Bush tax cuts failed - CBPP

from the Center on Budget and Policy Priorities: Voodoo economics - as George H.W. Bush called Ronald Reagan's supply side policies before he climbed onto the bandwagon - doesn't work:

h/t Paul Krugman

Krugman: The Unwisdom of Elites - NYTimes.com

Paul Krugman on 
The Unwisdom of Elites - NYTimes.com: "What happened to the budget surplus the federal government had in 2000?


The answer is, three main things. First, there were the Bush tax cuts, which added roughly $2 trillion to the national debt over the last decade. Second, there were the wars in Iraq and Afghanistan, which added an additional $1.1 trillion or so. And third was the Great Recession, which led both to a collapse in revenue and to a sharp rise in spending on unemployment insurance and other safety-net programs.


So who was responsible for these budget busters? It wasn’t the man in the street."

In favor of deficit spending

Lately I have spent a lot of time fighting despair at the prospect of the widely forecast rout of Democrats in the Congressional elections, and the "common sense" rants about government spending under Obama - as Republicans in Congress stood as the principal obstacle to spending the kind of money that might have jump-started growth.  Of course the big problem is that we don't have the Chinese Communist Party on our side.  They know how to do stimulus spending (40 high speed inter-city rail projects).  But that's for another day.

For today - thanks to Paul Krugman - here is the basic picture - spending continues in normal growth trendline but income has plummeted due to collapse in the private sector.  So - contrary to people like Niall Ferguson who say government stimulus will just lead people to buy gold and Chinese securities - it is clear that government spending is needed to create jobs - such as the (too small) $50b infrastructure program the Republicans refuse to support.  The short term deficit is now about $1.3 trillion.  That is why the Fed is printing money.  But if we really want to spur growth we have to make direct investments - such as Obama proposes.  We can if we let the Bush tax cuts above $250k expire - and use the revenue generated to put people to work.  VOTE DEMOCRATIC!

Krugman: Keeping it simple on healthcare

KISS, as we used to say about building your case for trial:

One health care reform, indivisible

by Paul Krugman
(so nice he won the Nobel as the Chicago School sinks into the dustbin, after incalculable damage to the economies of the world - not to mention their desiccation of legal theory. -gwc)

Jonathan Chait reads Peggy Noonan, so I don’t have to:

The public in 2009 would have been happy to see a simple bill that mandated insurance companies offer coverage without respect to previous medical conditions. The administration could have had that—and the victory of it—last winter.

Instead, they were greedy for glory.

Chait explains why this is nonsense. But let me explain at fuller length, because this is one of the great misunderstood keys to the whole health care debate.

Start with the proposition that we don’t want our fellow citizens denied coverage because of preexisting conditions — which is a very popular position, so much so that even conservatives generally share it, or at least pretend to.

So why not just impose community rating — no discrimination based on medical history?

Well, the answer, backed up by lots of real-world experience, is that this leads to an adverse-selection death spiral: healthy people choose to go uninsured until they get sick, leading to a poor risk pool, leading to high premiums, leading even more healthy people dropping out.

So you have to back community rating up with an individual mandate: people must be required to purchase insurance even if they don’t currently think they need it.

But what if they can’t afford insurance? Well, you have to have subsidies that cover part of premiums for lower-income Americans.

In short, you end up with the health care bill that’s about to get enacted. There’s hardly anything arbitrary about the structure: once the decision was made to rely on private insurers rather than a single-payer system — and look, single-payer wasn’t going to happen — it had to be more or less what we’re getting. It wasn’t about ideology, or greediness, it was about making the thing work.
from Paul Krugman's blog The Conscience of a Liberal,  New York Times online, January 8, 2010

Devastatingly accurate - Krugman's warning six months ago

Barack Obama is on Martha's Vineyard, relaxing and looking back. And forward we trust. September is here. The unemployment rate is 9.4%. The web is an amazing tool - making it so easy to retrieve information and determine if our predictions have panned out.

So go back to March 2009 for Paul Krugman's warning about the inadequacy of the stimulus - so contrary to the "common sense" that it was too much, rather than too little:

Behind the Curve

By PAUL KRUGMAN

Published: March 9, 2009

The Obama administration’s economic policy is already falling behind the curve, and there’s a real, growing danger that it will never catch up......

Click on the headline to get the story.

p.s. - Tim Geithner should pull out some of his old memos to see how his predictions stood up.

Hey, Paul Krugman, where are you now that your country needs you?

Paul Krugman has said he is "temperamentally unsuited" to be in government and probably has more influence as a gadfly than in office in Washington.  That is counter-intuitive.  Which is a nice way of saying WRONG!  Power is wielded - and you need to have your hands on the levers to exercise it.

So here's a young singer with the same message: