Bill Moyers: Paul Krugman Explains the Keys to Our Recovery

lambert strether blogs at Corrente

I’m tempted to call this one Krugman Agonistes. Why? Here’s the video, and don’t listen to Morning Edition, if you still do; listen to this:

Krugman Agonistes not so much for the battles Professor Krugman waged during the Bush administration, when he seemed quite literally the single voice willing to call bullshit, and not so much for the battles Krugman wages on behalf of Keynesian economics, whose policies really would help a lot of desperate and suffering people who’ve been betrayed and abandoned by “their” government, nor so much for the battle Krugman just waged on behalf of #MintTheCoin, nor even for the daily battle Krugman wages on behalf of old school blogging. No, I have a different battle in mind.

From the transcript, look on this picture:

[KRUGMAN] I think he might have said that two, three years ago. I don’t think that president, you know, we happen to have a very intelligent man as president.* He’s for real. And he does understand. You can have real discussions with him. …

And on this:

… [W]e have maybe made up a quarter of the ground we lost in that great plunge in 2008, 2009. And it’ll take years and years to get back to anything that looks like prosperity at this rate.

In the same paragraph.

A picture held us captive. I cannot help but think that Krugman must also be waging a tremendous internal battle between his picture of this man he seems to like and trust to do the right thing, and the picture of human economic devastation in all forms that he must see through the windows of the Acela, which can but tell him that this man is doing nothing like the right thing. This battle — and yes, “Will Doctor Freud please pick up the white courtesy phone?” — can only force its way to the surface with formulations like Obama “wussing out” (others say “cave”). But the possibility that Obama is doing exactly what believes in**, cannot be allowed to reach a conscious level, let alone expressed.

We’ve just gone through a battle where the proponents of Proof Platinum Coin Seigniorage (including, honorably, Krugman) were called every synonym for “crazy” in the book. Assume PPCS detractors were right: Isn’t it just as crazy to think that Obama will convert to Keynesianism? Na ga happen. Obama’s politics will never permit the kind of economics that Krugman (honorably) is fighting for. But then, that’s been the problem with Obama all along, hasn’t it?

NOTE * Meaning, although Krugman doesn’t say this, that to The Eternal Question — “Is ____ stupid and/or evil” — he’s given the answer, at least if one rules out “afflicted by Republicans” as a third alternative, as I do.

NOTE ** I realize that attributing a belief system to Obama may prove controversial.

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About Lambert Strether

Lambert Strether has been blogging, managing online communities, and doing system administration 24/7 since 2003, in Drupal and WordPress. Besides political economy and the political scene, he blogs about rhetoric, software engineering, permaculture, history, literature, local politics, international travel, food, and fixing stuff around the house. The nom de plume “Lambert Strether” comes from Henry James’s The Ambassadors: “Live all you can. It’s a mistake not to.” You can follow him on Twitter at @lambertstrether. http://www.correntewire.com

71 comments

  1. Nell

    I feel for ordinary americans. They live in an plutocratic oligarchy but cling onto the myth that freedom and democracy is the american way. One consolation, you are not alone. The american plutocratic model has pretty much enveloped the globe.

    1. from Mexico

      Yep. Freedom in the United States for all but the top 1% is slowly slipping away.

      The way I think of this is to compare my situation as a young college graduate 39 years ago to what that same young person faces today. I came from a working-class family. My parents helped when they could, but they couldn’t pay all my college expenses. But there were part-time and summer jobs, a number of folks who were not my family members who were willing to lend a helping hand, plus the cost of going to college back then was not prohibitive.

      The bottom line to all this is that when I graduated college, I had no debt. Today, on the contrary, kids from my background start out life with one huge strike against them: the chain and ball of a mountain of student debt. They’re already indentured servants the moment they walk across that stage. Their career is already mortgaged to the hilt.

      Then there’s the jobs issue. When I graduated with an engineering degree the job offers were plentiful. Compare that to two family members of mine who graduated with engineering degrees within the last few years. One was a real whiz kid who graduated at the top of his class with a degree in nuclear engineering. He received only two job offers, and went to work in some remote area in Louisiana. The other was a much more average student and graduated with a degree in aeronautical engineering. After looking unsuccessfully for a job in his degree area for over a year, he finally ended up going to work for Time Warner in a sales position (his mother is a sales executive for Time Warner.)

      Then there’s the healthcare issue. I had surgery when I was 2 years old. My parents didn’t have health insurance, but the costs were not exorbitant as they are today, the doctor and the hospital took payments, so there was a way out. Today my parents could not pay for the cost of that same surgery in their entire lifetime.

      So I was freer when I graduated college. I was free of debt. I was free of the need for a job in my career area. I was free from being a slave to the healthcare industry.

      There was also more personal freedom for the average Joe in the United States of my youth. Now law enforcement is draconian. Back then you got a traffic ticket the fine was $10. Now it’s hundreds of dollars. Back then you didn’t pay your property taxes on the date due the interest and penalty was minimal. Now you’re looking at a hefty fine for being a few days late, and the bill can easily double if you’re delinquent a year. For the average Joe, there is no forebearance anymore in the United States.

      I live in Mexico now, which certainly has its share of problems. But living in a society made up of a herd of well-trained and well-disciplined goats isn’t one of them. Rank and file Americans are slaves to the banks — to mortgage payments, car payments and student loan payments. They are slaves to the healthcare industry. They are slaves to a massive and unforgiving criminal justice industry. And in the dealings of everyday Americans with these institutions the response they get is always the same: Gotcha!

