Paul Krugman, "Secret Deficit Lovers": Krugman Tries to Pull a Fast One

In his latest New York Times op-ed entitled "Secret Deficit Lovers," Paul Krugman tells us:

"[T]he Congressional Budget Office has tallied up the totals for fiscal 2014, which ran through the end of September, and reports that the deficit plunge of the past several years continues. You still hear politicians ranting about “trillion dollar deficits,” but last year’s deficit was less than half-a-trillion dollars — or, a more meaningful number, just 2.8 percent of G.D.P. — and it’s still falling.

. . . .

Yes, current projections still show a rising ratio of debt to G.D.P. starting some years from now, and uncomfortable levels of debt a generation from now. But given all the clear and present dangers we face, it’s hard to see why dealing with that distant and uncertain prospect should be any kind of policy priority."

Victory over the deficit? Not so fast. What does Krugman mean when he says that the ratio of debt to G.D.P. will start to rise "some years from now"? How many years? Should we be concerned?

See what Fred Hiatt, editorial page editor of the Washington Post, had to say about America's debt in an October 5 opinion piece entitled "Obama’s false victory over the deficit":

"Now look into the future as seen by the scrupulously nonpartisan Congressional Budget Office.

Federal debt has reached 74 percent of the economy’s annual output (GDP), “a higher percentage than at any point in U.S. history except a brief period around World War II,” the CBO says, “and almost twice the percentage at the end of 2008.” With no change in policy, that percentage will hold steady or decline a bit for a couple of years and then start rising again, to a dangerous 78 percent by 2024 and an insupportable 106 percent by 2039."

So, whereas Krugman is telling us "Live for today!," Hiatt is explaining that "some years from now" means in another decade with catastrophe predicted by the Congressional Budget Office in 2039.

Yes, 2039 is 25 years into the future, and at that time no one will remember what Krugman wrote in 2014. But when the CBO, cited by Krugman, is warning that America's deficit could put an end to America as we currently know it, why is he crowing?

Paul Krugman, "Beliefs, Facts and Money": What Krugman Doesn't Tell Us

In his latest New York Times op-ed entitled "Beliefs, Facts and Money" (http://www.nytimes.com/2014/07/07/opinion/paul-krugman-conservative-delusions-about-inflation.html?hp&action=click&pgtype=Homepage&module=c-column-top-span-region&region=c-column-top-span-region&WT.nav=c-column-top-span-region&_r=0), Paul Krugman would again have us know that deficit spending, which caused US national debt to rise from $10.6 trillion when Obama took office in January 2009 to its current $17.6 trillion, has not been accompanied by inflation. Krugman writes (my emphasis in red):

"Above all, there were many dire warnings about the evils of 'printing money.' For example, in May 2009 an editorial in The Wall Street Journal warned that both interest rates and inflation were set to surge 'now that Congress and the Federal Reserve have flooded the world with dollars.' In 2010 a virtual Who’s Who of conservative economists and pundits sent an open letter to Ben Bernanke warning that his policies risked 'currency debasement and inflation.' Prominent politicians like Representative Paul Ryan joined the chorus.

Reality, however, declined to cooperate. Although the Fed continued on its expansionary course — its balance sheet has grown to more than $4 trillion, up fivefold since the start of the crisis — inflation stayed low. For the most part, the funds the Fed injected into the economy simply piled up either in bank reserves or in cash holdings by individuals — which was exactly what economists on the other side of the divide had predicted would happen.

Needless to say, it’s not the first time a politically appealing economic doctrine has been proved wrong by events. So those who got it wrong went back to the drawing board, right? Hahahahaha."

Whoa! Yes, there has been a horrific recession limiting demand for goods and services, and inflation has remained low, but what about the other side of the coin? What about currency debasement?

Over the past decade, the US dollar has lost some 20 percent of its value against the Canadian dollar, some 12 percent of its value against the euro, some 29 percent of its value against the Swiss franc, some 6 percent of its value against the Japanese yen, some 24 percent of its value against the new Israeli shekel, and some 25 percent of its value against the Chinese yuan.

What happens when the Chinese decide that their loans to the US are losing too much of their value owing to currency debasement and demand the return of their $1.3 trillion from the US government? Believe me, you don't want to know.

Hahahahaha indeed.

Paul Krugman, "The Damage Done": The Blame Game

Okay, we have a temporary solution to the shutdown, but as known to all, the US economy remains a mess. Who is to blame? If you're Paul Krugman, the answer is obvious. In his latest New York Times op-ed entitled "The Damage Done" (http://www.nytimes.com/2013/10/18/opinion/krugman-the-damage-done.html?adxnnl=1&adxnnlx=1382071460-tlsSzj+aDAKRfwNnaSUeMw), Krugman concludes:

"Are all the economy’s problems the G.O.P.’s fault? Of course not. President Obama didn’t take a strong enough stand against spending cuts, and the Federal Reserve could have done more to support growth. But most of the blame for the wrong turn we took on economic policy, nonetheless, rests with the extremists and extortionists controlling the House.

Things could have been even worse. This week, we managed to avoid driving off a cliff. But we’re still on the road to nowhere."

Odd. And all this while I thought that Obama controlled both houses of Congress during the first two years of his administration.

Spending is the answer? In the same manner that the federal government spent some $600 on a federal health care exchange for Obamacare, which "was built using 10-year-old technology that may require constant fixes and updates for the next six months and the eventual overhaul of the entire system" (http://www.usatoday.com/story/news/nation/2013/10/17/health-exchange-week-three-start-over/2995989/)?

