Paul Krugman: Behind the Bush Bust

How much responsibility for the lousy economy falls on Mr. "Clueless to the end" Bush?:

Behind the Bush Bust, by Paul Krugman, Commentary, NY Times: By huge margins, Americans think the economy is in lousy shape — and they blame President Bush. This fact, more than anything else, makes it hard to see how the Democrats can lose this election.

But is the public right to be so disgusted with Mr. Bush’s economic leadership? Not exactly. ... On the other hand, there’s a certain rough justice in the public’s attitude. Other politicians besides Mr. Bush share the blame for the mess we’re in — but most of them are Republicans.

First things first: pay no attention to apologists who try to defend the Bush economic record. ... Over all, Mr. Bush will be lucky to leave office with a net gain of five million jobs, far short of ... population growth. ...Bill Clinton presided over an economy that added 22 million jobs.

And what does Mr. Bush have to say about this dismal record? “I think when people take a look back at this moment in our economic history, they’ll recognize tax cuts work.” Clueless to the end. ...

Tax cuts didn’t work, but they didn’t create the Bush bust. So what did?

At the top of my list of causes for the lousy economy are three factors: the housing bubble..., rising health care costs, and soaring raw materials prices. I’ve written a lot about housing, so today let’s talk about the others.

Most public discussion of health care focuses on the problems of the uninsured and underinsured. But insurance premiums are also a major business expense...

One of the underemphasized keys to the Clinton boom, I’d argue, was the way the cost disease of health care went into remission between 1993 and 2000. For a while, the spread of managed care put a lid on premiums, encouraging companies to expand their work forces.

But premiums surged again after 2000, imposing huge new burdens on business. It’s a good bet that this played an important role in weak job creation.

What about raw materials prices? During the Clinton years basic commodities stayed cheap by historical standards. Since then, however, food and energy prices have exploded, directly lopping about 5 percent off the typical American family’s real income, and raising business costs...

Much of this pain could have been avoided.

If Bill Clinton’s attempt to reform health care had succeeded, the U.S. economy would be in much better shape today. But the attempt failed — and ... it was Republicans in Congress who blocked reform...

As for high food and fuel prices, they’re mainly the result of growing demand from China and other emerging economies. But oil prices wouldn’t be as high..., and the United States would have been much less vulnerable to the current price spike, if we had taken steps in the past to limit our oil consumption.

Mr. Bush certainly deserves some blame here... Still, in energy as in health care the biggest missed opportunities came 15 or more years ago, when Mr. Gingrich and other conservative Republicans in Congress, aided by Democrats with ties to energy-intensive industries, blocked conservation measures.

So here’s the bottom line: Mr. Bush deserves some blame for the poor performance of the economy on his watch, but much of the blame lies with other, earlier political figures, who squandered chances for reform. As it happens, however, most though not all of the politicians responsible for our current economic difficulties were Republicans.

And bear in mind that John McCain has gone to great lengths to affirm his support for Republican economic orthodoxy. So he’ll have no reason to complain if, as seems likely, the economy costs him the election.

Comments

[Alex Tolley]

My limited discussions with friends indicate that the economy is not the key issue in this election. They do not join the dots as Krugman does, which is a shame, but not surprising. The media, as discussed on many of these threads, has diverted attention to other issues, mostly silly, distracting voters from informing themselves of the choices. Much to my chagrin, I even see racism rear its head (in so very polite and evasive terms, of course) even in relatively liberal Silicon Valley.

If economic issues and who is responsible for them are to become an issue, it will take a lot more than PK's plaintive cries. It's a shame, but that's reality (at least in my little bubble).

[methinks]

"So here’s the bottom line: Mr. Bush deserves some blame for the poor performance of the economy on his watch, but much of the blame lies with other, earlier political figures, who squandered chances for reform." - PK

Is this his understanding and summation of the economic legacy of the Bush years? What about the inequality, the wars, the debt, the actions of the Federal Reserve, the complicity of Congress?
This country has been brought to the edge of a financial abyss, with debts we can never repay, and this is all he has to say about it?
Bush has successfully put his program into place despite widespread public opposition; Krugman and his ilk have all helped make it possible.

[ddt]

actually, McCain's handlers can be directly linked to current energy prices. His team is a who's who of the Enron scandal alumni, and have been knee deep in all the dubious regulation of energy markets in the last two decades, up to and including the current bubble:

John McCain, Phil Gram & The Enron Loophole - MSNBC
http://www.youtube.com/watch?v=AdRbuUQNcxw

As much as it pains me to say this, Keith Olberman is more or less on the money. It would be wise for the Democrats to follow his lead and viciously attack Phil Gramm for high oil prices. "Anti-speculation thesis" dems are throwing away the absolute best ammunition they have going into this election. Before doing so, I suggest that Krugman and others take another look into the futures market, specifically into the activities of the InterContinental Exchange (ICE) founded by Goldman Sachs and Morgan Stanley, which now trades over 30% of WTI futures and has absolutely no oversight from the CFTC.

The men who were in charge of overseeing these markets have been screaming foul for years:

Chris Cook, a former director of the London Petroleum Exchange—now ICE Futures Europe (interestingly, he is also the man behind Iran's new oil bourse).

