Krugman a Go Go

Before the Pawlenty 13 year old girl view of world economics disappears from the bottom of the page, I thought I'd resuscitate it up here. For those of you who don't know, it's basically another example of appeal to fear by the Cult in the form of the phrase, "We are going to be Greece soon." Thankfully, we have Paul Krugman, professor of Economics at Princeton or, for those of you Cult members, a "fucking idiot who lies about stuff."

In a column from last week, Professor Krugman clearly illustrates why we are NOT going to be Greece...pretty much torpedoing much of the silliness we hear from the Cult.

Both nations have lately been running large budget deficits, roughly comparable as a percentage of G.D.P. Markets, however, treat them very differently: The interest rate on Greek government bonds is more than twice the rate on U.S. bonds, because investors see a high risk that Greece will eventually default on its debt, while seeing virtually no risk that America will do the same. Why?

One answer is that we have a much lower level of debt — the amount we already owe, as opposed to new borrowing — relative to G.D.P. True, our debt should have been even lower. We’d be better positioned to deal with the current emergency if so much money hadn’t been squandered on tax cuts for the rich and an unfunded war. But we still entered the crisis in much better shape than the Greeks.

Markets are about perception and not necessarily about hard numbers. The perception is that the Greeks are going to default. There is no perception that we will...except from the Cult who has a clear agenda which we will illustrated clearly at the end of this column.

Even more important, however, is the fact that we have a clear path to economic recovery, while Greece doesn’t.

Look under the hood of those troubling long-run budget projections, you discover that they’re not driven by some generalized problem of overspending. Instead, they largely reflect just one thing: the assumption that health care costs will rise in the future as they have in the past. This tells us that the key to our fiscal future is improving the efficiency of our health care system — which is, you may recall, something the Obama administration has been trying to do, even as many of the same people now warning about the evils of deficits cried “Death panels!”

So that's why health care was so important. Huh. You learn something new every day:)

The U.S. economy has been growing since last summer, thanks to fiscal stimulus and expansionary policies by the Federal Reserve. I wish that growth were faster; still, it’s finally producing job gains — and it’s also showing up in revenues. Right now we’re on track to match Congressional Budget Office projections of a substantial rise in tax receipts. Put those projections together with the Obama administration’s policies, and they imply a sharp fall in the budget deficit over the next few years.

That's true. Take a look at the chart below.

I pulled it from Christopher Chantrill's web site, usgovernmentspending.com. Make sure that you check out his bio before poo pooing the data, Cult members.

Take a look at where we have been as opposed to where we are right now. You can also see the sharp drop that Krugman mentions. All of this jibes with the White House historicals you can review here. See Table 1.2.

But let's get back to Greece.

Greece, on the other hand, is caught in a trap. During the good years, when capital was flooding in, Greek costs and prices got far out of line with the rest of Europe. If Greece still had its own currency, it could restore competitiveness through devaluation. But since it doesn’t, and since leaving the euro is still considered unthinkable, Greece faces years of grinding deflation and low or zero economic growth. So the only way to reduce deficits is through savage budget cuts, and investors are skeptical about whether those cuts will actually happen.

Investors are skeptical with Greece but not so skeptical with us because of the avenues that are being pursued by President Obama. Again, it comes down to perception. And we have our own currency as does Britain, which is in much worse shape than us, yet both the US and the UK can still borrow at relatively low interest rates. So?

In short, we’re not Greece. We may currently be running deficits of comparable size, but our economic position — and, as a result, our fiscal outlook — is vastly better.

Next Krugman gets to the Cult bullshit.

“We demand more than we’re willing to pay for,” is the usual line. Yet that line is deeply misleading.

First of all, who is this “we” of whom people speak? Bear in mind that the drive to cut taxes largely benefited a small minority of Americans: 39 percent of the benefits of making the Bush tax cuts permanent would go to the richest 1 percent of the population.

And bear in mind, also, that taxes have lagged behind spending partly thanks to a deliberate political strategy, that of “starve the beast”: conservatives have deliberately deprived the government of revenue in an attempt to force the spending cuts they now insist are necessary.

Yep. But why?

We should ignore those who pretend to be concerned with fiscal responsibility, but whose real goal is to dismantle the welfare state — and are trying to use crises elsewhere to frighten us into giving them what they want.

I have a few ideas about why they want to dismantle the welfare state. One of them is that they simply don't want to give up their money. On the surface, it seems there is nothing wrong with this at all. But these same people want to enjoy the benefits of those aspects of government they deem important. They are so myopic in their Cult's beliefs that they can't see that the government needs to be about more than just "protecting us from bad guys" as Glenn Beck tells them. Worse still, their narrow mindedness views ANY perception of government that is different from theirs as being totalitarian. As Lewis Black said last week, they have Nazi Tourettes. Actually, it's a Tourettes salad of Stalin, Hitler, and Pol Pot. Pick any frightening dictator and that's what will happen to us if we don't listen to every thing the Cult says!

So, basically, what Krugman is saying is what I have been saying all along: don't pay attention to the people running around saying "We are going to be like Greece." That would include White House Budget Director Peter Orszag who clearly said it for political reasons. As is always the case with the Cult, they are using logical fallacies again.

Just like most of the time, they will be wrong again. And quickly onto something else...never admitting their error. Same shit, different day.