Asymmetrical Information

".....ultimately the last president who had a major impact on the economy was Richard Nixon, and we don't remember that period very fondly."

Okay. So what did Nixon do that had such an impact, and why hasn't everyone since done the same (or opposite) things?

James

He bullied the Fed chief into massively expanding the money supply in order to keep unemployment low, and then when that produced unacceptable levels of inflation, he slapped wage and price controls on everything to try to keep his pump-priming from inflating away everyone's happiness. Bad, bad, bad economics. And very bad for the economy.

In some sense, we are doing the opposite: we don't have wage and price controls, and the president leaves the Fed chief alone.

FDR never took the gold thing seriously. It was PR and he knew it, and he never manipulated the price enough to make a difference. He was just trying to calm down the goldbugs.

The NRA was a bad idea, and it's true that the Supreme Court ended it. But my recollection is that he was about to call it quits on that one anyway.

It's worth remembering the political situation FDR was in. Not only did he have the Depression to deal with on a substantive basis, but he also had to neuter the radical left/populists. It was a tough tightrope. Bush doesn't have either of those problems, and in any case, comparing Bush's situation to FDR's is the height of absurdity. Would you compare Bush's handling of Gulf War II to FDR's of WWII?

Anyway, just dropping in to defend my man from the slurs of the libertarian brigade.....

(Kidding.)

Kevin, it was the liberal who started it. You won't catch me saying "give Bush a break -- look how hard FDR had it!" But the comparison doesn't work the other way either. FDR doesn't seem to have done much of anything to improve the economy, and many of his ideas were actively bad. Now, I agree that the administration should catch flak for selling its tax cuts based on how wonderful they are for the economy -- but if you're a Keynsian who believes in stimulus, that's a pretty precarious tightrope to walk, what with the new research that shows that the wealthy spend much more of their extra income than was previously thought. And it's hardly a unipartisan sin -- I was recently interviewed by a television host who genuinely believed, because the Clinton administration had said so, that the Urban Empowerment zones had actually gotten the economy back on track. Politicians make all manner of ludicrous claims for their programs; that's how they get elected.

FDR was a good politician and maybe he even helped some people. But his economic plans, for whatever reason he tried them, weren't very good, and didn't accomplish much of anything worthwhile, and encouraging the president to emulate them is cheap pandering to ignorant FDR-worship among the New York Times' economically illiterate readers. It's certainly understandable, given Mr Krugman's political tastes, but its hardly laudable.

Besides, I could argue that Bush did better on the war part than FDR . . . and FDR was dead for the peace. (Which didn't, anyway, go as well as liberals seem to think, but that's another argument).

The modern belief that the president affects the vitality of the economy reminds me of the ancient and medieval belief that the king affected the fertility of the land. I think two beliefs share a similar psychology. Notice that Congress, which must pass all budget legislation, does not share the same responsibility in many peoples minds. I can think of similar examples of people and institutions that affect a modern dynamic economy, yet do not share the same responsibility as the president in these peoples minds. It reminds me of blaming the king for a famine or hoping that the new king will lead to good harvests.

Jane,

Don Luskin maintains blog poorandstupid.com and deconstructs everyone of Krugman's columns.

The percentage of the punditry who have anything remotely worthwhile to say on the subject of economic policy is exceedingly small, and what makes Krugman so rancid is that he is one of the pundits, if not THE pundit, most qualified to be part of that small company, but chooses instead to engage in the hackery that is the common practice of pundits. As for prominent professional politicians, I cannot think of one who is worth any attention when opining on the topic. It's gonna be a long, long, tedious time til' November, and if I hear one more dunce or hack talk about who is best qualified to "run the country", I'm gonna tune out completely. Oh well, there's a lot of fiction I've been meaning to catch up on....

I seem to read Krugman's critics much more than I read Krugman himself. I see I should really start doing both because Krugman's columns are rarely as radical as his critics suggest.

For example, the article Jane cited was pretty much mainstream stuff. The jigst was that the job condition is bad & he showed why the Bush administrations attempt to spin the numbers in a positive direction were flawed.

He did not cite Bush as the cause of the slowdown. He did not call for FDR to be resurrected from the grave along with the WPA and the NRA.

This is what he wrote:

"In 2001 the administration rammed through long-term tax cuts, heavily tilted toward the affluent. But employment didn't turn around, and by late 2002 many economists — including supporters of the original tax cut — were urging it to try something different. My own piece, "My Economic Plan," was fairly typical: I called for extended unemployment benefits, temporary aid to state and local governments, and rebates for low- and middle-income workers.

Maybe this more or less textbook response to a depressed economy wouldn't have worked. But we'll never know, because the administration rejected all such proposals. Instead, it went for a clone of the 2001 tax cut — another big break mainly for those at the top. And once again this failed to deliver the promised jobs."

His comparison to FDR was simply that FDR tried different policies while Bush is trying more of the same. Nowhere does he argue that fiscal policy is a magic bullet for creating new jobs really fast. In fact, he seems to be quite modest in his alternative suggestions.

Libery Lover, Luskin is crackpot, as is obvious if you spend thirty second reading his page, Krugman, on the other hand, actually knows something about economics. His older books are much better than his 700-word columns, but at least he still knows what he's talking about, which is more than can be said of most of his critics.

Boonton, the implication is that FDR's "experimental" approach produced superior results. It didn't. So why is one better than the other?

Let's see.

Some context.

Krugman's OpEd is 716 words long.

Of that he spends about 2/3 of it demolishing several myths that Republicans have been spouting lately, including the dea that the household survey is better than the establishment survey or that the 5.6% unemployment rate is a good indicator of the true jobs situation.

It is in the last 1/3 of his column that he talks about Bush's blame.

As Krugman points out, correctly, Bush's only response has been to cut taxes. Period. Bush has been unwilling to do or consider anything else. Even Reagan reversed course when he realized what he was doing wasn't working.

Nowhere does Krugman say that Bush could have avoided the 2.6 million jobs lost.

THAT IS NOT HIS POINT. That's a strawman argument.

His point is that Bush is unwilling to change even when his policies have clearly failed.

Jane-
Let me accept that the argument of this post is that who we elect will not much effect the jobs picture, and say that, braodly, I agree with this.

Question:
Why are you a libertarian?!?

I thought libertarians believed that their policies BENIFIT the poor. Cutting taxes stimulates growth, leading to greater employment, reducing regulation does likewise, cutting welfare eliminates dependency and puts people in the workforce, etc.

Here you argue that neither Clinton's tax increases or Bush's tax cuts significantly affected the ecconomy. So, then, why not raise taxes and use the money to ease the inevitable effects on the poor of the business cycles?

Is it really just meanness?

GT, one can only say that his policies have "failed" if you have a better alternative. By the metrics Paul Krugman is using, Bill Clinton "failed" to cure cancer, achieve world peace, and find me a husband--and isn't my Grandmother mad!

Given that any effect of any policy within the scope of the US government would be trivial -- and that no economist has a good recipe for restoring lost jobs -- that's crap. George Bush didn't do things that Paul Krugman would have liked him to do, that MIGHT have had, at best, a marginal effect on employment. Paul Krugman would like those things for other reasons -- which is perfectly valid -- but instead of giving those reasons, he accuses Bush of having failed on jobs because he didn't muck around trying out useless "solutions". Jobs will recover when jobs will recover, no matter what the president does -- so accusing him of somehow dropping the ball, when he can't really do anything, is partisan nonsense.

We've played this game before. You will parse his column and point out that Paul Krugman did not literally say "George Bush should have done X" or "George Bush didn't restore all our jobs the way he could have if he'd been willing to experiment with other [Democratic-type] solutions." And that's true. But he strongly implies it's so, so that an economically ignorant reader, of which the Times has many, most of whom still believe what they were taught in high school social studies about how FDR helped alleviate the Great Depression, will walk away believing that if only we had a Democrat in office, there's a good possibility that they could have restored most or all of the jobs we've lost. That ain't so, and Paul Krugman knows it ain't so, and I think carefully parsing your words so as to give your readers an impression that you know to be counter to fact, while maintaining the thinnest possible veneer of deniability to those who know you that you know better, is shoddy. You don't, at least as long as you agree with the parser. That's fine, but you're not going to persuade me.

