Thanks. Wondered when you'd get around to Krugman. Also wonder why Obama & Co. haven't picked him to steer our way out of this mess.

... congressional Republicans, who oppose increased government spending on principle

unless it's for war. or tax cuts. or their friends. or Dear Leader wants to do it.

how do you think we got from the Clinton surplus to that trillion dollar deficit? who was the majority in Congress for most of that time? who was President? what party was that? starts with an "R"....

these weasels only discover their principles when a Democrat is involved. please don't play along with that farce.

The only meaningful gripes are coming from congressional Republicans,

Blue dogs, too.

Not clear to me at all which way they'll go on the stimulus. They're going to be pushing to shrink the stimulus, which is a HUGE mistake. As Krugman points out, if we go too big, we'll see it and we can just hike up interest rates. But if we go too small, there's no easy fix--we have to start over with even more money, and we're that much closer to a depression.

And even after we pass the stimulus bill, there's going to be more spending needed on significant long-term challenges. Right now, we don't need ideologues demanding a 5 year budget ROI on energy policy or healthcare reform. These are much longer-term investments. Eisenhower's highway plan wasn't a 5-year return, and most projects of national strategic importance worth doing aren't 5-year returns, either.

From the 80's to the present we didn't have so much the era of small government as we had the era of small thinking. That era is ending, but 90% of the people in Washington have spent their entire professional lives steeped in it. Right now, they don't even see those limitations--it's just the way things are done.

They are bounded in a nutshell and count themselves kings of infinite space. It is our job to give them bad dreams.

What tatere said.
As long as the millionaires don't have to pay the same effective tax rate as the rest of us...

This issue isn't so much deficit spending, though that should be avoided where possible. More importantly is how money is spent. Bush gave tax cuts that primarily inflated the stock and bond market bubbles. He also spent a lot on wars. Obama needs (and intends) to spend money to create production and sustainable jobs. Let's hope he does that rather than bail out semi-monopolies by handing checks to their CEO's.

Gore/Feingold... and what makes you think zillionaires will have to do that now? Charles Schumer has blocked attempts to tax hedge fund managers more equitably.

To Steve, and others, while I don't totally disagree with the idea, I strongly recommend Paul Kennedy's "The Decline and Fall of the Great Powers." When previous great powers became more about making, or managing, money rather than things, they usually stopped being such great powers.

"The only meaningful gripes are coming from congressional Republicans, who oppose increased government spending on principal,..."

On principal? These are the guys that took us from surpluses to deficits and doubled our national debt.

Congressional Republicans don't have principals...only rhetoric.

The only meaningful gripes are coming from congressional Republicans, who oppose increased government spending on principal,

Considering the deficits that George Bush piled up in times of economic prosperity, it is clear that Republicans don't believe in paying down the principal! Bad loan risks, those guys!

" The only meaningful gripes are coming from congressional Republicans, who oppose increased government spending on principal"

I was going to try to be helpful by pointing out the typo in the last word of the half-sentence quoted here -- but then I realized it probably isn't a typo after all, since you can never properly use the word "principle" in conjunction with "Republicans."
And in this context, of course, that's clearly even more the case, since they obviously have no trouble with "government spending" on the war, and many of them have little trouble with "government spending" on I-Bank bailouts.

Dean Baker chastised Greg Mankiw for worrying about deficits but then even Greg is calling for Keynesian style - read fiscal - stimulus. And now the FED chairman is singing from the same hymn book:

econospeak.blogspot.com/2008/12/cost-and-benefits-from-fiscal-stimulus.html

to pick up on a point already made by several others: any republican who can demonstrate that they opposed treating the spending for the iraq war as an annual emergency appropriation that didn't have to be paid for by either taxes or spending cuts gets to be called a person of "principle" on the matter of government spending.

the rest? not a principle among 'em.

and my recollection is that the precise count of gop members who met this standard is "zero."

The trouble with 'spend now and we'll fix it later' is always that 'fixing it later' never comes, we just keep moving the problem down the road. It is without doubt that the US has been living recklessly on a national scale for many decades - the American way of life is way out of balance with anything reasonable. It is based and fueled solely on waste and greed, not anything resembling need and sustainability. Accordingly, massive adjustment of the US way of living is going to be necessary. Is now the time for the adjustment, or can we put it off a little longer by kicking down the road? Krugman's argument is the good industrialist argument for kicking it down the road.

pluege, i don't honestly know how to parse what you're saying here in general, but in specific terms, we can note that the clinton administration very specifically did address the "kicked down the road" aspect of the deficit, so it is possible.

and presumably you're talking about a high consumerist lifestyle in america, but as credit deleveraging continues, that will take care of itself....

I think we're attacking the wrong problems. It seems we're going all out to bail ourselves out of a recession, rather than addressing what's wrong with our system that produces so many crises - the 1987 stock market crash, the 1980s S&L scandal, the 1980s housing boom and bust, the dot.com boom and bust, the Enron scandal, the current housing crisis, the derivatives boom and bust, the oil and energy price spike and crash, etc.

We're frantically trying to stimulate consumer spending, when it's part of the problem, not the solution - oops, who said that about something else? It's like we're measuring our economy's performance on the extent we go Christmas shopping and how stock markets are performing. Neither has anything to do with the nation's long term real economic health in terms of its ability to produce the products and services needed to survive the real world of the 21st century.

There's absolutely no long term planning in our society. None. Even now, we're paying little beyond lip service to energy, the environment, our infrastructure, all of which need massive long term investment by the government i.e. the taxpayers, or nothing will be resolved but for the current economic downturn, and on we'll go, just as before, worshiping at the altar of unfettered free market capitalism, with a bit of tweaking here and there.

How about the system is fundamentally flawed from the foundation, because it produces all these catastrophes, and is just blind to the future, responding only to the immediate needs of the people in the course of their everyday lives?

Somebody has to invest in the long term. Billionaires have proven they won't do it. They just play with their money on Wall Street. We won't allow the government to do it, so who the hell will? We can't lurch and stumble through the crises of the 21st century, oblivious to everything but how merchants are doing during the Christmas season. It's got to stop. We've been doing it for thirty years. Enough is enough.

The trouble with 'spend now and we'll fix it later' is always that 'fixing it later' never comes, we just keep moving the problem down the road.

Frankly, with a major recession looming, the alternative to spend now and pay later (or just keep kicking it down the road) is to cut back now and trigger a major depression; we've already seen that once in the past 80 years, I don't think we need a repeat. Is it bad that when we "spend now", we generally end up kicking it down the road rather then cutting back when the stimulating effects of deficits are no longer needed? Sure, it is. The time to fix that is when the time comes to not repeat the second part of the pattern, not to spitefully avoid the part where you do what is necessary to avoid immediate national catastrophe.

Well ya, but I don't imagine our children would thank us for this broken economy if it forces them to live with us until they're 30.

Note that in Clinton's last year the surplus came from a substantial increase in individual tax collections as people sold the tech stocks on the way down.
Spending in Clinton's last year actually increased by $85 billion from the previous year.
See the OMB historical tables at the whitehouse.gov site.

"Note that in Clinton's last year the surplus came from a substantial increase in individual tax collections as people sold the tech stocks on the way down. Spending in Clinton's last year actually increased by $85 billion from the previous year."

And, what's your point ? Are we supposed to now chastise ourselves because we personally spent $1000 more on clothes this year, even though we saw an increase in our income to the tune of $10,000 ? I don't care how much we spend, as long as we pay for it.

"We can worry about the shortfall after the crisis."
----------------
Here the issue, that shortfall is trillions, the interest alone could probably fund the war.

The problem is Bush borrowed when it was not necessary and now that it is necessary, we are getting in a hole that is going to be nearly impossible to get out of w/o serious, and I do mean serious tax increases in the near future.

