Paul Krugman For OMB

By Simon Johnson

The president should nominate Paul Krugman to replace Peter Orszag as director of the Office of Management and Budget (OMB).  (Orszag resignation details are here.)

We have previously reviewed Krugman’s outstanding qualifications for this (or any other top level) job (link to details).  The main reason Krugman himself has been reluctant in the past relates to a potentially difficult Senate confirmation hearing – for example, if Krugman had been put forward to replace Ben Bernanke.

But for the OMB position, the dynamic of a hearing would be terrific for the president’s specific agenda and broader messages.  Krugman, of course, is the leading advocate for continued (or increased) fiscal stimulus.  This is exactly President Obama’s message to the G20 this weekend.

Plus, when Republicans push back against Krugman on this issue, he will let them have it full blast on fiscal policy during the Bush administration.  Krugman has, again and again, been an outspoken critic of the Bush era fiscal policy.  He has precise chapter and verse on where the Bush team went off the deep fiscal edge.

Krugman also stands for responsible medium-term fiscal policy – he wrote the original definitive work, after all, on balance of payments crises.  But the point is not to engage in precipitate and panicky fiscal austerity (as announced in the UK today), but rather to put the overall debt onto a sustainable path.  It is very hard to do that when the people claiming the represent “fiscal prudence” are actually the ones who created this massive mess in the first place.  Krugman can set the public record straight on this – it would be great television and very good economics.

This is exactly what the debate on our current deficit and future debt path needs.  The Obama administration lost the narrative on this point also (as well as on banking and much more).  Paul Krugman can get them back on track.

126 responses to “Paul Krugman For OMB

  1. When Obama was elected I think that Paul said something like that he could be much more influential in his actual position than in the council of economic advisors.

    I think you would agree with me, if not publicly, that he sometimes overstates or oversimplifies his cases when he makes some points. This allows him to give a heavier counterweights to some points of view that are predominant. The problem, in the OMB, is that he would have to be much more quiet and keep the internal discipline. Do you think that would really be able to be more influential there?

  2. More fiscal stimulus? Are you out of your mind? How would increasing our debt trajectory improve GDP? The US consumer is tapped out even though interest rates are historically low. Krugman, Summers, Geithner and Obama will always spew the bankers BS – but why would you?

  3. Oh…so you’re not a deficit hawk after all? Funny then, all that time you were taking the long-term deficit problem(which is not a problem), seriously.
    And I agree, Krugman would be great for the post.

    Baffled,
    DV

  4. I suspect that Krugman’s response to such an offer would be something along the lines of LBJ’s, clarified by Pat Paulsen:
    “I do not wish this post. If nominated, I shall not run. If elected, I shall not serve.”

    I can’t see it.

  5. I suspect that one of the reasons that the UK went all panicky is that the machinery of UK and US governance now is tuned to short-term actions, as that is all that the electoral cycle and the memory of the electorate pays attention to. A more rational longer term strategy for fiscal balance would require a governing structure that can maintain discipline for decades. That is an impossibility in our system; it is too focused on winning and holding political power rather than truly governing.
    The result of all this, unfortunately, is that the role of disciplinarian will be played by the only real actor in this play – the economy itself. And, also unfortunately, the only folks so disciplined will be the working stiffs, the school age youth, retirees, and immigrants.

  6. The only “stimulus” we should have is (1) direct lending from government to support the real (not phantom financial) economy and (2) for a “safety net.

    Supporting the real economy means government lending to qualified (i.e. well underwritten) entrepreneurs, small/medium sized R&D, & non-profits doing good works.

    THE FINANCIAL SECTOR SHOULD NOT GET 1 CENT MORE FROM GOVERNMENT. NOT 1 CENT MORE.

    THE FINANCIAL SECTOR SHOULD BE REMOVED FROM THE LOOP OF GOVERNMENT. THE FINANCIAL SECTOR SHOULD NOT BE A VEHICLE FOR ANY GOVERNMENT PROGRAM.

    FINALLY, NO MORE BAILOUTS (this includes “cash-for-xxxx” programs. PERIOD.

    If Krugman is agreement with this, I’d support him. If not, I would not.

  7. Brad Thrasher

    Internet motion to encourage President Obama appoint Paul Krugman as Director of the OMB is hereby seconded.

  8. “Krugman” and “responsible” do not fit into the same sentence, unless that sentence is “Krugman’s columns in the NY Times are responsible for degrading the quality of discussion of economics in this country.

  9. What an idiotic notion.

  10. Krugman’s hearing would be entertaining, but what they’ll get is someone with Orzag’s amorphous morality.

  11. Perhaps this post would be more appropriate for “The Highly Unlikely Scenario.” Is the idea here to punish Obama for not being stronger on FinReg?

  12. The OMB is supposed to be non-partisan. Krugman, over the past six years or so, has shown he is anything but. Poor choice.

  13. I think he would be a fantastic addition to the administration- smart, well-educated, respected and forceful. He’s also one of the few economists that actually predicted the collapse, and he called Bush way back in 2000, when the rest of the punditocracy was worried about neckties.

    However, I get the feeling that Krugman’s kind of a lone wolf and does not get along well with others. I don’t know how well he would do working on a team.

