Paul Krugman, "Ideology and Investment": Building an Unsustainable Debt for the Future?

"The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents - #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back -- $30,000 for every man, woman and child. That's irresponsible. It's unpatriotic."

- Barack Obama, July 3, 2008

Do you remember Obama telling us that taking the national debt up to $9 trillion was "irresponsible" and "unpatriotic"? Well, today it is $17.9 trillion and rising by the second.

In his latest New York Times op-ed entitled "Ideology and Investment," Paul Krugman rehashes all of his arguments for renewed federal spending. Krugman writes:

"America used to be a country that built for the future.

. . . .

Our inability to invest doesn’t reflect something wrong with 'Washington'; it reflects the destructive ideology that has taken over the Republican Party.

. . . .

We need public investment; at a time of very low interest rates, we could easily afford it. But build we won’t."

Darned Republicans! (That noise you just heard? Sorry, that was me, yawning.)

Krugman takes pains not to tell us what the nonpartisan Congressional Budget Office had to say about federal debt in July 2014:

"The gap between federal spending and revenues would widen after 2015 under the assumptions of the extended baseline, CBO projects. By 2039, the deficit would equal 6½ percent of GDP, larger than in any year between 1947 and 2008, and federal debt held by the public would reach 106 percent of GDP, more than in any year except 1946—even without factoring in the economic effects of growing debt.

. . . .

Beyond the next 25 years, the pressures caused by rising budget deficits and debt would become even greater unless laws governing taxes and spending were changed. With deficits as big as the ones that CBO projects, federal debt would be growing faster than GDP, a path that would ultimately be unsustainable."

Or in short, America is indeed building for the the future: An unsustainable debt, which, in another 25 years, will sink the ship. Currently, "the federal government can borrow incredibly cheaply"? Absolutely. But you're not supposed to borrow what you can never pay back.

Fortunately for Krugman, in another 25 years he will probably be too old to remember writing this rubbish.

Paul Krugman, "Addicted to the Apocalypse": An Asteroid or an Earthquake?

Do you like a good science fiction movie? I do, particularly owing to their marvelous special effects. For example, the tsunami depicted at the beginning of "Hereafter" (2010) was overpowering.

And then there are the disaster films involving asteroid collisions and earthquakes.

But note the difference between an asteroid collision and an earthquake. Although both of these phenomena can have catastrophic consequences, an asteroid collision can be predicted in advance, owing to its course and speed. On the other hand, whereas we might know that another earthquake will ultimately hit San Francisco owing to its proximity to the San Andreas fault, we can't say when.

In his latest New York Times op-ed entitled "Addicted to the Apocalypse" (http://www.nytimes.com/2013/10/25/opinion/krugman-addicted-to-the-apocalypse.html?_r=0), Paul Krugman mocks those warning of an "oft-prophesied, never-arriving debt crisis." Krugman concludes:

"Look at Japan, a country that, like America, has its own currency and borrows in that currency, and has much higher debt relative to G.D.P. than we do. Since taking office, Prime Minister Shinzo Abe has, in effect, engineered exactly the kind of loss of confidence the debt worriers fear — that is, he has persuaded investors that deflation is over and inflation lies ahead, which reduces the attractiveness of Japanese bonds. And the effects on the Japanese economy have been entirely positive! Interest rates are still low, because people expect the Bank of Japan (the equivalent of our Federal Reserve) to keep them low; the yen has fallen, which is a good thing, because it make Japanese exports more competitive. And Japanese economic growth has actually accelerated.

Why, then, should we fear a debt apocalypse here? Surely, you may think, someone in the debt-apocalypse community has offered a clear explanation. But nobody has.

So the next time you see some serious-looking man in a suit declaring that we’re teetering on the precipice of fiscal doom, don’t be afraid. He and his friends have been wrong about everything so far, and they literally [sic] have no idea what they’re talking about."

