May 7, 2012

"Hollande’s victory means the end of 'Merkozy,' the Franco-German axis that has enforced the austerity regime of the past two years."

"This would be a 'dangerous' development if that strategy were working, or even had a reasonable chance of working. But it isn’t and doesn’t; it’s time to move on. Europe’s voters, it turns out, are wiser than the Continent’s best and brightest."

Writes Paul Krugman
, opining on the French election. Move on... I understand the impulse, but to what?
One answer — an answer that makes more sense than almost anyone in Europe is willing to admit — would be to break up the euro, Europe’s common currency. Europe wouldn’t be in this fix if Greece still had its drachma, Spain its peseta, Ireland its punt, and so on, because Greece and Spain would have what they now lack: a quick way to restore cost-competitiveness and boost exports, namely devaluation....
But that's not the right answer, per Krugman. That would be "highly disruptive" and "a huge defeat for the 'European project.'" (Can you remember what that is?) Krugman's solution is to abandon "fantasies of prosperity through pain" — "the confidence fairy doesn’t exist" — and grow the economy.

79 comments:

Scott M said...

Krugman's solution is to abandon "fantasies of prosperity through pain" and grow the economy.

Krugman should be arrested immediately for treason if he's got a way to grow an economy that he's been holding out on the rest of us. Another wonderful development amixt all of this...8% of the Greek government's seats were won by Golden Path, a Greek nationalist neo-nazi party.

Rusty said...

And just how does one Grow and economy when there is no economy to grow?
I mean how much gelt can one squeeze out of the local Hebrews before they pack up their Torahs in search of greener pastures?
Hmmmm?

Matthew Sablan said...

The beauty is that Krugman realizes that the euros' connection with other nations is part of its crisis, but fails to see how because of that, austerity and cuts in only a few places, is never going to be enough while the rest of Europe continues to pull down the euro. It's so beautiful that he can see the interconnectedness of the economy only on some issues.

Why was Germany able to get a trade surplus? Is it maybe because other countries were less austere, while Germany was more austere, leaving more money in their economy to be spent on other countries' dwindling economies? Why was Germany realizing inflation and low-interest rates, while other countries did not benefit from the euro's inflation?

If only a Nobel prize-winning economist could tell us!

Freder Frederson said...

Krugman should be arrested immediately for treason if he's got a way to grow an economy that he's been holding out on the rest of us.

Krugman has plenty of ideas on how to grow the economy. You just don't like them.

Freder Frederson said...

Why was Germany able to get a trade surplus? Is it maybe because other countries were less austere, while Germany was more austere, leaving more money in their economy to be spent on other countries' dwindling economies?

Umm, no to both. Don't assume the wrong answer to your own questions to make a fact-free conclusion.

Scott M said...

Krugman has plenty of ideas on how to grow the economy. You just don't like them.

I'm agnostic. He hasn't proven that any of them work.

Sloanasaurus said...

Austerity is not a choice when you are in massive debt.

SPImmortal said...

Krugman should be arrested immediately for treason if he's got a way to grow an economy that he's been holding out on the rest of us.

Krugman has plenty of ideas on how to grow the economy. You just don't like them.

------------------

That's because their statist and stupib.

His one idea is "more stimulus!" Never mind that governments are teetering over due too their debt burdens being unsustainable...

The guy's playing the part of the court jester as the Keynesian endgame plays out for Europe and eventually for America

Matthew Sablan said...

"Umm, no to both. Don't assume the wrong answer to your own questions to make a fact-free conclusion."

So, what's the answer?

SPImmortal said...

Austerity is not a choice when you are in massive debt.

-----------------

Exactly.

There are only two choices in such a scenario. Cuts or currency devaluation. Both are a form of austerity.

Leftists like Krugman are always pining for a fantasy option that doesn't exist.

MadisonMan said...

You'd think that Germany would be fed up by now.

Freder Frederson said...

Krugman should be arrested immediately for treason if he's got a way to grow an economy that he's been holding out on the rest of us.

Here, I'll make it easy for you

MarkW said...

Yeah, Krugman has been peddling this nonsense for a while. 'Greater integration instead of austerity' boils down to 'Germany backstops Greek, Portuguese, Spanish, and Italian government debt from now until God knows when'

How many people think German voters are going to sign up for such a plan? How many think Germany's credit rating would hold up if they did? How many also think that providing more money for southern European governments to spend on 'stimulus' would kick-start growth?