It turns out that the amount spent by the Department of Health and Human Services (HHS) to create the federal health care exchange is far more than double the amount spent by Apple to develop the iPhone (see: http://online.wsj.com/news/articles/SB10001424052702304384104579139461596987366).

Does Krugman truly believe that the economy would be much improved if the HHS had significantly increased its spending on parties conferences in 2012, which amounted to $56 million for 135 conferences (see: http://freebeacon.com/hhs-spent-56-million-on-conferences-in-2012/)?

But what the heck? Who gives a darn about federal government profligacy and inefficiency? Maybe some of whatever additional money that might have been spent over the past five years by the Obama administration, resulting in unsustainable US national debt of $17 trillion, would have given a necessary shot in the arm to the economy . . . not.

Sorry, Paul, federal government spending is not the answer.

Maureen Dowd, "Welcome to Ted Cruz’s Thunderdome": Dystopia in 2084? How About 2038?

In her latest New York Times op-ed entitled "Welcome to Ted Cruz’s Thunderdome" (http://www.nytimes.com/2013/10/06/opinion/sunday/dowd-welcome-to-ted-cruzs-thunderdome.html), Maureen Dowd paints a dystopic picture of Washington 70 years from now, destroyed by the shutdown. Drawing on imagery much akin to scenes from Will Smith's 2007 "I Am Legend," Dowd writes:

"The year is 2084, in the capital of the land formerly called North America.

The peeling columns of the Lincoln Memorial, and Abe’s majestic head, elegant hands and big feet are partially submerged in sludge. Animals that escaped from the National Zoo after zookeepers were furloughed seven decades ago migrated to the memorials, hunting for food left by tourists.

The white marble monuments are now covered in ash, Greek tragedy ruins overrun with weeds. Tea Party zombies, thrilled with the dark destruction they have wreaked on the planet, continue to maraud around the Hill, eager to chomp on humanity some more."

Describing a conversation between a "gaunt man" and a "sickly boy" concerning who was responsible for this tragedy, Dowd is quick to name the villain :

"The boy frowns. 'But Papa, didn’t the healthy Republicans realize the infected ones had lower brain functions?”

'Well, son, they knew there was something creepy about the ringleader, Ted Cruz,' the man replies. 'His face looked pinched, like a puzzle that had not been put together quite right. He was always launching into orations with a weird cadence and self-consciously throwing folksy phrases into his speeches, like ‘Let me tell ya,’ to make himself seem Texan, when he was really a Canadian.'"

Blame it all on Ted Cruz? Forgive me if I don't assign that much importance or significance to any one member of America's dysfunctional Congress.

As I have said in the past, I support universal health care, but I am also worried by America's national debt, which is now just a tad under $17 trillion, growing by the minute and unsustainable.

And as even Paul Krugman asked yesterday (see: http://jgcaesarea.blogspot.co.il/2013/10/paul-krugman-reform-turns-real-welcome.html) regarding Obamacare:

"What we still don’t know, and is crucial for the program’s longer-term success, is who will sign up. Will there be enough young, healthy enrollees to provide a favorable risk pool and keep premiums relatively low?"

Or stated otherwise: Are there enough healthy youngsters willing to pay more in order to subsidize the unfavorable risk pool, thereby preventing a fiscal disaster, i.e. Democratic Senator Max Baucus's "train wreck"?

Taken a step further, can payments from healthy youngsters ensure that Obamacare is fiscally neutral, i.e. a zero-sum game that does not contribute to massive rapid expansion of America's debt?
As posited by the non-partisan Congressional Budget Office earlier this month with regard to America's financial future (http://www.cbo.gov/publication/44521):

"Between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing federal debt to soar. Federal debt held by the public is now about 73 percent of the economy’s annual output, or gross domestic product (GDP). That percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007. If current laws generally remained in place, federal debt held by the public would decline slightly relative to GDP over the next several years, CBO projects. After that, however, growing deficits would ultimately push debt back above its current high level. CBO projects that federal debt held by the public would reach 100 percent of GDP in 2038, 25 years from now, even without accounting for the harmful effects that growing debt would have on the economy . . . . Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely."

Yes, unless government spending is brought under control, dystopia could come to the US some 50 years earlier than the time imagined by Dowd. But in order to bring that spending under control, people need to talk to one another, a skill that was lost in the beginning of the 21st Century, when narcissism infected the land.

Gail Collins, "Congress Breaks Bad": Bill Clinton "Has a Winning Way of Not Being Barack Obama"

In her latest New York Times op-ed entitled "Congress Breaks Bad" (http://www.nytimes.com/2013/10/03/opinion/collins-congress-breaks-bad.html), Gail Collins writes with regard to the shutdown:

"'Even Bill Clinton, after I voted to impeach him, would work with you to get things done,' said Representative John Mica of Florida. That seemed like a high bar. But then there’s nobody Republicans love more than the former president, who has a winning way of not being Barack Obama. If only Clinton would come back! Then none of this would have happened, except the shutting down the government part."

A "winning way" about Bill Clinton? When not preoccupied with Monica, he was certainly a charmer, something that goes lacking in Obama. And there were the shutdowns of 1995 and 1996, lasting a total of 28 days. But more to the point, Bill's deficits did not compare with those of Barack.

Yes, there is a difference. Of course, we need to be fair: Obama inherited an economic mess from George W. Bush, and there are few who would deny that the American economy was desperately in need of stimulus.