      1. Pelham

        Excellent points. Thank you.

        I followed you through college just a couple of years later and have had much the same experience.

        I’ll add only that all this misery has been piled on Americans even though the average American worker today is three times as productive as he or she was in the 1950s.

        We should have abundance. Instead we have penury, imposed early in life and only ratcheted up as we go along.

        1. from Mexico

          That’s the crux of it.

          All the fruits of America’s phenomenal growth in worker productivity have not accrued to the worker, but to a very small sliver of the population that has a lock on political power.

          1. Inverness (@Inverness)

            Barbara Ehrenreich said, “The ‘working poor,’ as they are approvingly termed, are in fact the major philanthropists of our society.” They subsidize the wealthy.

          2. from Mexico

            This is called “free markets.”

            But in reality it is the Iron Heel that makes this happen.

          3. Susan the other

            Productivity is the achilles heel – even if the gains were distributed evenly to the workers. Because demand is satisfied or crushed. Either way, capitalism doesn’t work. What we need are lots and lots of low productivity jobs of high social value.

      2. Sufferin' Succotash

        The rise of the Oligarchy will always remain a cause of secret wonder to the historian and the philosopher. Other great historical events have their place in social evolution. They were inevitable. Their coming could have been predicted with the same certitude that astronomers to-day predict the outcome of the movements of stars. Without these other great historical events, social evolution could not have proceeded. Primitive communism, chattel slavery, serf slavery, and wage slavery were necessary stepping-stones in the evolution of society. But it were ridiculous to assert that the Iron Heel was a necessary stepping-stone. Rather, to-day, is it adjudged a step aside, or a step backward, to the social tyrannies that made the early world a hell, but that were as necessary as the Iron Heel was unnecessary. — Jack London, The Iron Heel

        http://www.gutenberg.org/files/1164/1164-h/1164-h.htm

        1. from Mexico

          Reading down a little bit further, this quote is also germane:

          Capitalism was adjudged by the sociologists of the time to be the culmination of bourgeois rule, the ripened fruit of the bourgeois revolution. And we of to-day can but applaud that judgment. Following upon Capitalism, it was held, even by such intellectual and antagonistic giants as Herbert Spencer, that Socialism would come. Out of the decay of self-seeking capitalism, it was held, would arise that flower of the ages, the Brotherhood of Man. Instead of which, appalling alike to us who look back and to those that lived at the time, capitalism, rotten-ripe, sent forth that monstrous offshoot, the Oligarchy.

          Too late did the socialist movement of the early twentieth century divine the coming of the Oligarchy. Even as it was divined, the Oligarchy was there—a fact established in blood, a stupendous and awful reality. Nor even then, as the Everhard Manuscript well shows, was any permanence attributed to the Iron Heel.

          The only explanation I can come up with is that the desire to dominate, the quest for raw political power, and the desire to see others suffer reaches pathological proportions in some 15 or 20% of any random human population, a mass minority which always seems, sooner or later, to succeed in its pathological pursuits.

          Here’s how a young blogger over at MacroBusiness put it:

          But in reality income rank, or relative income, matters more than absolute income. Which means small powerful groups will generate pressure for inefficient policy to increase their relative income, with it, their relative power.

          http://www.macrobusiness.com.au/2013/01/economists-and-the-powerful/

          Here’s how the introduction to Political Ponerology puts it:

          Like a color blind man incapable of distinguishing red from green, a small minority of the human population cannot experience or fully comprehend the normal range of human emotions. And like those color blind who may conceal their condition by using the correct words while not understanding their meaning (e.g., the top traffic light is “red”, the bottom is “green”) – so does this minority conceal their condition by playacting an emotion’s exterior signs (facial expressions, exclamations, body language). However, they do not actually experience the emotion in question. Their deception is revealed in the laboratory, where they respond to words like DEATH, CANCER, DISEASE, as if they were DAY, CREAM, or PAPER. They lack the ability to comprehend the emotional “punch” that certain words contain. They use others’ emotional reactions as cues, and they adjust their behavior to portray the correct ‘emotional’ behavior. (Hare, 129-30)

          These individuals are known as psychopaths. Not only can they not feel the pain of others, they often seem to deliberately cause others pain. Lobaczewski refers to this disorder as an “essential psychopathy” to distinguish them from others with deficits in their genetic/instinctual endowment, essential psychopathy being the most severe and disturbing.

          1. Nathanael

            “The only explanation I can come up with is that the desire to dominate, the quest for raw political power, and the desire to see others suffer reaches pathological proportions in some 15 or 20% of any random human population, ”

            Yep. In order to counteract that, we as a society have to systematically execute the most competent of these people; they are too dangerous even when imprisoned. Nobody has found a realiable way to catch them, however, so we’re forced to kill them *after* they attain power, through intermittent events like the French Revolution. Sigh.

          2. diptherio

            I think the percentage of psychopaths is a little lower than you say. Bob Altemeyer finds around 5% of any given population. The “authoritarians” who the psychopaths often end up leading constitute about 20-25%.

            Anyone who hasn’t already is encouraged to read The Authoritarians, available free online:

            http://home.cc.umanitoba.ca/~altemey/

          3. from Mexico

            @ diptherio

            I think that’s right.