Dave D said...

So, devaluation of currency is NOT a form of (personal) austerity? What am I missing here? Is this another example of liberal fantasy land?

SPImmortal said...

Krugman should be arrested immediately for treason if he's got a way to grow an economy that he's been holding out on the rest of us. Another wonderful development amixt all of this...8% of the Greek government's seats were won by Golden Path, a Greek nationalist neo-nazi party.

---------------

The thing I find interesting about the whole Golden Path situation is how it kind of illuminates the old arguement about whether the Nazis were a left or right movement.

One can clearly see from the rhetoric of GP that they are a fusion of both left and right. Railing against the banksters and the international finance that supposedly holds them in penury, while simultaneously hearkening to blood and soil. National Socialism. Nationalism and Socialism.

Expect the Golden Path to grow rapidly in the coming years. Greece now is eerily similar to Weimar Germany. Incompetent leftist statism running the country and brutal economic conditions imposed partly by outside forces (although in Greece's case the noose is entirely of their own making).

chickenlittle said...

Krugman just likes the prospect of a Euro currency breakup because even more capital will flee into the dollar thus boosting American securities and bonds. This will likely help Obama.

Forward in America--full reverse in Europe.

SPImmortal said...

Krugman should be arrested immediately for treason if he's got a way to grow an economy that he's been holding out on the rest of us.

Here, I'll make it easy for you

--------------------------

What a surprise, the answer is Stimulus! and "removing the austerity of the past couple of years". An "austerity" that demostrably exists only in Krugman's head.

The guy sure is brilliant.

SPImmortal said...

So, devaluation of currency is NOT a form of (personal) austerity? What am I missing here? Is this another example of liberal fantasy land?

--------------------

Since statist leftism is failing everywhere, liberal economic thought has pretty much devoled into pure fantasy. And it didn't start from a very good position to begin with.

Freder Frederson said...

So, devaluation of currency is NOT a form of (personal) austerity?

No, it isn't. Imported goods and foreign travel costs more, but exports are cheaper. It also effectively diminishes your debt. (Greece went into the Euro at 340 drachma to the Euro, if they came out at say 3400 drachma to the Euro, there debt would effectively be reduced to 10 cents on the dollar. It would make German, French and American banks very unhappy, but I say fuck 'em. The banks destroyed the economy (Goldman Sachs helped Greece fudge its budget number), they can face austerity for a while.

Insufficiently Sensitive said...

Krugman, and the French and Greek voters, all blithely believe that simply running up more on the credit card is the solution to the wanton abuse of said card for the last two decades.

Lurking not invisibly in the wings: a demonization campaign against 'the bankers' who 'control the currency'. Some new proto-Commies are overhauling their revolution gear as we speak.

ricpic said...

Merkozy, that two headed statist, bad as it was at least realized that for its beloved state to continue there would have to be some restraint in tax and spend. Hollande knows no such restraint. Pure statist. Like Barry. Our choice in November will be between Romney/Merkozy, the slightly restrained statist, and pure unrestrained ferocity.

Hagar said...

I would not get too excited about French politicians and their girl friends.

Remember the previous French socialist party candidate, Dominique Strauss-Kahn and his staying (on his own penny) in a $2,000/night hotel in NY? A curious kind of "socialist."

SPImmortal said...

No, it isn't. Imported goods and foreign travel costs more, but exports are cheaper. It also effectively diminishes your debt. (Greece went into the Euro at 340 drachma to the Euro, if they came out at say 3400 drachma to the Euro, there debt would effectively be reduced to 10 cents on the dollar. It would make German, French and American banks very unhappy, but I say fuck 'em. The banks destroyed the economy (Goldman Sachs helped Greece fudge its budget number), they can face austerity for a while.

-------------------

You're a total moron.

If they say "fuck 'em" to the banks, where are they going to get the money to pay the salaries of public sector workers that depend on the Greek governments endless borrowing to sustain? The answer: they're going to be paid in a debased currency that instantly cuts their spending power substantially. That's called austerity, and it will be brutal. ask Argentina.

Dropping the Euro may be Greece's best option at this point, but make no mistake, it will be austerity like you've never seen it before.

LarsPorsena said...