1. The US has the strongest economy in the world. When Bush took office, the economy was in rescession and the market was crashing from the internet bubble bursting. Both got an additional knockout punch from 9/11. Bush cut taxes and raised spending. I think having the strongest economy in the world is pretty good. Anyone who says Bush's policies have failed is obviously so infected with partisan insanity that they have become blind to reality.

2. At present, the household survey is more accurate than the payroll survey for a dozen good reasons. See the recent Heritage study for a long explanation of some of the factors involved.

3. Bush looks much better than Clinton when comparing the state of the economy in the re-election years of 2004 to 1996.

4. The affluent pay twice as much of the income tax burden than they did in 1979 (from 19% to 37%). Those in the bottom half have been completely removed from the income tax rolls. Other than the brain dead stupid liberals like Al Sharpton who repeat the lies of liberal politicans, there is no excuse for anyone not to understand that the GOP has been responsible for this very significant shift of the tax burden from the middle class and poor onto the affluent.

Isn't time liberals started dealing in facts instead of all these empty lies?

My goodness, Decnavda, that's a big question . . . a little too big for this thread. But I'll attempt a small answer.

I'm not a tax-obsessed Libertarian; I'm more worried about spending and regulation. Taxes can come later. Transfer payments such as unemployment insurance would be among the last programs I would eliminate, as they introduce (relatively) little economic distortion.

But nonetheless, they do distort. Welfare reform has made it crystal clear that the massive increases in transfer payments begun in the 1960's in effect encouraged social pathology, trapping an underclass in a dreadful cycle. High levels of unemployment benefits in Europe increase the rigidity of the labour market, since workers are extremely reluctant to move to another field rather than continuing their heavily subsidized search for chimerical jobs in a dying industry. This is good for the worker in the short run, perhaps, but bad for the worker, and the economy, in the long run -- and effectively penalizes more flexible workers by making them pay for their rigid brethren. Social security, the biggest child of the Great Depression, is about to double in size in a very short time, putting enormous pressure on young workers--and it represents a transfer from a poorer class to a wealthier class, which is hardly social democracy at work.

Finally, let me point out that the average worker like me in New York City, who struggles to get by, struggles in part because they pay about a third of their income in various taxes, plus more to the sales tax. My parents, who aren't struggling, had an effective tax rate over 50% in the same city under Clinton. To libertarians, this is a question of justice: by what right do you tell any man, rich or poor, that he must spend more than half of his labouring hours (and my parents work a lot of hours) working for someone else? At those rates, "taxation=slavery" starts to have some bite -- and yet, those rates will have to rise still further in order to fund all our current spending . . . and further still to cover the Boomers' retirement.

Jane,

I don't see how you can write that DeLong,

"doesn't contradict the central point of Samuelson's column, which is that no matter what the structure, the ultimate effect on jobs of that sort of fiscal stimulus is trivial."

DeLong estimates that

"we are 4.2 million jobs short of where we would like to be. That's an employment shortfall of 3%."

That doesn't seem trivial to me.

And he very definitely blames Bush for a big part of that shortfall:

"Certainly a good portion of that could have been closed by a tax cut that would boost demand by getting the money to middle- and working-class people who would largely spend, instead of to upper-class people who would largely save it."

decnavda...

the issue is that 1) presidents, by themselves can't pass legislation in the US (they don't have party discipline like tony blair has in the uk, where he can pretty much get exactly the legislation he wants passed), they must use rough measures like the bully pulpit and vetoes to try and craft legislation

2) 3 years is rather a short period to have an effect on an economy, especially as the president has to bully/encourage others to enact his platform... bush also had to phase his program in, and put a great deal of plans on hold temporarily to indefinitely due to 9/11.. so he is not working with a very long period economically (pass legislation, turn it into regulations/procedures, enact legislation, tell accountants & lawyers about new legislation/rules, have accountants/lawyers etc tell clients about changes &convince them changes will have some permanence, have those people change their plans to respond to new rules & develop new techniques to take advantage of rules) it can take years for styles of sports to change due to innovations and rule changes and the economy is no different, hell we are really living most of the techno-utopian dream from 94/95 but it took 10 years + to get here... similar to longer time periods play in economics

3) yes the poor will be freer, richer, have more opportunities, etc with less rules. the easiest thing is to eliminate farm subsidies and price controls, which in the age of wal-mart will quickly translate into lower prices for necessities. 2nd is to reduce/remove planning restrictions that shackle economic growth: leftwing city planners, politicians, and activists brag about how they stopped wal mart from entering their cities, so that locals can pay more for worse products and services! they also advocate restrictions on building houses and implement rent control, then complain that there is not as much housing available as needed!

so decnavda, really where are your programmatic solutions to the problems of the poor? what solutions do you have other than calling business people evil??? hmmm I hear crickets!

Jane-
Okay, so you are "...worried about spending and regulation." But doesn't this contradict the claim of this post? If these government policies do not significantly affect the ecconomy, why be "worried"? Conversely, if they do significantly affect the ecconomy, then Bush *CAN* be blamed for the job losses. You might disagree with Krugman about what Bush should have done differently, but it seems disinginuous to be "worried" about what government policies are doing to the eccomony respond to someone else blaming Bush by saying no one reasonably blame the President.

Jane,

Krugman has neither said nor implied that Bush could have avoided the full 2.6 million jobs lost. That seems to be your interpretation but it certainly isn't mine.

But not being able to do something 100% is not the same as saying you can't do anything. Our options are not either all or nothing.

Even if FDR's policies did not fully resolve the employment problem they did make a dent. Remember that Bush has seen a drop in total employment, something FDR did not.

Krugman's point is a very simple one. Bush tried one thing and one thing only and it's been clear for quite a while that that approach has failed to promote jobs.

And let's not forget that the Bush administration has very loudly proclaimed that its tax cuts would increase job growth. The Bush administration, including Mankiw, made clear that they believed that their policies would make a difference and certainly not a trivial one.

So before you start criticizing Krugman for something he did not say maybe you should consider criticizing Bush and Mankiw for something they very clearly said.

Jane-
Regarding the effects of various welfare programs, the bad effects you refer to are not from the wealth redistributions, but from the Nanny-state regulations imposed on welfare distributions. I am an SSI disability attorney. My clients would be greatly helped by the passage of basic income guarantee or negative income tax that put me out of work. But I'll be damned if I vote for anyone who is going to "solve" dependency problems by eliminating the help my clients need without any freer replacement.

Re: Tax slavery. This is an argument for progressive taxation. Taxation is only involuntary when work is involuntary - at wages below that necessary to live. Frankly, I would like to get rid of personal income taxes altogether, if possible, but if not, a progressive system is more voluntary because the richer you are, the less you HAVE to work.

"so decnavda, really where are your programmatic solutions to the problems of the poor? what solutions do you have other than calling business people evil??? hmmm I hear crickets!"

Sigh. hey obviously has no real interest in an answer, but for other reading this, I provide one: start by socializing the fair market value of legally created non-productive privledges, such as land ownership, braodcast licences, corporate charters, and inheiritences. People who start and run business are good and deserve to be rewarded with the full value of their work and investment, and not one dime more.

hey- please consider this the response of ignorant envious fool who does not understand fundimental ecconomics as revealed by Hayek, Von Mises, and Friedman. You may stay smug in your superior worldview.

"...manufacturing employment declines (due to extremely high productivity..."

This would only make sense if those products were still made in America, but at plants that employed fewer workers.

If you believe this to be true, I invite you to stroll around your own home and discard everything that does not say "Made in USA" on it.

FDR was a good politician and maybe he even helped some people.

Wow, faint praise indeed. Try talking to some people who, like my parents, actually lived through the Great Depression.

But I am curious who George W. Bush has helped, exactly, besides a few people who were already quite comfortable.

Orbitron -- He's helped us all, by taking the war to the fanatics driven to de-infidelize (from their point of view) the world.

(I know, this thread is all about economics, but still .......)

Okay, back to dollars and sense.

Taxation is only involuntary when work is involuntary - at wages below that necessary to live. Frankly, I would like to get rid of personal income taxes altogether, if possible, but if not, a progressive system is more voluntary because the richer you are, the less you HAVE to work.