"I am convinced there has been manipulation of the Brent Complex [the term that defines North Sea Brent crude prices] by ICE members for the last 10 years at least. I think it is quite likely that the Brent forward price is being kept artificially high—which does require deep pockets and accounts for the continuing barrage of Goldman [Sachs] forecasts and much of the other oil market hype that passes for news." - BusinessWeek

Michael Greenberger, former CFTC Director of the Division of Trading & Markets (1997-1999):

"Over 30% of the U.S. delivered futures benchmark largely determinant of the price of oil here and throughout the world is now being traded on an exchange headquartered in Atlanta, with trading engines in Chicago and trading terminals placed all over the U.S. Relying on an outdated 1999 CFTC staff no action letter granted to a now defunct U.K. subsidiary, the U.S. owned Intercontinental Exchange (ICE) and the CFTC assert that United Kingdom regulators, rather than the U.S. CFTC, should have primary oversight of that exchange. CFTC permission has now also been granted to the Dubai Mercantile Exchange, in partnership with U.S. owned NYMEX, to begin trading that same U.S. delivered contract in the U.S. under the regulatory oversight of the Dubai government, creating the ―London/Dubai‖ Loophole for U.S. speculation.
An ever burgeoning unregulated energy ―swaps‖ market has developed in the U.S. freed from CFTC oversight by the so-called statutory Enron Loophole. Those swaps dealers are laying off their risk from unregulated swaps markets on U.S. regulated exchanges which are treating those dealers, e.g., investment banks, as if they were ―physical‖ commercial hedgers not subject to speculation controls, thereby creating the ―Swaps Dealers Loophole....

If the 2008 PUMP Act becomes law, the U.S. consumer will know precisely the role speculation plays in the massive run up of gasoline, because that statute closes all three major speculation loopholes and brings all U.S. energy futures trading done in and affecting U.S. delivered energy products into the light of day. The only imposition required of speculators is that their trading must be observed by U.S. regulators. Indeed, the 2008 PUMP Act creates a new ―U.S. energy consumers‖ loophole to the massive unpoliced speculation unhinging the market price of oil from its economic bearings."
-Testimony before congress

[Richard H. Serlin]

When Krugman wrote:

"Yet even liberal economists have a hard time arguing that Mr. Bush’s cluelessness actually caused the poor economic performance on his watch. Tax cuts didn’t work, but they didn’t create the Bush bust. So what did?"

I really wish he would have emphasizes the "on his watch", and noted that the diversion of over one trillion dollars away from investment and into consumption, of yachts, mansions, super luxury automobiles, and other consumption goods, from the Bush tax cuts will cost American economic growth greatly in the future.

Krugman probably didn't explicitly mention this because he though it would clunk up the flow and "focus" of his writing. As I've said many times, sadly, so much learning is sacrificed and misunderstanding created because of the pressure to write with what's considered good style.

[Bruce Wilder]

I am struck by Krugman's hit-and-miss concept of Presidential responsibility for the State of the Economy.

It is not a sharp polemic, but it is also not particularly, a sharp economic analysis. Maybe, he should have left aside his relentless focus on the elections, as well as his animus for Bush, and just discussed the connection between policy and the economy.

Taking a meterological view of the economy is lazy and ignorant, and it would be too Republican to take the view that Presidents have little or no effect. Yet, Krugman floats the job creation numbers as a comparative metric, between Clinton and Bush -- with not even a gesture at explaining how policy might relate to that achievement. A skeptic is going to point out that Clinton did not personally hire those people, so attributing job creation to Clinton seems a bit of a stretch, without some policy mechanism. (I am not saying that there were no mechanisms; I admire Clinton's economic policy; I'm just criticizing Krugman for not saying something to draw a comparison of policy, instead of comparing results, which might have a thousand fathers.)

He chooses to talk mostly about health care costs, but not about policy, again. OK, he makes a lazy gesture, saying, in effect, if only Hillary's reform had succeeded. He makes it sound like the only sin of Bush and his Republican Congress was a sin of omission: they did not enact Hillary's plan or something. That's pretty weak. And, his explanation for Clinton's relatively flat growth in health care costs are attributed to . . . managed care. !?

The reality of health care cost inflation -- many health care costs and much health care resource allocation is subject to Presidential and Congressional fiat in one form or another -- is that general attitude and devil-in-the-detail policy makes a lot of difference. The Health Care industries were afraid of Clinton; they owned Bush and the Republican Congress.

It is never really fair to criticize a columnist for failing to write the column I, personally, would have preferred. But, I don't think Krugman did even an adequate job writing the column Krugman, himself, appears to have preferred.

I hate Bush, but I, personally, would have preferred a column that blamed the American people for their own profligacy. In many ways, we have chosen to live beyond our means, and Bush encouraged that, and compounded the problem, in the interest of siphoning off more $$$ for his friends and supporters.

The specific way in which the economy is lousy, and economic prospects are dismal, isn't the usual suspect of high unemployment, per se. It is that the American (median) standard of living is being forced down quite substantially.

Health care costs relate to that, but not because health care is such a huge cost for employers (though health care is a huge cost for employers); health care costs are going up with no improvement in health -- that reduces the standard of living.

While the pressure to reduce personal consumption expenditures is pretty intense and gives every evidence of becoming more intense in the days immediately ahead, there's another way in which the standard of living has been declining: households bear more uninsured risk. Policy -- Republican policy to redistribute income and wealth upward -- has something to do with the changing distribution of risk. It would be nice to mention the connection.

[Bruce Wilder]

RHS: "the diversion of over one trillion dollars away from investment and into consumption, of yachts, mansions, super luxury automobiles, and other consumption goods, from the Bush tax cuts will cost American economic growth greatly in the future."

Exactly the kind of thing I, too, think Krugman should have emphasized.

Politics is about choices.

[merkury]

"Bill Clinton presided over an economy that added 22 million jobs"

Just out of curiosity, if the internet/tech boom hadn't taken off, what would the economy be like back then? Also, with such a record why did Hillary lose?

[Don Lloyd]

At least 66% of the blame for whatever trajectory the economy takes in the intermediate term can be properly laid at the feet of Greenspan and his willingness to force interest rates down to 1%, if memory serves. Much of the rest will result from the insane ethanol subsidies used to buy midwestern votes and ADM campaign contributions by both parties.