  14. I like Paul Krugman overall, and I think as far as his resume is concerned he’s obviously qualified for the job. He’s generally a good guy, someone who cares about society, and an important voice above the din of the crowd. But he is way way way too opinionated. He won’t be able to “keep a lid on it” and the minutia of the job will bore him to tears over time, if his head doesn’t explode for keeping his jaw shut.

    I’m not against it, I just don’t see a good result.

  15. This has got to be a sarcastic approach! krugman is outright dangerous. He had lead the charge to ‘Spend our way out of debt” PATHETIC. I nominate Mike “Mish” Shedlock, or Max Keiser

  16. Krugman is a bright guy and has made some astute observations. He has also made some really dumb ones. He is a fan of globalization and job outsourcing. If his position was limited to pure economics, perhaps it would work. But I would vehemently protest against him being appointed to any position involving international commerce.

  17. Although I’m a fan of many of Paul Krugman and many of his ideas, I don’t think the budget job makes sense. He’s a thinker and theoretician,an academic like Simon, not a nuts and bolts administrator. If he were to replace Larry Summers I would be jumping up and down with joy; but in the budget job he’d be a liability to himself and to the Administration.

  18. He’s more needed (and more valuable) in his current role, I think — continuing the high profile debate on the issues, and educating the public, is the only clear way to provide/sustain the momentum for real reform. We need clear exposition of the issues on all sides, and he provides an important and very visible perspective via his work at NYT. I say he should stay put.

  19. Mish is often right with his calls, but he is also an extremist when it comes to his dogmatic beliefs about markets being the answer to everything. Even if this is true, as George Soros had said at the onset of the current crisis, the market should be rescued. And then there are market failures, tragedies of the commons, public good matters, abuse of monopoly power and so on which governments must regulate. Mish sweeps all those babies out with the bathwater; for example, he recently sided with the folks who think climate change is a hoax…Is it because his dogmatic markets perspective blinds him to the hidden costs of environmental degradation that unregulated free markets tend to leave behind in their wake?

  20. I think it’s a great idea. Krugman could go before the Senate with the instruction from the White House to scorch the Earth during the confirmation process. It would be great television, and he would ruffle so many feathers that he’d get voted down.

    And then Obama could nominate whoever he wanted for the post and they would sail through the confirmation process.

    Krugman gets to stay at Princeton, gets to yell at Bushies, Obama gets political cover from saying the exact same things, and his shadow nominee passes quickly. Win-win-win-win.

  21. great great idea. let’s hope he brings the same keen wisdom and insight to OMB as he brought to Enron when he was an advisor to them.

  22. “But the point is not to engage in precipitate and panicky fiscal austerity (as announced in the UK today), but rather to put the overall debt onto a sustainable path.” This is not the right way to characterise what the UK did today. According to our new OBR, the new budget slows down growth a tiny bit next year, accelerates it thereafter – that’s not so terrible, surely. And we do need to get welfare bills down somewhat, and cut general public spending – much of this is long overdue, I would argue.

    What the UK did today was neither panicky nor precipitate, and it ought to put the deficit onto a sustainable path, just as you quite rightly think we should be doing.

  23. Have to disagree. Simon, you dissappoint on this one. Budget is no place for a frothy Keynsian, like Krugman. You make it sound as though the role is another place to put politics, when it should actually remain a place for people exactly like Orzag. Remember his spokesman’s comment about him not wanting to speculate? Economists are much more given to that and we’ve been left with the consequences of 30 years of, more or less, economic speculation about lofty GDP assumptions that rationalized all sorts of debt. We have plenty of that already and won’t be anywhere near sustainable deficit/GDP growth (~3%) until after we’ve addressed costs that will make liberals and conservatives cringe.

    Now, Krugman Vs Summers would be a different proposition.

  24. Really good points. Budget and economic policy/politics are two different things. And Krugman vs Summers … that might be a worthy trade-off against Krugman’s public communication role at NYT.

  25. Simon:

    Good economists understand opportunity costs. As OMB director, Paul Krugman would have to vacate the role that he currently plays in political debates. Why precisely do you think he is more valuable as OMB director than in his current role?

  26. Government spending of 1 trillion dollars would increase GDP by the same amount. That’s not even factoring in a multiplier.

  27. And you are????? A nobody???

  28. WTF does that mean? Is that a requirement for the job?

  29. Kliment Voroshilov

    Krugman is a schmegeggie, and a particularly arrogant and supercilious schemeggegie at that, one who sees everything through the lens of the DNC. It is said of him that he predicted all eight of the recessions that occurred between 2003 and 2007. I can’t imagine a more poorly considered choice than this self-seeking sack of #@%& whether the position in question were head of OBM or simply cleaning up BM. But I suppose it fits for Johnson to make such an addle-brained recommebdation. Recall that Johnson views our government as free of corruption. Now that ought to tell you all you’d ever need to know about Johnson’s judgements.

  30. Seconded. He’s come out time and again stating his opinion bluntly and without reserve. He won’t get along with what’s in the whitehouse, and if he does, we’ll lose his voice out here balancing out others. I think he should keep doing what he’s doing, though I don’t mean that as a slight. I mean he’s exactly where he should be right now.