Debt, which hasn't yet sunk Japan, can't sink a nation? Oh really? Krugman, of course, doesn't mention what debt did to the Weimar Republic and what arrived in its aftermath.

So why the Weimar Republic and not Japan? My answer: Who is saying that it won't happen to Japan?

Okay, wise guy, if a disaster is about to befall us, tell us when?

But herein lies the quandary. Economics is not an exact science, and it is not possible to know exactly when human beings lose faith in their country's currency. An economic implosion is not a pending collision with an asteroid whose timing can be predicted. Rather, it is more akin to an earthquake, whose arrival is predestined, but whose timing cannot be foretold.

Rely on Krugman? Yeah, right. Remember how he once wrote concerning Occupy Wall Street (http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html):

"Occupy Wall Street is starting to look like an important event that might even eventually be seen as a turning point.

. . . .

It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details."

And just where is Occupy Wall Street today? As I said earlier, economics is not an exact science.

I am not a "serious-looking man in suit" and perhaps not deserving of respect, but when Douglas Elmendorf, head of the nonpartisan Congressional Budget Office, declares, "The federal budget is on a course that cannot be sustained indefinitely" (http://www.cnbc.com/id/101065200), maybe it's worth listening to what he has to say.

Was that a rumble I just heard?

Maureen Dowd, "Pope Trumps President": Obama Should Learn From a Soap Opera?

In her latest New York Times op-ed entitled "Pope Trumps President" (http://www.nytimes.com/2013/10/16/opinion/dowd-pope-trumps-president.html), Maureen Dowd describes an ABC television soap opera named "Scandal" (I am not familiar with it) and then asks, regarding America's real-world crisis:

"Why hadn’t President Obama used a pretext to lure John Boehner, Ted Cruz and Harry Reid to the White House, locked them in a bunker and kept them there until they hammered out a deal to save America’s reputation?"

Well, if you are a regular reader of this blog, you know that I have been calling for round-the-clock negotiations to end the shutdown crisis for some time (see: http://jgcaesarea.blogspot.co.il/2013/10/paul-krugman-dixiecrat-solution.html). But this is not a real-world presidential administration, owing to the fact that President Obama does not know how to govern. He is expert at campaigning and reading from a teleprompter; however, he still hasn't learned to govern.

As observed in Dowd's conclusion, even David Axelrod acknowledges this shortcoming:

"David Axelrod admitted to The Boston Globe’s Matt Viser that the Obama team should have involved Obama more in interacting with Capitol Hill from the beginning, so the aloof president who breezed through the Senate could learn how the velvet-and-vise game is played. Instead, negotiating with the Hill was outsourced to Rahm Emanuel, who makes Pope seem like a defeatist.

'If I rethink it,' Axelrod said, 'maybe we were too reliant on Rahm and should have engaged the president more in those early months and years.'

When the ship of state turns into the ship of fools, we all sink."

Maybe they "should have engaged the president more in those early months and years"? But why would they possibly want to do such a thing, thereby depriving the president of his alibi that he learned about something only "when it came out in the news" (see: http://www.huffingtonpost.com/2013/05/19/obama-irs-targeting_n_3302449.html)?

In a recent Washington Post opinion piece entitled "Panetta rebukes Obama’s handling of shutdown" (http://www.washingtonpost.com/opinions/ruth-marcus-leon-panetta-rebukes-obamas-handling-of-shutdown/2013/10/14/d5252dc4-34f9-11e3-be86-6aeaa439845b_story.html?tid=pm_pop), Ruth Marcus also noted that Leon Panetta has become cognizant of Obama's failings, although Panetta is a bit more candid than Axelrod:

"Leon Panetta served in Washington with nine presidents, starting with Lyndon Johnson. He has been a member of Congress, Office of Management and Budget director, White House chief of staff, director of the Central Intelligence Agency and secretary of defense — the last two under President Obama. He is a man who knows Washington and knows how to choose his words. So Panetta’s implicit rebuke of the president’s hands-off approach to the budget crisis at a breakfast Monday was striking.

