NYT's Krugman: Blame the Right Wing and 'Inequality,' Not Obama, for Today's Economic Paralysis
The left-wing site Salon published on Sunday a 3,000-word excerpt from an essay by Paul Krugman and Robin Wells (his wife) published in The Occupy Handbook, a collection of essays from a spray of left-wing economics writers (plus Tyler Cowen) released yesterday in support of the leftist sit-in. From the book description at Amazon: "A guide to the occupation, THE OCCUPY HANDBOOK is a talked-about source for understanding why 1% of the people in America take almost a quarter of the nation's income and the long-term effects of a protest movement that even the objects of its attack can find little fault with."
Under the full headline "Economy killers: Inequality and GOP ignorance -- By failing Econ 101, Republican leaders failed the country and repeated the errors that caused the Great Depression," Krugman and wife spent almost 3,000 words blaming conservatives for the "rising inequality" that has caused an ineffective response to the financial crisis of 2008. In other words, don't blame Obama, but "the right."
America emerged from the Great Depression and the Second World War with a much more equal distribution of income than it had in the 1920s; our society became middle-class in a way it hadn’t been before. This new, more equal society persisted for 30 years. But then we began pulling apart, with huge income gains for those with already high incomes. As the Congressional Budget Office has documented, the 1 percent -- the group implicitly singled out in the slogan “We are the 99 percent” -- saw its real income nearly quadruple between 1979 and 2007, dwarfing the very modest gains of ordinary Americans. Other evidence shows that within the 1 percent, the richest 0.1 percent and the richest 0.01 percent saw even larger gains.
By 2007, America was about as unequal as it had been on the eve of the Great Depression -- and sure enough, just after hitting this milestone, we plunged into the worst slump since the Depression. This probably wasn’t a coincidence, although economists are still working on trying to understand the linkages between inequality and vulnerability to economic crisis.
....
So how did we end up in this state? How did America become a nation that could not rise to the biggest economic challenge in three generations, a nation in which scorched-earth politics and politicized economics created policy paralysis?
We suggest it was the inequality that did it. Soaring inequality is at the root of our polarized politics, which made us unable to act together in the face of crisis. And because rising incomes at the top have also brought rising power to the wealthiest, our nation’s intellectual life has been warped, with too many economists co-opted into defending economic doctrines that were convenient for the wealthy despite being indefensible on logical and empirical grounds.
....
Why does higher inequality seem to produce greater political polarization? Crucially, the widening gap between the parties has reflected Republicans moving right, not Democrats moving left. This pops out of the Poole-Rosenthal-McCarty numbers, but it’s also obvious from the history of various policy proposals. The Obama health care plan, to take an obvious example, was originally a Republican plan, in fact a plan devised by the Heritage Foundation. Now the GOP denounces it as socialism.
The most likely explanation of the relationship between inequality and polarization is that the increased income and wealth of a small minority has, in effect, bought the allegiance of a major political party. Republicans are encouraged and empowered to take positions far to the right of where they were a generation ago, because the financial power of the beneficiaries of their positions both provides an electoral advantage in terms of campaign funding and provides a sort of safety net for individual politicians, who can count on being supported in various ways even if they lose an election.
....
In summary, then, the role of rising inequality in creating the economic crisis of 2008 is debatable; it probably did play an important role, if nothing else than by encouraging the financial deregulation that set the stage for crisis. What seems very clear to us, however, is that rising inequality played a central role in causing an ineffective response once crisis hit. Inequality bred a polarized political system, in which the right went all out to block any and all efforts by a modestly liberal president to do something about job creation. And rising inequality also gave rise to what we have called a Dark Age of macroeconomics, in which hard-won insights about how depressions happen and what to do about them were driven out of the national discourse, even in academic circles.
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Comments
OK Krugman.
Submitted by Savonarola on Thu, 04/19/2012 - 1:14pm.
Now just go away, and stay away.
Hey Paul, Go back to your
Submitted by John21 on Thu, 04/19/2012 - 1:16pm.