  31. Have you asked Krugman if he’s interested? Frankly, to paraphrase someone who repudiated the suggestion of a VP nomination, the job’s not worth a bucket of warm piss.

  32. The OMB is supposed to be non-partisan.

    Good one! But it’s not supposed to be a comedy blog.

    Though I do agree the Krugman idea sounds silly. I’ll admit that so far I’m looking incorrect in my expectation that after Thugman’s shilling for the health racket bailout, he’d next shill for Obama’s dream of gutting Social Security. So far he’s implicitly opposing that. (Although so far as I’ve read he’s been referring explicitly only to parallel assaults in Europe.)

    So given that this is Obama’s next big policy push, he’ll want a compliant hack at OMB (which is of course always highly partisan, as is the CBO; maybe the GAO struggles to maintain some independence).

    If Krugman’s really not on board with “austerity”, that is, with the next frontier of monumental robbery, then he’s obviously unsuited for the post.

    But I don’t assume for a second that if Obama directly asked him to get on board, that Krugman wouldn’t flip and go into Thugman mode.

  33. Wrong. He is not a partisan hack on the left simply because he criticized Bush’s policies. This can be proven by his willingness to criticize Obama’s policies as well. To anyone paying attention, Krugman has consistently shown that he makes his judgments on the merits of the argument, not based on the source.

  34. CBS from the West

    Well, it is clear from the responses so far, that there is considerable disagreement among the commenters on this blog about the appropriateness of the Keynesian approach to our current situation. Krugman’s pronouncements on this topic, in his NY Times Op-Ed column and on his own blog, are better reasoned than most of his opponents, but he has never really used his platforms to explain how it works over the long haul. That is, he starts from the basic assumption that the indebtedness generated by a massive stimulus program never has to be paid down: we will simply grow our way out of it after the economy recovers, and debt as percent of GDP will return to historical levels.

    Perhaps so, but I have never seen him explain where this GDP growth will come from. Nor, for that matter, why GDP growth will even be of much use when 65% of our GDP is wasted on military, finance, entertainment and healthcare (the latter being 33-50% waste). The double-dip in the Great Depression that occurred in 1937 is typically cited as what goes wrong when you prematurely start to wind down spending. Undoubtedly so.

    But do we really know that that isn’t just inevitable no matter when it happens? After all, World War II supervened shortly after that and changed the entire economic ball game. But we can’t count on anything like that: we’re already involved in two massively expensive wars and it isn’t pumping up our economy as far as I can tell.

    So, I think it would be great if we got some posts or extended comments dealing with these questions. A lot of our commenters are very knowledgable and also good at explaining. It would really help those of us who would like to understand better, but don’t have time to learn macroeconomics from scratch.

  35. You’re seconded Mr Lee. The other jobs (OMB, Trsy sec’y, even the Fed) don’t particularly suit his skills.

  36. WWII only pumped our economy because of a really fortunate juxtaposition of elements, not the least of which was super-plentiful domestic manufacturing capacity, domestic raw materials capacity, and last but certainly not least domestic OIL capacity. Even with all that, war brought with it the inflation it typically does since money is POURED in to a furnace that simply destroys ALL the valuable things you create.

    Now, we lack ALL THREE of the things we had rolling in to WWII, plus world wide oil is starting to lag for everyone. We simply cannot recover to the previous economy going gangbusters… the Keynesians are assuming a drop in replacement for oil before it becomes a problem. Way way WAY down the road we might recover, but for now we’re simply going down no matter what we do.

    Krugman may be wrong about the procedure for getting us out of this mess, conveniently ignoring the painful facts of looming energy, resource, and manufacturing shortage, but I give him credit for at least seeing the dangers of an out of control finance sector even without the other complications.

  37. There is no multiplier effect for government spending at the current time

  38. So, the only objection from the comments above seems to be that he’s too SHRILL!!111

    I wish such people would stop being such pearl-clutchers.

  39. Wow, sure seems like a lot of people here have drank the free-market cool-aid…

  40. “pearl clutcher”s?! Now that’s a new one – thanks for improving my vocabulary…

    I’m not exactly sure why people who don’t like Krugman would be hanging out reading the likes of Simon and James anyway but..

  41. OMB is a cabinet-level office and I don’t think it’s meant to be non-partisan. It shouldn’t be confused with CBO, which is non-partisan.

  42. Nobel Laureate Professor Dr. Krugman is a highly respected economist but that’s simply the same skill set as reading tea leaves. He is not a great mathematician nor a practical individual and that is a rather daunting problem. If someone is needed to helm the Ship of State higher up onto the rocks then he’s the guy but, I think it’s time time we learn to live within current available cash-flow – we’ll have to sooner or later. A 30% reduction in our standard of living now is better than a 50% reduction four years from now. A quick end with pain is better than pain without end.

  43. Sufferin' Succotash

    David Stockman, OTOH, was a great choice.

  44. By linking austerity with monumental robbery, I assume you mean that those who committed the robbery get to keep hteir loot, and those who lost their shirts get to be auster? what bull crap. With all the gains in producttivity over the last decade and the flat wages isn’t it about time that those who profited by the labors of others should pay to get this economy moving. Or is your suggestion more tax-cuts for the rich?