. . . .

'We govern either by leadership or crisis. . . . If leadership is not there, then we govern by crisis,' Panetta said at the start of the session, sponsored by The Wall Street Journal. 'Clearly, this town has been governing by crisis after crisis after crisis.'

. . . .

Then, to Obama. 'This president — he’s extremely bright, he’s extremely able, he’s somebody who I think certainly understands the issues, asks the right questions, and I think has the right instincts about what needs to be done for the country.'

Next came the 'but' — without a name but with a clear message. 'You have to engage in the process. This is a town where it’s not enough to feel you have the right answers. You’ve got to roll up your sleeves and you’ve got to really engage in the process . . . that’s what governing is all about.'"

"You’ve got to roll up your sleeves"? That's odd. When Obama was campaigning in 2012, his sleeves were always rolled up (so were Romney's). But I suppose that in today's Brave New World, it's all about imagery, having little or nothing to do with substance or reality.

Thomas Friedman, "Sorry, Kids. We Ate It All.": Obama and Friedman, Card Carrying Tea Party Members?

In March 2006, opposing an increase in America's debt ceiling to a "mere" $9 trillion, Senator Obama declared:

"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."

Today, under the stewardship of President Obama, the US is facing default unless Congress raises the current $16.7 trillion debt ceiling.

In his latest New York Times op-ed entitled "Sorry, Kids. We Ate It All." (http://www.nytimes.com/2013/10/16/opinion/friedman-sorry-kids-we-ate-it-all.html?_r=0&adxnnl=1&adxnnlx=1381886081-6IgZZNIjNavDTwi5fR242A), Thomas Friedman similarly acknowledges that the future of America's "children and grandchildren" is bleak. Friedman writes (my emphasis in red):

"Eventually this shutdown crisis will end. And eventually the two parties will make another stab at a deal on taxes, investments and entitlements. But there’s one outcome from such negotiations that I can absolutely guarantee: Seniors, Wall Street and unions will all have their say and their interests protected. So the most likely result will be more tinkering around the edges, as our politicians run for the hills the minute someone accuses them of “fixing the deficit on the backs of the elderly” or creating “death panels” to sensibly allocate end-of-life health care. Could this time be different? Short of an economic meltdown, there is only one thing that might produce meaningful change: a mass movement for tax, spending and entitlement reform led by the cohort that is the least organized but will be the most affected if we don’t think long term — today’s young people."

Friedman goes on to say that "if current taxes and entitlement promises are not reformed, the cupboard will be largely bare for today’s Facebook generation."

And indeed, this is what we are also being told by Douglas Elmendorf, head of the Congressional Budget Office, who recently declared, "The federal budget is on a course that cannot be sustained indefinitely" (http://www.cnbc.com/id/101065200).

And as much as I believe in universal health care, the disastrous rollout of Obamacare demonstrated that government is incapable of efficacious policy implementation. If a public corporation were to introduce a product in this same manner, top management would be fired, unless of course, the debacle didn't first result in bankruptcy.

But the federal government need not file for bankruptcy, inasmuch as more money can always be printed until it is finally understood that US government credit ratings need to be significantly downgraded, prompting a cataclysmic world economic disaster.

Indeed, our children and grandchildren are being sold into servitude . . . or even worse.

Paul Krugman, "The Dixiecrat Solution": American Roulette

"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."

- Senator Barack Obama, March 20, 2006

In 2006, Senator Obama was opposing an increase in America's debt ceiling to $9 trillion. Today, the US, under the stewardship of President Obama, is facing default unless Congress raises the current $16.7 trillion debt ceiling.

In his latest New York Times op-ed entitled "The Dixiecrat Solution" (http://www.nytimes.com/2013/10/14/opinion/krugman-the-dixiecrat-solution.html?_r=0), Paul Krugman compares Republican opposition to raising the debt ceiling to the antics of a neighbor from hell. Krugman writes:

"So you have this neighbor who has been making your life hell. First he tied you up with a spurious lawsuit; you’re both suffering from huge legal bills. Then he threatened bodily harm to your family. Now, however, he says he’s willing to compromise: He’ll call off the lawsuit, which is to his advantage as well as yours. But in return you must give him your car. Oh, and he’ll stop threatening your family — but only for a week, after which the threats will resume."

Krugman's solution:

"Despite denials from Republican leaders, everyone I talk to believes that it would be easy to pass both a continuing resolution, reopening the government, and an increase in the debt ceiling, averting default, if only such measures were brought to the House floor. How? The answer is, they would get support from just about all Democrats plus some Republicans, mainly relatively moderate non-Southerners. As I said, Dixiecrats in reverse."

Query: Is Krugman's comparison between Republican objections to raising the debt ceiling and an obnoxious neighbor making your life hell a correct analogy? Or is it more apt to compare such objections to a wife threatening her husband with divorce if he doesn't stop his drunken spending spree, which is threatening their household with bankruptcy?

Don't get me wrong: A compromise needs to be reached. Quickly. A default by the US government would decimate the world economic order.

On the other hand, as Douglas Elmendorf, head of the Congressional Budget Office, recently declared, "The federal budget is on a course that cannot be sustained indefinitely" (http://www.cnbc.com/id/101065200).

Peculiar how President Obama is capable of bending over backwards to avoid conflict with overseas bullies, but is willing to play "tough guy" at home and jeopardize what's left of the economy. I suppose the way he sees it, voters would place most of the blame on Republicans. However, this is not a time for politics.

Krugman's conclusion:

"The question for the next few days is whether plunging markets and urgent appeals from big business will stiffen the nonextremists’ spines. For as far as I can tell, the reverse-Dixiecrat solution is the only way out of this mess."

A "reverse-Dixiecrat solution is the only way out of this mess"? I don't think so. The damage in the interim would be immense.

Instead, how about both sides attempting to control their inflated egos and engaging in round-the-clock talks until a settlement is reached. The alternative is disaster.

Who blinks first? Who is to blame? Who cares.

Settle it.

Paul Krugman, "Dealing With Default": Defy Congress and Ignore the Debt Ceiling?

Paul Krugman is just chock full of good ideas. Remember how he once wrote concerning Occupy Wall Street (http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html):

"Occupy Wall Street is starting to look like an important event that might even eventually be seen as a turning point.

. . . .

It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details."

And then there was Krugman's trillion dollar coin proposal, which even Jon Stewart labeled a "stupid f#cking idea" (see: http://www.salon.com/2013/01/15/jon_stewart_responds_to_krugman_platinum_coin_is_still_a_stupid_fcking_idea/).

Today, in his latest New York Times op-ed entitled "Dealing With Default" (http://www.nytimes.com/2013/10/11/opinion/krugman-dealing-with-default.html?_r=0), Krugman has another stroke of genius concerning what Obama could do if the US were to indeed hit the debt ceiling. After observing the disastrous potential consequences of the US government delaying or "prioritizing" repayment of its debt, Krugman notes that the president has another option: He could simply ignore Congress and the debt ceiling. Krugman writes:

"Many legal experts think there is another option: One way or another, the president could simply choose to defy Congress and ignore the debt ceiling.

Wouldn’t this be breaking the law? Maybe, maybe not — opinions differ. But not making good on federal obligations is also breaking the law. And if House Republicans are pushing the president into a situation where he must break the law no matter what he does, why not choose the version that hurts America least?"

Query: What would be the effect on the US dollar and the world economy of such a move by Obama? Would it really be that much better than default? There would still be an economic crash.

In addition, the question would then arise whether Obama had staged a "coup," meaning an unlawful seizure of power and not a brilliant stroke of genius.

Yup, Paul, that would almost be as successful as minting that trillion dollar platinum coin.