            Psychopaths constitute only a portion of the characteropaths, as the introduction to Political Ponerology goes on to point out:

            These individuals are known as psychopaths. Not only can they not feel the pain of others, they often seem to deliberately cause others pain. Lobaczewski refers to this disorder as an “essential psychopathy” to distinguish them from others with deficits in their genetic/instinctual endowment, essential psychopathy being the most severe and disturbing.

            Many so-called “antisocial individuals” acquire similar characteristics in their life-time, whether caused by brain damage to certain areas of the brain, or functionally, because of close contact with and influence by such individuals. Lobaczewski terms such individuals characteropaths.

            What exists in nature is a continuum, as opposed to discreet categories.

          4. jonboinAR

            [The only explanation I can come up with is that the desire to dominate, the quest for raw political power, and the desire to see others suffer reaches pathological proportions in some 15 or 20% of any random human population, a mass minority which always seems, sooner or later, to succeed in its pathological pursuits.]

            What I don’t understand how those who thought the ugly chrysalis (sp?) of capitalism was going to naturally morph into the beautifully winged socialist butterfly. How did they completely forget about those you describe above who exist everywhere at all times? They have to be actively, consciously and continually combatted or they just take over, even in a nominally socialistic environment, ISTM.

        2. jake chase

          I graduated college in 1964. There was one vocal conservative in my class, and he was an object of scorn and ridicule. His opinions were clearly absurd, as was his mask as a preppy don. What went wrong? IMHO the Democratic Party and LBJ, a lifelong Haliburton and Bell Helicopter puppet, sold out the country to capitalize the profit opportunities offered by escalating the VietNam war. Within four years my generation so hated the Democratic Party that its lifelong spear carrier, Hubert Humphrey, was beaten by a Richard Nixon that every intelligent person knew to be a cheap crook six or seven years before Watergate exposed him.

          Given another chance by Watergate, the Dems nominated and elected a Republican, Jimmy Carter, who proved every inch a fool every time he opened his mouth. They have nominated nothing but Republicans ever since, and that anyone can view either Clinton or Obama as Democrats proves only that he has no sense of history.

      3. Brindle

        Up until Prop 13 was instituted in California (1978) a student could enroll full-time at a quality Community College and pay perhaps a total of $150-$300 per semester/quarter. Bonafide poor people could go to college then, now it is nearly an impossibility.

      4. sleepy

        Yep, and when I was in college in 1969, a small house could be rented for $65/month. With two other roomates, you had it made–even working at the minimum wage, you still had some money in your pocket after all expenses.

        I went to a private catholic law school in 1975–tuition was $800/semester. I drove an ice cream truck the first summer and was able to pay one semester’s tuition out of that.

        Try that now.

        1. diptherio

          In 2009 I applied to the MDiv program at Seattle Univ. They wanted to give me a job editing the departmental newsletter and knock half off my tuition. I would only have to pay them $12,000 per year (4-5 year program). After 5 years you can make $30,000/year as a chaplain, if you’re lucky…

          I had to tell them, “thanks, but no thanks.” Kept from the (UU) ministry by mammon…so ironic.

      5. digi_owl

        Reminds me of something i bumped into some time ago about the republican (not the modern US political party but the base idea of both the American republic and the French republic) notion of freedom. There freedom meant protection from coercion of any kind, physical, mental, economic.

        The private debt overhang, much like the notion that homeowners do not riot, are in a sense economic coercion.

      6. Carla

        @from Mexico: thank you for your comments on this and other posts. I always find them interesting and worthwhile. This particular one should be published widely.

        However, when you comment below drawing a distinction between “free markets” and the “Iron Heel,” I fail to understand the difference. What do you think finances “free markets,” if not the “Iron Heel”?

        1. Carla

          Whoops, I responded to the wrong thing– “from Mexico”– of course I was referring first to your biographical comment WAY above, and then to your short one, also, as it turns out, above. Sorry.

      7. Kansas City Phil

        During the summer of 1974, I worked for twelve weeks pumping gas at a filling station. I did small mechanical repairs on the side ( tightening a fan belt here, changing out wiper blades there). I made four dollars an hour, which was a very nice wage, as the minimum wage was 1.65/hour. However, during that recession year, there seemed plenty of jobs paying similar wages. Oh, I made some tips, too!

        I recall this because in twelve weeks, I managed to earn enough to pay for my tuition,fees, and books for two semesters at the University of Kansas. I earned enough to pay for a dorm room and a meal plan. I earned enough to have pocket money for a beer and a pack of smokes from time to time.
        I graduated with no debt. The only help I needed from my parents was an occasional infusion of five or ten dollars a week, a place to love during the summer, and auto insurance. My student fees included health services through school.

        Try doing this today. I calculate that a young person would have to find a job paying sixty or seventy dollars an hour to do what I did.

        Moreover, the excellent advice to begin immediately saving money in a 401 k or an IRA is moot, because the money gets sucked up paying off student loans. I know. I’ve gone through the numbers with young people, and have concluded that if they have a thirty thousand a year job, the. They can acquire a dinky apartment, a second-hand car, liability insurance, food, gas, and payment on their school loans. After that, not much left. So it makes sense that even a college graduate might move back into their old bedroom at home in attempt to make some headway.