  45. Mr. Johnson wrote:

    “This is exactly what the debate on our current deficit and future debt path needs.”

    Muy Bueno!

    Duke it out boys!

    I hope Mr. Krugman agrees.

  46. Good points. So, how about this: Geithner to OMB, Summers to Treasury, Krugman to NEC. Geithner is an All-Star MVP bureaucrat, exactly the type needed for OMB but not who you need to face down arrogant, powerful megabankers like Blankfein and Dimon. For that you need Summers, an equally arrogant political powerhouse and intellectual heavyweight who could give Treasury enough spine to say no to Wall Street when it’s needed. That leaves the National Economic Council spot for Krugman, exactly where he’d be most useful, helping to shape overall economic policy. Obama has some very talented people on his economic team, but they’re not in the right jobs, and so the results have been mediocre at best. If Obama doesn’t shake up his economic policies and personnel, he’ll continue to get the same results, and probably be a one-term President.

  47. Simon,

    “But the point is not to engage in precipitate and panicky fiscal austerity (as announced in the UK today),”

    A more pragmatic observer would have noted that ‘government’ as a proportion of GDP is much higher in Europe (~50%) than in the US or Japan – ergo, the ability of European governments to provide fiscal stimulus without adverse long-term consequences is constrained.

    I invite you to enlighten us with your view on the optimal size of ‘government.’

  48. when did larry move from wall to main?

  49. “he would ruffle so many feathers that he’d get voted down. And then Obama could nominate whoever he wanted for the post”

    Oh, you mean like when ‘W’ nominated the sycophantic Harriet Miers knowing she would be rejected, allowing him to bring-in the right-wing Alito?

  50. Kliment Voroshilov

    No, I said schmegeggie, not shrill.

  51. Kliment Voroshilov

    While it isn’t exactly encouraging that Johnson’s made this recommendation, the fact remains that at a personal level Johnson is inoffensive, his wussiness nothwithstanding. Krugman, on the other hand, needs soul surgery.

  52. Yes it is. That’s factoring in a multiplier of one. Otherwise, with complete crowding out, there would be no effect on GDP, just a shift from private to government consumption or investment.

  53. Bayard Waterbury

    Simon, I like Paul, and believe that he has a great economic philosophy, which, by the way, includes a level-headedness. But, I would rather see a different situation. I’d rather see the President move Christina Romer into Orzag’s position, have him ditch Larry Summers, and put Krugman in as a replacement for Summers. With Summers in his position, we will never see any trend away from supporting Wall Street. I think that he has been given far too much credence in his present position, and the Geithner/Summers team has proven to be a complete failure for Main Street, and a real boon for the TBTF’s. Summers is the primary reason why the President did not really push for a strong financial reform bill, and Geithner did the “inside” work to move the Dems away from anything with teeth.

    Krugman is just too much of a lightning rod for the Budget Director’s job. Sorry, but I just don’t see him there. Not that he’s incapable, but just not the right persona.

  54. Good points.

  55. There is quite a difference between expansionary fiscal policy in the U.S. and in the U.K. The response of the current account balance will be much more ferocious in the latter, but should not be ignored for the former. Paul has come out strongly in favor of measures to halt Asian currency interventions. Without that, expansionary fiscal policy here would be a bust, imho.

  56. Crowding out!!

    What planet are you on?

    The private sector is on a spending strike. Housholds because a large proportion of them have lost so much wealth and are overgeared while many of the rest are scared of a double dip, businesses because they have overcapacity for current demand – look at the construction starts and car sales compared to 3 to 5 years ago.

    If it weren’t for stabilising the banking system (it would have been better to have prevented systemic risk through regulation) and stimulus you would now be in depression. Check out the trends in Eichengreen and O’Rourke’s article on Voxeu.

  57. I just wonder what all of you will say when there are millions of angry starving people in the street…..

  58. Krugman would be great but would he be effective after all the half measures in financial regulation and everything else that’s been done?
    Maybe it would help turn the administration around. One man, I doubt it. I agree with most of what he says but that does not make him a savior.

  59. Even if you don’t agree with Paul Krugman on his recommendations for policy, you can’t accuse him of “spewing the backer BS.”
    That’s just ridiculous.

  60. oops, I meant “spewing the bankers BS.”

  61. Well, I don’t understand your comment, which seems unresponsive and rather confused.

    By calling “austerity” robbery I mean that as the banksters exhaust the ability of the Bailout to serve as a loot conveyance, they’re turning to the direct robbery of pensions, funding for public amenities, and other public property.

    That’s what “austerity” is. The term itself is just the new buzzword for the same old “structural adjustment” crimes, now being brought home to liquidate the Western middle class itself.

    Austerity is the next means of the gangsters keeping what they already stole and stealing more.

    So that’s what you’re supporting?

    My suggestion to “get the economy moving” would feature, as Stage One, puncture the bubble, jubilate the debt, wipe out the rackets, end all corporate welfare, and restitute everything the gangsters stole.

  62. You mean like the way that under Bush he wrote that only single payer would constitute real health reform, and warned “progressives” against letting themselves be astroturfed into supporting much less in the fraudulent name of reform…and then under Obama he suddenly wouldn’t demand single payer (giving the standard hack argument that “I can’t support it because people like me don’t support it”) and personally led the way in astroturfing for the health racket bailout, exactly the thing he had previously warned against?

