meanings are obscure – “it says here in my book that they mean thus and such”. Have those guys dig some holes so these guys can fill ’em – voila! jobs!

    Dave, you are right. It’s not the jobs we need, it’s the wealth created by productive jobs that is our salvation. You’d think that a few years of “unexpectedly” in every other headline might cause some to question the court astrologers.

  • steve

    “Over the period of the last 60 years we have never paid down debt. We have grown past it. We have rarely cut real spending. We have relied on growth to buoy us.”

    Beyond that, we also kept our rate of growth in spending lower than our growth in revenues resulting from our growth. That changed in 1980. Even with good growth we still increased debt. maybe the increased debt was largely responsible for that growth.

    Just a tangential question. I have been reading up on short term debt just on a whim. What would really happen if we did not have Treasuries available as a safe, liquid short term debt instrument? Suppose we really did get our debt down to 10% of GDP. Does our banking system, as currently constructed, still function?


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