'Blogger Freder Frederson said...

So, devaluation of currency is NOT a form of (personal) austerity?

No, it isn't. '

No? Explain what happens to the fools that have actually saved instead of spent. How about people who are retired an live on fixed-income instruments?

hawkeyedjb said...

"Fuck the banks"

Just one more way to grow the economy!

Matthew Sablan said...

"The truth is that recovery would be almost ridiculously easy to achieve: all we need is to reverse the austerity policies of the past couple of years and temporarily boost spending."

-- This was written in 2012, right? What austerity is he talking about, since spending has been increasing in the U.S., with I believe an estimated decrease in 2010 coinciding with the end of the stimulus and a generally weaker economy.

"Big spending programs rarely happen except in response to war or the threat thereof."

-- Or the space race, war on poverty, drugs, stimulus programs, bail outs... or education. They aren't as large as war spending, but they dwarf spending when not engaged in open hostilities.

This is... shaky economics at best.

Jane said...

Here's what I just don't get about the "austerity vs. growth" argument: in order to borrow & spend, you need a creditor. Who's going to be the creditor? Germany? Imagine that Greece did leave the Eurozone and, effectively, defaulted on its debt via devaluation -- what then? Go hat in hand to the IMF as lender of last resort? (If Greece decreed that its Euro debt is now to be denominated in Drachma at less than a market rate, that's effectively a default.)

I don't know how dire the situation is in France, whether it can still borrow at some halfway sensible rate or not, but the issue's the same.

SPImmortal said...

The truth is that recovery would be almost ridiculously easy to achieve: all we need is to reverse the austerity policies of the past couple of years and temporarily boost spending."

-- This was written in 2012, right? What austerity is he talking about, since spending has been increasing in the U.S., with I believe an estimated decrease in 2010 coinciding with the end of the stimulus and a generally weaker economy.

--------------------

Yes, exactly. Spending has exploded under Obama, the exact opposite of this fictional austerity.

If someone listens to what Krugman has to say, they are a fucking idiot listening to a fucking idiot.

It's just been proven over and over again during the last few years that Krugman has no idea what he's talking about. The molds his economic theory to fit his political theory, not the other way around.

Freder Frederson said...

Imagine that Greece did leave the Eurozone and, effectively, defaulted on its debt via devaluation -- what then?

Iceland did just that, effectively defaulted on their bank debt, just a few years ago and is recovering nicely.

Matthew Sablan said...

"Iceland did just that, effectively defaulted on their bank debt, just a few years ago and is recovering nicely."

-- Everyone can't default.

damikesc said...

Funny thing is, people like Krugman are why austerity has to hurt so badly.

If changes were made YEARS ago, they would have been mild at worst.

But, since "experts" were lighting their hair afire over any cut of any government program, nobody touched them and the problem became progressively worse.

Can it be fixed before it is too late to fix it? I doubt it. Krugman would fight that tooth and nail and our idiot President mistakes him for genius.

...but, hey, Csar Nicholas' wife thought Rapustin was amazing.

No, it isn't. Imported goods and foreign travel costs more, but exports are cheaper. It also effectively diminishes your debt.

And the only people hurt are the poor who can't afford anything and the elderly who have their retirement savings evaporate.

You know, Weimar Germany isn't supposed to be an economic model one wishes to follow.

(Greece went into the Euro at 340 drachma to the Euro, if they came out at say 3400 drachma to the Euro, there debt would effectively be reduced to 10 cents on the dollar. It would make German, French and American banks very unhappy, but I say fuck 'em. The banks destroyed the economy (Goldman Sachs helped Greece fudge its budget number), they can face austerity for a while.

So would all of grandma's savings. But, screw her too, huh?

Another wonderful development amixt all of this...8% of the Greek government's seats were won by Golden Path, a Greek nationalist neo-nazi party.

Same percentage as Communists, roughly. I wonder why the neo-Nazi vote is the one that raises eyebrows while the Communist vote does not.

damikesc said...

Iceland did just that, effectively defaulted on their bank debt, just a few years ago and is recovering nicely.

...so, Greece is going to screw over banks who are then going to be expected to bankroll a government that still spends more than it takes in EVEN IF YOU DON'T ADD IN INTEREST PAYMENTS?

How is that going to work, exactly?