Regards, Don

[hari]

Paul is confident economic slowdown and *bust* will mean victory of Dems come next election time.

I'm not so sure...given the penchant of US media to become attack dogs on Barack should he stick to his original Iraq policy - bring it to an end within 16mths.

The economic malise is more serious than what I seem to get from reading Paul's carefully drafted punditry. May be it's NYT/Editorial Page policy now to avoid getting too critical of Bush era...and focus on other matters.

I don't know. And I don't undertand Pauls timidity at getting into what BB called as real policy constraints affecting *inequality* and opportunity in today's America.

[hari]

Ref. Fed Speeches - Ben Bernake, Chairman.

"Embracing the Challenge of Free Trade: Competing & Prospering Ina Global Economy", Montana Economic Development Summit 2007, Butte, Montana, May 1, 2007.

[There is another BB speech I can't locate which addressed income inequality and its consequences in US economy.]

[NLS]

Did anybody see the part where Obama was in Montana on July 4th while McCain was taking a break from running around South America?

[save_the_rustbelt]

"For a while, the spread of managed care put a lid on premiums, encouraging companies to expand their work forces."

The American people screamed bloody murder about managed care.

Remember all of the left wing yelling and chest thumping about shorter hospital stays?

(The irony being that shorter hospital stays and ambulatory services lowered infection rates and in many cases promoted faster healing.)

Bush deserves lots of abuse, but Krugman tries to weave together threads that don't weave very well.

[anne]

"The American people screamed bloody murder about managed care."

Reference???

[bakho]

Bush missed his biggest opportunity to address the 2001 recession by not funding infrastructure projects that benefit everyone, and using trickle down tax cuts instead.

The internet economy never would have happened without Al Gore as its Congressional champion. It was Gore who built the political support for its funding when most politicians were clueless about its potential. Republican hacks managed to discredit Gore for his visionary support of the internet. It is government seed money in infrastructure that allows technology to bloom.

[bakho]

Tolley needs to get out more. Economy is THE issue. Gas prices are the flashpoint.

[Aaron]

On healthcare, just for the record the Clinton health care plan was developed in 1993 and had lost politically and was more or less pronounced dead in the summer before the 2004 election.

The case against the healthcare plan was that it was overly bureaucratic and limited patient choice. The failed healthcare initiative came before and contributed to the Republican blowout of the Democrats in the 1994 election, where every Republican incumbent seeking re-election won, and 34 incumbent democrats were defeated in 1994. The victory put the GOP in control of both the House of Representatives and the senate for the first time since the 1950s.

Paul Krugman said that it was the republicans that blocked reform yet it really was Clinton’s reform that brought the republicans to power. Clinton went on to announce that the age of government was over. I don’t see how can have it both ways as being an advocate of single payer healthcare on one hand, with the single payer being the government or a quasi government agency, and on the other hand saying that age of big government was over. This was Bill Clinton’s position in 1996. So he can hardly can be credited with fighting hard for healthcare during this period.

[Bob]

>> My limited discussions with friends indicate that the economy is not the key issue in this election.

Thats why the word anecdotal exists. Your limited discussions contain no information about how the public feels. Matter of fact you could have unlimited discussions with everybody you knew and what you would end up with would still be information free anecdotal non-data.

Your not unique and at least your honest about this just being the view from inside your bubble.

The number of people that i have run into that extrapolate their meaningless personal observations out onto the whole public is enormous.

Usually it goes something like this. "I was at the mall and i saw a bunch of people there so i declare the economy to be in good shape".

[Alex Tolley]

bakho: "Tolley needs to get out more. Economy is THE issue. Gas prices are the flashpoint."

Not where I live. House prices remain stubbornly high. The only sign I see that gas prices hurt is SUV drivers going REAL SLOW on the surface streets and freeways. I'm not saying that applies to anywhere beyond where I live, but it does seem to expose other views on the election.

What about other places? Do you think other issues might intrude? How about this voice from Iraq: "It's kind of like the fight's never over," said Sgt. Jacob Fultz, 22, from Gardner, Kan. "It started on July 4, 1776 and now it's 2008." Now if even a fraction of the US believe this, then McCain has support for something liberals assume is a no-brainer to vote for Obama.

As I recall, the economy wasn't exactly doing too well in 2004 either. Jobs growth was pretty flat, the issues of stagnant wages, rising costs and access to health care were relevant then too. But what sort of election did we get - a discussion on where Kerry was a flip-flopper, too "french looking" and lots of swift-boating his military record and a Bush 2nd term. And it's going to be different this time because the economy is worse?

[Bob]

>> Just out of curiosity, if the internet/tech boom hadn't taken off, what would the economy be like back then?

And if you grandfather had wheels instead of legs ...

Whats the point of your post ? There sure doesn't seem to be be much any maybe I'm mistaken. I suppose there could be some deep profound message somewhere in it but it if there is you have hidden it well.

Care to be a little more explicit ?

[save_the_rustbelt]

Anne:

I'm away from my files today, but a little research should lead you to Congressional hearings on the "horrors" of shorter hospital stays.

I was involved with some benchmarking studies on shorter stays and ambulatory surgery to prove the value of less hospital time, and of course shorter stays are now routine (the hospital is full of germs!). We are now able to, for some patients, to do knee replacement with a 24 stay or even outpatient.

Krugman's general thesis is correct, but as usual he is trying to tie too many things together, probably due to his hatred of Bush.

[btg]

Apart from Bush's role, Krugman is right to point out that much of the blame predates Bush - in particular, look at how the US automakers got exemptions/lighter standards for SUVs and light trucks. With tougher fuel mileage standards, the US would be less vulnerable to higher gas prices, but on top of that, the US auto industry itself would be in better shape.