Do you realize how absolutely screwed we would be if the top 3% of wage earners decided that taxes were too great, and decided not to work anymore?

Bob -
Yes, I do. That is part of the reason why I would like to, if possible, end the individual income tax. To the extent that it is needed, the ability of the top 3% to stop working gives them a leverage to prevent us from taxing them too highly. A leverage the bottom 50% do not have.

"Do you realize how absolutely screwed we would be if the top 3% of wage earners decided that taxes were too great, and decided not to work anymore?"

I actually don't think we'd be particularly screwed at all. I seriously doubt that the income of the top 3% bears much relationship to their productivity. But if you think so, are you advocating that the tax rate should be zero above some level of income?

Do you realize how absolutely screwed we would be if the top 3% of wage earners decided that taxes were too great, and decided not to work anymore?
Posted by Bob at March 12, 2004 09:14 PM

Why would they do that?

Orbitron -- He's helped us all, by taking the war to the fanatics driven to de-infidelize (from their point of view) the world.

Posted by old maltese at March 12, 2004 08:16 PM

You'll have to help me out here. What specific course of action are you referring to when you say that President Bush has helped us all?

"start by socializing the fair market value of legally created non-productive privledges, such as land ownership, braodcast licences, corporate charters, and inheiritences. People who start and run business are good and deserve to be rewarded with the full value of their work and investment, and not one dime more."

Wow! Can I be the guy that decides what is or is not productive, and what is full value? Or would that job be a non-productive privledge that would have to be socialized? Ok I'll that the latter.

It's also pretty darn certain that one of Krugman's proposed policies, extending unemployment benefits, would certainly alleviate the suffering of some people, but would also keep the unemployment rate higher and delay restructing. It's a nasty choice, of course, but when people can continue getting benefits, they become less likely to settle for less-preferred jobs, or retrain, or change fields, or accept less money than they were expecting.

So at least that one policy, while in one sense certainly good for the people who are unemployment, certainly would not decrease the unemployment rate and would almost certainly do the opposite.

Bill Clinton "failed" to cure cancer, achieve world peace, and find me a husband....

Jane, honey, I'll marry you.

I'm even taller than you are.

Well, just saying ....

If the President's economic policies have no effect on the economy, then let's take away the tax cuts. That way, the federal government benefits (less debt), but the economy doesn't suffer.

Bush did some good with his tax reductions, but he made a series of errors. His tax cuts did little to stimulate job creation, his education policy did nothing to improve education, and his health policy consists mainly of hugely wasteful spending. Bush and Congress passed a tax incentive for equipment encouraging firms to replace workers with machines. Bush's support for open borders invites Mexicans to enter the US and take low end jobs away from Americans. The US educational system is failing badly, but Bush's efforts to federalize the system do not address the problem, instead wasting more resources on ineffective testing regimes. Bush's health policy likewise does nothing to improve the system, but rather simply throws money at the problem. The key factors that inhibit job creation in the US are the demise of our educational system, tax regimes encouraging firms to move out of the US, and the regulatory and tax burdens heaped on employers. FICA, worker's comp, unemployment insurance, health costs, and other regulatory burdens make it uneconomical to hire workers. Bush has done little or nothing to address any of these issues, and this is why he faces being put out of office in November.

"Do you realize how absolutely screwed we would be if the top 3% of wage earners decided that taxes were too great, and decided not to work anymore?"

I'm sorry, how would I be screwed if Eisner decides to quit?

It seems to me that the FDR scenario validates what Samuelson says about Presidential credit. FDR's economic programs clearly did nothing to improve the economy, he tried and failed. The thing that finally turned employment around and therefore stimulated the economy was WWII. But he is remembered fondly by many as the President who rescued us from the Great Depression. To his credit he did actively pursue America's participation in the war. It is not unlikely that part of his desire for American's entry was the perceived economic (as well as political) benefit of getting unemployed men active in some worthwhile endeavor.

My point is that the Democratic party's love for FDR's economic policies is highly misplaced. Repeating them will never give us strong sustainable employment and growth.

I started to respond here, and decided to comment on my own movable type installation, instead.

gt - I'm sorry, how would I be screwed if Eisner decides to quit?

What a silly non-sequiter.

The question was, Do you realize how absolutely screwed we would be if the top 3% of wage earners decided that taxes were too great, and decided not to work anymore?

He's asking you to imagine a scenario in which the upper tax brackets are so onerous that the ~2-3 million US jobs that pay ~$200k+ (not actual statistics, I'm just guessing) stop being performed, or perhaps are filled by substantially less-qualified candidates. 40-year old cardiac surgeons suddenly decide the stress and hard work isn't worth it anymore; almost nobody is willing to invent anything, write a business plan, and start a company (why bother?); that sort of thing. In other words, Atlas shrugs, and so do his middle managers.

Nobody asked what the consequence of one 60-year old billionaire's retirement would be.

Bill Clinton "failed" to cure cancer, achieve world peace, and find me a husband....

Bill Clinton didn't promise any of those things (though he might have offered to have an affair with you).

George W. Bush, OTOH, has consistantly forecast jobs growth that has not happened.

If you are designing a tax cut strictly to increase the number of jobs wouldn't the most effective way be to give the cuts directly to businesses? Assuming that giving the tax cuts directly to businesses wouldn't be politically feasable, wouldn't the next best solution be to give the cuts directly to business owners? Those business owners tend to be rich and liberals would cry bloody murder if either of these cuts were proposed. It seems to me that a tax cut that only goes to the bottom 50% of earners would do the least when it comes to incresing employment.

A large number of liberal economists have also predicted the growth in jobs. See e.g. the fair model used by a liberal Yale econ prof.

So saying that Bush has used fuzzy numbers is a lie in making the predictions is a lie. See econopundit for more.

Of course, the stats show that those jobs have been created. The household survey shows more Americans have jobs than at any time in history. But hey, when hating Bush is a religious belief, you just pretend that the only numbers that count are the ones you want to believe and you steadfastly ignore any evidence to the contrary.

Why be intellectually honest when lies, slander and character assassination are so much fun?

He's asking you to imagine a scenario in which the upper tax brackets are so onerous that the ~2-3 million US jobs that pay ~$200k+ (not actual statistics, I'm just guessing) stop being performed, or perhaps are filled by substantially less-qualified candidates. 40-year old cardiac surgeons suddenly decide the stress and hard work isn't worth it anymore; almost nobody is willing to invent anything, write a business plan, and start a company (why bother?); that sort of thing. In other words, Atlas shrugs, and so do his middle managers.
Posted by Rob Leder at March 13, 2004 01:21 PM

I am not capable of imagining such a scenario. Clearly you are, though, so tell me: how high would payroll taxes have to be for this to happen?

I am not capable of imagining such a scenario. Clearly you are, though, so tell me: how high would payroll taxes have to be for this to happen?
Posted by Orbitron at March 13, 2004 03:03 PM

At the risk of being pedantic, I'd like to first point out that only Social Security and Medicare are properly referred to as payroll taxes.

How high would the top marginal income tax rate have to be, and at what level of income would it have to kick in, in order to achieve the effects that I described? Well, obviously the incentive-sapping effect of high tax rates is a continuum, so my answer is that there IS no magic threshold. You're basically asking me to graph the Laffer curve, which nobody can do. In order to collect the necessary data, we'd have to conduct an experiment wherein we keep raising rates and observing the effects, and I for one hope to never live to see such a social experiment (an Orwellian euphemism if ever there was one) conducted.

However, the absence of hard data on the effect that every imaginable progressive tax scheme would have on the economy does nothing to refute the fact that lower marginal rates tend to spur economic growth. Just look at what happened during the Reagan years.

Rob Leder,

What you say make sense, but I took the meaning in an entirely different direction: what if these folks quit working, so all that tax revenue goes away? What happens to the federal budget then, and how much do the rest of us get our taxes increased to avoid the whole thing falling apart?

Rob,

If you are going to be pedantic make sure you spell non sequitur correctly.