How do we know austerity doesn't work since it sure as heck hasn't been tried. Greece hasn't done it. At all.

And I love that Goldman Sachs, who "helped" them fudge numbers, is somehow MORE responsible for the problem than the Greek government who actually DID the fudging.

SPImmortal said...

Imagine that Greece did leave the Eurozone and, effectively, defaulted on its debt via devaluation -- what then?

Iceland did just that, effectively defaulted on their bank debt, just a few years ago and is recovering nicely.

--------------------

Yeah that was great when they shifted their debt burden to other countries and whiped out the savings of hundreds of thousands of British retirees.

Plus they lost as much as 75% of their 2007 GDP (the insane damage has still yet to be fully understood) and have had a sputtering "recovery" that has gotten almost nowhere.

But other than that it was great.

rehajm said...

LarsPorsena said...
Explain what happens to the fools that have actually saved instead of spent. How about people who are retired an live on fixed-income instruments?


Amen to that. When you devalue, you wreck the purchasing power of currency holders. It's austerity via monetary rather than fiscal policy...

Keynes wrote that “the boom, not the slump, is the time for austerity.” Nice in theory, put in practice there's two stages to the austerity life cycle- when times are bad, it means 'We can't do it because it will hurt too much!', and when times are good, then, 'Who needs it?'

raf said...

Wasn't it just back in 2005 that Krugman was claiming that the deficits being run up by GWB would lead to disastrous inflation?

Carl Vero said...

I had to check out Althouse, and she invaded my Krugman free zone (I have a detest arrangement with NYT – they don't publish my opinions and I don't read theirs – that are broken at about six months intervals).
The good news: None with any clout in the new French administration will listen to Krugman (an American!), and there will be much talk and little change frm Hollande (aptly nicknamed The Great Deflector).

Icepick said...

Everyone can't default.

Actually everyone can. But if the government of a country with about 320,000 people defaults, it's not that big a deal internationally. However, if the Eurozone (population ~332,000,000) started defaulting in big chunks, things would go south fast.

Freder is a fucking idiot because he can't figure out what happens when the banks start going belly up. It won't be just banks that start going under, but insurance companies, insurance funds, pension funds, etc. And it would ripple out from those businesses to everyone. He hates the people running the banks, but can't seem to realize that trying to hurt those assholes will result in massive pain for everyone, and probably not so much for the banksters themselves. (Hey, has anyone from CITI or BofA gone to jail yet? Hell, has CORZINE gone to jail? Of course, Corzine has a "STAY OUT OF JAIL" card purchased on the relative cheap by giving Barry O a few bags of cash.)

Icepick said...

You know, Weimar Germany isn't supposed to be an economic model one wishes to follow.

hey, the Weimar Experiment worked out just fine from the point of view of the modern statist. It's just that at the end the 'wrong' group of homicidal statists siezed power. But other than that it was a huge win!

traditionalguy said...

There is a special place in semantics hell for doofuses who say "grow the economy" and "grow a business.

Businesses and economies are net trade results willed into being by owners of property under a government/court/Army protection from thieves. They do not contain DNA of life that just grows abundance.

The Germans are going to have to go this alone. That should scare the French and the Poles.

About 1960 the New World Order guys proclaimed their intent to create a United States of Europe as a worthy successor to the Roman Empire which they loved so much. It was to be a "fair" counter hegemon to the new ursurper of their Empire across the ocean in North America called the USA.

The Common Market and the EU and its Euro all popped out of Zeus's head to compete with the upstart USA.

They are not our friends and never have been. Their intent is to re-conquor us.

And how is the UN doing proclaiming the USA must disband and return all lands that were taken from the Indians while we were colonies of England, France and Spain.

SPImmortal said...

Wasn't it just back in 2005 that Krugman was claiming that the deficits being run up by GWB would lead to disastrous inflation?

---------------

Yes is was. He also CALLED for a housing bubble in 2003 to replace the tech bubble. Seriously.

My favorite bout of Krugman insanity though was when he wrote an article on how an alien invasion could help out economy recover.

Icepick said...

I wonder why the neo-Nazi vote is the one that raises eyebrows while the Communist vote does not.

Because the Commies are the 'right' group of homicidal statists to sieze power, to the likes of Krugman and Freder.

Matthew Sablan said...

