I don't know how I missed this Charlie Rose roundtable (click on the "Transcript" tab, or scroll up to see the video). It was back in February 2010, and it included Krugman, El-Erian, and David Walker, i.e., the heavyweights. Here are some excerpts:
"I think the extreme deficit that we’re dealing with now is something that came at us out of the blue resulting from a crisis in high finance, a crisis in housing, a crisis in automobiles. The private sector created a lot of the problems that’s given rise to these huge recessionary deficits."
"The way I look at it, there are really just two things that are top of the line. Everything else is secondary. First is health care. Nothing works unless you can get health care costs under control...[and second,] the bulk of it has to involve raising more revenue. "
"And I would say we’re still spending quite a lot of money to keep Soviet tanks from going across Germany, and so if we could stop doing that, that would help."
"Why is it that we want fiscal consolidation and fiscal stability? It’s a means to an end. And the end is growth, employment creation, and welfare creation. Ultimately we look for financial stability and fiscal stability because it’s a means to an end."
"Let me give you my broader take, which is that the United States does worse than anybody at controlling health care costs."
"[L]ook, we need protection against catastrophic accidents and illnesses that could wipe us out financially. It’s the number one cause of bankruptcy in the United States."
"Even if they [interest rates] don’t go up, the single largest line item in the federal budget within 12 years will be interest on the federal debt -- larger than defense, larger than Medicare, larger than Social Security. And what do we get for that? Nothing." (David Walker)
"I’m really -- I really hate that calculation. I share your concerns about the long term, but I really hate that calculation. Take the Obama budget, I happen to know the numbers. It says in 10 years we will be spending 3.5 percent of GDP on interest payments. And when did we last do that? We did it when the first George Bush was president. It wasn’t catastrophic then and it isn’t catastrophic now. It’s a very misleading number in calculating the real burden." (Paul Krugman)
"Let me put it this way -- you need a situation where irresponsible rhetoric actually loses people elections. And that has not been the case in America for a while." (Krugman)
"[W]hen you add in the unfunded promises that have been made, this country is in a $60 trillion-dollar hole. Just Medicare and Social Security, pensions and health for civilians and military. That’s three times what it was when George Bush became president. The debt has doubled, more than doubled, since George Bush, this is 43, became president." (David Walker)
"It’s not that our democracy has become dysfunctional. It’s really that we’re going through a paradigm shift. We have a seen a 20 percent increase in the debt to GDP ratio in a very short period of time. We have seen unemployment go up to levels that were unthinkable and is likely to stay there. And this is in a system built on the assumption that unemployment cannot stay high for a long time. That’s why our safety nets are so weak. We have seen major questions being raised about institutions, about the Fed, about the banks. This is a paradigm shift." (El-Erian)
"Let me tell you one other thing I say to my Democratic caucus when we’re trying to pass a budget resolution, referring to the incumbents about what the rest of the world thinks of us. I tell them, if you can’t budget, you can’t govern. That’s the way it is looked upon. And if you look at other, true parliament systems is it particularly a condition or rule of the parliament, if they fail to pass the budget it’s a call for dissolution of the parliament. And frankly we should be held accountable for what we do to a far greater extent than we are." (John Spratt)
"And if an epitaph be my story, I'd have a short one ready for my own: I had a lover's quarrel with the world." -- Robert Frost
Showing posts with label Paul Krugman. Show all posts
Showing posts with label Paul Krugman. Show all posts
Monday, October 4, 2010
Friday, June 5, 2009
The Economists' Roundtable
Just a wonderful, wonderful exchange between prominent economists:
http://www.nybooks.com/articles/22756
Nouriel Roubini:
[F]iscal policy cannot resolve problems of credit, and it is not without cost. Over the next few years it's going to add about $9 trillion to the US public debt. Niall Ferguson said it's the end of the age of leverage. It's not really. There is not deleveraging. We have all the liabilities of the household sector, of the banks and financial institutions, of the corporate sectors; and now we've decided to socialize these bad debts and to put them on the balance sheet of the government. That's why the public debt is rising. Instead, when you have an excessive debt problem, you have to convert such debt into equity. That's what you do with corporate restructuring—it converts unsecured debt into equity. That's what you should do with the banks: induce the unsecured creditors to convert their claims into equity. You could do the same thing with the housing market. But we're not doing the debt-into-equity conversion. What we're doing is piling public debt on top of private debt to socialize the losses; and at some point the back of some governments' balance sheet is going to break, and if that happens, it's going to be a disaster.
