Krugman says stimulus, and Keynesian economics, is a complete failure

[Quantum Windbag]

If you were shocked by Friday’s job report, if you thought we were doing well and were taken aback by the bad news, you haven’t been paying attention. The fact is, the United States economy has been stuck in a rut for a year and a half.

Excuse No. 4: We tried to stimulate the economy, and it didn’t work.
Everybody knows that President Obama tried to stimulate the economy with a huge increase in government spending, and that it didn’t work. But what everyone knows is wrong.
Think about it: Where are the big public works projects? Where are the armies of government workers? There are actually half a million fewer government employees now than there were when Mr. Obama took office.
So what happened to the stimulus? Much of it consisted of tax cuts, not spending. Most of the rest consisted either of aid to distressed families or aid to hard-pressed state and local governments. This aid may have mitigated the slump, but it wasn’t the kind of job-creation program we could and should have had. This isn’t 20-20 hindsight: some of us warned from the beginning that tax cuts would be ineffective and that the proposed spending was woefully inadequate. And so it proved.

http://www.nytimes.com/2011/07/11/opinion/11krugman.html?_r=1&partner=rssnyt&emc=rss

OK, I admit that is not what he intended to say, but when you contrast that to what he said about the stimulus two years ago it adds up to him admitting that the stimulus is full of shit.

— much of it among the most effective and most needed parts of the plan. In particular, aid to state governments, which are in desperate straits, is both fast — because it prevents spending cuts rather than having to start up new projects — and effective, because it would in fact be spent; plus state and local governments are cutting back on essentials, so the social value of this spending would be high. But in the name of mighty centrism, $40 billion of that aid has been cut out.

What the centrists have wrought - NYTimes.com

That's right folks, the part of the stimulus that was the most needed because it prevents spending cuts and most effective because it would actually be spent is the part that "wasn’t the kind of job-creation program we could and should have had."

He is trying to blame it on the tax cuts, but the truth is that it had no chance from the beginning. Even if Krugman had personally designed the stimulus plan to cover exactly what he knows it needed to cover it wouldn't have worked because it would not do what he claimed.

I would love to say that Keynesian economics is dead, but some idiots will never learn. That list obviously includes Paul Krugman.

 

[Wiseacre]

Krugman basically wants to spend 2 or 3 times as much as the original stimulus bill, maybe 2-3 trillion more which would entirely be borrowed (debt). I appreciate that he wants to improve unemployment and kickstart the economy, but I believe if the business climate remains as is then however much stimulus you spend will be temporary. You fix roads and bridges, great; we get jobs for awhile but if we don't have an enironment that encourages growth then it'll be just another cash for clunkers except much bigger. We cannot afford to blow another two or three trillion and end up where we are now but with more debt.

 

[Sallow]

Ah..so you are willfully misrepresenting what Krugman is writing about.

Hmm..what is that called?

Oh yeah.

Lying.

 

[Ravi]

His complaint all along is that we haven't stimulated the economy enough.

Your title is a lie.

 

[Paulie]

His complaint all along is that we haven't stimulated the economy enough.

Your title is a lie.

Do you believe that spending more money we don't have is the only way to do so?

 

[Sallow]

His complaint all along is that we haven't stimulated the economy enough.

Your title is a lie.

Do you believe that spending more money we don't have is the only way to do so?

Naw.

The OP lied.

Simple as that.

 

[CrusaderFrank]

Krugman: We needed $900B ....$2 trillion... $3 Trillion...no! 8 Trillion in Stimulus. YES! $18 Trillion

Face it, It failed during the FDR Depression and it Failed Finally and Permanently Under Obama.

Oh, where was Clinton's Big Deficit Stimulus?

 

[Sallow]

Krugman: We needed $900B ....$2 trillion... $3 Trillion...no! 8 Trillion in Stimulus. YES! $18 Trillion

Face it, It failed during the FDR Depression and it Failed Finally and Permanently Under Obama.

Oh, where was Clinton's Big Deficit Stimulus?

Well except FDR didn't fail. Unless of course you consider the rise of a real American Middle Class a failure.

The United States did not have a big middle class (or any really) prior to FDR.

The United States was pretty much a wretched place to live prior to FDR for all except the extremely wealthy.

 

[CitizenPained]

Krugman has always been skeptical of Obama's social economics (not sure how else to phrase that). I remember his case for Senator Clinton in the primaries re: healthcare.
*sigh*

 

[CrusaderFrank]

Krugman: We needed $900B ....$2 trillion... $3 Trillion...no! 8 Trillion in Stimulus. YES! $18 Trillion

Face it, It failed during the FDR Depression and it Failed Finally and Permanently Under Obama.