Ford has put billions into the new F-150 due to come out this fall - instead investing it into cars or technologies to improve efficiency - same goes for Chrysler with the Challenger and GM with the Camaro - 2 pretty and exciting gas guzzlers that are hitting the market at the wrong time!

GM is imputed to be on the verge of going bankrupt, and Chrysler lacks the ability to develop small cars on its own (it is teaming up with Nissan).

Granted Toyota's sales are down, but they have built in the flexibility to change their product mix by building flexible manufacturing plants - something the big-3 have been slow to do.

[ken melvin]

I think there is little chance of dealing with the economy's problem from the vantage offered. It goes far beyond these partisan differences. Such waste of times, as with energy, just puts us further away from solution. The things that needed be done in the 70's, weren't. Those that needed be done in the 80s, weren't. Those that needed be done in the 90s weren't. And, alas, the changes that need be made now, aren't going to be made.

[anne]

STR:

"I was involved with some benchmarking studies on shorter stays and ambulatory surgery to prove the value of less hospital time, and of course shorter stays are now routine (the hospital is full of germs!). We are now able to, for some patients, to do knee replacement with a 24 stay or even outpatient."

When possible please add.

[save_the_rustbelt]

Anne:

Off the top of my head this site might interest you.

http://www.ascassociation.org/

[Dormilon]

"Tax cuts didn’t work, but they didn’t create the Bush bust. So what did?" -PK

On the surface, I believe it's quite fair to add those tax cuts to the column of contributors to our current bust.

Much has been written about the burden gulf (no pun intended) between Americans fighting in Iraq and Afghanistan and those at home "doing their part" through egregious consumption--We'll show them that no terrorist threat can stem our insatiable appetites. Indeed, our president has provided the motivation and means to continue the improvidence of the last six years, believing that "consumers know best" how to spend their own money. Well, that's garbage. Bridges, roads, and levees, among a host of infrastructure ills, crumble while the citizenry continues overstuffing themselves on iPods and HDTVs. Until consumers begin to balance savings, consumption and their ownership to our communities and infrastructure throughout the nation, I prefer that GOOD government manage our tax revenue in a way that benefits our society collectively and for subsequent generations.

The civilian population must begin to bear the financial consequences of this five-year war on terrorism. However, Bush's tax cuts have eliminated this burden and disconnected the homefront from the normal strains that foment policy discussions around America's dinnertables.

I am also disappointed in PK's column; it felt too weak. In the end, PK should have simply asked Bruce Wilder to write this week's column.

[JB]

I've always wondered why ANY health-care expense is the responsibility of your employer. Education isn't, nor is transportation for the most part....

It just seems like it's a needlessly distorting and opaque cost to levy on business.

Are there good, economically-based arguments against just transfering the cost of health insurance to employees, along with salary increases? It would solve a lot of these 'changing-health-insurers-when-you-change-jobs' problems and would make it a lot easier to measure/keep track of.

[Bruce Wilder]

JB: Are there good, economically-based arguments against just transfering the cost of health insurance to employees?

Briefly, there are two factors at work.

One, is that a large employer defines a "group" for insurance purposes, and it is a group with attractive characteristics for health insurers. Therefore, employers could get health insurance for their employees more cheaply (per employee) than the individual employees themselves.

The second economic reason has to do with the economics of the typical employment relationship in large firms: the employer's ability to get enforceable obediance to manager's instructions often without detailed observation and supervision, which is key to the employer's control of production processes, is advantaged by increasing the cost to the employee of being fired. In short, dependence on the employer for health care and pension enhances the employer's control of the employee, and, loosely phrased, increases the "loyalty" of the employee to the employer. You can see this in even more exaggerated form in the military.

A different employment contract -- say where the employee is being paid piecework -- might not attract the addition of health insurance as a natural evolution.

[Theinvestingspeculator]

I think Bush and Chenney, knew that we were going to have oil problems. I think that is one reason they went to Iraq. But they didn't do anything about an energy policy.
www.theinvestingspeculator.com

[donna]

Alex, head down to L.A. where I have a friend who has been out of work for 11 months now. It's not so rosy in other places outside your bubble. Or Bush's for that matter.

[ken melvin]

If the bubble is your shtick, I can tell you of places not to go. If you want to meet MBAs working three gigs and pretending they aren't unemployed, I can arrange that. If you want to meet 60 year old men w/ degrees who can't beg a job, I can tell you where to look.

[Alex Tolley]

bob: "The number of people that i have run into that extrapolate their meaningless personal observations out onto the whole public is enormous."

However, everyone's opinion relies on some form of observation bias. You may think that wide reading, watching tv, studying poll data even, will buy you a better perspective, but this may not be true. I would certainly say that good poll data is the best data, but the biases of the question mix, answer set and even wording make this data poor. Poll data often states that it is correct to some statistical value, but all that means is that the data collected is correct based on the sample, not on whether the questions were useful.

Silly case in point. I recently received a Republican begging letter (I'm unregistered for party affiliation) which contained a poll. The poll obviously wasn't serious based on the way the questions were asked, but it was constructed to make the reader agree with the Republican positions on various issues.

Back to the real world. Do people even answer polls truthfully, especially to human questioners? We know they don't regarding questions of sexual habits. Why would we necessarily believe them in political races? The point is that there is no way to be sure that economic issues are the MOST important issues in this presidential race, nor whether other issues will trump these issues on election day. By the same logic given by PK, Americans by a huge margin believe that the war in IRAQ is a huge mistake due to Bush, but that doesn't mean that they necessarily vote for someone who will end it quickly with troop withdrawals.

Which is a long winded way of saying, anecdotes may be fairly content free, but so is much other opinion regarding politics.