He makes so much sense, it's almost painful to listen.
http://www.nybooks.com/articles/22756
Nouriel Roubini:
[F]iscal policy cannot resolve problems of credit, and it is not without cost. Over the next few years it's going to add about $9 trillion to the US public debt. Niall Ferguson said it's the end of the age of leverage. It's not really. There is not deleveraging. We have all the liabilities of the household sector, of the banks and financial institutions, of the corporate sectors; and now we've decided to socialize these bad debts and to put them on the balance sheet of the government. That's why the public debt is rising. Instead, when you have an excessive debt problem, you have to convert such debt into equity. That's what you do with corporate restructuring—it converts unsecured debt into equity. That's what you should do with the banks: induce the unsecured creditors to convert their claims into equity. You could do the same thing with the housing market. But we're not doing the debt-into-equity conversion. What we're doing is piling public debt on top of private debt to socialize the losses; and at some point the back of some governments' balance sheet is going to break, and if that happens, it's going to be a disaster.
He makes so much sense, it's almost painful to listen.
Tuesday, February 24, 2009
Robert Reich = The New Dr. Doom?
The Commonwealth Magazine featured a recent Robert Reich speech, where he seems to be auditioning for Nouriel Roubini's "Dr. Doom" title. Mr. Reich predicts that the unemployment rate will reach double-digits and the Dow will be "languishing around 7,050." Of course, Mr. Reich is no dummy--he conditions his predictions on a supremely vague qualifier--"without effective government action." Mr. Reich believes at least $900 billion is necessary to be effective--which isn't too far off from the $787 billion package actually passed. After almost $800 billion, it's hard to believe another $100 billion would make a difference either way.
It appears that some Democrats and some Democratic supporters like Reich and Krugman see this crisis as a way to get more money distributed to the middle class and poor. There's nothing wrong with taking that policy position, but it may explain why so many pundits are advocating for more stimulus. Even if no stimulus money reaches the mid- to lower-income classes directly, the more money the government prints, the less burdensome consumer debt becomes. In other words, assuming the poor and middle class hold most consumer debt, printing money creates inflation, which temporarily reduces a debtor's burden. Inflation, at moderate rates, isn't all bad--it reduces the value of savings but also debt, and may lead to salary increases in certain fields. If anything, resulting inflation will hurt Chinese and Japanese investment holdings the most, because they hold the most dollar-denominated assets.
Still, it's important to understand why so many Democrat-linked economists are calling for more stimulus. It's quite simple, really. Mr. Reich and Mr. Paul Krugman view the last 25 years as an unconscionable transfer of resources/income from the poor and middle class to the rich--and the numbers seem to support their conclusions, at least where net assets are concerned. Mr. Reich even coins a funny phrase for this phenomenon: "DINS--double income, no sex," to demonstrate how badly the non-rich have fared. (Mr. Reich wants us to believe the poor and middle class are so overworked, they don't have time for basic things, such as sex.) Mr. Reich ends his speech on a safe note: he says that economic recovery is "likely to be [here] in two or three years."
I disagree. My main issue is with Mr. Reich's view that the last 25 years were a terrible time for the middle class and poor. Economics is not a zero-sum game. First, although the rich have gotten richer, the middle class is now enjoying an unprecedented quality of life. To be poor in America in 2009 is to be the envy of 90% of the world's population, many of whom work for less than $2 a day. I don't need economic statistics to prove this point--you can just look at how many foreign citizens apply for asylum here every year, or who are willing to risk their lives to cross America's border.
Second, it is true that other countries have more equitable distributions of income--but almost all those populations are smaller, less diverse, and declining. In large, diverse populations, including China and Brazil, income distribution is usually heavily concentrated at the top. The most notable exceptions are Canada and Australia, which have massive stores of natural resources and smaller military budgets. Unless America becomes energy-independent and more willing to cut defense spending, income equality will probably persist. This won't be because of a conservative Republican plot--it's just that too many Americans appear unwilling to advocate for a smaller military budget and, in recent history, too willing to go to war. That's a terrible combination, because as Californians are starting to learn, you can't have it all. At some point, the piper comes calling, and the bills become due.