    2. citalopram

      Will Americans wake up and fight? Don’t hold your breath.

      Look! Shoes are on sale at Macy’s.

  2. Ned Ludd

    I quit listening to or reading anything Krugman said or wrote after he posted this piece of garbage:

    Things I’d Rather Not Read

    Noam Scheiber has a tick-tock about bad economic moves on the part of the Obama team after the midterms. It’s all kind of painful; but at this point Obama may have gotten his groove back, and since he’s going to be the Dem nominee, reviewing this stuff doesn’t seem all that urgent (which is not to deny that Noam is doing fine reporting).

    Krugman would, in his own words, “rather not read” about “bad economic moves on the part of the Obama team” because he found it too “painful”. If reading analysis of bad economic moves by the current President of the United States of America is too painful for Krugman to read about, he should be fired by both Princeton and the New York Times because he is evidently incapable of doing his job.

    1. Unsympathetic

      Very nearly a solid trolling effort. Try again, this time with fewer threats – and more wit. If it’s too aggressive, you won’t get people to respond as though you actually believe it when you’re calm.

      1. Ned Ludd

        Do you have anything substantive to add to the conversation? I offered a quote, which I put forth as evidence that Krugman is unable to act competently as an economist and economic writer because he is, by his own words, too distraught to read about bad economic decisions by Obama. I am not trying to be witty; I am not a monkey here to entertain you. I think Krugman should be shamed and fired since he is, by his own words, not willing to perform his job when it comes to reviewing – simply reading – criticism of Obama.

        If you want to scold people for their tone, your will find your efforts much more appreciated at many of the fine, loyal Democratic blogs that litter the Internet.

  3. Anonymous

    Cognitive dissonance is indeed a bitch! Poor Krugster! There was a time he actually had a voice and people actually listened. Now, just a neutered little house poodle who pees on the carpet when he’s glowered at. Someone needs to give him a good whack with a rolled up Sunday Times and put him outside again to fend for himself.

  4. Max424

    “I cannot help but think that Krugman must also be waging a tremendous internal battle between his picture of this man he seems to like and trust to do the right thing, and the picture of human economic devastation in all forms that he must see through the windows of the Acela …”

    Good one, Lambert …

    Professor, thanks for coming.

    “Thanks for having me.”

    Yesterday, looking out the port side of your train, you saw two Predator drones firing Hellfire missiles at selected American targets. What did you think of this?

    “Well, I’m not entirely sure if the Republican dominated House of Representatives should be forcing Obama to do this. But at the same time, the collateral damage done to infrastructure might be a good thing.”

    A good thing?

    “Think about it. We’re in a liquidity trap, which means, the Fed can only hand out aspirin. But our depressed economy requires heavy doses proscribed medications, we need, so to speak, a more potent palliative for our damaged national psyche.”

    “Now, if we have potholes, and filling them in would be good, it makes sense to assume that bomb holes, which are bigger, would be even better.”

    So responsibility for the strikes doesn’t matter, as the strikes are always beneficial?

    “Yes and no. The thing to remember is, without the Obama Drone Check, Republican’s would use Predators to kill teachers and other public sector workers, and we know that killing teachers is not only wrong, it is a proven anti-stimulative. We need more teachers, not less.”

    We are we headed, Professor?

    “If we can find the political will to repair the potholes and the bomb holes, to re-hire the teachers that Obama was forced to fire, or to replace the dead ones when the un-checked Republicans are in charge, it would be significant step toward what I call, a New Deal for 21st century.”

    A new New Deal. Is this really achievable?

    “Despite the fact that rising ocean levels are going to wipe out New York City by 2030, I believe it is, because I’m hopeful.”

    1. Javagold

      they must t be bombing the teachers in the summer time, because there are none to be found for over 2 months !

    2. Crazy Horse

      See what happens when you stop taking your Hopium meds? Truthiness can be a bitch during the withdrawal phase.

  5. fatman51

    I have to say that I do not understand Krugman and his position at all. We got here because of structural problems in the economy, namely loss of wages compensated for a time by growth of debt. Now we are at a point when the growth of debt has to be exponential, because debt permeates the entire economy. Krugman is advocating more government spending, achieved through greater public debt, without any structural changes in the economy. What good can this do? And if debt does not matter, may I ask why do we have money at all? If the government can simply print money without any penalty, why not set up a website that says “to everyone according to need”, if I have a need I go this website and the government cuts me a check? The problem with Krugman is that his position is entirely superficial. It is a form of intellectual laziness. He is advocating a bandaid that changes nothing and pushes us into a deeper hole.

    1. ScottA

      I also was confused by this possibility of simply creating money, but I think you’re missing a subtle point, which is:

      We would not really be setting up a cash dispenser where anyone could grab money for whatever they want.

      We would be voting on projects we want to invest in, and then printing the money just to pay for those projects.

      And if we do this via MMT, then the money “printed” is interest-free – which is better than having to pay interest to central bankers for freshly printed money.

      Number 7 in this list:
      http://heteconomist.com/posts-to-read-first/
      gives a pretty good tutorial intro as to how this works (for a layperson such as myself).