Oh, where was Clinton's Big Deficit Stimulus?

Well except FDR didn't fail. Unless of course you consider the rise of a real American Middle Class a failure.

The United States did not have a big middle class (or any really) prior to FDR.

The United States was pretty much a wretched place to live prior to FDR for all except the extremely wealthy.

FDR was the Biggest Failure until Obama. How anyone calls 15% unemployment over 8 years good for the Middle Class can only be ascribed to some brain washing.

Thank Hitler for invading France for ending the FDR Depression

 

[Zander]

By any measure the stimulus was a complete and utter failure, just like the dilettante that occupies 1600 Pennsylvania.....

 

[CrusaderFrank]

Krugman: We needed $900B ....$2 trillion... $3 Trillion...no! 8 Trillion in Stimulus. YES! $18 Trillion

Face it, It failed during the FDR Depression and it Failed Finally and Permanently Under Obama.

Oh, where was Clinton's Big Deficit Stimulus?

The United States was pretty much a wretched place to live prior to FDR for all except the extremely wealthy.

Clearly you don't know dick about anything

 

[Paulie]

The United States was pretty much a wretched place to live prior to FDR for all except the extremely wealthy.

This is all relative, and a matter of opinion. When you account for how inflation has destroyed the middle class's purchasing power over the years, one could just as easily say the middle class is a wretched class to be in.

Today's middle class busts its ass at underpaying jobs, if they have one at all, to HOPEFULLY live better than paycheck to paycheck.

 

[Foxfyre]

Krugman has always been skeptical of Obama's social economics (not sure how else to phrase that). I remember his case for Senator Clinton in the primaries re: healthcare.
*sigh*

I disagree. Krugman was one of Obama's biggest supporters for awhile and was one of the 'smart' pundits trumpeting the necessity for the stimulus and promoting de facto Keynesian economics when all this first came up more than two years ago. He was quoted again and again and again by the Obamabots as 'proof' that we should all be supporting Obamas's initiative on that.

By October 2009 he was writing that Obama hadn't been Keynesian enough and should have spent twice as much:

So Christy Romer’s math looked similar to mine: even given what we knew last December, the straight economics said that we should have a stimulus much bigger than the Obama administration’s initial proposal. And given what happened to that proposal in the Senate — we actually ended up with only about $600 billion of actual stimulus — what we eventually got was half of what seemed appropriate in December. And the actual news on the economy since then has been worse than was expected back then, so that the stimulus now looks way short of what we need.
The story of the stimulus - NYTimes.com

 

[CrusaderFrank]

Krugman has always been skeptical of Obama's social economics (not sure how else to phrase that). I remember his case for Senator Clinton in the primaries re: healthcare.
*sigh*

I disagree. Krugman was one of Obama's biggest supporters for awhile and was one of the 'smart' pundits trumpeting the necessity for the stimulus and promoting de facto Keynesian economics when all this first came up more than two years ago. He was quoted again and again and again by the Obamabots as 'proof' that we should all be supporting Obamas's initiative on that.

By October 2009 he was writing that Obama hadn't been Keynesian enough and should have spent twice as much:

So Christy Romer’s math looked similar to mine: even given what we knew last December, the straight economics said that we should have a stimulus much bigger than the Obama administration’s initial proposal. And given what happened to that proposal in the Senate — we actually ended up with only about $600 billion of actual stimulus — what we eventually got was half of what seemed appropriate in December. And the actual news on the economy since then has been worse than was expected back then, so that the stimulus now looks way short of what we need.
The story of the stimulus - NYTimes.com

If Krugman agrees with you, know that not only are you wrong, but you're probably wrong in the trillion column

 

[Ravi]

His complaint all along is that we haven't stimulated the economy enough.

Your title is a lie.

Do you believe that spending more money we don't have is the only way to do so?

Uh, no, I am simply commenting on the lie the OP posted.

 

[CitizenPained]

Krugman has always been skeptical of Obama's social economics (not sure how else to phrase that). I remember his case for Senator Clinton in the primaries re: healthcare.
*sigh*

I disagree. Krugman was one of Obama's biggest supporters for awhile and was one of the 'smart' pundits trumpeting the necessity for the stimulus and promoting de facto Keynesian economics when all this first came up more than two years ago. He was quoted again and again and again by the Obamabots as 'proof' that we should all be supporting Obamas's initiative on that.