[Alex Tolley]

JB: "I've always wondered why ANY health-care expense is the responsibility of your employer. Education isn't, nor is transportation for the most part...."

The question is, who should pay for healthcare and through what mechanism.

There is a very good reason not to put the direct burden on individuals: the inability to pay for basic care. This can leave people in a sickly state when simple treatment would have given then healthier lives. Secondly, public health. Untreated diseases can spread which puts a greater burden on society.

The mechanism of payment is another issue. Pick almost any taxpayer funded, universal system. They all work better than the US private system. The US medicare system is just such a system and it works pretty well too.

[Alex Tolley]

donna, ken. Bob's point about anecdotal evidence applies to your comments too. And please, just because I used the word "bubble", don't assume that I have some extremely parochial viewpoint.

[howard]

JB, because no one else has addressed it fully, let me note that during world war ii, we had wage-and-price controls, and so owner-provided health insurance became a way to offer people a raise and then became embedded into the economy.

[Alex Tolley]

Food is another issue. However, I do not see how impoverishing the global population helps the situation other than temporarily reducing meat consumption. Better to have farmers able to use more productive techniques, shift preferences to eating more vegetables (in the rich nations) and ensure that good education, incomes and access to health care will continue to reduce population growth in poorer countries.

[Alex Tolley]

oops, wrong thread.

[paine]

a new low for krug

this is complete dribble
where's the science in these claims ???
lower health costs flowing from hillarycare ????
how
burden shift off corporations ...hillary care ???

employment levels vs output levels
efected by added employer costs of labor versus what???
using machines ?? or is it building more and more of the stuff we buy here ...over seas
the forex fiddle lower labor costs inside this yawning trade gap was a clinton strong dollar consequence
as much as a bush refusal to bust the trade scam
behind the oiler and east asian dollar peggers

when the dollar quite properly
swooned against most oecd currencies
it never budged against the real danger
to our good jobs

commodity prices??
where's the mid east crusade against terror
and for freedom
try showing that.. voluntary mission
didn't effect oil prices
or for that matter the clinton containment policy
which effectively ended maximum
oil production development
in iraq and maybe dimmed it seriously in iran
there's more but isn't this enough

paul
try harder or write less

[paine]

"the diversion of over one trillion dollars away from investment and into consumption, of yachts, mansions, super luxury automobiles, and other consumption goods, from the Bush tax cuts will cost American economic growth greatly in the future."

what ???
are you telling us private real investment in domestic plant and equipment
would have been higher if ....

prove it ..at least in theoretical outline

[paine]

"I admire Clinton's economic policy;"

bruce ...i don't !!!!

but

you have it dead right
tie the job creation into federal macro policy
or don't give clint credit

[paine]

The Health Care industries were afraid of Clinton

which clinton??

either one
i doubt it was the case after 94

btw
what about the famed uncle fed's
over payment formula deal
of the mid 90's ???

[paine]

"I, personally, would have preferred a column that blamed the American people for their own profligacy"

the wage class got no raises bruce
while paying billions into the trust funds
u begrudge a little borowing on their part ???

effective efective demand management required some body to borrow us out of the recession
if not uncle then it had to be the householders

okay so the oilers and asians loaned us bck the dollars
to purchase their gunk and junk
but our trade gap is a product of our forex policy

[paine]

"Paul's carefully drafted punditry"

no way ...he wings and slings this shit

his bully pulpit at the NYT
deserves his QUICK GRASP FAST MOVING MIND
and his fearless keen bite too
but a more deliberate
drafting process might be in order

ya his is a liberal conscience
and not a class warrior conscience
but even so
lets have more science and less con
or at least
deal from a full deck

[kthomas]

"but our trade gap is a product of our forex policy"

You say this all the time. Please suggest a remedy.

[paine]

bob

i think your self confidence is miss placed

the internet real investment boom
not the stock scheinvert fiasco
proly had little to do with clintons triangles

[hari]

@ Paine - It looks like you had a good weekend in the sun and well rested...because you seldom made better and more succint intelligent and persuasive comments...even I can follow your good old American lingua franca.

Look I've a feeling there is *dumbing-down* of ed-op page in NYT and Paul is caught in it...they're even forcing a language upon him (I suspect) compete with internet blogs.

That's why I argued, on principle, Paul should stick to his acdemic competence and make the calls he finds valid on basis of solid evidence and his own intuitive intelligence....

The blah, blah, blahaaa...we are all tired of and can avoid.

[paine]

forex remedy

an automatic import surcharge
to level the playing field
implemented
dirty floated currency by currency
startin with the largest offenders

could say france do it and win out ??

no

could uncle hedge ???

yes
could a deal with the euro zone be worked out ??

yes

with the international orgs wto imf etc ???

might scream but ....yes

precedent ???

uncle went off gold
effectively ending the post war global hi fi system
as we then knew it
and with few gags
the globe swallowed our default ...

[Aaron]

Let me introduce the concept of a benchmark. A benchmark is the starting point or reference point to which a policy could be compared. So the way you could use a benchmark is to start with an existing economic policy, make a change, and then observe how different economic performance measures reacted to the new policy.

The problem with economics is that the economic environment changes making it difficult bordering on the impossible to control for these changes and to establish a true benchmark for comparison. In reality history does not repeat itself so you only get one shot at it.

So how about for a thought experiment take Bush’s economic policy and implant it in the 1990s and take Clinton’s economic policy and try it between 2001 and 2008. Who would argue that Clinton’s policies would have worked well this decade and Bush’s would not coincided with impressive numbers for the 1990s.