      1. different clue

        I believe I remember reading about Thomas Edison advocating the FedGov emitting dollars to pay for building the prospective power dam at Muscle Shoals, instead of selling bonds for it. Here is the link.
        http://www.primeronmoney.com/edisonandfordongovernmentbonds.html

        I read about this many years ago. Where? In the book Unforgiven, by the insufficiently well-know Dry Land economist named Charles Walters Jr. Reading about it in that book oh so many years ago is what allowed me to remember about it and find an internet link to it this very day. That book Unforgiven would be well worth buying and reading.
        http://www.amazon.com/Unforgiven-Charles-Walters/dp/091131167X

        http://www.heritech.com/pridger/unforgiven.htm

      1. fatman51

        this is all fine and good. But I do not think that this is what mainstream opponents of austerity are talking about. They are simply talking about more stimulus which is backed by government bonds. While you can find musings or even extensive writings about new monetary theory in the internet, nobody that I can see in the so called mainstream, including Krugman, is advocating printing money outright. They are advocating running high deficits (read high deficits in a form of new debt) “until the economy recovers”. Why should it recover? It will be the same low wage economy and new money will flow to the top the same as old money did. So even if the government does print new money outright, it will simply flow to the top.

        1. Calgacus

          They are simply talking about more stimulus which is backed by government bonds.

          Stimulus is not “backed by government bonds”. Government money is not “backed by government debt”. It’s like saying a one dollar bill is “backed by” a five.

          While you can find musings or even extensive writings about new monetary theory in the internet, nobody that I can see in the so called mainstream, including Krugman, is advocating printing money outright. They are advocating running high deficits (read high deficits in a form of new debt) “until the economy recovers”.
          Running a high deficit MUST BE “in a form of new debt”. Money is debt. The difference between a government bond & a government dollar is microscopic. They are “one and the same thing” as FDR said. “Debt-free money” is a psychotic idea, a contradiction in terms. To seriously use the phrase is to show no understanding of the first thing about money.

          And we already do “print money outright”, all the time. That’s what government spending is. That Krugman might not understand this doesn’t really matter. The main thing is to run the deficit. Abba Lerner called this mistake confusing spending with borrowingandspending. (And the “borrowing” in borrowingandspending is not really borrowing, but that is another matter.)

          It will be the same low wage economy and new money will flow to the top the same as old money did. So even if the government does print new money outright, it will simply flow to the top.

          So what? Sure, we could have a better system, a better structure. But if someone is dying of thirst, giving him a lecture on how they should change their diet and lifestyle is not apt to be welcomed. However the deficits are run, the economy will not be as “low-wage”. Employment will rise, and low wage is better than no wage. No wage = unemployment is the primary tool in enforcing low wages.

          Will Rogers understood MMT just fine, as did many back then:
          Give it [money] to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellow’s hands.

          Yes, I am all for taxing the rich. But for the sensible reason. So they will have less money.

    2. Min

      You are right that inequality and personal indebtedness are at the root of our problems. We ought to get higher wages and otherwise get money into the hands of ordinary citizens, to lift the burden of their debts.

      Where is this money going to come from? It comes from the gov’t, which is the ultimate source of our money. How does the gov’t inject money into the economy? By spending more than its revenues.

      Now, how it spends the money counts. But the basic point is that it has to spend more than it takes in, so that ordinary people can get the money to get out of debt, and do other things as well. :)

  6. Abe, NYC

    It’s been more and more difficult for Krugman to maintain a semblance of coherence. “Fiscal cliff” was the latest episode. But at the same time:

    Krugman knows, or believes, that he can influence policy through his columns and the blog. He has said so many times, most recently here. Perhaps he believes that he needs to style himself as an administration loyalist in order to maintain that influence. That’s the most charitable explanation I can find but even then, for all my great respect for Krugman, it’s painful to see his exercises in more and more convoluted doublethink.

    1. mac

      I think that Krugman writes what he writes and says what he says in order to be controversial. He is making money because it helps sell newspapers, which helps sell advertising. Non controversial stuff does not sell in print or on TV.
      He is a “soap salesman”.

  7. JEHR

    Alexander Pope states what I think may be hazardous to any of our conversations (or comments on blogs) where knowledge is incompletely known or incompletely expressed:

    “A little learning is a dangerous thing; drink deep, or taste not the Pierian spring:
    there shallow draughts intoxicate the brain, and drinking largely sobers us again.”

    We need more deep drinking and less intoxication.

  8. William Neil

    I agree with your assessments of both Krugman and Obama, Lambert. I wonder what Krugman thinks of the Kansas City School – I don’t recall him having explicitly addressed it. But I think Randall Wray could teach him something about how long our labor market has been ailing, and how much damage a 5% unemployment rate, which Krugman says is the best we can aim for, would still deliver.

    Krugman must have been under great strain in the runnup to this November’s election, because he was faced with not panning the economy’s troubles so much he would sound like Romney (“cures” aside) but in my mind, at times he was saying the economy was on the way to healing…and isn’t that the fundamental economic question centrist democrats and economists like Krugman (slightly left of center) must address: is the current state of world capitalism capable of righting itself without fundamental restructuring, or not?
    Nothing Obama has put on the table addresses the vast and fundamental inequality which now dominates American life; he offers the working class the option of bettering their skills and “moving up,” not improving the terrible minimum wage or, perish the thought, the lack of labor representation in the Congress, much less the workplace.