    Or you mean like the way he was so eloquent in opposing Bush’s war, but has gone mysteriously silent since it became Obama’s war?

    It seems “the merits of the argument” in these and many other cases suddenly changed completely from 2008 to 2009. What a coincidence!

    You’re of course right that Krugman’s not a partisan hack “on the left”, since Obama and the Democrats’ corporatism and war-mongering aren’t on the left, but just as much on the right as those of the Republicans.

    But Krugman absolutely is a partisan hack of the Democratic party, and an ideologue of predatory globalization (which he toned down during the Bush years since that was an example of Clinton policy he no longer wanted to laud once Bush took it over).

    For the real Thugman, lasciviously gloating over outsourcing and the downward pressure on wages (“In Praise of Lower Wages”), one must go back to his writings in the 90s. Here’s two examples.

    http://www.slate.com/id/1918

    http://www.slate.com/id/56497?obref=obinsite

  63. CBO, which is non-partisan

    Please, no more jokes.

    The CBO is of course a flunkey which isn’t even allowed to “score” something other than according to the political parameters it’s given by Congress.

    Whatever one thinks of that procedure, “non-partisan” it ain’t.

  64. Let’s not be melodramatic little deary. In fact this doesn’t have much to do with anything long term. Probably there are at least 5 dudes (I would go with someone of the Hebrew persuasion if it was my choice) who are qualified and well suited for the job. Probably more like 10 dudes.

    But when people should have worried about homeless was when the “cramdown” legislation failed in the Senate. http://www.nytimes.com/2009/05/01/business/01credit.html On that day most Americans were just too bothered to read a newspaper or phone their Senator (assuming they knew their Senators’ names). 95% of Americans didn’t even know it was being voted on….. But then it’s like that everyday in America.

    Don’t worry though, the Tea Party has the answer. Complain about the taxes on your cigarettes and draw a Hitler mustache on a President Obama poster—that will get us where we need to go.

  65. Roman Berry

    No, he isn’t out of his freaking mind. Are you?

    Seriously (and I don’t mean this to be ad hominem), it’s woefully apparent that you have no clue with regards to GDP, deficit spending by the government (of the nation that has the advantage of minting the world’s reserve currency) and the difference between deficit spending by our government and spending by consumers that drives them into deeper debt.

    As far as Krugman “spew the bankers” (which I read to mean in the context of Geithner that you’re saying Krugman is on their side), exactly which planet is it that you live on?

    Krugman is saying that government spending can help to make up for the difference between potential economic output and real/depressed economic output in the short to medium (say 1 to 5 years) term and that doing so is actually money well spent. Krugman is saying that the time for government to cut back is when the economy is running smoothly at close to its full potential. And Krugman is right.

    I know that it’s hard for some people to wrap their heads around this idea, but when it comes to the economy during recessions/depressions, what is folly for individuals that have lost or may lose their jobs (increased spending) is absolutely the correct prescription for government…or at least for a government in a nation with its own currency…and all the better if that currency is the world reserve currency. Lucky us…unless we’re stupid and make ourselves unlucky as a result of that stupidity.

  66. Roman Berry

    Are you conflating “partisan” with “in touch with reality”?

    Krugman has shown that he stands ready to slice and dice fools regardless of party. He slices and dices Obama and Obama appointees on a regular basis, much as he did with Bush and Bush appointees from the previous admin. In what way is this partisan?

  67. Roman Berry

    Krugman has never said that we (or any nation) can “spend our way out of debt.” Never. That you would even say such a thing tells me that you have absolutely no grounding in basic economic theory or in any way understand the output gap.

    Krugman, like every other Keyenesian, is saying that when times are bad, deficit spending will help to make the times less bad and is in effect a jump start or otherwise an investment in the future. And Krugman is right.

    Deficit spending by government is not the same thing as binge debt spending by consumers. They are polar opposites. When times are bad, government should spend like crazy and consumers (engaging in the paradox of thrift) should save. And when times are good, government should pay down debt…and consumers should spend like crazy.

    Think about it.

  68. Roman Berry

    Krugman WAS a fan of globalization and outsourcing. As the facts have come in and the theories have been found wanting, his positions have changed. Really. (You should perhaps check it out for yourself.)

  69. I’ll back the “spewing banker BS” comment.

    Krugman got a Nobel Prize. So did Hayek. You might study up on Hayek. His contribution to economics was focused on business cycles and how government spending serves to extend the time of depression and the severity of wealth destruction (unless you work for the government?).

    Any attempt at the start of depression to spend and tax serves to make matters worse, eventually, unconditionally.

  70. So Krugman says we should prop up all the companies, investors, entrepreneurs who made bad choices because of insufficient understanding, research, diligence, risk management?

    This is a perfect recipe on expansion of moral hazard and how to continue making bad decisions that you don’t pay for.

    The correct answer is/was to have those banks fail, have the businesses fail, clearing the bad investments and bad businessmen out of the system. Cutting taxes and government spending to allow people to have greater access to real money, not debt. Those with money will have more money, less competition, and more resources (machine and manpower) to invest in new business ventures and expansion — resulting in real jobs, real growth, and real recovery.