However, as observed in past blog items, the non-partisan CBO declared in September with regard to America's financial future (http://www.cbo.gov/publication/44521):

"Between 2009 and 2012, the federal government recorded the largest budget deficits relative to the size of the economy since 1946, causing federal debt to soar. Federal debt held by the public is now about 73 percent of the economy’s annual output, or gross domestic product (GDP). That percentage is higher than at any point in U.S. history except a brief period around World War II, and it is twice the percentage at the end of 2007. If current laws generally remained in place, federal debt held by the public would decline slightly relative to GDP over the next several years, CBO projects. After that, however, growing deficits would ultimately push debt back above its current high level. CBO projects that federal debt held by the public would reach 100 percent of GDP in 2038, 25 years from now, even without accounting for the harmful effects that growing debt would have on the economy (see the figure below). Moreover, debt would be on an upward path relative to the size of the economy, a trend that could not be sustained indefinitely."

In a nutshell, there is a problem and it's time for Obama and House Republicans to set aside their bloated egos and settle this matter, before it truly gets out of hand.

Paul Krugman, "Moment of Truthiness": Americans Confuse "Deficit" with "Debt"

Can you imagine a non-economist confusing "deficit" with "debt"? Actually, I think such confusion is easily understood. Paul Krugman, however, is not so forgiving.

In his latest New York Times op-ed entitled "Moment of Truthiness" (http://www.nytimes.com/2013/08/16/opinion/krugman-moment-of-truthiness.html?_r=0), Nobelist Krugman whines that the American public has been misled. Krugman writes:

"In a well-known paper with the discouraging title, 'It Feels Like We’re Thinking,' the political scientists Christopher Achen and Larry Bartels reported on a 1996 survey that asked voters whether the budget deficit had increased or decreased under President Clinton. In fact, the deficit was down sharply, but a plurality of voters — and a majority of Republicans — believed that it had gone up.

I wondered on my blog what a similar survey would show today, with the deficit falling even faster than it did in the 1990s. Ask and ye shall receive: Hal Varian, the chief economist of Google, offered to run a Google Consumer Survey — a service the company normally sells to market researchers — on the question. So we asked whether the deficit has gone up or down since January 2010. And the results were even worse than in 1996: A majority of those who replied said the deficit has gone up, with more than 40 percent saying that it has gone up a lot. Only 12 percent answered correctly that it has gone down a lot."

Who, according to Krugman, is responsible for this misunderstanding? Those nefarious Republicans, of course.

Okay, the annual federal government budget deficit is the difference between government receipts and spending.

On the other hand, US public debt is the outstanding amount owed by the federal government.

The federal government deficit is currently down; however, US public debt is up. How much higher is US public debt? As of January 20, 2009, when Obama became president, US gross debt was $10.6 trillion. As of March 31, 2013, US gross debt was some $16 trillion and rising.

The American public is obviously confusing "deficit" with "debt."

But Krugman denies that he is calling Americans foolish:

"Am I saying that voters are stupid? Not at all. People have lives, jobs, children to raise. They’re not going to sit down with Congressional Budget Office reports."

So what did the nonpartisan Congressional Budget Office say in May 2013 (http://www.cbo.gov/publication/44172) about America's rising debt (my emphasis in red)?:

"Such high and rising debt later in the coming decade would have serious negative consequences: When interest rates return to higher (more typical) levels, federal spending on interest payments would increase substantially. Moreover, because federal borrowing reduces national saving, over time the capital stock would be smaller and total wages would be lower than they would be if the debt was reduced. In addition, lawmakers would have less flexibility than they would have if debt levels were lower to use tax and spending policy to respond to unexpected challenges. Finally, a large debt increases the risk of a fiscal crisis, during which investors would lose so much confidence in the government’s ability to manage its budget that the government would be unable to borrow at affordable rates."

Hey, is it possible that a concerned American public, which is confusing "deficit" with "debt," is not so foolish after all?

Paul Krugman, "Cheating Our Children": Who Is the Ringleader of Those Dastardly Deficit Scolds?

In his latest New York Times op-ed entitled "Cheating Our Children" (http://www.nytimes.com/2013/03/29/opinion/krugman-cheating-our-children.html?_r=0), Paul Krugman, in an all too familiar reprise, again rants against those who would rein in federal spending. Krugman concludes:

"And why are we shortchanging the future so dramatically and inexcusably? Blame the deficit scolds, who weep crocodile tears over the supposed burden of debt on the next generation, but whose constant inveighing against the risks of government borrowing, by undercutting political support for public investment and job creation, has done far more to cheat our children than deficits ever did.

Fiscal policy is, indeed, a moral issue, and we should be ashamed of what we’re doing to the next generation’s economic prospects. But our sin involves investing too little, not borrowing too much — and the deficit scolds, for all their claims to have our children’s interests at heart, are actually the bad guys in this story."

Those dastardly "deficit scolds"! Who is their scurrilous ringleader, who is busy weeping crocodile tears over our children? A hint: Obama, who blamed Bush for this debt in July 2008 when it stood at only $9 trillion.

.

Paul Krugman, "Marches of Folly": Krugman Shoots Himself in the Foot

In his latest New York Times op-ed entitled "Marches of Folly" (http://www.nytimes.com/2013/03/18/opinion/krugman-marches-of-folly.html), Paul Krugman draws an analogy between the "groupthink" that led to America's entry into the Second Gulf War and the "obsession" with the US deficit:

"Now, I don’t want to push the analogy too far. Bad economic policy isn’t the moral equivalent of a war fought on false pretenses, and while the predictions of deficit scolds have been wrong time and again, there hasn’t been any development either as decisive or as shocking as the complete failure to find weapons of mass destruction.

. . . .

But now as then we have the illusion of consensus, an illusion based on a process in which anyone questioning the preferred narrative is immediately marginalized, no matter how strong his or her credentials. And now as then the press often seems to have taken sides. It has been especially striking how often questionable assertions are reported as fact. How many times, for example, have you seen news articles simply asserting that the United States has a 'debt crisis,' even though many economists would argue that it faces no such thing?"

