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Sunday, July 7, 2013

Paul Krugman, "Defining Prosperity Down": Will World War III Heal the Economy? Answer: Not a Chance

Will it take World War III to heal the economy? Paul Krugman seems to think this might be possible.

In his latest New York Times op-ed entitled "Defining Prosperity Down" ( Krugman correctly bemoans America's disastrous rate of unemployment. Krugman writes:

"Friday’s employment report wasn’t bad. But given how depressed our economy remains, we really should be adding more than 300,000 jobs a month, not fewer than 200,000. As the Economic Policy Institute points out, we would need more than five years of job growth at this rate to get back to the level of unemployment that prevailed before the Great Recession. Full recovery still looks a very long way off. And I’m beginning to worry that it may never happen."

Yes, there is enormous suffering out there, which calls into question Krugman's recent support for Obama's ill-timed declaration of war against coal (see:

In his opinion piece, Krugman blames the "Austerity Gang" for an economy which refuses to get better. He also blames a wavering federal reserve. But he refuses to blame Obama . . . at least not by name. Krugman hints:

"Put it this way: If unemployment rises from 6 to 7 percent during an election year, the incumbent will probably lose. But if it stays flat at 8 percent through the incumbent’s whole term, he or she will probably be returned to power. And this means that there’s remarkably little political pressure to end our continuing, if low-grade, depression."

And if Krugman does not mention Obama, he certainly refuses to mention the affects of Obamacare on the economy. As stated in a CNNMoney article entitled "Businesses were more hesitant to hire in April" ( by Annalyn Kurtz:

"Hiring has slowed particularly among small businesses with 20 to 49 employees. They hired only 17,000 workers in April. This phenomenon could be partly due to health care reform measures. The law requires businesses with 50 or more full-time employees to start providing insurance in 2014, or face fines.

'That 50-employee threshold is important and it feels like health care reform is having an impact,' said Mark Zandi, chief economist for Moody's Analytics. 'If you look at the slowdown in job growth in the last few months, it's primarily among companies that are small.'

Small business owners continue to say taxes and government regulations are their two biggest problems, according to a monthly survey by the National Federation of Independent Business."

Now have a look at Krugman's conclusion:

"Someday, I suppose, something will turn up that finally gets us back to full employment. But I can’t help recalling that the last time we were in this kind of situation, the thing that eventually turned up was World War II."

World War III could cure the American economy? Not a chance. Not after Iran sets off a "dirty bomb" mixing radioactive material with conventional explosives in Manhattan. Also, World War III will not require the construction of battleships and fighter aircraft. Rather, America's next war will involve a cyber attack targeting infrastructure, transportation and financial markets, whose primary purpose will be to paralyze the US economy at a cost of trillions.

Fortunately we have Obama (busy at the links), Kerry (busy with his toys in Nantucket) and Hagel (just plain stupid) to defend us from such a potential meltdown.

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