    All we have now is fewer people working and those remaining getting more money taken away to support those who don’t/won’t work. Now no one has the real money, not debt, to resume business growth. The nation is on life support with little motivation to recover.

  71. Dear Mr. Berry,
    Thanks for your opposing input. The Keynesian Theory is based on saving in the good times to spend in the bad (squirrels actually do that) – it falls apart in one important area – governments never save in the “good” times – it isn’t in their nature. Professor Dr. Krugman would flunk a basic math course. We make all things much more complicated than reality by hoping the complication will somehow rescue us from the basic truth of the math. You are correct that a spending binge by an individual and government are very different – the individual at some point has to face the math and pay or default. A structural deficit of such magnitude has been allowed to develop that the cost of three programs will exceed the entire cash-flow of the government in 2011. I sincerely wish your thesis was correct because it would be a (seemingly) more pleasant future and I’d love my kids to enjoy that but sometimes, reality sucks and can’t always be avoided.

  72. How can anyone believe that appointing this idiot or that idiot to a position which amounts, basically, to covering up with mathematical flimflamery the scheming and looting and waste immortalized in the Federal budget will have any more impact than a fart at the Superbowl?

  73. Yes, wherever wealth and power gather to do business. Certainly Washington and Wall Street which is why they co-mingle so well.

  74. And while we’re at it, tom, let’s quit paving streets, close all public schools, parks, reduce fire and police, hey, maybe we should go back to the barter system? In case you missed it, those with money already are getting more money -they’ve got the game skewed that way. No one will invest in producing if there is no market for that production, or do you believe that we should give businesses more tax breaks so they will build more plants to make more products no one can/will buy? Send a few more jobs to China and India, cut the hours of those left here in the US, continue to widen the gulf between the haves and have nots. Yeah, that’s the ticket! Sorry, that’s not the world I want to live in, nor for my kids.

  75. ROFLMAO! Well said, hermanas! And so very true!

  76. I don’t understand what your point is, Russ. PK’s Slate articles are as true today as they were in the 90’s. Developments in China especially have borne him out.

  77. “…with complete crowding out,…”

    IOW, in a different universe,….

  78. And while we’re at it, Sandi, let’s finance terrorist groups, invade Pakistan, prohibit Earl Grey tea, and hey, maybe we should add a tax for everyone whose first name starts with S? I don’t want my kids to live in that society, unless their names don’t start with S.

    Wait, what? You’re saying no one here is talking about doing any of this so my comment is worthless?

    Ya don’t say.

    In case you missed it, Sandi, the “haves” with political connections and the money to take advantage of Cash for Clunkers, lobby for free money, etc. have been precisely the ones who have benefited the most from these ridiculous stimulus packages which leave in power the idiots in management who by their incompetence and greed screwed up. Stop being so incredibly naive and closing your eyes to the billions in bonuses upper management is getting, courtesy of the taxpayer, instead of criminal investigations because the corrupt and self-important “experts” don’t think the infantilized world can survive without them.

  79. It is time to allow Krugman to put his acts where his mouth is and see if he is any better.

  80. Yes, it’s true. All real jobs being vaporized. The middle class being liquidated. All non-rich Americans being reduced to serfdom. It’s all happening, exactly as the globalization elitists like Krugman always intended and wanted.

    But their Big Lie, as with every totalitarian ideology, was that “if everyone sacrifices now, we’ll all have paradise in the future”. That was the great crime of the flacks.

    Surely you didn’t read those criminal pieces as attacks on globalization? “In Praise of Lost Jobs”?!

  81. You’re mad – stark, raving mad.

    You need some help, Russ.

  82. Brad Thrasher

    Mish is nothing more or less than a shill for an investment management firm. Personally I found him to be far too full himself to be objective on any topic.

  83. Brad Thrasher

    WOW, After skimming these posts I must say that I have never read such a gross misrepresentation of anyone since yesterday when I read a Von Mises Institute true believer on Keynes.

  84. Summers likes debt, Wall Street likes debt. Come to think of it, Krugman and Geithner do too. The difference I see in Krugman over Summers is one aspires to be more liberal in facing the “too big” issue, while the other, first and foremost, aspires to power.

  85. Yes, right from the kitchen table of budgeting.

  86. Simple, Orzag wasn’t an idiot. He was one who could be asked the financial implications of policy and turn around with an answer almost as good as Bill Gross can count cards. Certain people are so impulsively geeky that no amount of ideology gets in their way.

  87. sorry Simon, won’t happen. They will probably pick some former Clinton person or someone from the Republican Party who wants to gut Social Security.

  88. RE: Will we double dip, like 1937?

    I don’t have all the numbers, but first consider we didn’t shrink like we did after 1929. To this point, the worst quarter was -6.7%. That was one quarter, mind you. We’re back near +3% for 2010. That tax revenues from that growth rate are unlikely to bring the deficit under a trillion, or about 10% of GDP any time soon.

    An economy can pay back debt by simply growing around it, if debt growth is slower than economic growth. Given that not only are we at a non post-war high for debt to GDP, but we’re at a pretty juicey high for deficit to GDP, it gets harder to suggest we’ve got untapped GDP (unless you’re Summers, or even Romer) to close an enormous deficit/GDP gap.