[paine]

"the employer's ability to get enforceable obediance to manager's instructions often without detailed observation and supervision, which is key to the employer's control of production processes, is advantaged by increasing the cost to the employee of being fired. In short, dependence on the employer for health care and pension enhances the employer's control of the employee, and, loosely phrased, increases the "loyalty" of the employee to the employer"

beautiful bruce
i plan to dine on each word for lunch

[paine]

"I think Bush and Chenney, knew that we were going to have oil problems. I think that is one reason they went to Iraq"

exactly

why is this truth
not ringing from every hill top and tower mega phone

[hari]

Greenspan said so in simple language in his book that Bush decided to invade Iraq for oil....

[anne]

I do not understand Paul Krugman's essay.

Why should the economy have been relatively weak from the initial budget of George Bush in 2002 and on? Interest rates have been relatively low, taxes for individuals and businesses were cut several times, there was war time spending with only a slight cut in social spending, there was a boom in the housing and commercial real estate markets, the dollar spurred exports. What went wrong?

Housing was surely not the problem hefore 2006, commodity price increases had fairly little effect on producer and consumer price indexes before 2006, health care cost increases were there but were they a reason for a pronounced lack of job creation compared to the Bill Clinton years?

[anne]

Looking to commodity price increases, I am struck by the warnings from 2006 on about food prices as Republicans and Democrats happily decided that ethanol was the answer to rising dependency on imported fuel and to rising fuel prices. I am struck by the evidence of the effect of ethanol on food prices and a lack of comment in Congress as farmers become increasingly dependent on corn for fuel production. After all, by 2006 some 20% of the corn harvest went for fuel though already world grain harvest had fallen below consumption in 6 of 7 years.

[anne]

"I don’t see how can have it both ways as being an advocate of single payer healthcare on one hand, with the single payer being the government or a quasi government agency, and on the other hand saying that age of big government was over."

The reason for not seeing a move to single payer health care insurance as a move to smaller government, is that it is not true in any way. President Clinton never suggested single-payer health care, the idea was to use the existing private insurance companies only adding to the competitiveness which was done in any event through encouraging Health Maintenance companies.

Clinton was significantly responsible for limiting cost increases in health insurance from 1992, as any investor understood completely.

[paine]

aron
nice gadanken

[anne]

What Krugman does not do, and I cannot do, is properly explain why the Bush economy has been so relatively poor from 2002 on. The Clinton economy makes perfect sense to me. The 96 months of the Clinton years averaged 225,000 jobs created, while the finest 52 months of the Bush years averaged only 160,000 jobs created and the Bush economy was notably weak before and weak after those 52 months.

The recovery from recession for the Bush economy was the weakest since 1945, and obviously the recovery ended 6 months ago as job began to be lost each month. But, why should a war-time economic recovery have been so weak? Why was domestic investment so weak? Corporate revenues were near and at record levels, so that was no problem.

[anne]

Knowing about or caring about or not distorting history really, really, really helps. Lowering taxes after 1992 would have been precisely what was not needed for economic growth; especially lowering taxes for the wealthiest as has been repeatedly done during the Bush years. By raising taxes fairly, Clinton began to limit the deficit and allowed the Federal Reserve to keep short term interest rates low through the 1990s. Low interest rates were just what was needed, and Clinton gave us an important budget surplus that has been dissipated since.

Bush economic policies have not even been sufficient to properly spur domestic investment, despite favoring corporate revenue growth at the expense of returns to ordinary employees.

[anne]

Which brings round the question of just why Bush policies have been so poor.

Also; there are continually rounds of complaints about the use of fuel efficiency standards in lowering our consumption, but before such standards were circumvented about 1986 they in fact worked splendidly.

[paine]

"Why was domestic investment so weak? "

the key question anne

[Aaron]

anne says...

Which brings round the question of just why Bush policies have been so poor.

Is that actually the most important question? What about an alternative question that in the face or decent policy why is the economy still doing relativily poorly.

My microeconomic economic textbooks tell me unambiguously that lowering taxes reduces the deadweight loss to the economy, a loss that nobody benefits from, not government, private business, or us, the consumer. My macroeconomic textbook say tax cuts stimulate the economy.

Furthermore, my books on optimization tell me that once you find and optimal solution that you can’t improve up it by adding constraints. Therefore, since getting serious about global warming adds constraints it seems that more un-Bush policies that added environmental constraints could have left the economy in even worse shape then it is today.

[paine]

"By raising taxes fairly, Clinton began to limit the deficit and allowed the Federal Reserve to keep short term interest rates low through the 1990s."
ya but..

"Low interest rates were just what was needed "

really ?????

" and Clinton gave us an important budget surplus that has been dissipated since"

that surplus was contributing to the clinton miracle ???

"low rates " ???
the green scum policy rates of this recovery
were ultra low anne ..

like corporate profit performance
u can cross interest rates
off your list of
reason why there's been practically
no serious productive domestic investment
this decade

[paine]

"..properly spur domestic investment "

a trade balance dollar

a major uncle financed set of productive investments

project green america
on a scale like
fdr's arsenal of democracy

[anne]

http://economistsview.typepad.com/economistsview/2008/03/easing-financia.html#c107142186

March 15, 2008

On Financial Market Stress
By Mark Thoma

I've been meaning to add international flows to this, and think about it a bit more carefully, so I never quite got around to posting it, but here is a very basic cut at the problem (from a draft of a post):

If I understand Bilmes and Stiglitz correctly, this is one of their points. The government budget constraint says:

Government spending + interest on the debt - Taxes = ΔBonds + ΔMoney

That is, any government deficit (the left-hand side) from increased spending or decreased taxes must be covered by either borrowing (changing the quantity of bonds outstanding) or printing new money. So if, "By the end of the Bush administration, the cost of the wars in Iraq and Afghanistan, plus the cumulative interest..., will have added about $1 trillion to the national debt," and if taxes cause a decrease in revenues at the same time, it must be that:

One trillion plus new debt from tax cuts = ΔBonds + ΔMoney

The change in bonds (debt) plus the change in money must cover more that a trillion dollars, and the new debt we have created doesn't cover it all, so that's the basis for the assertion that Fed policy to support the war led to an increase in liquidity and fueled the housing boom.

