[jolepp]

...
What do I mean by saying that this is already a Republican economy? Look first at total government spending — federal, state and local. Adjusted for population growth and inflation, such spending has recently been falling at a rate not seen since the demobilization that followed the Korean War.

How is that possible? Isn’t Mr. Obama a big spender? Actually, no; there was a brief burst of spending in late 2009 and early 2010 as the stimulus kicked in, but that boost is long behind us. Since then it has been all downhill. Cash-strapped state and local governments have laid off teachers, firefighters and police officers; meanwhile, unemployment benefits have been trailing off even though unemployment remains extremely high.

Over all, the picture for America in 2012 bears a stunning resemblance to the great mistake of 1937, when F.D.R. prematurely slashed spending, sending the U.S. economy — which had actually been recovering fairly fast until that point — into the second leg of the Great Depression. In F.D.R.’s case, however, this was an unforced error, since he had a solidly Democratic Congress. In President Obama’s case, much though not all of the responsibility for the policy wrong turn lies with a completely obstructionist Republican majority in the House.
...
As an aside, I think it’s worth pointing out that although the economy’s performance has been disappointing, to say the least, none of the disasters Republicans predicted have come to pass. Remember all those assertions that budget deficits would lead to soaring interest rates? Well, U.S. borrowing costs have just hit a record low. And remember those dire warnings about inflation and the “debasement” of the dollar? Well, inflation remains low, and the dollar has been stronger than it was in the Bush years.

Put it this way: Republicans have been warning that we were about to turn into Greece because President Obama was doing too much to boost the economy; Keynesian economists like myself warned that we were, on the contrary, at risk of turning into Japan because he was doing too little. And Japanification it is, except with a level of misery the Japanese never had to endure.
...

http://www.nytimes.com/2012/06/04/opinion/krugman-this-republican-economy.html

edit, related: http://krugman.blogs.nytimes.com/2012/06/03/1937-2/

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Last edited by jolepp; 06-04-2012 at 08:50 AM.

[kenafein]

Thanks for a depressing start to the week . This, surprisingly, is not common knowledge, though it is painfully obvious. I'll never understand the masses that vote for the current republican regime. They blindly vote against their own best interests. We have precedent on our side. You don't cut your way out of a recession. We're playing right into the oligarchs' plans.

[Nesster]

Here's Summers:

Even more remarkable are the interest rates on inflation-protected bonds. In real terms, the world is prepared to pay the U.S. more than 100 basis points to store its money for five years and more than 50 basis points for 10 years. Maturities would have to reach more than 20 years before the interest rates on indexed bonds becomes positive. Again, real rates are even lower in Germany and Japan. Remarkably, the UK borrowed money last week for 50 years at a real rate of 4 basis points.

These low rates on even long maturities mean that markets are offering the opportunity to lock in low long-term borrowing costs. In the U.S., for example, the government could commit to borrowing five-year money in five years at a nominal cost of about 2.5 percent and at a real cost very close to zero.

What does all this say about macroeconomic policy? Many in both the U.S. and Europe are arguing for further quantitative easing to bring down longer-term interest rates. This may be appropriate given that there is a much greater danger from policy inaction to current economic weakness than to overreacting.

However, one has to wonder how much investment businesses are unwilling to undertake at extraordinarily low interest rates that they would be willing to undertake with rates reduced by yet another 25 or 50 basis points. It is also worth querying the quality of projects that businesses judge unprofitable at a -60 basis point real interest rate but choose to undertake at a still more negative real interest rate. There is also the question of whether extremely low safe real interest rates promote bubbles of various kinds.

There is also an oddity in this renewed emphasis on quantitative easing. The essential aim of such policies is to shorten the debt held by the public or issued by the consolidated public sector comprising both the government and central bank. Any rational chief financial officer in the private sector would see this as a moment to extend debt maturities and lock in low rates – exactly the opposite of what central banks are doing. In the U.S. Treasury, for example, discussions of debt-management policy have had exactly this emphasis. But the Treasury does not alone control the maturity of debt when the central bank is active in all debt markets.

So, what is to be done? Rather than focusing on lowering already epically low rates, governments that enjoy such low borrowing costs can improve their creditworthiness by borrowing more, not less, and investing in improving their future fiscal position even assuming no positive demand stimulus effects of a kind likely to materialize with negative real rates. They should accelerate any necessary maintenance project-issuing debt leaves the state richer not poorer, assuming that maintenance costs rise at or above the general inflation rate.

Breaking the negative feedback loop | Lawrence Summers

[Nesster]

The simplest way to gauge if an economy is vibrant and creative: count the number of millionaires and see if they are getting more numerous, and whether each is getting richer. (this is basic Republican math):
Number of millionaires see a decline in wealth - Yahoo! Finance

Guess what, predictably under the socialist policies of Obama - the confscatory tax raises, the stifling increase in regulation, the historically higest ever *EVER* run up in government debt Obamanomics - has caused an alarming decline in US millionaires.

(yeah, never mind reality)

[Parallax]

This, surprisingly, is not common knowledge, though it is painfully obvious.

Actually, it is common knowledge that if the economy is bad under a Republican president, it's the Republicans' fault. If the economy is bad under a Democrat president, it's the Republicans' fault. Quite simple, really.

[Nesster]

Actually, it is common knowledge that if the economy is bad under a Republican president, it's the Republicans' fault. If the economy is bad under a Democrat president, it's the Republicans' fault. Quite simple, really.

Well, now Jim, when did you start spouting Democrat talk? Of course the Republicans believe the exact opposite.

[boriscleto]

Paul Krugman Is Tired Of You People | Crooks and Liars

[Parallax]

Well, now Jim, when did you start spouting Democrat talk? Of course the Republicans believe the exact opposite.

Sorry, I forgot the smiley.

[GeneV]

Actually, it is common knowledge that if the economy is bad under a Republican president, it's the Republicans' fault. If the economy is bad under a Democrat president, it's the Republicans' fault. Quite simple, really.

Tell that to Jimmy Carter.

[kenafein]

Actually, it is common knowledge that if the economy is bad under a Republican president, it's the Republicans' fault. If the economy is bad under a Democrat president, it's the Republicans' fault. Quite simple, really.

Oversimplifying again? A lot of people blame the President for everything that happens in his term, but the President only has so much power. Federal spending is controlled by the legislature, and we have a screwed up house that hold the nation hostage to promote it's regressive and insidious agenda, it's quite simple, really.

[Nesster]

Oversimplifying again? A lot of people blame the President for everything that happens in his term, but the President only has so much power. Federal spending is controlled by the legislature, and we have a screwed up house that hold the nation hostage to promote it's regressive and insidious agenda, it's quite simple, really.

But it really was Bush, wasn't it? And not him being constrained by Congress?

[Parallax]

A lot of people blame the President for everything that happens in his term, but the President only has so much power.

Roughly half of people blame the sitting president (any sitting president) for what happens in his term. The other half blame the previous president.

Tell that to Jimmy Carter.

There are exceptions to every rule.

[Nesster]

Actually, I blame Nixon for Carter