Daily Archives: May 6, 2013

The Chutzpah Caucus

RichardH sent me the link to The New York Times column The Chutzpah Caucus by Paul Krugman.

At this point the economic case for austerity — for slashing government spending even in the face of a weak economy — has collapsed. Claims that spending cuts would actually boost employment by promoting confidence have fallen apart. Claims that there is some kind of red line of debt that countries dare not cross have turned out to rest on fuzzy and to some extent just plain erroneous math. Predictions of fiscal crisis keep not coming true; predictions of disaster from harsh austerity policies have proved all too accurate.

If the level of debt compared to GDP is the real issue for Republicans like Gabriel Gomez and for Harvard Professors Carmen Reinhart and Kenneth Rogoff, then why is the following revelation by Paul Krugman true?

The key measure you want to look at is the ratio of debt to G.D.P., which measures the government’s fiscal position better than a simple dollar number. And if you look at United States history since World War II, you find that of the 10 presidents who preceded Barack Obama, seven left office with a debt ratio lower than when they came in. Who were the three exceptions? Ronald Reagan and the two George Bushes. So debt increases that didn’t arise either from war or from extraordinary financial crisis are entirely associated with hard-line conservative governments.

OK, let me be fairer to Reinhart and Rogoff than they were to academic rigor.  They claim that despite their erroneous and fudged calculations,  neither their paper nor their book ever advocated austerity during an economic recovery.  So I guess, Gabriel Gomez and his fellow Republicans are really on their own on this one.

The Gomez Plan For Growth – NOT!

CNBC has an interview with Gabriel Gomez on his supposed plan for growth.

The last thing we need is a another vulture capitalist who thinks that running a business is the same thing as running a national economy. These guys are so sure that they know how to do it, mainly because they know nothing of macro-economics. They are probably not even aware of this field of economics.

We all want economic growth, but there is a difference between someone who actually knows something about a national economy and a quack practitioner who gives you assurance, but does not have the required qualifications.

Could the people of Massachusetts actually elect another disastrous Senator like they did with Scott Brown? Why should the ordinary citizen understand economics any better than the fool economics professors at Harvard? Maybe there is something to the claims of elitism in Harvard. If only the average voter could understand what the economists at UMass Amherst know (and MIT, Princeton, UCal Berkeley, UTexas Austin, and some at Harvard – the people who don’t fudge the data to prove their point).

Keynesian economic theory has two things going for it. The explanation of why it works is very logical. The history shows unequivocally that it works.

On the other side is national Austerity which is totally illogical in why it ought to work. And history has proven time and time again that it makes things worse rather than better. It even makes the debt go up while it strangles the economy.

New England drivers ought to know from experience that if your car is skidding on ice, you do not stop faster by slamming on the brakes. Slamming on the breaks makes your car lose traction even faster than doing nothing. This is quite similar to how austerity makes the debt grow because the national income drops faster than the cuts in spending.

I have been in the very driving situation described above. My foot just wanted to press harder on the brakes, but my head kept telling me to take my foot off the breaks. It is very hard to give control to your brains instead of your gut when you are in a panic. I failed to let my head take control, the car spun around,  and had to be winched out of a snow bank at the bottom of a hill.  Luckily I survived to talk about it.

If this country fails, it will not be because its citizens kept their cool in a difficult situation. It will be because we panicked.