I sure wish Krugman would give us a number we can not exceed, a number that would bankrupt this country, it it 4 trillion, 10 trillion, a 100 trillion ? What number will break us like it broke the Soviets ? Once I hear that number, then I can make a decision on how much we should borrow and where it should go. Because right now, it feels like no one is even thinking about the repercussions of 100's of Billions for this and 100's of billions for that. I also think when we speak of hundreds of billions, there whould be some sort of attachment that this is going to be done once we reach this goal to get it repaid. Like one does at home, 'How are we going to pay for the new roof dear ?' We don't just charge it filled up credit card and move along.

Plus how long can we sustain paying these absurd interest payments to China before they become wealthier then us, what are the repercussions of giving them massive interest payments.

This is stuff no one is talking about, not even on the internet and it's starting to really wear on my nerves. What is the cost of ending the recession and is it worth it ? Things are bad, but they are not 10 of Trillions bad and I think someone needs to be reminded of cost benefit analysis instead of instinctively going to 'How much do we borrow' mantra.

The key to any stimulus is what comes after the economy recovers, which is to cut the hell out of spending and possibly raise taxes. Personally, I think everyone should pay something to the government in income taxes. If you use government services, you should pay, even if it's only $1 a year.

My bigger concern isn't deficits per se but inflation. We will print more money to stimulate the economy but killing the dollar long term. Raising interest rates will help but could send us back to 1970s economy.

No good options but something has to happen to get the economy moving again.

mickscotty, nonsense, just plain nonsense. the incremental level of cap gains in 2000 wasn't sufficient, by itself, to balance anything.

nor did clinton claim to be a spending cutter, so the fact that his final budget was in general fund surplus despite a spending increase simply means that clinton was a moderate democrat.

scottw, slow down a touch: the level of interest payments we make to china isn't why china is gaining on us economically; it's an effect of china gaining on us economically: those trade surplus dollars have to go somewhere, and for reasons of their own, the chinese have decided that somewhere is US treasuries.

so people are willing to loan us money at 4% for many years: i'm not crazy about the interest line item, but if they're willing to fund our recovery, i'm willing to take the funding.

hark, no offense, but what you want is socialism, and socialism keeps not getting many votes in america. as long as retain our faith in free-market dogma (as opposed to actual free markets, but i digress), we're not going to get much in the way of long-term planning....

scottw, i haven't been following the market action, but after posting, i took a look, so let me update my comments: people are willing to loan us money for 10 years at 2.75%; they're willing to loan it to us for 30 years at 3.23%....

I sure wish Krugman would give us a number we can not exceed, a number that would bankrupt this country....that would break us like the Soviets.

At the end of the Napoleonic Wars, Britain's debt was 2.5 times GDP, and survived.

That's about 40 trillion, if the US's GDP is substituted.

Posted by: howard on December 1, 2008 at 4:50 PM |pluege, i don't honestly know how to parse what you're saying here...presumably you're talking about a high consumerist lifestyle in america,

The economic model of the Industrial Revolution is unsustainable. It is predicated on waste - people burning the Earths' resources for things they do not need to survive comfortably. The model collapses, or humanity goes extinct - those are the only two possible longterm outcomes.

we can note that the clinton administration very specifically did address the "kicked down the road" aspect of the deficit, so it is possible.

agreed that a couple hundred billion was shown on the books as savings, once by accident over the course of what, 2 years even that it wasn't actual savings because Social Security trust money was used for general expenditures when it was collected to be saved in trust strictly for future social security pay out. And all this grand phony savings occurred after accumulation of $5 trillion of debt, none of which was actually paid down and "the Clinton surplus" was quickly vaporized by bush and the plutocrats. 10 years later we stand at $10 trillion in debt, are handing $700 billion unaccounted for over to plutocrats in the space of 3 months, and are trying to out-deficit each other at a rate of over $1 trillion/year. So tell me again how its conceivable for the US to reduce its debt?

but as credit deleveraging continues, that will take care of itself....

no idea what you are talking about, but it sounds like you are saying that as $trillions in built-up paper wealth is vaporized (mostly Americans' personal retirements) all will be well. If so, I'm not really on board with that. Clearly the average American will be financially wiped out while the plutocrats continue to raid the treasury.