I mentioned Eisner as an exaggeration because I was trying to understand what Bob was saying. How, exactly, would we be screwed? I, like Orbitron, can't imagine such a scenario nor has anyone proposed anything that would lead to that.

In the 1950s and 1960s we had very, very high marginal rates and that did not result in any lack of cardiologists or entrepreneuship. In fact it was a period of very fast growth.

And not to start another thread on this but no, lowering marginal rates does not increase long-term growth. There may be other benefits but there is no impact on trend GDP.

"Boonton, the implication is that FDR's "experimental" approach produced superior results. It didn't. So why is one better than the other?"

No Jane, that was not what Krugman was saying. He said that when a policy didn't work, FDR discarded it and tried something else. Whereas Bush keeps trying the same thing over and over. I admit that is a bit of historical myth (like saying G. Washington never told a lie) but Krugman was not arguing the need for a new FDR; rather he was arguing that we need one less Bush.

"GT, one can only say that his policies have "failed" if you have a better alternative. By the metrics Paul Krugman is using, Bill Clinton "failed" to cure cancer, achieve world peace, and find me a husband--and isn't my Grandmother mad!"

Well it appears that Clinton did fail to cure cancer and find you a husband! It isn't clear that these are proper goals we should set for a President. Now economic policies, on the other hand, are a different story...

"We've played this game before. You will parse his column and point out that Paul Krugman did not literally say "George Bush should have done X" or "George Bush didn't restore all our jobs the way he could have if he'd been willing to experiment with other [Democratic-type] solutions." And that's true. But he strongly implies it's so, so that an economically ignorant reader, of which the Times has many, most of whom still believe what they were taught in high school social studies about how FDR helped alleviate the Great Depression, will walk away believing that if only we had a Democrat in office, there's a good possibility that they could have restored most or all of the jobs we've lost. That ain't so, and Paul Krugman knows it ain't so"

The only game here is the distortion of what Krugman actually wrote. You depict a radical column where he claims Bush could have saved all those jobs if only he modeled himself on FDR. In reality the column is 2/3 dubunking GOP spin and 1/3 advocating only that Bush try something different. In fact, Krugman quite humbly states that his proposal might have produced results no better than the current situtation. The person reading your commentary on Krugman without reading Krugman's piece will not walk away with an accurate picture of it.

Stan
"1. The US has the strongest economy in the world. When Bush took office, the economy was in rescession and the market was crashing from the internet bubble bursting. Both got an additional knockout punch from 9/11. Bush cut taxes and raised spending. I think having the strongest economy in the world is pretty good. Anyone who says Bush's policies have failed is obviously so infected with partisan insanity that they have become blind to reality."

Hey Stan, are you aware that the Bush administration itself has stated the economy was no in recession until 9/11? Are you aware that the administration stated that the economy probably wouldn't have even slipped into recession if 9/11 didn't happen? BTW, 'strongest economy' is a pretty meaningless statement but it was certainly true during Clinton's terms as well as the first Bush's. Your statement is just a roundabout way of saying that Bush must be successful because he didn't destroy everything.

" Even if FDR's policies did not fully resolve the employment problem they did make a dent."

Sheesh! Megan is correct, for Krugman to put FDR up as a paragon of economic management is risible. FDR's stupid policies retarded the recovery. Almost every policy was the exact opposite of what was needed.

Wages and prices were prohibited from DROPPING (a tailor was actually arrested for pressing a suit for $ .35, when the legal minimum was $ .40). Henry Wallace ordered livestock destroyed to raise prices for farmers. Unions were encouraged to aggressively threaten to strike for HIGHER wages.

Europe generally recovered more quickly than the U.S., because they weren't saddled with FDR's numbskull policies.

Boonton,

get a clue. economists are now debating whether the rescession started as early as the 3d Q of 2000 or as late as the 1st Q of 2001. In either case, it is obvious that the economy was in serious decline as Bush took office.

Since Bush hasn't destroyed anything it should be obvious that he hasn't destroyed everything.

In the echo chamber where you reside, you may actually believe the lies about Ashcroft and the Patriot Act, the lies about Florida in 2000, the lies about the "destruction" of the environment, the lies that claim "Bush lied" when he said the same things about WMD that Clinton and every other Dem said, the lies about a "quagmire" in Iraq, and the lies about the "worst economy since Hoover". You probably believed that the economy in 1992 was the "worst in the last 50 years".

But proof of your own failure of critical thought does not constitute evidence that Bush has performed poorly as president. It only proves how gullible you are.

No Jane, that was not what Krugman was saying. He said that when a policy didn't work, FDR discarded it and tried something else. Whereas Bush keeps trying the same thing over and over. I admit that is a bit of historical myth (like saying G. Washington never told a lie) but

So then which part is the historical myth? That he tried numerous policies, or that his policies "worked"? The former of those doesn't seem to be in serious question so if we assume the latter, then what exactly was Krugman's point? That FDR tried different policies and Bush keeps trying the same policy and both accomplished roughly equal levels of nothing?

Simply asserting that Bush ought to vary his strategy would be a reasonable talking point, but Krugman blew that opportunity by presenting FDR as a contrast to Bush. Citing one kind of policy screw-up as evidence that another kind of policy screw-up allegedly isn't doing his job is not a convincing argument. Thus I think it's pretty safe to conclude that either Krugman believes FDR did finally achieve strong recovery policies (doubtful, given Krugman's background to know better, even though he may have other valid reasons for admiring FDR) or else he is bringing FDR in the debate for the primary reason of subtly playing upon that popular mythology.

Admittedly there is some inference at work there but "fool me twice" is long overdue: this variety of subtle witness-leading is just too common in Krugman's NYT pieces. Given that his general intellect and writing skills are not in doubt, his motives are next on the hit list.

Krugman was not arguing the need for a new FDR; rather he was arguing that we need one less Bush.

Exactly the problem. The initial statistical dissection of the job situation was very informative. But from there it wandered off into a partisan rant, interspersed with enough Econ 102 jargon that the average Times reader might assume it continues to be an economic rant.

The only game here is the distortion of what Krugman actually wrote. You depict a radical column where he claims Bush could have saved all those jobs if only he modeled himself on FDR.

Given (a) the FDR reference appearing to reduce to unusually convenient ends on closer inspection, and (b) the final sentence in the op-ed itself, and (c) the apparent general agreement here that the president has only weak influence in job creation, I think the depiction is reasonable. If Krugman wanted to state (c) himself he could have simply done so and then claimed that Bush's statements about job creation were correspondingly mere political maneuvering. THAT would have been "GOP claim debunking." Instead, he used counterspin.

You may disagree with the depiction because you think that Krugman is correct in his net assessment, but his arguments are not designed to convince persons of a different persuasion that they ought to reconsider.

The person reading your commentary on Krugman without reading Krugman's piece will not walk away with an accurate picture of it.

...which would nonetheless be the fault of the reader, since the article was linked at the very beginning of the post. Would be nice to see claimed Jane Galt Photoshopping actually revealed, though.

Let's start with Krugman's opening paragraph:

"As job growth continues to elude the U.S. economy, we're hearing two main excuses from the Bush administration and its supporters: that the real situation is much better than you're hearing, and that to the extent employment is lagging, it's the result of factors outside the administration's control. But after three years of extravagant promises and dismal results, the time for excuses has passed."

Krugman does an effective job of taking on the 'employment is really great' spin. After nearly 2/3 of the essay is done, he brings up FDR:

"In short, things aren't as bad as they seem; they're worse. But should we blame the Bush administration? Yes — because it refuses to learn from experience.

Franklin Roosevelt, in his efforts to combat economic woes, was famously willing to try anything until he found something that worked. George Bush, by contrast, seems determined to try the same thing, over and over again."

So Krugman solidly pins the problem on Bush trying the same policy over and over (deficit exploding tax cuts). FDR is used only as a contrasting example...the way a right-winger may use George 'never told a lie' Washington to contrast with Bill Clinton.

Krugman's concluding paragraphs:

"Maybe this more or less textbook response to a depressed economy wouldn't have worked. But we'll never know, because the administration rejected all such proposals. Instead, it went for a clone of the 2001 tax cut — another big break mainly for those at the top. And once again this failed to deliver the promised jobs.