Hey Paul, Go back to your Kool-aid and let the adults have an intelligent discussion.
You have not been close to right in your evaluation of the economy in the last decade. Your credibility is non-existant. You offer nothing but the same old theories that have already been proven as failures. Your very limited capability is no longer needed, wanted or trusted and you mangered to do that all by yourself. Will pity the fact that you are capable of intelligent descussion but we need to deal with reality and not your version of utopia.
Economist and Statisticians
Submitted by Agnostic on Thu, 04/19/2012 - 1:44pm.
One asks you what you want the answer to be and the other will tell you how the answer supports their hypothesis.
Probably just more fruit from the misinformation tree created by Piketty and Saez. You can't expect Krugman to verify the data when it agrees with his enlightened opinion.
These people are jealous that
Submitted by okie-pastor on Thu, 04/19/2012 - 1:19pm.
These people are jealous that someone besides themselves have the intelligence, the ambition, the ingenuity, and dose of luck to make themselves wealthy.
If they want "equality" go to a socialist country that offers the "equality" they want
I demonstrated this once by walking in front of group of people and asking them how many ofmthem would like to have a thousand dollars. All hands went up. Then I played it up by saying 'well, I'm feeling extra generous how about two thousand dollars? They all were exuberant. Then I walked out in to the crowd and had a friend stand up and asked him to hand me his wallet. They all rolled laughing. I said isn't it easy to be generous with other peoples money?
The applause was deafening.
Nobel prize in Economics,
Submitted by texastommy on Thu, 04/19/2012 - 1:27pm.
Nobel prize in Economics, huh? Must have been a random selection pulled from a jar.
Previous work
Submitted by JeffC... on Thu, 04/19/2012 - 1:40pm.
I think he won his award for something he did a long time ago--presumably when he had some working brain cells.
That, and the new qualification of really hating former President Bush.
Actually, Kruggie's Nobel
Submitted by HockeyKid on Thu, 04/19/2012 - 1:56pm.
winning work, as I recall, was based on a theory that's long since been debunked. It was 'controversial' at the time, thus titillating to the Nobel crowd, but fundamentally flawed. He's been dining out on that one piece of work ever since.
Note that Kruggie seems to think that "income" is a fixed amount, and therefore when the rich "take" more of it, others are economically injured. In reality, work creates money and sloth loses it. If sloth is rewarded by taking from the working (i.e., tax and government support), the economy necessarily contracts. This is something Kruggie doesn't seem to understand.
He has no real concept of the money supply, added value, or any other growth-related economic topic.
"Beauty is only skin deep, but liberal's to the bone." - me
Maybe this puts Krugman in perspective . . .
Submitted by Galvanic on Thu, 04/19/2012 - 1:50pm.
Last year, Krugman wrote that it doesn't matter how much debt the US accrues because "we're essentially borrowing from ourselves."
Debt doesn't matter? Is it any wonder that the Left idolizes him?
Now, if that's the kind of economic rationality that Nobel-Prize winning Krugman anchors his analysis on, it's easy to dismiss out of hand everything else he utters.
Just another example
Submitted by HockeyKid on Thu, 04/19/2012 - 2:01pm.
of how outdated Kruggie's economic education is.
There was a time when that statement was true (and frequently repeated)--before we started borrowing from other countries for a major part of our deficit. When the "national debt" was mostly in the form of T-bills held by American citizens (not all that long ago), Kruggie would have been right.
In 2012, though, it's not even remotely true.
"Beauty is only skin deep, but liberal's to the bone." - me
Krugman and inequality
Submitted by Steve Cakouros on Thu, 04/19/2012 - 1:56pm.
Paul Krugman is a disciple of Harold J. Laski, Victor Gollancz, and Francois Babeuf. He should leave for Communist China ASAP.
Can somebody explain to me in
Submitted by MrSnuggles on Thu, 04/19/2012 - 1:58pm.
Can somebody explain to me in detail how deregulation caused banks to make bad loans to unqualified buyers?
deregulation
Submitted by Agnostic on Thu, 04/19/2012 - 2:07pm.