In fact, Democrats like Reich and Krugman are stealing a page from the GOP's playbook. In the old days, Republicans would spend trillions of dollars on wasteful defense projects and then scapegoat poor single mothers on welfare. Now, Democrats are demonizing bankers and Wall Street to divert the public's focus from their own act of generational theft (America's future generations will be paying for the recent stimulus package). So while Republicans ran up deficits to increase the military, Democrats are running up deficits to send taxpayer money to their core constituents--education, local and state governments, and unionized interests. In the end, government gets bigger under either administration--it's just a matter of where the dollars go.
Meanwhile, fiscal conservatives like me are left screaming in the dark and wondering when Ron Paul will make a comeback. I hear Estonia's a nice place for anti-war libertarians like myself (see the incredible film, The Singing Revolution, to understand where I'm coming from). I might just go on a visit and not come back till Congress learns some fiscal discipline. If I do leave, however, it won't be because I think the rich in America have it out for the middle class, or that America's poor have terrible lives--it'll be because our two-party system has failed the average American who saves money, lives modestly, and tries to create a future where American children will be better off than their parents.
It appears that some Democrats and some Democratic supporters like Reich and Krugman see this crisis as a way to get more money distributed to the middle class and poor. There's nothing wrong with taking that policy position, but it may explain why so many pundits are advocating for more stimulus. Even if no stimulus money reaches the mid- to lower-income classes directly, the more money the government prints, the less burdensome consumer debt becomes. In other words, assuming the poor and middle class hold most consumer debt, printing money creates inflation, which temporarily reduces a debtor's burden. Inflation, at moderate rates, isn't all bad--it reduces the value of savings but also debt, and may lead to salary increases in certain fields. If anything, resulting inflation will hurt Chinese and Japanese investment holdings the most, because they hold the most dollar-denominated assets.
Still, it's important to understand why so many Democrat-linked economists are calling for more stimulus. It's quite simple, really. Mr. Reich and Mr. Paul Krugman view the last 25 years as an unconscionable transfer of resources/income from the poor and middle class to the rich--and the numbers seem to support their conclusions, at least where net assets are concerned. Mr. Reich even coins a funny phrase for this phenomenon: "DINS--double income, no sex," to demonstrate how badly the non-rich have fared. (Mr. Reich wants us to believe the poor and middle class are so overworked, they don't have time for basic things, such as sex.) Mr. Reich ends his speech on a safe note: he says that economic recovery is "likely to be [here] in two or three years."
I disagree. My main issue is with Mr. Reich's view that the last 25 years were a terrible time for the middle class and poor. Economics is not a zero-sum game. First, although the rich have gotten richer, the middle class is now enjoying an unprecedented quality of life. To be poor in America in 2009 is to be the envy of 90% of the world's population, many of whom work for less than $2 a day. I don't need economic statistics to prove this point--you can just look at how many foreign citizens apply for asylum here every year, or who are willing to risk their lives to cross America's border.
Second, it is true that other countries have more equitable distributions of income--but almost all those populations are smaller, less diverse, and declining. In large, diverse populations, including China and Brazil, income distribution is usually heavily concentrated at the top. The most notable exceptions are Canada and Australia, which have massive stores of natural resources and smaller military budgets. Unless America becomes energy-independent and more willing to cut defense spending, income equality will probably persist. This won't be because of a conservative Republican plot--it's just that too many Americans appear unwilling to advocate for a smaller military budget and, in recent history, too willing to go to war. That's a terrible combination, because as Californians are starting to learn, you can't have it all. At some point, the piper comes calling, and the bills become due.
In fact, Democrats like Reich and Krugman are stealing a page from the GOP's playbook. In the old days, Republicans would spend trillions of dollars on wasteful defense projects and then scapegoat poor single mothers on welfare. Now, Democrats are demonizing bankers and Wall Street to divert the public's focus from their own act of generational theft (America's future generations will be paying for the recent stimulus package). So while Republicans ran up deficits to increase the military, Democrats are running up deficits to send taxpayer money to their core constituents--education, local and state governments, and unionized interests. In the end, government gets bigger under either administration--it's just a matter of where the dollars go.
Meanwhile, fiscal conservatives like me are left screaming in the dark and wondering when Ron Paul will make a comeback. I hear Estonia's a nice place for anti-war libertarians like myself (see the incredible film, The Singing Revolution, to understand where I'm coming from). I might just go on a visit and not come back till Congress learns some fiscal discipline. If I do leave, however, it won't be because I think the rich in America have it out for the middle class, or that America's poor have terrible lives--it'll be because our two-party system has failed the average American who saves money, lives modestly, and tries to create a future where American children will be better off than their parents.
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