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» The Ornery American Forum » General Comments » It's Time We Republicans Finally Admitted That Paul Krugman Might Be Right

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Author Topic: It's Time We Republicans Finally Admitted That Paul Krugman Might Be Right
philnotfil
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David Frum must be a RINO.

businessinsider.com

A bunch of paragraphs on things that Krugman got right.

quote:
Recently, Krugman has denounced the "austerity" push of the GOP, arguing that tackling our debt and deficit problem right now with spending cuts is the worst move we can make. Such cuts, Krugman argues, will put more people out of work and shrink the economy. And this, in turn, will increase, not decrease, the deficit.

Krugman thinks we should tackle the debt and deficit problem later, when the economy is on more solid footing. He points to record-low interest rates as a sign that the world is still willing to lend us as much money as we want, practically for nothing. And he argues that, instead of cutting back, we should be using that money to build infrastructure, strengthen the economy, and put more Americans back to work.

And some Republicans, it seems, are starting to notice.

A couple of months back, Republican commentator David Frum made a startling observation on his site:

Imagine, if you will, someone who read only the Wall Street Journal editorial page between 2000 and 2011, and someone in the same period who read only the collected columns of Paul Krugman. Which reader would have been better informed about the realities of the current economic crisis? The answer, I think, should give us pause. Can it be that our enemies were right?

Following the link to David Frum's site and reading the responses to this question is entertaining.
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drewmie
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The weekly magazine The Economist has been consistently critical of short-term austerity in America. It's a recipe for a double-dip recession. What we need is heavy short-term spending on infrastructure and education (and re-education). And the money should be spend immediately, not over some multi-year plan. All austerity measures should be strictly medium and long-term.

For some psychotic reason, Republicans are doing exactly the opposite, opposing short-term spending and balking on long-term austerity.

History will not treat current Republicans well. It will be quite clear that they pushed through record deficits during good times (the Bush years) and record cuts during down times (the Obama years). And that's exactly the opposite of what every economics class says you're supposed to do.

My only question is: why? Is it that these Republicans really don't understand basic economics? Or are they so hyper-partisan than every policy must be treated as a way to hurt Obama? Which is it GOP? Ignorance or corruption?

[ October 24, 2011, 10:36 PM: Message edited by: drewmie ]

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cherrypoptart
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We've tried short term spending already, twice, and it looks like all we're getting for results is high inflation on our groceries. I used to be able to buy a gallon of organic milk about a year ago for the price of regular milk today. By spending you mean printing money right?

Is it just me that's seeing inflation now?

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Grant
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quote:
Originally posted by cherrypoptart:

Is it just me that's seeing inflation now?

The consumer price index is up less than 10% since 2008. It was up more then 10% during the period from 2004 to 2008, so inflation has actually slowed.

That being said, prices for groceries have indeed climbed, much more then 10% in some cases. I believe some of this is due to the price of oil, supply-demand, and rising prices outside basic consumer items. The price of college is up huge, the price of automobiles continues to grow, the price of retirement continues to grow. Mo money, mo money, mo money.

We havn't hit hyperinflation, but the banks have basically just sat on alot of that qe money.

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ken_in_sc
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Food and gas are no longer included in the inflation rate. If they still were, our inflation rate would be much higher. Of course, that would mean all of the government's inflation adjusted payments would be higher as well, such as social security and civil service pay roll.
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JWatts
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quote:
Originally posted by drewmie:
The weekly magazine The Economist has been consistently critical of short-term austerity in America. It's a recipe for a double-dip recession. What we need is heavy short-term spending on infrastructure and education (and re-education). And the money should be spend immediately, not over some multi-year plan. All austerity measures should be strictly medium and long-term.

Indeed, The Economist has been critical. They've been even more critical over European austerity measures, since those have actually been substantially more drastic than American ones. The Economist leans pretty strongly Keynesian.

However, their articles written by the British staff are very well researched and logical. They often make very good points.

quote:
Originally posted by drewmie:
For some psychotic reason, Republicans are doing exactly the opposite, opposing short-term spending and balking on long-term austerity.

My only question is: why? Is it that these Republicans really don't understand basic economics? Which is it GOP? Ignorance or corruption?