Ah, yes, the "stuff" that Nobel Prizes are made of . . .

Gail Collins, "First, the Good News": Will There Be Survivors After the Titanic Again Goes Down?

Has the Titanic, i.e. the US government, hit an iceberg, i.e. the debt ceiling, and is it about to go down? Will there be time for any of the passengers to board the lifeboats? Meanwhile, the ships musicians continue to play for the benefit of all aboard, who will soon be drowning in the freezing Atlantic, and a comedian by the name of Gail Collins, persists, from the ship's deck already awash with water, with her one-woman show, poking fun at those responsible for this navigational disaster.

In her latest New York Times op-ed entitled "First, the Good News" (http://www.nytimes.com/2013/10/10/opinion/collins-first-the-good-news.html?_r=0), Collins, who wears partisan blinders, again casts aspersions against those nefarious Republicans. Collins concludes:

"Good news: The Congressional gym is open.

O.K., possibly only good news if you are a member of Congress. Or a person who enjoys making fun of members of Congress.

Good news: The Centers for Disease Control and Prevention called back some of its furloughed employees to try to control that salmonella outbreak.

Bad news: Most of the C.D.C. is still at home, including the ones who work on flu.

And our moral is: Get your flu shot, people. Cook your chicken well. Cross your fingers and pray."

Yup, the Congressional gym is open, and so is Obama's golf course on Andrews Airforce Base (see: http://www.breitbart.com/InstaBlog/2013/10/06/Obama-s-Golf-Course-Has-Been-Spared-from-the-Shutdown).

But too much is at stake to waste time with name-calling. Enough nonsense.

It's high time for Obama and Republican Congressional leaders to hold round-the-clock talks to achieve a compromise before it's all too late.

Who's to blame?

I don't care. We're not in kindergarten. Settle it!

Thomas Friedman, "U.S. Fringe Festival": No Room for Compromise?

Have you followed the Obama administration's efforts over the past five years to restart negotiations between the Israelis and the Palestinians? The Obama administration has persistently demanded that the Israelis toss the Palestinians some sort of bone, e.g., a halt in settlement construction, in order to get talks moving. A pity Obama cannot adhere to this same strategy when attempting to end the shutdown in the US and avoid a debt default.

In his latest New York Times op-ed entitled "U.S. Fringe Festival" (http://www.nytimes.com/2013/10/09/opinion/friedman-us-fringe-festival.html), Thomas Friedman compliments President Obama on his intransigence involving negotiations with the Republicans. Friedman writes:

"President Obama is leading. He is protecting the very rules that are the foundation of any healthy democracy. He is leading by not giving into this blackmail, because if he did he would undermine the principle of majority rule that is the bedrock of our democracy.

. . . .

The president has said that he would give the G.O.P. an agenda for negotiations that could start when the government is funded and the debt ceiling lifted. He’s ready to consider trading the medical-device tax in Obamacare for another equivalent source of revenue or having a talk about closing tax loopholes and reforming entitlements — to both lower the deficit and raise revenue to invest in infrastructure or early childhood education. What Obama will not do, and must not do, is pay an entry fee to that negotiation — say giving up the medical-device tax — just to help Boehner down from the tree. Cruz & Co. would claim victory."

No "entry fee" to negotiation? Tell that to the Israelis.

Given what's at stake here - an epic economic disaster - there is no room for games involving ego. Obama has almost no experience in negotiations, and it shows. When you want to reach a settlement, there comes a time to drop the rhetoric and make some sort of conciliatory gesture in order to initiate talks.

Friedman is afraid that any such gesture could strengthen the hand of Ted Cruz? So Obama should call for round-the-clock talks with John Boehner to settle this thing. Boehner would emerge as the hero, not Cruz, and Obama would also share in the glory.

But then such a move would demand leadership on the part of Obama, which is not part of his repertoire.

Friedman can rail against Republican gerrymandering of Congressional districts, but sooner or later (let's hope sooner), compromise will be necessary.