By October 2009 he was writing that Obama hadn't been Keynesian enough and should have spent twice as much:

So Christy Romer’s math looked similar to mine: even given what we knew last December, the straight economics said that we should have a stimulus much bigger than the Obama administration’s initial proposal. And given what happened to that proposal in the Senate — we actually ended up with only about $600 billion of actual stimulus — what we eventually got was half of what seemed appropriate in December. And the actual news on the economy since then has been worse than was expected back then, so that the stimulus now looks way short of what we need.
The story of the stimulus - NYTimes.com

Obama's economics --and his healthcare 'plan' - fail to help those who need it most. Thankfully, the Times makes it easy to search their articles. God Bless the Internet.

Clinton, Obama, Insurance

Mr. Obama claims that people will buy insurance if it becomes affordable. Unfortunately, the evidence says otherwise.

After all, we already have programs that make health insurance free or very cheap to many low-income Americans, without requiring that they sign up. And many of those eligible fail, for whatever reason, to enroll.

An Obama-type plan would also face the problem of healthy people who decide to take their chances or don’t sign up until they develop medical problems, thereby raising premiums for everyone else. Mr. Obama, contradicting his earlier assertions that affordability is the only bar to coverage, is now talking about penalizing those who delay signing up — but it’s not clear how this would work.

So the Obama plan would leave more people uninsured than the Clinton plan. How big is the difference?

To answer this question you need to make a detailed analysis of health care decisions. That’s what Jonathan Gruber of M.I.T., one of America’s leading health care economists, does in a new paper.

Mr. Gruber finds that a plan without mandates, broadly resembling the Obama plan, would cover 23 million of those currently uninsured, at a taxpayer cost of $102 billion per year. An otherwise identical plan with mandates would cover 45 million of the uninsured — essentially everyone — at a taxpayer cost of $124 billion. Over all, the Obama-type plan would cost $4,400 per newly insured person, the Clinton-type plan only $2,700.

RE: Stimulus:

Bit by bit we’re getting information on the Obama stimulus plan, enough to start making back-of-the-envelope estimates of impact. The bottom line is this: we’re probably looking at a plan that will shave less than 2 percentage points off the average unemployment rate for the next two years, and possibly quite a lot less. This raises real concerns about whether the incoming administration is lowballing its plans in an attempt to get bipartisan consensus.

In the extended entry, a look at my calculations.

The starting point for this discussion is Okun’s Law, the relationship between changes in real GDP and changes in the unemployment rate.

His biggest complaint is good ideas that don't get the follow-through. I've been reading him for years...I don't disagree with most of your premise, but he's never been an Obamite or a lock-step partisan.

We have to keep in mind that he's a commentator, not part of Obama's advisory staff. So I think it's fair to say the he's observing and applying what he knows, endorsing (or rejecting) ideas but also arguing the mechanics that come after.

 

[Baruch Menachem]

If the events of Sept 1938 in Munich stimulated the economy, then Krugman's argument works. Building huge numbers of things that are totally useless and were going to be destroyed in 6 years with huge amounts of cash we don't have either made the economy grow, and therefore wasting billions on useless shit is a good way to grow an economy, or there were other things going on that made things better.

Personally, I think it was more a matter of just waiting out the bubble and eliminating government stupid that had more of a positive effect. Also, the government projects of the 30's did make demonstrable results. Oregon highway 101 was completed, for example, as were large numbers of other US highways. Prohibition ended. Which increased government revenues on a voluntary basis and eliminated a wasteful and useless government department. Smoot Hawley was repealed, which helped international trade.

From what I remember of my Econ history, 1933 was the worst year as the banks collapsed in huge numbers ahead of the New Deal. Roosevelts brains trust talke a lot of their plans, which scared a lot of money out of the banks and into mattresses. Hoover was useless in dealing with the issue. However 1936 was almost as bad as 1933. But as the benefits of the TVA, BPA and the highways took hold, there was a gradual increase in economic activity.

The Obama people have not dealt with the impediments to economic growth, they have even added new ones. The projects haven't got off the ground. All there is is studies and spending on friends of the administration, not any kind of construction at all.

We wer told that stimulus would result on unemployment reaching no more than 8 1/2% percent, and it would be back down around six by now. Instead unemployment went up to 10% and it hasn't sunk below 9% yet.

the promises made have not been kept. It has not performed as advertised. Belief that throwing cash at an economy does any good has not been proved.

 

[Paulie]

His complaint all along is that we haven't stimulated the economy enough.

Your title is a lie.

Do you believe that spending more money we don't have is the only way to do so?

