"The Story of Our Time" by Paul Krugman at the NY Times

[applegrove]

The Story of Our Time

by Paul Krugman at the NY Times

http://www.nytimes.com/2013/04/29/opinion/krugman-the-story-of-our-time.html?_r=0&adxnnl=1&smid=re-share&adxnnlx=1367373875-lz3G8Y6VbuylZtKONYwnNA

"SNIP..............................


Families earn what they can, and spend as much as they think prudent; spending and earning opportunities are two different things. In the economy as a whole, however, income and spending are interdependent: my spending is your income, and your spending is my income. If both of us slash spending at the same time, both of our incomes will fall too.

And that’s what happened after the financial crisis of 2008. Many people suddenly cut spending, either because they chose to or because their creditors forced them to; meanwhile, not many people were able or willing to spend more. The result was a plunge in incomes that also caused a plunge in employment, creating the depression that persists to this day.

Why did spending plunge? Mainly because of a burst housing bubble and an overhang of private-sector debt — but if you ask me, people talk too much about what went wrong during the boom years and not enough about what we should be doing now. For no matter how lurid the excesses of the past, there’s no good reason that we should pay for them with year after year of mass unemployment.

So what could we do to reduce unemployment? The answer is, this is a time for above-normal government spending, to sustain the economy until the private sector is willing to spend again. The crucial point is that under current conditions, the government is not, repeat not, in competition with the private sector. Government spending doesn’t divert resources away from private uses; it puts unemployed resources to work. Government borrowing doesn’t crowd out private investment; it mobilizes funds that would otherwise go unused.

............................SNIP"

[MannyGoldstein]

1. It's amazing. We know exactly how to fix this.

But the Predator Class wants pain from us.

More fun for them, I guess.

[RainDog]

4. over a year ago

I was reading an article about the decimation of the middle class in the U.S. and more than one "serious person" in comments said that U.S. wages would have to sink to the level of third world nations before corporations would move back to the states.

These comments caused outrage, but that's what is happening, whether we're outraged or not.

[socialist_n_TN]

15. It's pretty easy to explain in Marxist economic terms....

Google Michael Robert's blog. What it boils down to is that the RATE of profit is still too low for the capitalist private sector to invest in either new equipment or in new hiring, or indeed, in ANY of the productive sectors of the economy, so they turn excess money into dividends for stockholders, stock buybacks, or (once again), exotic financial instruments which provide a higher rate of profit.

Profit in capitalism is like water in that it finds it's own level to pool. Unlike water which pools at the lowest levels, profit will pool at the highest level of rate of return. Since most of the damage to profit is done by labor costs, there won't be much private investment until labor costs come down to the point where it becomes profitable to invest again.

[abelenkpe]

2. K&R nt

[Warpy]

3. People cutting spending was a good thing

since when they did it, they used their money to pay down unreasonable debts and then put a little aside for emergencies. They did nothing wrong and a lot of things right.

However, the government is not on the same level as individual households. When the economy has the bottom drop out the way ours has, government is the only entity that can possibly rescue and restart it by spending on jobs programs to get money circulated at the bottom where it will do the most good while raising revenue by scraping it off the top, where hoarding has made it useless to the larger economy.

Republicans have this exactly backwards. They think workers have a duty to spend every dime in tough times and go into debt if they don't have enough to spend, while the government cuts taxes on the top and increases their hoarding, doing nothing in the way of jobs programs.

I don't know what we can do about the people who so slavishly follow Republican dogma on this subject, who don't realize that government functions quite differently from the home economy or business economy, but I suspect destroying corporate media monopolies will have to be the first step.

Until we manage to outvote them, this is what we are going to get: a stalled economy with Congress sitting on its hands and doing nothing about it except making it worse.

[Spitfire of ATJ]

5. "Government spending doesn’t divert resources away from private uses"

And there's the rub. Paul is now STARTING to realize The Big Lie.

Republicans have been claiming every dollar the government spends is a dollar that it STOLE from "the economy" and that the cure for an economy in crisis is to make the government give back what it stole.

[Lydia Leftcoast]

6. As if government employees don't shop at the same stores as private sector employees

and as if the government doesn't buy everything it uses from the private sector.

[Spitfire of ATJ]

7. AND as if companies don't trip over each other to get a government contract.

[muriel_volestrangler]

8. 'Starting'? He's bneen saying this for over 4 years

He was arguing for a bigger stimulus from before Obama took office.

[Spitfire of ATJ]

10. But he's only recently beginning to realize what he's up against....

Republicans aren't interested in what's good for the country, the people, the economy or even for business. They're only interested in presenting themselves as heroes swooping in to save everyone from the Evil Gubmunt who will tax and spend us all to death.

[reformist2]

9. Increased government spending is fine, but Mr. Krugman needs to talk more about higher taxes.

Unless he's arguing that we can go up to 2 trillion dollar deficits, then I would have to respectfully disagree with him.

[Spitfire of ATJ]

11. Forget the deficit. It doesn't matter...

The only reason everyone in DC is freaking out over it is because Republicans told them to.

They didn't give a shit about it when they were in charge.

Trust me, if RMoney was in there right now the Beltway would be all aflutter over the lavish parties at the White House.

[Jim Lane]

13. I agree, and I'll add that tax increases have a contractionary effect.

It's not the case that a dollar is a dollar is a dollar. To increase taxes and spend the same amount on an increase in some forms of spending, such as unemployment insurance, would have a stimulative effect, because the multiplier is better. Nevertheless, other things being equal, a tax increase tends to cut aggregate demand. If all the Bush tax cuts were repealed, some rich people, now paying higher taxes, would respond by laying off the maid or deferring the renovation of the vacation cottage or whatever.

Krugman's point would be to deal with the unemployment problem first. Progress on that helps reduce the deficit, which isn't a big problem anyway.

[Spitfire of ATJ]

14. Here's the thing about the "debt" as opposed the deficit we don't hear...

The debt is mostly in bonds.

Bonds are a RIVAL to stocks.

When the Stock Market crashed a lot of the investor class moved their money to the security of the Bond Market. That's why you heard Republicans claiming the country is "broke". It's to scare the investors into believing those bonds are going to be worthless. This is also why the rich are obsessed with the deficit.

It's all a con.

Republicans want the idiot investor class to put their money back into the Stock Market so the crooks on Wall Street can play with it.

[Skittles]

12. when people realize they're not going to be able to retire

spending will plunge even further