My point is that Krugman (who I am almost never at odds with) is looking to sustain the status quo. Over the long term that is neither possible, nor desirable because the status quo has been pretty damn disastrous in human and Earthly terms.
.

"We can worry about the shortfall after the crisis."

That's like worrying about putting out fire after your house burns down.

Unless of course you all agree with Arthur Laffer, Larry Kudlow, Dick Cheney, Jack Kemp and the other supply siders who say deficits don't matter.

For Obamiacs and Krugmanites who say ‘spend away,’ I offer the counter-example of Japan. Japan, with the highest debt burden of any modern nation — debt at 182 percent of GNP — has little money for m ore programs for the elderly, for example.

Result? Japan now has more crime (almost all non-violent) among senior citizens than among youth.

If we get more articles like this, we will have ONE fortunate advantage –

We can bury neoliberalism next to neoconservativism.

And, after four (or eight) years of Obama/Clinton II, we'll need to bury neoliberalism, trust me.

Davis X. Machina -- irrelevant on the Napoleonic War UK, because liberal Britain didn't have the modern safety net/welfare state to try to run while also carrying a massive debt.

Dee -- Slick Willie never did that; oh, he did the tax increases early in his administration to cut the Reagan/Bush deficits, but never implemented structural change in the last couple of years.

Howard -- if you really believe that American people will learn a permanent lesson, I've got some swampland in Arizona to sell you.

Invest now, stimulate the economy, and spend freely on infrastructure and public investment that will benefit the country now and in the future. Interest rates are already at rock bottom, which means it's a non-issue for the foreseeable future. --
We can worry about the shortfall after the crisis.

Wasn't that Bush's plan in 2001 and in the second half of 2008? With all the money going to rescuing the housing market, and to entitlements, where will the money come from for infrastructure and public investment? Wasn't that the policy that produced the stagflation of the 70s? Has such a policy ever worked before? (It didn't work for Hoover who started large public works and increased the federal deficit, or for FDR who started even more public works and increased the deficit even more.) Did Clinton make a mistake by running a balanced budget as the dotcom bubble was bursting?

Just a few of the many obvious questions that might be asked by people who have memories.

We have a comparative advantage in retailing and consumerism, while production is a Chinese forte; so a good stimulus package will certainly kickstart the Chinese economy as we use Walmart to transfer the money to China.

pluege, i'd like to understand you, really i would, but you're just running some stream of conciousness stuff here.

if the model of the industrial revolution is unsustainable, then it won't be sustained. i'm not sure what your further point is on that score.

as for the deficit, i dunno what you're talking about. over a period of years, clinton (and congress) moved us to a general fund surplus (do you understand what that means? it means that no social security trust fund money was being spent). had the supreme court ruled on bush v. gore on the merits, we would have continued that pattern. no, i doubt we would have paid off the entire deficit, but i'm not sure that we need to, but yes, we could have continued to make gains.

the notion that "plutocrats" are "raiding the treasury" does sound awful, doesn't it? too bad it's a wonderful street corner slogan that doesn't really mean much: tell me which "plutocrat" is getting rich right now by "raiding the treasury." i'd really like to see who that is.

but no, what i was referencing is that the consumerist lifestyle is sustained by easy access to credit, and what is actually going on in the financial markets is that the amount of credit available is going to decline considerably, making it impossible to sustain a debt-underwritten consumer lifestyle.

Socratic Gadfly, i make no long-term prediction with that last paragraph: i speak to near-term reality: that's the point of deleveraging. and if you can't just keep increasing your credit card limit, and if you can't tap a HELOC, and if you can't buy a house with nothing down and flip it for a profit in 2 years, then even a modest gain in real income isn't sufficient counterweight: consumer spending as a percentage of gdp is going to decline.

at some moment, that will change, and if i were smart enough to pick that moment, i wouldn't be wasting my time writing blog comments (i can assure you), but none of this has anything to do with "learning a lesson."