Once deregulation was completed then the banks became prey for the government efforts to run their social experiments. Some lenders were greedy, some took reasonable risk and some did not participate in the government programs - deciding to stay small because government restrictions would have never allowed them to grow.
The government could not have coerced banks into making bad loans (regardless of the level of unethical behavior that existed at the banks) if the government hadn't reduced the regulations.
They deregulated the banks in
Submitted by MrSnuggles on Thu, 04/19/2012 - 3:18pm.
They deregulated the banks in order to regulate then more thoroughly? It doesn't make sense.
No,
Submitted by HockeyKid on Thu, 04/19/2012 - 4:01pm.
they deregulated in order to control them in a different manner. Regulations prevented banks from making bad loans, even if they were willing to take the bad risk (which most weren't). Once he regulations were lifted, the government (along with Fannie and Freddie) was free to "encourage" bad lending practices under the guise of the Community Reinvestment Act, etc. With government guarantees in place, the bad risk was lifted, and many (but nowhere near all) banks took to the newly opened markets. Wiser bankers (like mine), saw that the emperor had no clothes, and refused to make bad loans, government guarantees be damned. But it wasn't enough to save the market from the government's "everybody deserves a home" shenanigans.
Make sense now?
"Beauty is only skin deep, but liberal's to the bone." - me
Marxism replaces logic
Submitted by c5then on Thu, 04/19/2012 - 2:29pm.
And socialism replaces common sense.
They so want to make their little ideology come true that when reality crushes it again and again and again, they find themselves looking around an blaming anyone except themselves for just simply being wrong.
Here is what no one can do anything about....the largest generation in recorded history is about to retire en-mass. They will stop spending money on upgrades (cars, clothes, houses, vacations) and begin to save as their income becomes fixed and their needs become smaller. Their spending on healthcare will skyrocket and then in about 15 years they will begin to die.
There is no economic policy or tax structure that can prevent the GDP from contracting and the economy slowing down.
Their children's generation is smaller (thanks to the environmentalists crying about over-population 20 years ago) so the ponzi schemes known as Social Security and Medicare can not continue as they currently are structured because in 10 years there will be more people recieving money than there will be paying into the system (trust funds are empty and hold only IOUs from the federal government).
What is clear is this: You can rely on the government to supply your basic needs and be in the worst position possible should the economy (and the country) not be able to weather the comming "winter storm". Or you can try your best to become part of the evil rich that the left demonize and be in a position to weather the storm independant of a political entity.
What is even more clear is that the democratic party and the liberals in the media are going to try their best to make as many people as possible choose to be dependant upon the government for their basic needs, because that will enable them to play the class warfare game and make people vote a certain way based on their fear of having to fend for themselves. If the economy and the country can not weather the coming storm, the resultant carnage will make the Great Depression pale by comparison, and Krugman and company will be sitting in their ivory, gated, luxury tower wondering why it didn't work again.
Madison and Jefferson and Franklin built a Republic - Roberts killed it!
Amazing Republicans!
Submitted by Morganfrost on Thu, 04/19/2012 - 2:37pm.
Out of power for the last three years, but we're still responsible for everything that's gone wrong under the current administration. When Romney's elected, and things turn around, I'm looking forward to Krugman's insightful analysis about how the recovering economy will be the (slightly delayed) result of Obama's brilliant economic leadership.
Obesity
Submitted by CJohnson on Thu, 04/19/2012 - 3:19pm.
Can Krugman explain why all our personal kW use , calorie intake, average sqft of living space, life expectancy, and miles traveled per lifetime increased during the same time?
Paul Slugman, Your Rampant Psychosis is Alarming
Submitted by Motormouth KOS on Thu, 04/19/2012 - 4:16pm.
You know, when I see these breathless displays of irrelevant Leftist rage, I always take pause to try to understand the driving force(s) behind the irrational behavior.
In Slugman's case, I think it's a bad case of Napoleon Syndrome.
He's an angry midget.