[Joseph Stiglitz suggested a crowding out of domestic investment by deficit financed defense spending. Mark Thoma began to model this possibility.]

[anne]

Repair of the budget during the Clinton years allowed for relatively lower interest rates, made crowding out of private investment no problem. The surplus as such could have been much used for infrastructure development; soft and hard infrastructure, from health care insurance and tuition extension to energy efficiency projects.

[methinks]

"I, personally, would have preferred a column that blamed the American people for their own profligacy." -1:03am

You can't explain social behavior or reduce it to individual motivation. People do not make decisions and life choices in a vacuum. Society and its structures shape us and the decisions we make.
Explain why 2/3rds of Americans are overweight? Explain why women earn less than men; or why 50% of marriages end in divorce? And it isn't because their took prayer out of the schools.
Any analysis that blames the American people for anything is shortsighted at best. Particularly, when we have so little control over where society is going or where it has been. And don't mention voting, or writing my congressmen- or any other inanities.

[mik]

The internet economy never would have happened without Al Gore as its Congressional champion. It was Gore who built the political support for its funding when most politicians were clueless about its potential.

Do you mean Gov and Algore funded Internet economy?
How and when?

Care to elaborate with references, data and dates?

Off top of my head:
Basic technology for internet was developed under DARPA in 1965-1980. If you mean that Algore voted for Defense budget in that time frame, he surely did not know words Arpanet or Internet.

Internet as we know it today started with idea of browser from CERN (no Algore involvement) and Mosaic from a student research at U of Illinois. No Algore traces there.

First serious companies in Internet commerce space were privately created immediately after, Netscape and Yahoo.
No Algore there.

Immediatly after Dot com bubble has started, financed (many woold say over-financed) by virtually entirely private capital.
Algore was not involved.

So, when and how Algore did something material for Internet economy?

[rufus]

Krugman, “As for high food and fuel prices, they’re mainly the result of growing demand from China and other emerging economies. But oil prices wouldn’t be as high..., and the United States would have been much less vulnerable to the current price spike, if we had taken steps in the past to limit our oil consumption.

Mr. Bush certainly deserves some blame here... Still, in energy as in health care the biggest missed opportunities came 15 or more years ago, when Mr. Gingrich and other conservative Republicans in Congress, aided by Democrats with ties to energy-intensive industries, blocked conservation measures.”

I usually do not find myself disagreeing with much of what Paul Krugman has to say, but in the above editorial excerpt I find a distinct exception.

“ddt” – Great post, even if it is from Youtube. Pardon my personal disdain for this ‘pop’sicle cultural arena. Here is another post discussing the recent congressional hearings into energy speculation effects on prices.

http://www.marketwatch.com/news/story/gas-could-fall-2-if/story.aspx?guid={2673C102-68E0-41D9-9C9A-10EE2E723948}&dist=msr_13

My fundamental disagreement with Krugman on this point is that the “biggest missed opportunities came 15 or more years ago”. I do not deny that energy conservation and alternative fuel research has rested too long on the back burner, but I do believe there are current opportunities for regulation to curb unbridled speculation as cited above.

http://www.marketwatch.com/news/story/feds-yellen-says-things-could/story.aspx?guid={26EA6B75-9915-4994-97DB-8AF2D7AC860C}&siteid=yahoomy

Yellen “If rising commodity prices reflect supply and demand fundamentals, then the situation is not likely to turn around any time soon."

The problem is that to a lesser degree current commodity prices, primarily futures, do reflect some current increases in demand and expected future increases in demand, but to a larger degree, current commodity prices, again primarily futures, do not reflect such a dramatic increase in demand sufficient to justify the current spike in prices. The lack of regulation in trading of commodities and their derivatives has given rise to a new speculative bubble somewhat analogous to the real estate bubble. For example, see the recent trading history for the USO Exchange traded fund as compared to its trading history since April 2006 inception. We have a glut of investment dollars that are exiting the MBS and real estate investment markets now pouring into the energy sector commodities and derivatives trading market (only major sectors of the market experiencing significant short term return), another unregulated market experiencing radical speculation not based on long term market demand fundamentals…and here we go again.

[rufus]

Furthermore the positions being taken by large institutional investors giving them the ability to be market movers and manipulate pricing is right inline with the reasons behind the popping of the real estate bubble...lack of oversight, lack or regulation

[btg]

it is completely illogical that a society will pay for the education of someone's child, yet, if that child has a life-threatening illness, the government will do nothing to help unless that family has already been reduced to utter poverty enough to qualify for medicare.

i don't think t hat there is a justification for making employers pay for the health care of their employees, because, except for non-essential treatment, everybody should be responsible for everybody else's health care, just as we are all responsible for the primary to high school education of everybody elese's children.

failure to educate children has social costs, just as failure to provide basic health care had social costs.

health care is a necessity and should be paid for out of general tax revenues. why is this not obvious to many people in the US, while in europe and most other advanced industrialsed countries access to health care is considered a basic right.

[mik]

save_the_rustbelt says...

"For a while, the spread of managed care put a lid on premiums, encouraging companies to expand their work forces."

The American people screamed bloody murder about managed care.

And Congresscritters responded.
Here Krugman's hero, Ted Kennedy, holding up the Senate to push reform designed to gut HMO cost savings (http://www.cnn.com/ALLPOLITICS/stories/1999/06/23/congress.healthcare/).

Do Google "HMO Problems Democrats" and you will have wealth of references to Krugman dearest friends demanding, in effect, that HMO would stop saving money.