"Actually everyone can. But if the government of a country with about 320,000 people defaults, it's not that big a deal internationally. However, if the Eurozone (population ~332,000,000) started defaulting in big chunks, things would go south fast."

-- True. Maybe I should've said, no economic policy should be based around everyone defaulting.

Icepick said...

True. Maybe I should've said, no economic policy should be based around everyone defaulting.

Tru' dat.

Rusty said...

Freder Frederson said...
So, devaluation of currency is NOT a form of (personal) austerity?

No, it isn't. Imported goods and foreign travel costs more, but exports are cheaper.


And inflates prices for domestic goods and services.
We're seeing that now at the pump and at the grocery store.
devalued currency=inflation

damikesc said...

Wasn't it just back in 2005 that Krugman was claiming that the deficits being run up by GWB would lead to disastrous inflation?

Those annual deficits (which Obama exceeds in A MONTH, mind you) were bad because shut up.

You know, the usual.

I remember idiots griping because Mark Sanford, after really not wanting stimulus money, then proposed to use it to pay off debt because --- and this is silly apparently --- it would allow the state to do more things to help if they could lower their interest payments by paying down debt.

Heck, give the Greeks Communism. It's what they want --- and, at this point, it is what they deserve.

damikesc said...

Can we call what Krugman advocates Mugabe-nomics?

fleetusa said...

elimination of the Euro as tough as it sounds would definitely put all of Europe back on the growth track.

edutcher said...

FWIW Krugman also says we're in a Depression.

Stopped clocks and all.

MadisonMan said...

You'd think that Germany would be fed up by now.

Be careful what you wish for...

The Drill SGT said...

The fact that the EU and the Euro hasn't collapsed yet is due to two things:

- the willingness of the German tazpayer to keep bailing people out.
- the willingness of Sarkozy to work with Merkel and keep the Germans bailing people out.

The Arrival of a French Socialist is going to rapidly result in:

- France going stimulus big time
- trash talking German austerity
- German Txpayers going bonkers
- Germany withdrawing support for more PIGS bailout
- Collapse of the Euro as Germany withdraws
- general Isolation of Germany
- Europe wide recession
- Deeper US financial problems

Icepick said...

Can we call what Krugman advocates Mugabe-nomics?

YES WE CAN!

hawkeyedjb said...

"Greece went into the Euro at 340 drachma to the Euro, if they came out at say 3400 drachma to the Euro, there debt would effectively be reduced to 10 cents on the dollar"

Of course, most of their debts are denominated in Euros. So their debt will be 10 dollars on the dollar.

Not that it really matters. If you're repudiating your debt, who cares if you're pretending to pay 10 cents rather than zero cents on the dollar?

EMD said...

alien invasion could help out economy recover.

What about an illegal alien invasion?

Scott M said...

What about an illegal alien invasion?

They don't have plasma rifles.

David said...

He's correct that they must grow faster. Considerably faster. Austerity in itself is not going to solve the structural problems of the demographically and creatively challenged European economies.

Where Krugman has it wrong is that he believes they should grow by further spending. The need for European central bank intervention by funding bank purchase of bonds shows how dangerous that path is. The European central bank can't buy bonds directly to hold rates down like the American fed can, so they lend even more money to shaky banks so the banks can purchase the bonds. These recently issued bonds mostly mature in 1-3 years. How is that going to work out, do you think? Is Germany going to keep funding this non-solution?

Part of Europe's problem is demographic. That's not fixable. The other part has to do with labor and regulatory environment that limits innovation and efficiency.

Krugman is correct that austerity alone will not solve their problem. But he has no coherent idea of what else would work. If he did, he would be working for the EU right now, not the New York Times.

Hoosier Daddy said...

"... The banks destroyed the economy (Goldman Sachs helped Greece fudge its budget number), they can face austerity for a while..."

That's funny. I thought it was spending vastly more money than what was being taken in is what did it.

So the answer is spend even more money.

Hoosier Daddy said...

"... Iceland did just that, effectively defaulted on their bank debt, just a few years ago and is recovering nicely..."

A nation with about 300,000 people and a GDP of $12 billion.

Fen said...

It won't be just banks that start going under, but insurance companies, insurance funds, pension funds, etc. And it would ripple out from those businesses to everyone.

I'd like to see analysis of how it would affect the US. If Germany lets the Euro fall (as they should) I think globalism would take America (and then everyone left) over the cliff with them.