This is factually incorrect. The Republicans have not opposed short-term spending. They voted for both of the first two stimuli and even in the last round of cuts, did not vote any immediate cuts. No cuts occurred before 2012 and even the 2012 cuts were very minor.

The final bi-partisan budget deal involved $21 billion in cuts in fiscal 2012 on a budget of $3,729 billion. Or to put it in relative terms it was a: 0.5% cut.

Furthermore, the budget deal established a commission who's purpose is to establish further long term deficit reductions.

2012 Budget Deal

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JWatts
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quote:
Originally posted by ken_in_sc:
Food and gas are no longer included in the inflation rate. If they still were, our inflation rate would be much higher. Of course, that would mean all of the government's inflation adjusted payments would be higher as well, such as social security and civil service pay roll.

No, that's not right. From the Bureau of Labor and Statistics site:

quote:

What goods and services does the CPI cover?

The CPI represents all goods and services purchased for consumption by the reference population (U or W) BLS has classified all expenditure items into more than 200 categories, arranged into eight major groups. Major groups and examples of categories in each are as follows:

FOOD AND BEVERAGES (breakfast cereal, milk, coffee, chicken, wine, full service meals, snacks)
HOUSING (rent of primary residence, owners' equivalent rent, fuel oil, bedroom furniture)
APPAREL (men's shirts and sweaters, women's dresses, jewelry)
TRANSPORTATION (new vehicles, airline fares, gasoline, motor vehicle insurance)
MEDICAL CARE (prescription drugs and medical supplies, physicians' services, eyeglasses and eye care, hospital services)
RECREATION (televisions, toys, pets and pet products, sports equipment, admissions);
EDUCATION AND COMMUNICATION (college tuition, postage, telephone services, computer software and accessories);
OTHER GOODS AND SERVICES (tobacco and smoking products, haircuts and other personal services, funeral expenses).

BLS

They also say:

quote:
Which index is the "Official CPI" reported in the media?

Our broadest and most comprehensive CPI is called the All Items Consumer Price Index for All Urban Consumers (CPI-U) for the U.S. City Average, 1982-84 = 100.

In addition to the All Items CPI, BLS publishes thousands of other consumer price indexes. One such index is called "All items less food and energy". Some users of CPI data use this index because food and energy prices are relatively volatile, and these users want to focus on what they perceive to be the "core" or "underlying" rate of inflation.

Obviously the "All items less food and energy" index, does not include food and energy. That's a special case however. The standard Consumer Price Index (CPI-U) does cover the costs of food and energy.

It does focus on Urban customers and may not correctly state rural inflation, but the two rates are probably not significantly different in the long term.

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Pyrtolin
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quote:
Originally posted by ken_in_sc:
Food and gas are no longer included in the inflation rate. If they still were, our inflation rate would be much higher. Of course, that would mean all of the government's inflation adjusted payments would be higher as well, such as social security and civil service pay roll.

That's headline vs core inflation, and the rate of inflation wouldn't have been any higher, because they're highly volatile and spend as much time below core inflation as above it. Once you average out the swings there is not significant difference between headline and core in the long term.

http://www.advisorperspectives.com/dshort/updates/CPI-Headline-and-Core.php

You can see it pretty clearly in the graphs there.

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drewmie
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quote:
Originally posted by JWatts:
This is factually incorrect. The Republicans have not opposed short-term spending. They voted for both of the first two stimuli and even in the last round of cuts, did not vote any immediate cuts. No cuts occurred before 2012 and even the 2012 cuts were very minor.

I see what you mean regarding the issues you're focusing on, but it ignores, among other things, the elephant in the room from 2011: the debt ceiling debacle. Since it's money already spent, that's about as "short-term" as it gets. This is a prime example of something The Economist and I considered ridiculously irresponsible and completely partisan. It had nothing to do with pushing good economics or good fiscal policy, at least not according to anyone remotely objective on the matter. In my opinion, it had everything to do with scoring political points, i.e. the "corruption" choice. But hey, I could be wrong. It could be flat-out ignorance. Take your pick.

[ October 25, 2011, 08:16 PM: Message edited by: drewmie ]

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Grant
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quote:
Originally posted by drewmie:
This is a prime example of something The Economist and I considered ridiculously irresponsible and completely partisan.

Well daym. I really didn't know wether I should trust in THE ECONOMIST, but your opinion just tipped the scales. Mad Magazine and I salute you.
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