The Obamination... A crisis leading to a catastrophe..(please donate to MRC)
More partisan nonsense from
Submitted by lesterwink23 on Thu, 04/19/2012 - 4:21pm.
More partisan nonsense from the lawn gnome? Who cares?
I used to read Krugman and
Submitted by Dan The Man 2 on Thu, 04/19/2012 - 4:34pm.
I used to read Krugman and Molly Ivans and a few more before I got wise, well not that I am wise now. It seems we are destined to go down in flames due to the idiots in charge. The only consolation I have is the knowledge God sent the Israelites to be slaves in Egypt for 400 years. We too might be sold into slavery if Obama gets in in November.
Impossible
Submitted by giatn on Thu, 04/19/2012 - 6:06pm.
How do you have a rational discussion with someone who thinks Obama is
"modestly liberal"? While demonizing Republicans, he carefully ignored the
1993 law passed under Clinton that capped deductible executive pay at
$1 million. That led to massive grants of stock warrants in lieu of salary.
The bull market did the rest. If capital gains are subtracted and transfer payments
and benefits added, the so called "inequality" almost disappears. The point is
that the financial distortions in income and housing prices (the bubble) all were
unintended consequences of misguided government policies designed for social
engineering. The era he remembers fondly of more equal incomes was a time when
everyone was equally poor. Government can not print money to create prosperity;
and, income "equality" is not possible when only half graduate from high school.
L.A. just announced it wants to lower standards because only 15% qualified for
college!
Klug.. Krugman is...
Submitted by retrocon on Thu, 04/19/2012 - 6:20pm.
the very definition of a "useful idiot."
Lib economics is "if something good happened coincidentally with a liberal policy, the policy caused it."
"If something bad happened because of a liberal policy, and the current administration is republican, the republican caused it."
"If something bad was caused by a liberal policy, and a liberal administration is in power, it was caused by the most recent republican administration."
They do not understand the idea of "root cause." They do not understand real economic issues, or anything about statistics... just loose associations that fit their current finger pointing directions.
The dictionary definition of "Liberal Economist" should include the synonym "Useful Idiot"
Krugman:"In 2008, found ourselves in a Keynesian world" - indeed
Submitted by Gary Hall on Thu, 04/19/2012 - 6:53pm.
Krugman: In 2008 we suddenly found ourselves living in a Keynesian world — that is . .
Honestly, I don't really care about what it is he's trying to fool the reader with, so instead, let's just stop him mid-sentence and lay out the case that indeed, in 2008 we found ourselves in the midst of an historic economic crash, almost entirely caused by an Keynesian experiment gone horribly wrong . . well, just like any good follower of Hayek would have predicted this would have turned out:
July 29, 1999 - CUOMO ANNOUNCES ACTION TO PROVIDE $2.4 TRILLION IN MORTGAGES FOR AFFORDABLE HOUSING FOR 28.1 MILLION FAMILIES
Or as Obama explained that "original idea:"
Senator and Presidential candidate Barack Obama, Sep't 17, 2007: The original idea was a good one, which was that let's see if we can distribute this more broadly and make it easier to provide loans to people who otherwise might be-- not be able to get a mortgage loan.
Hey Obama - no it was not a good idea - you get it yet?
(;~/ gary
I've got five words for
Submitted by Trix Rabbit on Thu, 04/19/2012 - 7:07pm.
I've got five words for Krudman: Five Trillion Dollars in DEBT!
Hells bells! My cat understands economics better than this idiot does.
For the MSM: In your pomp and all your glory, you're a poorer man than me. As you lick the boots of death born out of fear.
Ian Anderson "Wind up"
I guess this guy is called a "pundit". Is there a worse...
Submitted by jawebster1 on Fri, 04/20/2012 - 3:35am.
one around? If you can give me a name or two that is worse, I will give you a tip of my hat. (No MSNBC anchors please. It has to be a nationally syndicated columnist.)
Poor Paul... Like every other
Submitted by Tim the Enchanter on Fri, 04/20/2012 - 3:44pm.
Poor Paul... Like every other leftie, he's educated beyond his intelligence.