Well, I opposed the Second Gulf War, which destroyed the equilibrium between a Sunni-dominated Iraq and a Shiite-ruled Iran. I have also opposed US ground involvement in Afghanistan, which was escalated by Obama, goes unmentioned by Krugman, and is costing the US some $6 billion per month. But no debt crisis?

However, as observed by Krugman in an earlier op-ed (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0), the ratio of debt to G.D.P. is "the best measure of our debt position."

US debt is currently some $16.7 trillion, which is more that 100% of America's G.D.P. Those "fools" at the nonpartisan Congressional Budget Office recently warned that "U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037" (http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook). Sure, in the meantime the American Taxpayer Relief Act and the sequester may have delayed "achievement" of that 200% debt to G.D.P. ratio by a few years; however, as acknowledged by the Peterson Foundation (http://www.pgpf.org/Issues/Fiscal-Outlook/2013/01/fiscal-cliff-atra-2012-long-term-analysis.aspx), we're still headed for that astronomical percentage by 2040.

Compare US involvement in Iraq with attempts to rein in America's spiraling debt? Apples and oranges. No way, Jose!

Paul Krugman, "Kick That Can": No Longer "Yes We Can"

You want a poignant indication of the severity and danger of America's debt problem? You need look no further than measures being taken by the State of Virginia to issue its own currency (see: http://www.washingtonpost.com/business/economy/virginia-coin-moves-closer-to-reality/2013/02/05/9bcdd532-6fa4-11e2-ac36-3d8d9dcaa2e2_story.html?hpid=z4).

You want another indication? Even Paul Krugman is now acknowledging that the US economy is in a shambles and that debt needs to be brought under control.

In his latest New York Times op-ed entitled "Kick That Can" (http://www.nytimes.com/2013/02/08/opinion/krugman-kick-that-can.html), Krugman grudgingly admits that "we will eventually need some combination of revenue increases and spending cuts to rein in the growth of U.S. government debt." Krugman, however, claims that this is not the time for the federal government to swallow its medicine:

"Given the state we’re in, it would be irresponsible and destructive not to kick that can down the road.

Start with a basic point: Slashing government spending destroys jobs and causes the economy to shrink.

. . . .

[F]iscal austerity should wait until the economy has recovered, and the Fed can once again cushion the impact."

But has spending by the Obama administration over the past four years created jobs? Are there signs of an economic recovery anywhere in sight? Is it possible that short-term, or even medium-term, the economy is not going to recover?

"Given the state we're in," some sort of economic plan is necessary, but meanwhile, Obama is surrounding himself with a cabinet of the worst and dumbest, a harbinger of further intellectual and economic stagnation.

Paul Krugman, "The Dwindling Deficit": A Unicorn Felching a Centaur

Perhaps you recall my blog entry earlier this month (http://jgcaesarea.blogspot.co.il/2013/01/paul-krugman-coins-against-crazies-just.html) concerning Paul Krugman's advocacy on behalf of the US minting a trillion dollar coin. I wrote:

"Mint the coin? I'm certain world financial markets would highly appreciate this stunt, which could cause instant collapse of the American economy.

But heck, why go to the trouble of minting a platinum coin when an autographed picture of Obama, inscribed with the amount of $10 trillion, should do the trick?

Thanks, Paul. Keep those lucid ideas coming!"

Well, Jon Stewart apparently agrees with me. Instead of a one trillion coin, Stewart suggested that the US issue a 20 trillion dollar coin, or better still, a one hundred quillion dollar bill with a picture of a unicorn felching a centaur. Wounded by Stewart's taunt, Krugman accused Stewart of being "lazy," whereupon Stewart doubled down in a moment of comedic history, "It's a stupid f***ing idea" (http://www.thedailyshow.com/watch/mon-january-14-2013/paul-krugman---the-trillion-dollar-coin).

Support for Occupy Wall Street (http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html)? Trillion dollar coins? Apparently it's the stuff that makes for Nobel laureates. And not to worry: Krugman's creative juices continue to flow. In a New York Times op-ed entitled "The Dwindling Deficit" (http://www.nytimes.com/2013/01/18/opinion/krugman-the-dwindling-deficit.html?_r=0), Paul tells us that we need not occupy ourselves with concern for America's long-term deficit prospects:

"Recently the nonpartisan Center on Budget and Policy Priorities took Congressional Budget Office projections for the next decade and updated them to take account of two major deficit-reduction actions: the spending cuts agreed to in 2011, amounting to almost $1.5 trillion over the next decade; and the roughly $600 billion in tax increases on the affluent agreed to at the beginning of this year. What the center finds is a budget outlook that, as I said, isn’t great but isn’t terrible: It projects that the ratio of debt to G.D.P., the standard measure of America’s debt position, will be only modestly higher in 2022 than it is now.

. . . .

Now, projections that run further into the future do suggest trouble, as an aging population and rising health care costs continue to push federal spending higher. But here’s a question you almost never see seriously addressed: Why, exactly, should we believe that it’s necessary, or even possible, to decide right now how we will eventually address the budget issues of the 2030s?"

Yup, why should we care that by 2037 US debt will be double GDP (see: http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook)? That's our children's problem, and there's no need now to "address the budget issues of the 2030s." Heck, you might as well cash in your retirement plans now and spend it all on new Bentleys, given that it's all so far away.

Bottom line: Come the 2030s, the US could well need to issue that one hundred quillion dollar bill with a picture of a unicorn felching a centaur.

