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Paul Krugman vs. Steve Forbes

Discussion in 'Sports and News' started by CarltonBanks, Oct 17, 2011.

  1. CarltonBanks

    CarltonBanks New Member

    I thought this was an interesting back-and-forth. Two things stood out...first that Krugman still argues in favor of Keynsian Economics and second, that he could not answer Forbes' question about when a government has spent its way out of economic trouble.

  2. king cranium maximus IV

    king cranium maximus IV Active Member

    Why wouldn't he?
  3. The Big Ragu

    The Big Ragu Moderator Staff Member

    It was interesting that Krugman actually didn't shy away from Japan, which is conclusive evidence that he is wrong. It is two decades of evidence.

    At the end of the clip he is saying something about how if you look year by year, when Japan was spending more it's economy did better and then they would pull back on the spending and the economy would start to suffer.

    That is not really true unless you are manipulating numbers somehow to paint the picture you want, but even if it was true, the only conclusion is that spending yourself into debt is the only thing that can keep an economy growing in an economic down cycle, and you have to just keep increasing debt upon debt in order to expand the economy. Otherwise you are doomed to recession (for how long?!?!?).

    That is just insane, and it's just not true, in theory or in practicality.

    Other than where that money comes from (what Forbes brought up), a major problem is that government allocation of resources is inherently corrupt. When politicians pick economic winners, they are not picking it based on actual demand for anything. They hand out the favors to their cronies usually. So there is a real economic cost, because you shift money from potentially productive areas of the economy to those hand-picked areas. That has been a major problem in Japan, which has become a public works welfare state with the regional governments relying on Tokyo to provide jobs, not real economic growth.

    Japan has accumulated the largest public debt in the developed world, trying to revive an economy that has been in the tank for two decades. Its debt is more than 180 percent of its GDP. It has been the ultimate "stimulus" experiment.

    It hasn't stimulated anything, except the public debt.

    At what point can we conclude that it hasn't worked, and has created a bigger problem, not a fix?
  4. LongTimeListener

    LongTimeListener Well-Known Member

    If it has been two decades, that puts it a decade behind the U.S. gutting of regulation, lowering of taxes and embrace of trickle-down. We apparently haven't been convinced yet that those delusions don't work. So who knows how long these things can take?
  5. The Big Ragu

    The Big Ragu Moderator Staff Member

    Please tell me what U.S. fiscal policy has been since 1992 (good luck finding a cohesive policy in there), in Keynsian or neo-classical terms (what Krugman was arguing), and what consistent economic results it has resulted in. I'll listen. For what it is worth, "embracing trickle down" whatever it means to you, is not a fiscal policy. Be specific, please.

    Then, if you want to compare the U.S. economy since 1992 with the Japanese economy over that time, and demonstrate how the U.S. stagnated for most of the last two decades the same way Japan did, go to it.

    Japan has pretty much done one thing for the last two decades, and it has been right out of the John Maynard Keynes playbook. It's economy has been a disaster. It's the kind of discussion Krugman should be avoiding, given what he advocates.
  6. Bob Cook

    Bob Cook Active Member

    I don't know what this means for or against Keynesian economics, but a big part of Japan's problem is an aging, declining population. (Actually, that's getting to be a bigger problem in Europe, too.)
  7. britwrit

    britwrit Well-Known Member

    In a way, though, haven't some major government policies over the last few decade have been Keynesian stimuli by other names? The billions flowing into the high tech/aerospace sectors via the defense budget? The subsidies paid to farmers? Federal highway dollars?

    This isn't to argue that the entire federal budget is one huge scam, nor that we don't need to spend money on these things. But it's a matter of degree. You definitively need an armed forces but do you need 23 carrier groups to combat the ghost of the Soviet Union? To preserve the family farm but with milk cheaper than water? Effective law enforcement but thousands of prisons to jail non-violent drug offenders (keeping them out of the job market AND employing lots of guards?)

    I'm almost most definitively wrong but to my little pea-brain, we've been doing this sort of thing since FDR. Just because we don't label something as Keynesian doesn't mean that it isn't.
  8. Alma

    Alma Well-Known Member

    Ah, more of the "trust the magical money people" thinking to solve all of America's financial woes, I see.

    I love how the motivation of money, according to some, is so overwhelmingly pure that a thing like corruption couldn't possibly become a factor. Government allocation is inherently corrupt? Yeesh. <i>People</i> are inherently corrupt. So what's the solution again? Have fewer people capable of corruption? Let them discern how we solve this problem? And sell the American people on that?

    The level of the con here is spectacular. Is it finally becoming more clear that the Republicans plan to post Mitt Romney as their candidate, glom on some 9-9-9 tripe from Herman Cain and lube up Paul Ryan and/or the Fat Man for 2016? The next four years are going to spent in the kind of gridlock and stupendous Congressional warfare that we haven't seen since the 1850s.

    I have to applaud it, really. Liberals and independents have spent so much time up in a lather over GOP candidate clowns who don't have a prayer of winning - and never had a prayer of running, like Palin - that they can't see that the conservatives <i>want</i> Obama for four more years. He's the lightning rod. He's the punching bag they need to coast into the Oval Office in 2016. Could you seriously see some of the people on this board shilling for frigging Romney for the next eight years?
  9. hondo

    hondo Well-Known Member

    Krugman will not allow himself to be wrong, nor will he allow anyone to prove him wrong. He's going to believe what he believes. Better to let him wallow in his insulated New York worldview of things and hope guys like him never get any real power.
  10. LanceyHoward

    LanceyHoward Well-Known Member

    In Japan the economy suffers from deflation. If the Japanese cut spending the reduced spending would cut demand at least a little and lead to further deflation. And I guess waht Steve Forbes would recommend for Japan is further tax cuts for the wealthy, which certainly increases public debt in the short term.

    And for an economic disaster Japan is certainly a nice place. If you walk around Tokyo it is in my opinion nicer than Manhattan.
  11. Alma

    Alma Well-Known Member

    Oh, I'm pretty sure the New York "worldview" of things includes quite a few who'd disagree with Paul Krugman. Many of them work on Wall Street. Nice canard, tho.
  12. LanceyHoward

    LanceyHoward Well-Known Member

    This is a point Krugman makes I don't think that more conservative economists rebut very well.

    The best way to stimulate an economy is to cut interest rates. Even Krugman thinks that. But what strategy do you take when interest rates are already zero? Tax cuts? They also drives up the deficit and the rate of government debt to GNP. Tax revenues have already fallen to thier lowest point as a percentage of GNP in 60 years. And cutting FICA taxes has not accelerated the growth of the economy this year. What examples of economic recoveries does Forbes present when the interest is already basically zero?
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