Meanwhile, Mr. Bush has mortgaged the nation's future. If all of his tax cuts are made permanent, they'll reduce revenue by at least three times the amount that would be needed to secure Social Security benefits at current levels for the next 75 years.

No sensible person blames Mr. Bush for the onset of the recession in 2001. But he does deserve blame for the fact that all he has to show for three years of supposed job-creation policies is a mountain of debt. "

Jane's piece is a dramatic distortion. Krugman's main complaint is not that Bush failed to solve the employment problem but that he gave us a mountain of debt (plus even more debt in the future) while producing no results. He doesn't come out and say it but it he is very close to saying we'd be better off if Bush didn't try anything regarding employment and didn't leave us with a sick budget.

Sorry, if you actually read the piece you'll see Krugman was using FDR as an illustration not a model. You'll also see Krugman was not saying Bush could have stopped the job loss. This distortion is the fault of the writer (Jane), not the reader. If you are going to write a commentary about another piece then you should be accurate about it & not distort it to set up easy straw men for yourself!

The idea that the tax cuts "mortgaged the nation's future" is absurd, since they are temporary, and spending increases dwarf them in size. Greenspan told Congress that an excess of spending on entitlement programs is much more of a problem than tax cuts, which are needed to keep the economy growing.

Decnavda

You said

"Sigh. hey obviously has no real interest in an answer, but for other reading this, I provide one: start by socializing the fair market value of legally created non-productive privledges, such as land ownership, braodcast licences, corporate charters, and inheiritences. People who start and run business are good and deserve to be rewarded with the full value of their work and investment, and not one dime more."

I assume by socializing you mean have the federal government take away by force? If you mean what you wrote you are saying that owning a home (land ownership) is a non-productive privilege and home owners should turn their title over to the government. If that is not what you mean then you didn't think through the consequences of your ideas. Not recognizing the unintended consequences of well meaning ideas is a consistent problem with populist ideas for making life better for people and improving the economy. Mostly, the medicine ends up being worse then the disease it was supposed to treat.

Who decides what the full value of a business owner's work and investment is? J.K. Rowling started writing the Harry Potter books while she was on welfare. Should she be rewarded with nothing because she was on welfare and her time was not worth that much? Or should she be rewarded only for her investment in pencils and notepads? Should her copyright be taken away because it is a legally created non-productive privilege? I think the fairest, easiest, most dependable way to decide how much she and other business people are rewarded is to pay them according to how many people like their products and buy them. Funny, this is the way things work now.

J.K. Rowling is very wealthy now. She got wealthy by providing thousands of jobs to people who work at book publishers, printers, bookstores, movie makers, theaters, and other places we probably couldn't imagine.

TJIT

After reading Jane's article and this entire comment page I read my first Paul Krugman piece. I have to conclude that it was written with a partisan bent. The introduction of FDR is presented to contrast that Democrat President's accomplishments with Bush's supposed ineptness. However, Krugman could not make that comparison if he honestly presented FDR's results, FDR never got it right and the economy was only eventually bailed out by WWII, (at a huge price to human life, and no you can't say that is Bush's plan, please, really!).

I believe Krugman only introduced the FDR non sequitur into the piece so he would have an excuse to mention his previously proposed relief policies, that he masqueraded them as economic policy is to his further discredit. FDR's income redistributions did not solve the economic dilemma then, and neither would have Krugman's today. It is a politically inspired slam, from start to finish.

After reading Jane's article and this entire comment page I read my first Paul Krugman piece. I have to conclude that it was written with a partisan bent. The introduction of FDR is presented to contrast that Democrat President's accomplishments with Bush's supposed ineptness. However, Krugman could not make that comparison if he honestly presented FDR's results, FDR never got it right and the economy was only eventually bailed out by WWII, (at a huge price to human life, and no you can't say that is Bush's plan, please, really!).

I believe Krugman only introduced the FDR non sequitur into the piece so he would have an excuse to mention his previously proposed relief policies, that he masqueraded them as economic policy is to his further discredit. FDR's income redistributions did not solve the economic dilemma then, and neither would have Krugman's today. It is a politically inspired slam article, from start to finish.

I've long believed that Heinlein was right: It is very rare that anything can be done to make an economy improve any faster than it already is but it is extremely easy to make an economy worse by trying to control it.

In my lifetime the only time I've seen a President have a positive economic effect was by reducing his own influence, particularly in the form of reduced taxes. People controlling their own money don't always get it right but a million people have a much higher number of chances than a single government making decisions for everyone.

As I've always understood it, a libertarian's objective is to neither degrade or imporve the condition of the poor but rather to get the hell out of the way and let them pursue their opportunities to the best of their ability. The most intervention a libertarian would be inclined to offer would be in the form of providing jobs as a result of their own sucsess.

Krugman's believe should Bush should flail around wildly looking for fast results is the worst possible advice I could imagine short of embracing Marxism. The administration has a policy in place and the results, for better or worse, cannot be properly assesed for years to come. Bush is only at the tail end of a single term and if reelected will only have another four years. Since the rules changed after Roosevelt he cannot have any further terms in office. This is probably just as well. Without WWII it's hard hard to estimate how much more damage Roosevelt could have done. One massive pyramid scheme was enough for me, thank you.

How high would the top marginal income tax rate have to be, and at what level of income would it have to kick in, in order to achieve the effects that I described? Well, obviously the incentive-sapping effect of high tax rates is a continuum, so my answer is that there IS no magic threshold. You're basically asking me to graph the Laffer curve, which nobody can do.
Posted by Rob Leder at March 13, 2004 03:56 PM

Actually, I was asking you to leave the level of pure abstraction and tie your ideas to something in the real world. If you're not willing to do that then there's not really any point in having this discussion.

TJIT-
First, I have thought through the consequenses of my well-meaning ideas at least as well and libertarians have thought throught the consequences of thier well-meaning ideas.
Second:
"I assume by socializing you mean have the federal government take away by force?"
See, this is the crux of the dispute. Who created land? Maybe God, maybe no one, but certainly no one living. So how do you maintain your "right" to exclude others from "your" land, which neither you nor any of your predicessors in interest created? Government force. And who created the broadcast spectrum? No one. So why does KQED get to send out signals over 88.5 FM in the Bay Area, but I can't? Government force. Who created corporate charters, and all of the rights that go with them? Government, which people only listen to becuase its proclamations are backed by force. Now, all of this force may be necessary from a consequentialist standpoint to make the ecconomy funtion, but those for whom the government is welding the guns should at least compensate the rest of society for what has been taken by force. There are various ways to accomplish this with land, you can tax the rent at about 95%, or the government can take the titles and auction sort-term leases (peferably with rights of first refusal on renewal to secure ownership of improvements).

I would not socialize the value of your home, just the land it is on. The best known proponet (but not originator) of this idea is Henry George.

Rowlings should be richly rewarded for her accomplishment, with the reward set by the free market. But yes, a copywright IS a government created monopoly. However, socializing the full value of this right would defeat the purpose of creating it. The way I would split the value between Rowling and society would be temporaly, that is, not taxing it, but making it only as long as necessary to induce writing. Oddly, I think many opponents of the Disney copywright extention act are libertarians who would do the same thing. This is weird, since the only two "principled" libertarian positions on copywrights are:
1. Copywrights are government monopolies and should not exist.
2. Copywrights are the ownership of pure labor, and should be absolute and eternal.

*Anything* in between is an acknowledgement that copywright is ownership of something created by BOTH the individual AND society. Yet few libertarians are willing to commit to either extreme.

My take on libertarianism is that it breaks down when you come to issues of public order. I'm unable to understand how private police would function. It seems that government must have the duty of enforcing social order, but once government assumes this duty, then impediments to freedoms required for true libertarianism begin to emerge. Free markets can't really exist without a rule of law to support them.

Ian -
I agree with you, but I would point out that you are not here talking about libertarianism, but anarcho-capitalism.

Now, all of this force may be necessary from a consequentialist standpoint to make the ecconomy funtion, but those for whom the government is welding the guns should at least compensate the rest of society for what has been taken by force.