Paul Krugman, "The Big Fail": Whose "Colossal Failure"? Go Ahead, He's Been Re-elected and You Can Say His Name

In his latest New York Times op-ed entitled "The Big Fail" (http://www.nytimes.com/2013/01/07/opinion/krugman-the-big-fail.html?_r=0), Paul Krugman concludes:

"The truth is that we’ve just experienced a colossal failure of economic policy — and far too many of those responsible for that failure both retain power and refuse to learn from experience."

Although Krugman tells us that "political leaders — and all too many economists — chose to forget or ignore what they should have known," there is of course no mention of His Highness, Obama. I suppose that it has dawned on Paul that it is getting late in the game to continue blaming Bush, and he decided to leave the name of the current US president, responsible for the country with the world's largest economy, out of his discussion.

Krugman's answer to all the world's travails - yawn - spend, spend, spend. His illustrative example this time:

"For an economy is not like a household. A family can decide to spend less and try to earn more. But in the economy as a whole, spending and earning go together: my spending is your income; your spending is my income. If everyone tries to slash spending at the same time, incomes will fall — and unemployment will soar.

So what can be done? A smaller financial shock, like the dot-com bust at the end of the 1990s, can be met by cutting interest rates. But the crisis of 2008 was far bigger, and even cutting rates all the way to zero wasn’t nearly enough.

At that point governments needed to step in, spending to support their economies while the private sector regained its balance."

However, as observed by Paul in an earlier op-ed (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0), the ratio of debt to G.D.P. is "the best measure of our debt position." Well, US debt is currently more than $16.4 trillion, which is more that 100% of America's G.D.P., and those "fools" at the nonpartisan Congressional Budget Office also recently warned that "U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037" (http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook).

Does Paul really think that debt will ever be repaid? I don't.

And when a government issues debt that is not going to be repaid, i.e. prints money, the value of all money in circulation among the American public declines.

Print ever larger amounts of money, which become worth steadily less? Also problematic, or even a recipe for disaster.

Indeed, sometimes there are no good answers.

Paul Krugman, "When Prophecy Fails": Confusing Doomsday With a Slow and Agonizing Decline

As December 21 approached, my wife, who had been cautioned by her spiritual guru regarding the significance of the date and the possibility of an impending calamity, told me that the Mayans were a very wise tribe. "Yes," I replied, "and they practiced human sacrifice." To which my wife rejoined, "They also had the good sense to replace their spouses every seven years."

December 21 has come and gone, and what new nonsense will be next to arrive on the scene? The answer was quick in coming: Paul (Spend! Spend! Spend!) Krugman's latest New York Times op-ed entitled "When Prophecy Fails" (http://www.nytimes.com/2012/12/24/opinion/krugman-when-prophecy-fails.html?_r=0). The good doctor writes:

"Seriously, at every stage of our ongoing economic crisis — and in particular, every time anyone has suggested actually trying to do something about mass unemployment — a chorus of voices has warned that unless we bring down budget deficits now now now, financial markets will turn on America, driving interest rates sky-high. And these prophecies of doom have had a powerful effect on our economic discourse.

. . . .

The key thing we need to understand, however, is that the prophets of fiscal disaster, no matter how respectable they may seem, are at this point effectively members of a doomsday cult. They are emotionally and professionally committed to the belief that fiscal crisis lurks just around the corner, and they will hold to their belief no matter how many corners we turn without encountering that crisis."

Yet another JG Caesarea challenge: Which untoward, albeit not cataclysmic, event does Paul fail to mention in his opinion piece? One . . . two . . . three. Sorry, time's up. As reported by The Washington Post on August 5, 2011 (http://articles.washingtonpost.com/2011-08-05/business/35417342_1_downgrade-aaa-credit-ratings-government-debt):

"Standard & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.

Lowering the nation’s rating to one notch below AAA, the credit rating company said 'political brinkmanship' in the debate over the debt had made the U.S. government’s ability to manage its finances 'less stable, less effective and less predictable.' It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings 'fell short' of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future."

So, the US credit rating was downgraded for the first time. A disaster? No. I'm still delighted to be paid in US dollars. But what will the next downgrade bring?

I don't believe in a doomsday, because the US government can always print more money. Rather, I believe that inasmuch as US debt is fast growing unsustainable, America's economic demise will be slow and painful.

Krugman himself told us in a very recent opinion piece (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0) that the ratio of debt to G.D.P. is "the best measure of our debt position." Well, those "fools" at the nonpartisan Congressional Budget Office also recently warned that "U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037" (http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook).

Doomsday? No. Most likely our children and grandchildren will watch as the magnificent edifice crumbles.

David Brooks, "The White House Argument": Never Kick a Turd on a Hot Day

President Harry Truman was famous for his pithy witticisms. All of us are familiar with "The buck stops here," but how many know that Truman was also fond of declaring "Never kick a turd on a hot day." Sometimes, however, we cannot avoid kicking that turd.

Today, as Obama faces reelection, he is faced with a plethora of dilemmas: Whether to continue to function as president and make the hard choices, or whether to delay decisions until after November. Regarding the Iranian nuclear threat, it plainly appears that there is a confluence of interest between the agendas of both Obama and Iran: While Iran stalls for time to achieve the capacity to build an atomic bomb, Obama stalls for time to avoid a nasty confrontation that could impact in an unforeseen manner on his reelection campaign.

Regarding America's burgeoning budget deficit, Obama is also facing difficult choices, and as observed by David Brooks in his New York Times op-ed "The White House Argument" (http://www.nytimes.com/2012/04/17/opinion/brooks-the-white-house-argument.html):

"Under the Obama budget, debt would skyrocket to 124 percent of G.D.P."