    Here’s a good example of how strange this Krugman-Obama tension has become. Krugman was ferocious in attacking Ryan’s budget, yet I have three recent articles in my hands which don’t see much difference in the federal outlays for civilian spending under either Obama’s or Ryan’s ten year projections: they come out to be about 1.8% in either case, down from a norm of 3-4% of GDP. What the hell?

    My sources are: “Goodbye, Government, Under Either Fiscal Plan,” by Eduardo Porter, Dec. 19th, NY Times; “Reject the Deal,” from Jeffrey Sachs, Jan.1, Huffington Post; David Brooks, Jan. 8th, “why Hagel Was Picked,” NY Times…

  9. ScottA

    my main reactions are:

    (1) great to see a folksy-yet-wonky-yet-realpolitik “winning” video argument for PlatinumCoin
    (simply as a corollary to the axiom/doctrine of not-negotiating-with-hostage-takers)

    (2) great to see someone calling a hostage-taker a hostage-taker

    (3) does PlatinumCoin essentially amount to a backdoor / de facto implementation of MMT?
    (ie: USGovt can now create money, not just PrivateCentralBankers)

    (4) would there be a kind of NixonGoesToChina irony for the pro-austerity HouseRepublicans to be the ones who made it possible to usher in MMT?

    (5) is this* somehow a gutsy departure for a “Nobel-ish” ** -prize-in-Econonics winner like Krugman to be saying?

    (And is that why Krugman’s voice seems to be trembling a bit the whole time?)

    * “this” being the novel idea of the USGovt itself minting money, not the Fed “loaning” it into existence at (manipulated) interest rates

    ** merely “Nobel-ish” because the prize in Economics is an entirely other prize from the “real” Nobels,
    sponsored by PrivateCentralBankers at the ECB and not the actual Nobel committee in Sweden,

    http://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economic_Sciences#Controversies_and_criticisms

    with the main Nobel-ish rule being that “thou shalt not talk about public a/k/a government a/k/a sovereign MoneyCreation” –
    which is why eg Michael Hudson is banished to Kansas – TheSiberiaOfAcademia –
    as exposed in that video by Bernard Lietaer earlier on NakedCapitalism.com

    http://www.nakedcapitalism.com/2012/12/former-president-of-the-central-bank-of-belgium-on-why-the-money-system-is-a-taboo-topic.html

    (6) great populist metaphors from Krugman:

    PrivateCentralBanker Fed head Bernanke lowering rates
    = “aspirin”

    …but leads to LiquidityTrap which could be renamed “vicious-cycle-of-lower-and-lower-rates-where-money-is-not-being-invested-because-rates-are-low”

    USGovt selects, budgets and coughs up the (interest-bearing Fed-printed or non-interest-bearing USGovt-coined) about 300 (really 200) billion USD per year for certain essential infrastructure projects*
    = “prescription medicine”

    * example essential infrastructure projects : getting back to our previous levels of filling potholes and paying teachers
    – to get economy started now
    – to avoid costs far greater than 300 (200) billion USD per year due to permanent effects such as killing the careers of the current crop of graduates forever

    (7) if WeThePeople via the USGovt start to engage in PublicMoneyCreation or MMT via PlatinumCoin, then why would we want to deposit it at the Fed?

    Aren’t they after all an enemy of PlatinunCoin or PublicMoneyCreation or MMT – since it encroaches on their territory – so why should we trust the guy with the former monopoly on MoneyCreation to be the guy to hold onto the new money which we arrogate to ourselves the right to create?

    Or by “holding” it have they merely accepted it as some kind of payment?

    I guess I still don’t get why we need the Fed at all, but maybe I’m getting ahead of myself, and maybe their “acceptance” on “deposit” of this first PlatinumCoin would be just the first step towards wrenching the monopoly on MoneyCreation out of the hands of the PrivateCentralBankers, in the direction of distributed MoneyCreation and the resulting more resilient economy outlined by Bernard Lietaer in the video link above.

    (8) speaking of invoking arcane, fanciful but perfectly legal provisions to handle the fact that the HouseRepublicans are literally attempting (or publicly threatening to attempt – which legally probably amounts to the same thing) to take the USGovt and financial system hostage (by mandating and then blocking spending)…

    wouldn’t it be ironic if our lovely new anti-txrrxrism provisions were applied against these HouseRepublicans?

    I mean, if any guy with an Arab-sounding name went on TV and attempted or threatened to attempt to take down the USGovt and the financial system
    aren’t there now certain new govt agencies with scary names and powers specially designed to round up such enxmy cxmbxttants under cover of night
    and make sure they’re never heard from again?

    just sayin’

    1. Lambert Strether Post author

      Yes, those are all good things. And we all have our fantasies that we cling to. A very common one is believing that powerful figures have our best interests at heart, have care and concern for us, possess rather than simulate empathy, and so forth. Sometimes, this fantasy aligns more or less closely with reality; alas, with Obama, it does not.

      * * *

      As for as the blame-shifting to Republicans, a standard trope for Democrat and Obama apologists, see the link provided.