Read: I wasn't here to get a shot at the initial land grab, and now I want the government to take by force from others to "compensate" me for it. Justification? Apparently, a right to social shareholding. Inherent flaw: this alleged right is just as much a philosophical fabrication as our current property rights scheme, and distinguished from the latter by lacking a proven track record.

There are various ways to accomplish this with land, you can tax the rent at about 95%, or the government can take the titles and auction sort-term leases (peferably with rights of first refusal on renewal to secure ownership of improvements).

95% taxation of rents? Government leasing contracts at some centrally-determined rate? What is accomplished from such a scheme other than an effectively (and arbitrarily) higher taxation rate, and what of the corruption potential associated with creating that kind of gold pot in a country of 280+ million people? At minimum it's a recipe for an extreme crony capitalist state, and slouching into communism is an extended, but plausible, outcome.

Centrally determined rate? I suggested auctions. Done publicly, they could have more transparency and less possiblities for crony capitalism than current forms of taxation, although nothing is perfect.

The proven trackrecord of private land ownership is a history of a mass of poor producers of wealth and a minority of non productive takers. Land leases has had success in Hong Kong and moderate forms of rent taxation have raised revenue elsewhere with no special problems.

What it accomplishes:
1. Prevents wealth from being distributed to those who hold assets no one produced. This prevents unmeritacratic wealth inequality.
2 Raises revenue without discouraging production. Unlike taxes on income or consumption, land taxes do not decease supply - the land will be there regardless.
3. Might actually increase supply and therefor production, since no one would want to pay the taxes on land they are not using.
4. Some infrastructure such as transportation could be self-funding through the rise in land values near the improvements.

"this alleged right is just as much a philosophical fabrication as our current property rights scheme"
I actually agee with this. I just can not understand why the masses would agree to a property rights scheme that denies them the right to use the vast majority of land without compensation or any observable utility.

Jane Galt wrote:

But he would not have restored the 2.6 million jobs we've lost since the downturn began.

Okay here is what might seem like a rookie question but one that I have never seen addressed.

If you look at the numbers of the Department of Labor, it shows that when Bush took office in January of 2001(1) there were approximately 136 million people employed while the current numbers show about 138.3 million people employed (payroll survey) which is about 2.3 million more than when we started.

Now I understand that there are new people entering the workforce (e.g. graduates) looking for work just as there are people voluntarily leaving the workforce (e.g. stay-at-home parents, retirees) and that if the number of entrants is greater than the people leaving, we need to produce X number of jobs to keep up. However I’m betting that when most people here “we lost 2.6 million jobs” they think “2.6 million people were thrown out of work as their companies laid them off or went under” but that doesn’t appear to be the case at all.

In which case, isn’t it misleading to say that we lost these jobs as opposed to something such as “failed to create” or something more descriptive? I realize that it’s not as useful for political fodder (e.g. John Kerry saying he’s going to “get back” the “three millions jobs lost” under Bush) but I think saying that something which wasn’t created was somehow “lost” is misleading and inaccurate and there has to be a better way of saying this.

Just a question and I hope someone has an answer.

TW

(1) I realize that Jane is talking about when the economic downturn began (3Q 2000 IIRC) and not when Bush took office (1Q 2001). However even then employment was at about 135.4 million per the BLS.

Arnold Kling on the Krugman who didn't bark:

http://www.techcentralstation.com/031104E.html

------------quote------------
Partisan economists are attacking the Administration's forecast of rapid job growth this year, as Paul Krugman did recently. In fact, however, those attacking the Administration forecasts appear to believe them. If you were a left-leaning economist who thought that employment growth was going to be feeble, you would be making an urgent case for more economic stimulus. You would call for tax cuts and/or increases in government spending. At the very least, you would call for more interest rate cuts from the Federal Reserve.

The Administration's opponents do not have a stimulus package. From that, it is logical to deduce that they judge the economy does not need one. In that case, they must believe that something close to the Administration's employment forecast is probably correct. Elementary!

[snip]

suppose you were to do a blindfold test. Give an economist the actual output growth of 7.8 percent over three years (roughly 2.5 percent per year) and ask the economist to "predict" the breakdown between growth in employment and growth in output per person. Almost any economist would have said something like "Well, the output growth sounds pretty close to trend. So, assuming that trend productivity growth is about 1.5 to 2 percent per year, I figure 5 or 6 percent total productivity growth and 2 or 3 percent total employment growth."

No economist in his or her right mind would have predicted that we would have gotten 7.8 percent growth in output with 11.3 percent growth in productivity and a loss of 3.1 percent in employment. That is completely outside the experience of history.

By attacking the Administration's credibility in forecasting employment, Krugman and others are implicitly criticizing its failure to forecast the unprecedented burst in productivity. In fact, Krugman's tone all but suggests that the Administration knew about the coming productivity miracle and was engaging in a cover-up!

Here, we have another curious incident of a dog that failed to bark. In 2001, were the Democratic economists warning that productivity was going to take off, which would mean that the economy would require more stimulus to reach full employment? I have not found any evidence of such warnings.

-------------endquote-----------

Thorley,

Your links don't work but based on what you posted it seems you are looking at the wrong numbers.

The numbers you quote are from the household survey that is used to calculate the unemployment rate.

But the total job numbers come from a different survey, called the establishment survey.

It seems clear by now that Krugman's columns have become a Rorschach test for those on the right. When we read their interpretations of what Krugman wrote we learn more about the writers than we do about Krugman. (I'm still waiting for someone on the right, anyone, to acknowledge how wrong they were on the CA energy crisis and how right PK was. Walsh already did. Patrick? Jane?)

For some reason just reading what PK wrote is not possible for many on the right. And if you ask, "Where did you get that from?" it turns out you are parsing.

To me the column was pretty clear and pretty simple. The first 2/3 seems to be accepted by all. In the last 1/3 Krugman says that Bush's big problem is his unwillingness to try anything else other than tax cuts and compares that with FDR who tried everything.

Note that PK does not say that FDR found the perfect formula or that he (PK) has a better policy. In fact PK makes very clear that he does not know whether what he proposes would make any difference. But he thinks Bush should have at least tried something else. PK says :

"Maybe [my proposal] wouldn't have worked. But we'll never know, because the administration rejected all such proposals."

Simple, huh?

Yet Jane seems to believe all this is silly because PK should have told us that the federal government can't do anything. And she supports this with a column by Samuelson. She doesn't explain why Samuelson is better qualified than PK on this. Jane also tells us, erroneously, that Delong does not contradict Samuelson when Brad cealrly does. Brad wrote that in his opinion a different policy would have recovered a 'substantial' portion of the jobs lost. That's a direct contradiction of what Samuelson wrote. And not only Brad. Mankiw as well believes that government policies can have a major impact on job growth and actually published specific forecasts.

So on the one hand we have Brad, PK, and Mankiw, all agreeing that govt policy can make a big difference. They may not agree on which is the best policy but they agree that it's worth trying. On the other hand we have a WP columnist telling us it's all for naught.

Now maybe Samuelson is right. I don't know. But what is very clear is that there is nothing silly about what PK wrote. Many other very prestigious economists agree with him. Yes, they may all be wrong but that doesn't mean that what PK is beyond what is currently accepted.

This is what happens when you let your ideology take over (hence the Rorschach reference). Jane believes that govt policy can only have a trivial impact. If that were all she said that would be fine. But she believes it so badly that she thinks no one else disagrees with her when in fact many prominent economists do. She confuses what she believes in with accepted wisdom when it is not.

But he thinks Bush should have at least tried something else.

When? On a parallel time-track? That Krugman would admit that he doesn't know what would work pretty much says right out that there is no tried-and-true approach. But to postulate that Bush had an unlimited set of opportunities to exhaust options other than the currently implemented one is just absurd.

GT, c'mon. This is ludicrous.

FDR's major programmes were, by any strictly economic reasoning, worse than anything Bush has done. Holding him up in a positive light, and Bush in a negative one, is thus, on economic terms (which are the terms from which Krugman is purporting to deliver his judgements, rather than his personal political preferences) extremely hard to justify. You haven't even tried.