You don't need to be an economic wizard to realize that debt of this magnitude is unsustainable. Moreover, I question whether this percentage takes into account the ominous warning recently issued by Chuck Blahous, public trustee for Medicare and Social Security (see: http://mercatus.org/sites/default/files/publication/The-Fiscal-Consequences-of-the-Affordable-Care-Act.pdf), that over the next decade, Obamacare will:

"add at least $340 billion and as much as $530 billion to federal deficits while increasing federal spending by more than $1.15 trillion over the same period and by increasing amounts thereafter."

Yes, this is a train wreck in the making.

In his New York Times op-ed, Brooks concludes:

"I’ll just say that my conversations reaffirm my conviction that Obama is a pragmatic liberal who cares about fiscal sustainability, who has been willing to compromise for its sake, but who has not offered anything close to a sufficient program to avoid a debt crisis.

But we have a campaign in front of us. If the president is truly committed to a strategy for progressive fiscal stability, as Bill Clinton was, he’ll make that the center of his campaign. He’ll earn a mandate. He’ll win over independents who want fiscal discipline but worry about the way Republicans get there.

If he doesn’t have a passion for fiscal stability, he’ll campaign on side issues and try to win by scaring everybody about the other side."

Or in other words, will Obama decide between now and November to make hard, unpopular, decisions involving Iran and the budget, or seek to remain president by engaging in scaremongering and divisive tactics, e.g. accusing Paul Ryan of "social Darwinism"? I think we know which way Obama is leaning.

As Harry Truman also once said:

"America was not built on fear. America was built on courage, on imagination and an unbeatable determination to do the job at hand."

If only Obama could take Truman's words, which have yet to make their way onto the screen of his infamous teleprompter, to heart.

"Past Time for a New Agenda": The Political Agenda of The New York Times

In a less than remarkable opinion piece entitled "Past Time for a New Agenda" (http://www.nytimes.com/2011/08/09/opinion/past-time-for-a-new-agenda.html?_r=1&hp), the editorial board of The New York Times purportedly calls upon President Obama to shift his apparently limited attention span from curbing debt to job growth. The editorial mentions the proposals for job growth proffered by the president on Monday:

"Increased investment in infrastructure, renewing the payroll tax cut and extending jobless benefits are vital to prevent further backsliding. Inaction on the payroll tax and unemployment benefits could cost nearly a full percentage point in growth next year."

But does the editorial board have any novel suggestions to spur employment? Obviously not. In fact, the overwhelming bulk of this epistle was devoted to partisan politics (Italics added):

• "In the defective logic of the Republican machine, that was Mr. Obama’s fault because it occurred on his watch. (That’s a breathtaking bit of hypocrisy, by the way, from the party that fabricated the debt-ceiling crisis.)"
• "The credit decision put a price tag on the agenda of dysfunction that Republicans brought to Washington, in which unnecessary crises are created to achieve their goals of shrinking government and bringing down Mr. Obama. When one of the two political parties announces its willingness to let the nation default, S.& P. essentially said, those who lend it money can no longer trust it to act rationally."
• "But having spent far too long haggling over the margins of the Republican agenda to reduce the deficit with only spending cuts, the president needs to move to a very different set of priorities. He should start making the case that it is foolish to focus the nation’s attention solely on debt, where the Republicans want it, and instead shift every available resource toward jobs."
• "If he stays locked into the arid agenda of the Republicans, the economy will remain as dormant as his speech on Monday, which is just where his rivals hope it will be in November 2012."
• "Defeatists may say that it is impossible to consider programs like these at a time when Republicans will find a way to kill any worthy idea from the White House, especially those that might require some short-term spending. But the shackles forged by Republican lawmakers can only be broken with the power of good ideas."
• "He is now free to move past that deal, to outline much bolder plans for a turnaround. Then he could defy Republicans — with their crabbed vision of government’s role — to stand in his way."

Query: Is this editorial about job creation or an obsessive campaign manifesto?

Given the chaos in world financial markets, I am astounded by such partisan tripe. If Obama is finally able to rise to the occasion and pull the US out of this morass, he will be reelected. If he and the subservient editorial board of The New York Times pursue the blame game, Obama and friends should get an early start on packing prior to January 2013.

You Lack Faith in the Creditworthiness of the US? Buy Cow Manure, Not Gold!

I had many calls from clients over the past 24 hours concerning my stance with regard to the malaise affecting world financial markets. Let me make this as short as I made it to my customers: I bought shares yesterday in the companies in which I believe. Obviously, it could be that I bought them too high, and if I were to have waited, I might have been able to buy them at a better price; however, there is no doubt in my mind that the markets will recover, and the share price of the companies in which I invest will do well over time.

When asked whether I recommend the purchase of gold, I told my customers that I prefer cow manure. I explained that unlike Standard & Poor's, my faith in the ability of the United States government to repay its debt has not changed one iota, and if it did, gold would offer me little security over the long-term. On the other hand, if the US government were to default, we would all be growing vegetables in our gardens, and cow manure for fertilizer would ultimately prove more valuable.

Never good at growing vegetables, I will stick with my belief in the creditworthiness of the US and take advantage of the decline in world equity markets to add to my positions in the companies which I respect and trust.