Uh, no, I am simply commenting on the lie the OP posted.

just asking

 

[Foxfyre]

Krugman has always been skeptical of Obama's social economics (not sure how else to phrase that). I remember his case for Senator Clinton in the primaries re: healthcare.
*sigh*

I disagree. Krugman was one of Obama's biggest supporters for awhile and was one of the 'smart' pundits trumpeting the necessity for the stimulus and promoting de facto Keynesian economics when all this first came up more than two years ago. He was quoted again and again and again by the Obamabots as 'proof' that we should all be supporting Obamas's initiative on that.

By October 2009 he was writing that Obama hadn't been Keynesian enough and should have spent twice as much:

Obama's economics --and his healthcare 'plan' - fail to help those who need it most. Thankfully, the Times makes it easy to search their articles. God Bless the Internet.

Clinton, Obama, Insurance

Mr. Obama claims that people will buy insurance if it becomes affordable. Unfortunately, the evidence says otherwise.

After all, we already have programs that make health insurance free or very cheap to many low-income Americans, without requiring that they sign up. And many of those eligible fail, for whatever reason, to enroll.

An Obama-type plan would also face the problem of healthy people who decide to take their chances or don’t sign up until they develop medical problems, thereby raising premiums for everyone else. Mr. Obama, contradicting his earlier assertions that affordability is the only bar to coverage, is now talking about penalizing those who delay signing up — but it’s not clear how this would work.

So the Obama plan would leave more people uninsured than the Clinton plan. How big is the difference?

To answer this question you need to make a detailed analysis of health care decisions. That’s what Jonathan Gruber of M.I.T., one of America’s leading health care economists, does in a new paper.

Mr. Gruber finds that a plan without mandates, broadly resembling the Obama plan, would cover 23 million of those currently uninsured, at a taxpayer cost of $102 billion per year. An otherwise identical plan with mandates would cover 45 million of the uninsured — essentially everyone — at a taxpayer cost of $124 billion. Over all, the Obama-type plan would cost $4,400 per newly insured person, the Clinton-type plan only $2,700.

RE: Stimulus:

Bit by bit we’re getting information on the Obama stimulus plan, enough to start making back-of-the-envelope estimates of impact. The bottom line is this: we’re probably looking at a plan that will shave less than 2 percentage points off the average unemployment rate for the next two years, and possibly quite a lot less. This raises real concerns about whether the incoming administration is lowballing its plans in an attempt to get bipartisan consensus.

In the extended entry, a look at my calculations.

The starting point for this discussion is Okun’s Law, the relationship between changes in real GDP and changes in the unemployment rate.

His biggest complaint is good ideas that don't get the follow-through. I've been reading him for years...I don't disagree with most of your premise, but he's never been an Obamite or a lock-step partisan.

We have to keep in mind that he's a commentator, not part of Obama's advisory staff. So I think it's fair to say the he's observing and applying what he knows, endorsing (or rejecting) ideas but also arguing the mechanics that come after.

Well we can agree to disagree on this one. Acknowledging that Krugmqn was one of Obama's strongest supporters re the stimulus is not the same thing as saying he is a 'lock step' partisan. But then Krugman has generally tilted left of center on most things and any way you want to slice it, he has been a staunch Keynesian. I too have been reading him for years along with the rebuttal of his philosophy by economists of a different mind.

In a lengthy and scholarly essay circa Sept 2009 he writes:

. . . .This is the second time America has been up against the zero lower bound, the previous occasion being the Great Depression. And it was precisely the observation that there’s a lower bound to interest rates that led Keynes to advocate higher government spending: when monetary policy is ineffective and the private sector can’t be persuaded to spend more, the public sector must take its place in supporting the economy. Fiscal stimulus is the Keynesian answer to the kind of depression-type economic situation we’re currently in.

Such Keynesian thinking underlies the Obama administration’s economic policies — and the freshwater economists are furious. For 25 or so years they tolerated the Fed’s efforts to manage the economy, but a full-blown Keynesian resurgence was something entirely different. Back in 1980, Lucas, of the University of Chicago, wrote that Keynesian economics was so ludicrous that “at research seminars, people don’t take Keynesian theorizing seriously anymore; the audience starts to whisper and giggle to one another.” Admitting that Keynes was largely right, after all, would be too humiliating a comedown. . . .

. . . .So here’s what I think economists have to do. First, they have to face up to the inconvenient reality that financial markets fall far short of perfection, that they are subject to extraordinary delusions and the madness of crowds. Second, they have to admit — and this will be very hard for the people who giggled and whispered over Keynes — that Keynesian economics remains the best framework we have for making sense of recessions and depressions. Third, they’ll have to do their best to incorporate the realities of finance into macroeconomics.

How Did Economists Get It So Wrong? - NYTimes.com