    When a politician wants to reach for the Keynes sauce to get an economy back to a potential GDP rate of ~3%, or close to the average, that’s one thing. But when they won’t lay off it and start to pull numbers out of the sky instead of addressing their budget, most of us begin to get nervous.

    I was a caller on a radio show who asked someone with access to Christina Romer what her projections were for GDP and the answer was something like “we’re 6% below potential”. I don’t know if that means she believes in 3%, plus 6%, or just 6%, but the implied debt for failing to reach that mark isn’t something I want to be around for.

  89. Paul should stay put. He has much bigger impact where he is. The only exception maybe at some point replace Summers with Paul. And move Summers over as Fed chairman.

  90. “Reality is a crutch for people who can’t cope with drugs.”

    Lily Tomlin (1939 – )

  91. Paul Krugman For OMB seems a controversial choice.

  92. Great satire!
    Or… do you mean that seriously?

  93. Krugman would be perfect for the position. So of course he won’t be chosen. This President will make a conservative and uninspired choice and likely that choice will be and alumnus of Government Goldman.

    I like the president, but his choices other than Hillary Clinton, Shinseki, and Chu have been boring as a box of rocks and not necessarily the best ones, cough General McChrystal comes to mind. Shouldn’t have been hired knowing he was involved in the coverup of Pat Tilman’s death. Tim Geitner shouldn’t have been hired since he was asleep at the wheel in New York and had a ridiculous sum of back taxes.

  94. Can I be the man who cried Volker? Volker would be a much better choice.

  95. Brad Thrasher

    That’s because Obama is Bush in brown skin. Look no further than HCR, FinReg and with a wonderful opportunity for change we can believe in re. Afghanistan, Obush continues the policy by appointing Patreaous.

  96. Amen brother
    Amen

  97. There is no good person for the job because the job is impossible

    Krugman, however, is a damn fool, and will accelerate a hyperinflationary hell future.

  98. Statists don’t understand a thing… i hope Krugman goes there, it is already past time to see how idiot he is.

  99. Ted Kaminski

    Your characterization of Krugman’s support for final reform of health care seems misguided. Did you follow his blog through the year at all? With the choice of all or nothing over single payer he decided it was better, but not great, to at least have some reform.

  100. Hilarious! Thanks for the laugh. Your sarcasm is unflappable Simon.

  101. I came to this via a link on Zerohedge.

    I spent six paragraphs thinking this was tongue-in-cheek.

    Sadly it is not.

    Ralf

  102. Ted Kaminski

    “Never” actually happened during the Clinton administration.

    Interesting that most finance/business types take their econ 101 classes and move onto MBAs while those delving into economics are very heavy into math.

  103. Ted Kaminski

    The facts don’t seem to support your thesis on hyperinflation. The worry should be deflation.

  104. Krugman is a beltway Economist that provides cover to failed Keynesian economics so closely embraced by economic illiterate politicians. Remeber, Barack Obama has a Nobel Prize too!

    Anyone who would want Krugman in any lead Policy position is insane. Take off your rose colored glasses. The crowding out effect of all this stimulus is staggering. Look at private domestic investment and the broader unemployment numbers, and private lending. If you own a small business, try to secure a line of credit. Good Luck. It will take decades for our economy to heal.

  105. Krugman’s views of debt are indefensible. Greece, Spain, Portugal, Italy, Ireland, and England categorically discredit the Krugman school.

    Massive public debt destroys comparative advantage in production, and this fact makes Krugman’s theory of massive public expenditures reliant on borrowing a recipe for ruin.

  106. Good idea, a President who ran on the platform of breaking up “partisan politics as usual” nominates maybe the most partisan main-stream economist in the entire country.

    And don’t forget to vet his wife as well, based on the recent New Yorker article she has a heavy hand in his policy opinions.

  107. Johnny Galt_Laughing

    “”Never” actually happened during the Clinton administration.” ????

    Here are some uncomfortable facts from the (undeniably non-partisan) Bureau of the Public Debt, regarding the Clinton administration’s “contribution” to our country (first number = national debt at point in time, second number = incremental debt added to that point in time):

    9/30/1993 Clinton/Democrat Congress
    $4,411,488,883,139.38 +$346,868,227,617.72
    9/30/1994 Clinton/Democrat Congress
    $4,692,749,910,013.32 +$281,261,026,873.94
    9/30/1995 Clinton/Republican Congress
    $4,973,982,900,709.39 +$281,232,990,696.07
    9/30/1996 Clinton/Republican Congress
    $5,224,810,939,135.73 +$250,828,038,426.34
    9/30/1997 Clinton/Republican Congress
    $5,413,146,011,397.34 +$188,335,072,261.61
    9/30/1998 Clinton/Republican Congress
    $5,526,193,008,897.62 +$113,046,997,500.28
    9/30/1999 Clinton/Republican Congress
    $5,656,270,901,615.43 +$130,077,892,717.81
    9/30/2000 Clinton/Republican Congress
    $5,674,178,209,886.86 +$17,907,308,271.43

    So, Democrat/Republican, doesn’t matter. Governments, and the politicians who run them, are insatiable beasts.