  10. Tom

    I did not hear Krugman talk of the split between the financial services sector (extractive business model) and the production and consumption side (productive). Tax burden the extractive economy and feed the revenue into the productive side. – Just a start as many other facets of import have been totally ignored like – enforcing the law, prosecuting criminals, breaking up TBTF, bring back fences between banking, insurance, and investing. public funding of elections from local to national, slow down or reverse the concentration of media into fewer and fewer hands (monopolistic now)

    1. diptherio

      “I did not hear Krugman talk of the split between the financial services sector (extractive business model) and the production and consumption side (productive).”~Tom

      Yeah, this is what I thought when he was discussing the liquidity trap. He says that QE is “dumping money into the economy,” when in fact it’s just dumping money into the financial sector. That’s something very different from “dumping money” into the real economy. In order for the real economy to make use of that liquidity, they have to agree to return all of the borrowed liquidity to the financial sector, plus interest. That seems like a net drain on liquidity in the real economy to me, but maybe I’m thinking about it wrong.

      I don’t know why Krugman hasn’t adopted the balance-sheet recession model yet. Richard Koo’s analysis makes a lot more sense to me than what Krugman has to say, at least on this particular topic.

  11. Rasmus Xera

    “NOTE ** I realize that attributing a belief system to Obama may prove controversial.”

    No doubt, but this is exactly what’s done every time people decide to take Obama’s word at face value, while ignoring or apologizing for his actions.

    I mean, who is more guilty of attributing beliefs to Obama: those who understand you can’t become president without becoming a habitual liar, or those who do not? Those who see through the ‘O’ brand being sold to us, or those who spend their time worrying about people calling him “Obama” instead of “President Barack Obama”, and debating whether or not he should be on Mt. Rushmore? (both actual segments on MSNBC a couple days ago)

    The same ‘two Obamas’ show up when discussing matters of foreign policy, national security, and the like. Obama is seen as being mindful of civil liberties, while he tirelessly works to take them away by supporting legislation like FISA. He’s seen as a peaceful president who is winding down wars, while he – drone joystick in one hand, kill list in the other – destroys innocent life (even children, US citizens) halfway across the world. He’s seen as being anti-torture, and really upset he can’t close Guantanamo for moral reasons; while he courts John Brennan again, has never challenged the more systemic types of torture America engages in, and only objects to Guantanamo because Congress limits his ‘executive power’ to move Guantanamo onto US soil.

    It’s enough to make you pine for the atmosphere of the late Bush-era. At least then everyone on the ‘left’ was willing to admit the president embraced certain approaches toward capitalism and American Empire that were harmful to the average human being.

    1. Nathanael

      Teddy R. became President without becoming a habitual liar.

      Of course, it helps if you become Vice President and then are lucky enough to be around when the President is assassinated. The assassination of McKinley seems to have been one of the best things which ever happened to the US; McKinley was a *monster*.

  12. TK421

    ” Obama’s politics will never permit the kind of economics that Krugman (honorably) is fighting for.”

    President Obama: ” Government can’t create jobs to replace the millions that we lost in the recession, but it can create the conditions for small businesses to hire more people, through steps like tax breaks.”

    http://www.whitehouse.gov/the-press-office/2010/09/27/remarks-president-signing-small-business-jobs-act

    Obama is not a Keynesian, and never will be.

      1. William Neil

        Lambert, yes they run away from the New Deal like it was the red plague.

        There was one other thing Krugman said, speaking of the New Deal, and it was what sounded like an endorsement of Mr. Jack Lew for Treasury Secretary via the WPA art that he has hanging on his office wall; now it’s pretty tough to square that endorsement with a little more direct linkage to Mr. Lew’s policy history in both the public and private sector, as presented by Bill Black mainly, and Matt Taibbi here:

        http://www.alternet.org/economy/matt-taibbi-bill-black-obamas-new-treasury-secretary-failure-epic-proportions?page=0%2C0&akid=9920.41763.Yvurja&rd=1&src=newsletter775831&t=3

        I think that this speaks to your broader point of Krugman’s discomfort when it comes to Obama’s policy and maybe his identity; this is endorsement by art analogy, an unusual departure for the more rigorous dissections we’re used to from Krugman. I’m not an expert on Lew’s bio, to be sure, but to give some benefit of the doubt to Bill Black’s portrait, Lew has been close to some major policy failures, public and private, awfully close.

  13. Hugh

    Krugman is an Establishment liberal and a Democratic man. He will criticize aspects of the Establishment and what they do. He will do the same with the Democratic party, but he will never reject either. This creates a tremendous cognitive dissonance which Max424’s comment captures.

    Krugman rolls out his standard Keynesianism, which sounds good, but then walks it back by adding in or leaving out all kinds of things.

    First, it’s not going to happen. Why? Krugman acting the part of the loyal Democratic tribalist puts it this way: “What he [Obama] has to do now is bargain down or ride over these crazy people in the Republican Party.” You have to consider how amazing this statement is at this jointure after 5 years, a year of his intial campaign and four years in office. Krugman is supposed to be an opinion leader, ahead of the curve, but somehow he has not noticed how Obama has out-Bushed Bush on all the great issues of the day: bailing out the bankers, a policy that became apparent with the TARP more than 4 years ago and has continued ever since, the concomitant screwing over of the American people at every turn since but most notably in housing, jobs, income, healthcare, education, and Constitutional rights, in other words the fundamental building blocks of a fair, decent, and just society.

    The cognitive dissonance that is in Krugman transmits to those who praise him. Krugman has achieved fame, wealth, and prestige, in a kleptocracy. Shouldn’t that tell you something?