Ah, you say, but all Krugman is saying is that FDR was better on one term of evaluation: his willingness to try new things. The problem is, that there is no evidence offered that a willingness to experiment is a preferred policy strategy to sitting tight. The willingness to experiment, in FDR's case, produced policy outcomes that were, by the standards of modern economic theory, objectively worse than Bush's strategy. So the term itself is only valid if you define a willingness to experiment as an end in itself, rather than a means to achieve better economic performance. I don't think that a desire to muck around in the economy for the pure joy of action is laudable in a politician, and I am sure that Krugman doesn't either.

Paul Krugman could have written a perfectly good column slamming Bush--with justification--for making silly claims for his tax policy. But he doesn't want to write that column, presumably because doing so would entail admitting that none of his favoured political candidates (I assume John Kerry) are going to make much difference to the economy, since the simple fact is that while economists have lots of good ways to screw economies up on a macro level, none of them know how to permanently raise trendline growth in either output or jobs, whether they're Democratic economists or Republican ones. So instead he writes a column implying that if only we had a Democrat in office, things would be different. Jobs-wise, that isn't true, and Paul Krugman must know that that isn't true.

As for California, I believe I've acknowleged in several places that there was more gaming going on than I thought--though not, I think, as much as Paul Krugman says. I hope this admission brings you the fulfillment that has driven you to bring it up in every single post I have ever written on Paul Krugman, and that we can now lay this matter to rest.

It seems clear by now that Krugman's columns have become a Rorschach test for those on the right. When we read their interpretations of what Krugman wrote we learn more about the writers than we do about Krugman. (I'm still waiting for someone on the right, anyone, to acknowledge how wrong they were on the CA energy crisis and how right PK was. Walsh already did. Patrick? Jane?)

The unconditional support of PK apparently constitutes a comparable Rorschach test for the left. Considering all of the explicit swipes he makes against right-leaning thinkers policy makers, it's hardly unreasonable to speculate that a clear non-sequitur in his prose might be motivated thereby.

Also, I may have missed a memo, but I don't recall a steady stream of leftists publically apologizing to Jane Galt for all the intelligence-insulting tripe they left in a previous comments section back when she was shown by a leaked document to have correctly called the Estrada stalemate as a minority issue. I also haven't seen droves of leftists disclaiming the favored pastime of reading all kinds of deceit and mallice into statements made by Bush and/or his administration, based on far flimsier premises than what we have here.

Rorschach, schmorschach. Perhaps we can lay off the holier-than-thou talk and actually stick to the substance?

You keep 'interpreting' Krugman and making him say things he never did.

Krugman did not say that FDR was a success. He contrasted FDR (try everything) to Bush (try one thing). Contrary to what you said nowhere does Krugman compare FDR's economic record to Bush's. He compares their approaches, hardly the same thing.

You say that it's not always better to try a lot of stuff. That's your opinion. Clearly Krugman has another. That's not grounds to call his opinion silly.

Krugman believes we should have tried something else. Maybe you don't. Again, that is simply your opinion.

I made no comments on FDR's record. Suffice it to say that I don't agree at all with your characterization. But neither you nor I are economic historians and I wasn't interested in a debate on this topic so I skipped it altogether. And in any case it was irrelevant to the point at hand since Krugman nowhere says or implies that anything about FDR's record other than to say that FDR was willing to try a lot of things.

And you keep insisting that no policy can make much difference on jobs. That is just your opinion. A WP columnist agrees with you but Krugman, DeLong and Mankiw don't.

As for California it's way beyond an issue of 'gaming'. Krugman proved to be ahead of the curve of everyone in the blogosphere as well as everyone in mainstream media. As Walsh noted PK, by himself, did more to explain what happened in the CA crisis and why and what to do about it than the whole NYT and maybe even the whole WSJ. Just one columnists with 9 columns. During a long time supposedly experts in economics in the blogging world kept saying that PK was wrong. Turns out it was they who were wrong. I was expecting some recognition of this mistake. There's a reason, after all, why PK has the reputation he has in economics. And his columns on the CA crisis showed that.

But we can leave it at that.

FDR made money available for my grandfather to borrow to make the payments on his farm. My grandfather became a county commissioner and sent his children to college. I would say approximately 100, at least, in my family have benefited from his policies. The high school I went to is a public landmark and was built by the WPA. The artistry and skill that went into that building are incredible. The road I drove on when I went to a national park was built by the WPA. You can't tell me that FDR's policies were bad.

FDR made money available for my grandfather to borrow to make the payments on his farm. My grandfather became a county commissioner and sent his children to college. I would say approximately 100 people, at least, in my family have benefited from his policies. The high school I went to is a public landmark and was built by the WPA. The artistry and skill that went into that building are incredible. The road I drove on when I went to a national park was built by the WPA. You can't tell me that FDR's policies were bad. The many people I have spoken to that were alive during the Great Depression have nothing but praise for FDR. It is easy to sit in an office analyzing (economists do to much of this) and quite another to have lived through these events. Have a little compassion.

enjoyed the exchange between gt and jg.

1. many eco textbooks today are quite sangine on the ability of fiscal policy to affect change (as long as we are not living in a (new)classical world). should we weigh these any less or more highly than samuelson?
2. "The willingness to experiment, in FDR's case, produced policy outcomes that were, by the standards of modern economic theory, objectively worse than Bush's strategy. "
i will grant that. i think we knew less about a macro environment then, then we do now. the fact that plenty of economists predicted that the outcome of the bush tax cuts would be a lot of deficit for not much growth, appears to undercut the argument that the bush "more of the same" was as good (almost as good? at least comparable to as a policy?) a plan as trying an alternative, some might say "quaint" plan that krugman suggests.

" Krugman did not say that FDR was a success. He contrasted FDR (try everything) to Bush (try one thing)."

So, it's QUANTITY, not quality that impresses you lefties. No wonder you like JFK II, he's got two policies for every issue.

Btw, I DID explain, in detail, what was wrong with Krugman's arguments to you. To which I got: "I don't geeeeettt it.", from you. Again, can you point me to the Krugman column that says California needed to repeal the retail level price caps?

"I would say approximately 100 people, at least, in my family have benefited from his [FDR] policies."

At what cost to others? At what cost relative to alternatives?

"I would say approximately 100 people, at least, in my family have benefited from his [FDR] policies."

At what cost to others? At what cost relative to alternatives?

"FDR's major programmes were, by any strictly economic reasoning, worse than anything Bush has done."

Oh, I don't know. Has Bush averaged a 8%+ real GDP growth rate during peacetime?

Tom -

The basis matters. A start-up company expects to grow much faster than IBM. That's because they are starting from nothing. The point is that FDR had far more room for improvement. Comparing growth rates is not necessarily useful (though if our current economy could outgrow the Depression-era economy it would be very impressive).

OK, how much of a handicap should Bush II receive for being President of a country that is not a 'start-up'? BTW, I thought the US 'started up' in 1776 if not earlier?

I don't know, but is there any dispute that the potential for growth in percentage terms was higher immediately following the Depression than the most recent recession?

Regarding Enron and the California power crisis: Pennsylvania deregulated its electricity market at about the same time that California did. Pennnsylvania's deregulation plan was the result of a bipartisan effort. When electricity shortages rocked California, everyone immediately asked, "Can it happen here?" The answer was a resounding "No". Not one of the explanations given as to why something similar couldn't happen in the Keystone State mentioned Enron. While the exact reasons escape me, everyone - Republican and Democrat - agreed that California's government had made mistakes when it attempted to deregulate that state's energy markets.

Maybe Enron exploited some loopholes in California, but to lay the blame for what happened in California entirely on Enron gaming the system is not telling the whole story, nor placing the blame where it belongs.

" but to lay the blame for what happened in California entirely on Enron gaming the system is not telling the whole story, nor placing the blame where it belongs"

Nobody claims that.

Tom, at what point in FDR's term was there 8% growth, other than when the increased production was bought by the goverment with borrowed money? (And few of those goods went to American consumers - in the 30's milk was purchased and poured on the ground, in the 40's industrial products were shipped overseas and mostly blown up.)

"I don't know, but is there any dispute that the potential for growth in percentage terms was higher immediately following the Depression than the most recent recession? "

None. It's Milton Friedman's famous rubber band analogy; the further you stretch it the faster and more vigorous the snapback.