Maybe we can renew trade with libtard socialist scalps.

Fen said...

I bet Gore's scalp would be worth a six pack of German beer. At least.

crosspatch said...

Sarkozy never got his austerity program through the legislature. He got a few little bits and pieces, but his program was never adopted in its entirety.

Revenant said...

I suspect German voters are willing to accept Greek and French pain. :)

Revenant said...

It also effectively diminishes your debt.

Depends on what currency you borrowed the money *in*.

If you borrowed Euros, you have to repay Euros -- even if your country leaves the Euro. Sure, Greece could pass a law mandating that loans made by Greek lenders are to be repaid in Greek currency, but what about the people who borrowed from German, French, British, or American banks? They will still be expecting euros, pounds, or dollars. Greece could try repudiating those debts, but they would face incredible economic sanctions for doing so.

The banks destroyed the economy (Goldman Sachs helped Greece fudge its budget number), they can face austerity for a while.

I assume you keep your money in a mattress?

Because if you keep it in a bank, think for a minute about how much you'll enjoy that "austerity". :)

cubanbob said...

Freder Frederson said...
So, devaluation of currency is NOT a form of (personal) austerity?

No, it isn't. Imported goods and foreign travel costs more, but exports are cheaper. It also effectively diminishes your debt. (Greece went into the Euro at 340 drachma to the Euro, if they came out at say 3400 drachma to the Euro, there debt would effectively be reduced to 10 cents on the dollar. It would make German, French and American banks very unhappy, but I say fuck 'em. The banks destroyed the economy (Goldman Sachs helped Greece fudge its budget number), they can face austerity for a while.

5/7/12 8:43 AM

Freder go to Amazon and buy both a brain and a book called "When Money Dies" it's a real eye opener for fools who think they can default by devaluation. Hyperinflation is real austerity. Obviously you have never travelled in let alone live in a country in the throws of hyperinflation.

Krugman has long jumped the shark and is now just a court jester be clowning himself. Incidentally, the German's did devalue the DM when they adopted the Euro, the Euro made German exports reasonably priced to the rest of the Eurozone. Ultimately the Greeks, the Spanish, Italians, the Portuguese and the French were fools to adopt the Euro. But at the time given those countries history of constant devaluation and inflation adoption of the Euro was thought to be the cure for such fiscal corruption and incompetence. Sadly the politicians realized they could borrow at German rates while never understanding the debt they would not have otherwise been able to incur would some day be required to be repaid. The only real choice those countries would have had to avoid the constant devaluations would have been to adopt the DM as their currency leaving the fiscal restraints in the hands of the German's but politically that much surrender of sovereignity in return for fiscal sanity would have been impossible.

For the German's they are in a very difficult spot. If they drop the Euro on Thursday morning for the new DM Friday morning they become much wealthier but on Monday morning they are also out of work. It's sort of like owning a condo. You never want to be the richest owner with the nicest apartment in a building where everyone else is a lot less wealthier than you. The Swiss understand this.

Alex said...

Notice that Freder is always right and anyone who disagrees with him is always wrong.

Alex said...

So the word going 'round lefty circles these days is "humanist economics" as devised by the Krguman/Reich/Stiglitz axis. Essentially repackaging Communism under a more palatable label for gullible consumers.

Alex said...

Leftists like Krugman are always pining for a fantasy option that doesn't exist.

Yet conservatives keep believing in the confidence fairy or the other fairy that says "we can slash tax rates and massively increase defense spending" and that will magically grow everything.

Scott M said...

Leftists like Krugman are always pining for a fantasy option that doesn't exist.

Yet conservatives keep believing in the confidence fairy or the other fairy that says "we can slash tax rates and massively increase defense spending" and that will magically grow everything.


Notice that Alex is always right and everyone else is always wrong.

Alex said...

Notice that Alex is always right and everyone else is always wrong.

I never said so, prove where I'm wrong. Didn't Reagan massively cut tax rates and massively increase defense spending? Budget deficits under Reagan went through the ROOF. Can't deny it!

Zach said...

Somebody ought to mention to Krugman that in Germany, the recession ended three years ago. Right now, the unemployment rate is the lowest it's been in 20 years.

Rusty said...