Joe Nocera, "The Tea Party, Take Two": "Nothing Like a Good Financial Crisis to Turn You Into a Liberal"

In his latest New York Times op-ed, "The Tea Party, Take Two" (http://www.nytimes.com/2011/08/06/opinion/the-tea-party-take-two.html?hp), Joe Nocera describes his liberal upbringing and apologizes for accusing Tea Party Republicans of waging "jihad on the American people" in a prior column (http://www.nytimes.com/2011/08/02/opinion/the-tea-partys-war-on-america.html?_r=2&partner=rssnyt&emc=rss). Nocera, chagrined by this earlier apoplectic attack, explains his rant:

"Then came the financial crisis. I like to joke that there’s nothing like a good financial crisis to turn you into a liberal. But it’s not really a joke. The more I learned the back story that led to the crisis, the more horrified I became. The lack of regulation and oversight of Wall Street and the big subprime companies like Countrywide, driven by the ideology of deregulation, was thoughtless and irresponsible. The refusal of bank regulators to stop subprime abuses bordered on the criminally negligent. The unwillingness of the Obama Justice Department, even now, to hold anyone to account for their role in the crisis has been disheartening."

Unlike Nocera, appellations of liberal and conservative and attributions of good and evil do not interest me, notwithstanding my liberal upbringing. More important is a path out of the abyss.

I would also observe that absent from Nocera's laundry list of factors contributing to the crisis is the decline of antitrust regulation over the course of past decades, which, under the auspices of both liberal and conservative administrations, has also wrecked havoc upon competition and the job market (see: http://jgcaesarea.blogspot.com/search/label/antitrust).

Nocera gently scolds Obama for the financial crisis:

"I still think it was terribly wrong for the Republicans to use the threat of default to insist on massive spending cuts, though President Obama also deserves blame for playing his hand so poorly. Putting on my pragmatist hat again, I also think Congress could not have chosen a worse time to rein in spending. Yes, the country’s enormous debt — and the entitlement programs that are driving the federal deficit — needs to be brought under control."

Obama could have played his hand better? Oh really? When was there ever a written budget plan from the president?

"Congress could not have chosen a worse time to rein in spending"? The real question is why didn't Obama deal with the debt ceiling months earlier. Nobody has illustrated this point better, albeit humorously, than Jon Stewart (see: http://www.thedailyshow.com/watch/mon-august-1-2011/dealageddon----a-compromise-without-revenues).

I went to sleep last night feeling ill from the week's events - the slaughter of civilians in Syria, the downing of a helicopter in Afghanistan, the tumultuous debt ceiling debate, world economic rot - not knowing of the downgrade by Standard and Poor's of US debt, which will only add to the chaos on world markets on Monday. Will Obama, now purportedly focusing his attention on jobs, be able to turn the American economy away from the shoals? Why do I lack confidence in the Procrastinator in Chief?

But perhaps we should at least be grateful that Nocera apologized for his uncivil outburst. No such remorse has been expressed by Nicholas Kristof, who recently lumped Republicans together with al-Qaeda (see: http://jgcaesarea.blogspot.com/2011/07/nicholas-kristofs-republicans-zealots.html). Kristof's incendiary language, protected by the First Amendment but conducive of violence, doesn't belong on the op-ed page of The New York Times.

Paul Krugman's "The President Surrenders"

Thank goodness, this time I was right: A compromise settlement involving the debt ceiling was indeed reached. However, many liberal commentators are enraged by this bargain and leveling scathing criticism on President Obama.

In his column in today's New York Times entitled "The President Surrenders" (http://www.nytimes.com/2011/08/01/opinion/the-president-surrenders-on-debt-ceiling.html?hp), Paul Krugman intersperses venom directed at Republicans with bile aimed at the president. Krugman's anger at Republicans could be anticipated; however, his furor with the president is unprecedented:

"And then there are the reported terms of the deal, which amount to an abject surrender on the part of the president.

. . . .

In fact, Republicans will surely be emboldened by the way Mr. Obama keeps folding in the face of their threats.

. . . .

Did the president have any alternative this time around? Yes.

First of all, he could and should have demanded an increase in the debt ceiling back in December. When asked why he didn’t, he replied that he was sure that Republicans would act responsibly. Great call.

. . . .

But wouldn’t taking a tough stance have worried markets? Probably not. In fact, if I were an investor I would be reassured, not dismayed, by a demonstration that the president is willing and able to stand up to blackmail on the part of right-wing extremists. Instead, he has chosen to demonstrate the opposite."

Now consider what the New York Times's token conservative, bad boy columnist, Ross Douthat, has to say in his op-ed entitled "The Diminished President" (http://www.nytimes.com/2011/08/01/opinion/the-diminished-president.html?src=un&feedurl=http%3A%2F%2Fjson8.nytimes.com%2Fpages%2Fopinion%2Findex.jsonp):

"But winning a debate on points isn’t a substitute for looking like a leader. It’s one thing to bemoan politics-as-usual when you’re running for the White House. It’s quite another to publicly throw up your hands over our 'dysfunctional government' when you’re the man the voters put in charge of it.

. . . .

This leaves Americans to contemplate two possibilities more alarming than debt-ceiling brinkmanship. First, that we’re living through yet another failed presidency. And second, that there’s nobody waiting in the wings who’s up to the task either."

In essence, this is one of those rare instances where Krugman and Douthat are in agreement: Obama lacks the leadership skills to take the US forward.

Where have you previously heard someone bemoan this lack of leadership? Have another look at "Official: Obama Worst President in U.S. History" (http://jgcaesarea.blogspot.com/2010/08/official-obama-worst-president-in-us.html), written almost a year ago, in which I labeled an absence of leadership as the hallmark of the Obama administration. Sadly, nothing has occurred to make me change my opinion.

Maureen Dowd's "Not O.K. at the O.K. Corral": Still Blaming Bush and Cheney

Maureen Dowd, in her latest New York Times op-ed, "Not O.K. at the O.K. Corral" (http://www.nytimes.com/2011/07/27/opinion/27dowd.html?hp), uses the opportunity to blame the Republicans, specifically Bush and Cheney, for all of America's ills. According to Maureen, an independent Obama, willing to compromise at the drop of a hat, has fallen victim to the morass created by his predecessors:

"The last century was the American century. But this one will not be, thanks to George W. Bush and Dick Cheney, who used their boots and spurs to ride roughshod over the globe and American economy. They spent eight years and trillions of dollars either barging into stuff they should have left alone or leaving alone stuff they should have intervened on.