Tom, FDR's rates of growth during the depression averaged 5.2%. Considering he came into office after GNP had contracted roughly 30%, that really isn't particularly impressive.

Even at 5.2% growth, 8 years will correct an initial 30% collapse. By 16 years (four terms of four years) you'll be 57% better off than when you started.

Of course, there were ups and downs along the way rather than an even growth of 5.2% every year but you get the idea. Furthermore, FDR's policies lasted a very long time. SSI, unemployment insurance, protection for labor, the SEC remain fundamental features of our modern economy. While labor unions seem to be shrinking & regulation has gone thru some major paradign shifts, it is remarkable that his policies continue to shape the skeleton of our economy over a half century later.

Somehow I doubt anyone will remember the 'Contract with America', 'Shining Points of Light', 'Faith Based Initives' in 2050. I shutter to wonder if the Dept. of Homeland Security will still exist then & if it will be either a huge Dept. of Pork or the foundation of a police state.

Decnavda,
"why does KQED get to send out signals over 88.5 FM in the Bay Area"
Because what you suggest has already occurred. KQED paid the government for the right to broadcast at 88.5 FM in the Bay Area. This occurred when FM radio was established as a new way to communicate; I don't know if the government decided on a set price for the license, auction, or simply granted the license "for the good of the community". Recently the government has held auctions for broadcast spectrum for cell phones and wireless network that raised billions.
Private land ownership in the US is the result of the government selling the land to private owners, especially when it was trying to get people to settle the Great Plains.
Your issue is that the government has sold, not rented the land and broadcast sprectrum to private owners. In effect, the government received a larger one-time payment for what was at the time the current fair value, instead of smaller yet continuous rent payments. This actually worked to the government's advantage so far with the cellphone and wireless network auctions. The auctions were made at the height of the dotcom bubble, and my understanding is that the fair value of what was auctioned has declined from the prices paid.

Boy, this has been fun reading. GT -- I'd be happy to spend a few minutes talking about Krugman and the California power crisis. As someone who was directly and rather intimately involved in that mess from 1998 through 2003 (including the general chaos in the Summer of 2000 and the secondary spikes in the winter of 2000/2001), I am fairly comfortable that I understand it as well as any armchair economist can.

Here's my problem -- I haven't read any of Krugman's columns on the issue in well over a year, and don't remember anything about them other than a general sense that he made a few nice points in arguments that were otherwise almost completely wrong. Can you point me to the nine columns of which you speak? If so, I'll put aside my Krugmaphobia and my pathological disgust for his disingenuous sleight-of-hand in exchanging the economic for the political (I know, I know, Rorschach and all), and actually read his columns. And I promise a sincere attempt at an objective response. I'm just not going to go wading through the Krugman archives to extract the California columns.

Boy, this has been fun reading. GT -- I'd be happy to spend a few minutes talking about Krugman and the California power crisis. As someone who was directly and rather intimately involved in that mess from 1998 through 2003 (including the general chaos in the Summer of 2000 and the secondary spikes in the winter of 2000/2001), I am fairly comfortable that I understand it as well as any armchair economist can.

Here's my problem -- I haven't read any of Krugman's columns on the issue in well over a year, and don't remember anything about them other than a general sense that he made a few nice points in arguments that were otherwise almost completely wrong. Can you point me to the nine columns of which you speak? If so, I'll put aside my Krugmaphobia and my pathological disgust for his disingenuous sleight-of-hand in exchanging the economic for the political (I know, I know, Rorschach and all), and actually read his columns. And I promise a sincere attempt at an objective response. I'm just not going to go wading through the Krugman archives to extract the California columns.

I have never studied economics, but I have paid a great deal of attention thru the years to the economy and my interactions with it. I am mystified by the allegations I have seen in this discussion that there is some sort of employment crisis in this country right now.

First of all, because, after 35 years in the labor force, I have never worked for a company which would have been noticed by it, I pay no attention to the establishment survey. I haven't paid as much attention to the job market of late as much as I might have, because the "at least six weeks of work" I signed on for in February of 2003 now look to run thru much of this year, but it appears to this casual observer that in the Milwaukee area there is work for anyone who wants it. Every employment firm I drive past, and many factories, have signs listing available manufacturing positions. A sizeable percentage of the trucks I pass on the hiway have "Drivers Wanted" ads on their trailers. There is such a shortage in my wee wifey's line of work that her employer no longer enforces attendance rules because they can't afford to fire anyone who shows up even semi-regularly.

You people have too many degrees on the wall -- this is not as complicated as you're making it.

Krugman is not exactly trying to have a debate about who was the better steward of the economy, FDR or GWB. What he is pointing out is a difference in personalities or management styles. Krugman is pointing out that GWB has one goal, and one goal alone, and that is to cut taxes for wealthy people. As the facts change, GWB -- Shifty George -- shifts from one explanation for cutting taxes to another: for instance, first, we needed tax cuts because we had a surplus, then, when the surplus evaporated, we needed tax cuts to stimulate the economy.

Krugman's point is that FDR was a pragmatist, not a doctrinaire, whereas Shifty George is purely a doctrinaire, and that doctrine is tax cuts for the wealthy (and, when the facts and diagnosis change, GWB won't change the doctrine, he'll just shift the rationale).

It's the difference between Western medicine (based on observation and experimentation) and faith-based healing.

In other words, I think Krugman's basic point is that FDR was trying to help America at any cost (right or wrong though FDR's economic policies may have been), whereas GWB is trying to cut taxes at any cost and in any weather.

Krugman's implicit point -- and from what I've seen, I agree -- is that GWB is constitutionally incapable of deviating from his doctrine of tax cuts even if such a deviation were desirable or even necessary, that this constitutional inflexibility is undesirable in a president, and that most rational people would consider that any person with GWB's particular level of inflexibility on this issue should be disqualified from the presidency.

Quite apart from how the economy performs or how many jobs are created or destroyed.

--LB

Throughout the entire post no one pointed out a fairly strong assumption on Krugman's part (at least in the part of the paper that everyone is debating) -- that if the tax cuts had NOT been enacted and NOTHING had been done by the government; that the economy would be exactly the same as it is today.

Imagine if this assumption were not true (as Bush most likely does) and the economy, without the tax cut stimulus and horrific deficit spending, were much worse off (I assume worse off b/c I can't imagine how it would be better off with more taxes and less gov. spending). Then Bush's refusal to try anything new is not so bad because his cut-taxes-to-the-exclusion-of-all-else policy IS improving the economy by keeping it from completely tanking and he doesn't want to risk the success by trying something else.

Of course the problem is the two sides have two completely different sets of assumptions. And let's be honest, if Bush had pushed for an alternative method (or two, or three) and they didn't work, the complaint would merely switch. Maybe to Bush being too stupid to succesfully resolve the economic problems, or to unwilling to try radical solutions, etc...

Throughout the entire post no one pointed out a fairly strong assumption on Krugman's part (at least in the part of the paper that everyone is debating) -- that if the tax cuts had NOT been enacted and NOTHING had been done by the government; that the economy would be exactly the same as it is today.

Imagine if this assumption were not true (as Bush most likely does) and the economy, without the tax cut stimulus and horrific deficit spending, were much worse off (I assume worse off b/c I can't imagine how it would be better off with more taxes and less gov. spending). Then Bush's refusal to try anything new is not so bad because his cut-taxes-to-the-exclusion-of-all-else policy IS improving the economy by keeping it from completely tanking and he doesn't want to risk the success by trying something else.

Of course the problem is the two sides have two completely different sets of assumptions. And let's be honest, if Bush had pushed for an alternative method (or two, or three) and they didn't work, the complaint would merely switch. Maybe to Bush being too stupid to succesfully resolve the economic problems, or to unwilling to try radical solutions, etc...

That's fair, maybe if Bush didn't pass his tax cuts things would have been far worse. There will never be a way to know for sure since economic models can only tell us so much.

I don't have a beef with criticizing Krugman's columns. I do have a beef with misrepresenting them, as Jane did, so the critic can knock down a straw man rather than address Bush's very real flaws.

Agreed, we can't rewind and rerun the past years to test what-if scenarios, so we're stuck with speculation.

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