    Krugman says: “I guess I am an optimist, which is that I believe that you can fix both capitalism and democracy.” But we have neither. We have kleptocracy. So Krugman goes about proposing his cute, little solutions to problems for things that don’t exist: capitalism and democracy, knowing that his solutions will never be implemented because of goblins or crazy Republicans or something similar. If the kleptocrats had not already invented Krugman, they would have created him because what counts are not his innocuous critiques but his validation of, and optimism in, the Establishment and system which they use to loot us.

    Second, what struck me about Krugman is how he ignored wealth inequality throughout the interview until perfuctorily at the very end, and only because Moyers brought it up quoting Keynes:

    “The outstanding faults of the economic society in which we live–” and this was the ‘20s and ’30s, “are its failure to provide for full employment. And its arbitrary and inequitable distribution of wealth and incomes.”

    Wealth inequality is tied to looting and criminality because this is how that inequality has been achieved. It is why Keynesian stimulus either will not be used at all or used only if it increases opportunities for looting. Far from decreasing wealth inequality, in a kleptocracy, Keynesianism will increase it. (So will MMT but that is another story.)

    Third, because I write on this subject, I do not like the way Krugman plays a fairly standard Establishment role of both decrying our jobs crisis and whittling down its true dimensions to almost nothing. Krugman arbitrarily declares full employment to mean 5% unemployment. So right off the bat, he reduces the problem down from 12.206 million unemployed to 4.43 million, and rounds it down further to 4 million.

    But these are the official unemployment numbers based on a restrictive definition of what it means to be unemployed. And while 4.43 million is a large number, it is a problem number, not a crisis number. I calculated that last month the real unemployment number was 20.41 million. Even knocking off 2% for job changing, that would leave 17.3 million real unemployed, that is more than 4 times the number Krugman is using.

    And it doesn’t end there. If we look at real disemployment, that is unemployment and underemployment, I calculated this number at 28.328 million. Again allowing for a 2% turnover in any given month, this leaves 25.69 million (real unemployed plus involuntary part timers). Or more than 6 times the 4 million Krugman cites.

    And again it does not end there, there is an unquantifiable decrease in the quality of jobs in terms of their income, benefits, stability, working conditions, and meaningfulness.

    When you look at things this way, then yes, the jobs crisis that we all know to be there can be seen, but Krugman attempts to have it both ways: At once acknowledging the crisis but then casting it in terms so small that Obama and the Democrats’ miniscule efforts to address it, while looking insufficient, do not look as criminal as they are.

    1. Jimmy

      What a huge response from so many intelligent, educated folks.
      I don’t hear any real consensus. For me the “reasons” Krugman and others are not going to go anywhere are only important if someone’s going to do something with the information. What’s a viable solution? An issue I see that’s not on the table is one that’s been pretty much ongoing since industrialization. Take people off the farms and out of the mines and factories with equipment and they are essentially going to be relegated to something else. Teaching, Healthcare, Building infrastructure, defense all seem positive – then it gets to some extent people will be reduced to selling useless baubles and unneeded services in the street – video games, professional sports, reality shows, viagra, and on an on. Once the necessary jobs are filled, people will be forced to move to unnecessary “work”. I’m thinking gainful unemployment might be the ticket. “Labor Productivity” gains should be equal to the number of newly unemployed. Hmmm..? If people don’t want to work and or are not capable of doing the needed work, maybe “gainful unemployment” is a good direction to look to. Maybe the economic, cultural and environmental consequences of trying to find a place for everyone in the workforce are misguided? Whether people have a job or are on the dole, if they are not producing something of value with their work – food – clothing – education – shelter – infrastructure – etc., maybe we’d be better off paying them not to work..?? Gainful unemployment. I’m sensing something close to the military having people (who otherwise have nothing to do) dig unneeded ditches and then fill them in to eliminate the hole. As I see it people pretty much don’t need jobs, they first need need enough $ to survive. I think people would like to feel that their existence is worth something. I was gratified here to see comments about Jack London and Herbert Spencer – Seems the pretty much the same questions were being asked 100 years ago, way before computers and iphones.

    2. jake chase

      I think total unemployment and underemployment is at least 50 million, perhaps 60 million. That category pretty much includes everybody over age 50 who is not an executive or a business owner, and eighty percent of those between ages 20 and 30. We could well be talking about 100 million, don’t you think?

    3. JTFaraday

      Employing people in a kleptocracy puts them in the service of the kleptocracy. Now we’re getting somewhere, analytically speaking.

      I said in 2001 that the only people making any money are those who are screwing over the rest of us.

      The thing I like about the George Friedman/Stratfor article everyone is criticizing on the links page is that he at least makes that much clear, and also indicates that they own the government. He also suggests this will not be remedied by economic “dumb luck.”

      That’s more than a lot of people will say, including those who want the kleptocrats to toss everyone a minumum wage job, one bootstrap, and a lottery ticket because “any job is better than no job.”

      Really?

  14. redleg

    Dear Dr. Krugman:
    WW2 did not end the Great Depression. Standard of living did not improve until the war ended. There was rationing, internment and conscription during the war in the US, certainly different than the 1930’s but not an improvement like what happened afterwards.
    Those in the line of fire would argue that the 1930’s may have been better than WW2 and the immediate aftermath.

  15. saurabh

    Did anyone else catch the moment where he called William Tecumseh Sherman a “good man whom I admire”? WTF? Was there some very subtle sarcasm here?

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