    JG

  108. Then why did he support a reactionary bill which constitutes no reform at all but instead a vicious government consciption program for the benefit of a pure gangster parasite, the health insurance racket?

    Anyone who knows anything at all about the issue knows that the very concept of private health insurance makes no sense. It’s an existential market failure. And that’s even before getting into their vile racketeering.

    Yes, I did read his blog, all too much of it, and nauseating garbage it was. Just like I wasted far too much time following the whole issue, all year.

    But I’m not going to waste anymore time arguing with liberal teabaggers about it, that’s for sure. But we sure know Krugman’s a despicable corporatist hack. From the day of that bill’s passage all insurance racket crimes are on his hands, just as much as anyone’s.

    The slogan of the traitor: “I can’t demand single payer because people like me aren’t demanding single payer.” That’s exactly what he said. He and the rest of the corporate liberal goons.

    “Social fascists”, as we used to call them.

  109. Is this article serious or intended as satire? I’m genuinely confused.
    Krugman has been wrong on absolutely every issue. Every single one. His record is public so you can read what he was writing ten years ago.
    He genuinely believes that governments spending money they don’t have at any point in time is a good idea (not just during recessions which is Keynesian orthodoxy). He is partisan to the point of absurdity. A typical column reads like this: “Those idiot Republicans screwed us by spending money they didn’t have. What Obama needs to do is spend money we don’t have”.
    The Germans laughed at him when he went there and told them they needed to act more like the US. When will we get the joke?

  110. dumbfounded

    What an idea! With Krugmans approach we can step on the pedal and go over the cliff even faster!For years,no fiscal discipline,and a drip ,drip ,drip of deficits piling up.Let appoint Krugman so we can go into a fiscal death spiral and just get this over with quickly.Come to America.There free money for everyone unless your a sucessful small-bussiness owner in which event your bussiness is held in trust by the feds.

  111. SkepticalInvestor

    Let Paul Krugman be OMB Director. We’ll get the following benefits.

    1. Won’t be seeing his often idiotic comments in the NYT for a while.

    2. Put him in the hot seat of reality.

    3. He’ll try to run this country down so quickly that the real revolution of the fiscally responsible, anti-excessive taxation citizens will really start and get rid of these liberal-Socialist twits.

    “The inherent vice of capitalism is the unequal sharing of the blessings. The inherent blessing of socialism is the equal sharing of misery.”
    – Winston Churchill

  112. I see the reality challenged wing-nuts have taken over the commentary here.

  113. “Humankind cannot stand very much reality.”

    T. S. Eliot (1888 – 1965)

  114. No, a depression occurs when demand collapses due to private sector debt destruction. If government does nothing, eventually this will liquidate all the way to the bottom, which would be extremely destructive to society. A tiny country that can devalue and export zounds to others might get away with it, but no the whole world, and certainly no the US. Expansionary policy by government is the only thing that can alleviate these problems.

  115. the only smart comment thus far. I like Krugman’s ideas but he would be a terrible administrator and, as importantly, political in-fighter.

    He has no experience for the position and a personality style ill suited for the job.

  116. You don’t even know what socialism is.

  117. His first article is not hypocritical relative to his later opinions. He has evolved relative to new awareness and as a reaction against W’s insanity.

    He is wrong about factory farming in the second article, though.

  118. What crowding out effect? Mortgage rates are at an all-time low. It’s not that government spending (borrowing) is crowding out private investment, its that nobody has enough confidence to invest. Your posting just goes to show how the level of bluster is inversely proportional to the level of knowledge. We still need short-term stimulus spending to prime the pump. Right now the problem is not inflation but deflation (tried to sell any real estate lately?) Once the economy gets moving, then is the time to do things like means-testing for social security, increasing the retirement age, etc.

  119. Coyote Bill

    Truth Has Fallen and Taken Liberty With It

    http://www.counterpunch.org/roberts03242010.html

  120. I was born in an eastern block socialist state and have studied the growth of communism, both from written and oral accounts. One thing that we fail to see from our entitled US viewpoint is how quickly history changes once it starts changing.

    This administration has taken dramatic steps towards socialism. The pace of such changes tends to increase exponentially as the state assumes more and more power. I am reluctantly and completely on the side of the “tea baggers”.

  121. What are you talking about “dramatic steps towards socialism”? What steps are you referring to specifically?

  122. Are you deluded or paid?

  123. No, I’m serious. What are you specifically referring to with “dramatic steps towards socialism”?

    I’m an American, but I live in Germany. Maybe I’ve missed something, but I truly don’t know hat you’re talking about.

    So, no insults now; just give me some specific examples of what you’re talking about.

  124. June 29, 2010,

    “If we’ve been bleeding the patient, and he has nonetheless gotten sicker, well, we clearly need to bleed him some more.”

    Paul Krugman

    http://krugman.blogs.nytimes.com/2010/06/29/a-terrible-ugliness-is-born/

  125. Mieses, has the cat got your tongue? Or you just don’t know what you’re talking about.

    The only thing I’ve seen come out of this administration that could be called socialist is the health care reform – something that old socialist, Nixon, tried to shove down out throats 40 years ago.

    And something that only the remaining beacon of capitalism among the major powers of this world, China, has so far successfully resisted.

    What other examples do you have?