Yet conservatives keep believing in the confidence fairy or the other fairy that says "we can slash tax rates and massively increase defense spending" and that will magically grow everything.

No. That would be slash taxes and cut spending to grow the economy.

Defense spending is something we are obligated to do anyway. You may disagree about how much to spend on defense, but the state by law must protect us.

Steve Koch said...

Alex said...
"Yet conservatives keep believing in the confidence fairy or the other fairy that says "we can slash tax rates and massively increase defense spending" and that will magically grow everything."

Cutting taxes is a common belief among conservatives but massively increasing defense spending is much less believed among conservatives. Conservatives realize that nearly everything in the budget will have to be cut (or at least capped) if we are to get anywhere near balancing the budget.

Last year Obama spent $3.6T with revenue of $2.3T for a deficit of $1.3T. That works out to spending more than three bucks for every two bucks of revenue. The $1.3T deficit in 2011 was not unusual, Obama has had $4T of deficits over the last three years. IIRC, Obama and the dems have not passed a budget since he has been prez.

Saint Croix said...

First thing France is doing? Reducing the retirement down to 60. Unbelievable.

Scott M said...

First thing France is doing? Reducing the retirement down to 60. Unbelievable.

This may not be earth-shattering for anyone, but after reading probably my sixth article today on the results of the French presidential election, and the subsequent hurry-up invite from the Obama administration, it occurred to me that Obama is wanting to get Hollande into the White House before he goes to see Merkle. It will be interesting to see how the dates shake out.

Politically, that would be a tough road to hoe, domestically for a French president, wouldn't it? To run off to see the American president BEFORE the German chancellor?

From Obama's point of view, his re-election team would like to see Hollande hold off on major reforms until after November. If France institutes a spending spree and things go south...

Steve Koch said...

The Congressional Budget Office constructed the "Alternate Fiscal Scenario" (not as rosy as the official scenario but probably more realistic) which said:

"Under that combination of policy assumptions, federal debt would grow much more rapidly than under the extended-baseline scenario. With significantly lower revenues and higher outlays, debt would reach 87 percent of GDP by 2020, CBO projects. After that, the growing imbalance between revenues and noninterest spending, combined with spiraling interest payments, would swiftly push debt to unsustainable levels."

Unsustainable in 8 years, after that debt spirals completely out of control and debt interest payments consume the budget.

Henry said...

We all know how Krugman works. When his side wins the future is rosy. When his side screws up it's the past that's to blame.

Bruce Hayden said...

Budget deficits under Reagan went through the ROOF. Can't deny it!

Well, no. We used think that, but Reagan's budget deficits were peanuts compared to those of Obama. AND, Reagan's arms buildup was instrumental in the demise of the Soviet Union, so the money was well spent. And, Obama's deficits are for what? What have they built for the future, besides even higher borrowing? We are talking some $4 trillion in 3 or so years, with no long term benefit. Or, at least not to the benefit of the average American. Of course, his friends and their families, along with the friends and families of members of Congress, and esp. of his party, have benefited mightedly, and that is a long term benefit for them. But not, unfortunately, for the rest of us. Of course, Krugman constantly claims that we didn't waste enough money, and we should have upped the ante by quite a bit.

John Lynch said...

Some European projects need to be defeated. Especially those that crush democracy and freedom.

Steve Koch said...

John Lynch said...
"Some European projects need to be defeated. Especially those that crush democracy and freedom."

The French are going to do whatever they want but I doubt the socialists have enough votes to push through sweeping changes, to actually accomplish their vision. More likely, they just increase spending a bit. I doubt they will be in a hurry to drop the Euro because the French support the EU as a vehicle to magnify French power and influence.

NRO seems to think that one possible major impact is that the French will be less likely to follow the German lead in EU financial discipline, reducing market confidence in the ability of the EU to solve its financial problems. This could lead to a market meltdown that could spread beyond the EU.

Sabinal said...

It's not Golden Path, but Golden Dawn.
If it was Golden Path, imagine the Dune jokes. Or rather, don't imagine since it's neo-nazi

Sabinal said...

ps they are far-right but disclaim neo nazism, their symbol is actually part of what is known as a Greek key (you sometimes see them on coffee cups) but it's section and color look a lot like an adaption of a swastika

http://en.wikipedia.org/wiki/Golden_Dawn_%28Greece%29