. . . .

The White House feels that its foes not only want to stomp on any reasonable compromise; they want to make sure that Obama never has the presidency he dreamed of, one that isn’t about digging out from W.’s intractable messes; one that helps the parties reason together and move into the future.

. . . .

You could argue that Obama created his own nightmare by failing to read the class rage of the public and aggressively cut government fat as soon as he came into office. His passivity allowed the Tea Party to rise, fed by fury over Nancy Pelosi and the House Democrats stuffing pork into the 2009 stimulus package.

But whatever the criticisms of Obama, it’s Republicans who are overtly playing politics. Even though Obama compromises ridiculously easily, the Republicans are showing no willingness to compromise at all."

Only the Republicans are playing politics? I suppose that is why Obama has been rejecting any temporary agreement ending before November 2012, which would allow the parties to hammer out a better reasoned arrangement without the exigencies of time bearing down upon them.

Only the Republicans got us into this mess? Peculiar. I thought it was Obama who decided to escalate the war in Afghanistan, which will cost the US a record $120 billion in 2011. This is now Obama's senseless war.

Obama is the "great compromiser"? Observe what David Brooks had to say yesterday in "Congress In the Lead" (http://www.nytimes.com/2011/07/26/opinion/26brooks.html?_r=1&partner=rssnyt&emc=rss), concerning Obama's negotiating style:

"[T]he White House negotiating process was inadequate. Neither the president nor the House speaker ever wrote down and released their negotiating positions. Everything was mysterious, shifting and slippery. One day the president was agreeing to an $800 billion revenue increase; the next day he was asking for $400 billion more."

Obama merely failed to trim government fat when entering office? Read "Toying With Default" in "Review & Outlook" of The Wall Street Journal (http://online.wsj.com/article/SB10001424053111903999904576465843244525786.html?mod=djemEditorialPage_h):

"Then again, it has long been clear that Mr. Obama isn't interested in spending reform. In February he proposed a budget that spent more than any in U.S. history. In April he demanded that Congress pass a 'clean' debt ceiling hike that included no spending cuts whatsoever. Only after House Republicans unveiled their own sweeping budgetary reforms did the White House rush to also claim it wanted deficit reduction as part of the debt-ceiling debate."

And if you think for one moment that the president's nascent desire to cut spending is anything other than an unscrupulous political ploy designed to win him reelection, read Paul Krugman's "Messing With Medicare" (http://www.nytimes.com/2011/07/25/opinion/25krugman.html?ref=opinion):

"So why is the president embracing these bad policy ideas? In a forthcoming article in The New York Review of Books, the veteran journalist Elizabeth Drew suggests that members of the White House political team saw the 2010 election as a referendum on government spending and that they believe that cutting spending is the way to win next year."

Don't get me wrong: Bush was indeed profligate in his spending. However, I had always thought that Obama was swept into office in order to correct these excesses. Instead, in July 2011, as we coast toward November 2012, absent any meaningful achievements attributable to the Obama administration, economic or otherwise, we are stuck in a "blame game."

Let's see if the American electorate is willing to buy it.

Paul Ryan on the Budget Deficit: "We Have a Leadership Deficit"

Paul Ryan (R-Wis.) speaking yesterday from the floor of the US House of Representatives (http://www.realclearpolitics.com/video/2011/07/20/paul_ryan_leading_on_reporters_at_press_conferences_is_not_leadership.html):

"Here's the problem we have right now, Mr. Speaker. We have a leadership deficit. I keep hearing about the President's got a plan. The President's offering balance. The President hasn't offered a thing yet. Nothing on paper. Nothing in public. Leading on reporters at press conferences is not leadership. Giving speeches according to the CBO is not budgeting.

The President did inherit a tough problem. No two ways about it. What did he do with this problem? He drove us deeper into debt. $1 trillion of borrowed money for a stimulus that was promised to keep unemployment below 8% and went up to 10% and now it's at 9.2%. A stalled economy. A budget the President gave us that doubles the debt in five years and triples it in 10 years. That's not leadership."

Okay, suppose it's all true. Name a viable alternative being offered by a dysfunctional Republican party, who is prepared to vie for the presidency in 2012. Yes, there is a leadership deficit, but it extends to both parties.

How about you, Mr. Ryan? Are you ready to do something other than lecture from the sidelines? Time to test your theories and proposals upon the broader American electorate. Yes, you might be forced to walk away in humbled defeat, but that is the price of leadership.

New York Times Editorial, "The Worst Time to Slow the Economy": Brain Dead

In yet another catastrophic attempt at providing economic guidance, the editorial board of The New York Times in "The Worst Time to Slow the Economy" (http://www.nytimes.com/2011/07/10/opinion/sunday/10sun1.html?ref=opinion) blames the Republicans for cutting spending notwithstanding Friday's dismal unemployment report. The editorial concludes by calling upon the president to find a way to put Americans back to work:

"There is still time for the president to insist that the debt talks include a substantial program to put people to work now, while reducing the deficit over a longer period. To do otherwise is to ignore Friday’s ugly reality."

I would observe:

1. Any attempt to establish a meaningful program to create employment within the space of a week would be specious. This should have been done long ago by Obama.

2. On March 16, 2006, a Democratic senator named Barack Obama opposed George W. Bush’s request to raise the debt limit, declaring: “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

Enough said.