Krugman is far too partisan and hates Bush too much for his analysis to be rational.

Having said that, I don't think HMO is a good solution.
I like French system, but I don't trust the Left, the Dems and the Progressives to create such system to benefit Americans.

Most likely they will include population of Mexico and Central America and whoever happened to be here at the moment into such system, to spite the whitey.
We cannot provide medical care to even half of Mexico and maintain any semi-decent standards.

[anne]

"Most likely they will include population of Mexico and Central America and whoever happened to be here at the moment into such system, to spite the whitey."

Quite a stunningly revealing comment.

[anne]

"I like French system, but I don't trust the Left, the Dems and the Progressives to create such system to benefit Americans.

"Most likely they will include population of Mexico and Central America and whoever happened to be here at the moment into such system, to spite the whitey.

"We cannot provide medical care to even half of Mexico and maintain any semi-decent standards."

This is of course absurdly false, and absurdly spitefully prejudiced.

[paine]

"crowding out of private investment"
has prolly not happened since 1946

[ken melvin]

The comparison of the more pragmatic Clinton policies with the more dogmatic Bush policies is an interesting one (the odds do favor the pragmatic). But, I'm not sure how related the policies in either case to reality. Very to the point, that loud rumble you are hearing, this matter of being unable to give money away for capital investment in industry.

[anne]

What would crowding out mean, if there were crowding out? Not that there was not enough private capital available for important investment projects, but that a lack of government spending initiative meant that an absurd amount of capital went to mortgage markets. Though commodity prices were rising from 2000, by 2006 we were spending only $3 billion on energy research and development projects as opposed to $7 billion in 1979, and fairly little of the $3 billion was on alternative energy projects.

There was private energy investment, but seemingly much went to natural gas projects and that I attribute to clean air standards carried from the 1990s so that electricity generation by coal was becoming more difficult from 2000.

Where was government spending though, beyond defense?

[anne]

There was government leading on investment through the 1990s, and lately leading in Europe and Australia and Canada and, notably, in China, but where have we been in recent years beyond defense; at least for an economy of our size? Where was the government lead for private investment, when there were such leads internationally?

Ethanol, in time, but the way we have gone about stimulating ethanol production is more than suspect and interestingly enough Europe is even now thinking about cutting biofuel production.

[anne]

http://krugman.blogs.nytimes.com/2008/07/07/inflationary-psychology/

July 7, 2008

Inflationary Psychology
By Paul Krugman

A sign I saw on a church in rural Ohio, today:

"The cost of going to Heaven hasn’t gone up."

[anne]

http://krugman.blogs.nytimes.com/2008/07/07/bush-boom-bah-2/

July 7, 2008

Bush Boom Bah
By Paul Krugman

[Chart] Tax cuts work, he said. *

The funny thing is that the essential ludicrousness of this guy was plain to see all along.

* http://www.cbpp.org/8-9-05bud.htm

[save_the_rustbelt]

"What Krugman does not do, and I cannot do, is properly explain why the Bush economy has been so relatively poor from 2002 on."

Quick guess.

Globalization, especially the rapid rise of India and China, moved much faster than US politicians and economists on both the left and right expected. Until the last year or so we have not had the policy analysis to figure out where this was going.

Just a quick guess though.

[Headache]

Aaron,

In physical applications of optimization the addition of constraints can increase the relevance of that optimization to reality. I imagine that may be true for optimization in economics.

[anne]

STR:

"Globalization, especially the rapid rise of India and China, moved much faster than US politicians and economists on both the left and right expected. Until the last year or so we have not had the policy analysis to figure out where this was going."

OK, but there is where government investment comes in.

[Aaron]

.. Headache says...

In physical applications of optimization the addition of constraints can increase the relevance of that optimization to reality.

Sorry, but I don't understand this point.

says...

Aaron says...

"Sorry, but I don't understand this point."

Your most veracious citation to date

[Aaron]

blank says...

Your most veracious citation to date

Thank you blank.

[anne]

http://www.nytimes.com/2008/07/07/us/politics/07cnd-econ.html?hp&pagewanted=print

July 7, 2008

McCain Shifts Emphasis to Cutting Deficit
By MICHAEL COOPER

“American workers and families pay their bills and balance their budgets, and I will demand the same of the government,” Mr. McCain said.

[Qatar Boy]

Looking back at the Bush's tenure - there is not a single thing that I'd would single out as an extraordinary success. There were a number of moves that helped the rich elite - but the economy and country as a whole are much worst off today. To be honest, last 8 years just look as a nightmare...

[mik]

save_the_rustbelt says...

Quick guess.

Globalization, especially the rapid rise of India and China, moved much faster than US politicians and economists on both the left and right expected. Until the last year or so we have not had the policy analysis to figure out where this was going.

Rise itself - GDP growth? - does not hurt US. Russian Federation GDP has grown tremendously during Jorge Bush years, mostly due to boom in energy and commodities.
If Russia affects US economy negatively, it is a very slight effect.

What really hurts US economy in a big way is shifting production overseas and job outsourcing.
Record levels of legal and illegal immigration exert downward pressure on wages of low and high skill workers.
I would guess that China, India and Mexico are countries that are doing the most hurting of our economy.

[Anthony]

You sir are an idiot.

Bush tried to offer a Healthcare solution but good blasted by the idiots who run the demonrat congress.

Any economic problems can be attributed to SPENDING (checkout that 3Trillion DEMOCRAT budget)

and

Real Estate market correction

[Real Person from the Real World]

I think the premise of the article, that sometimes the wrong guy gets blamed for something, or the right guy gets blamed for the wrong thing is right on!

Trickle down has been trickling for a long time. Clinton got credit for some things that worked, Bush is getting blamed for somethings that were coming long before he got in. Maybe it all evens out in the end.