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October 30, 2014

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Letter to the editor:

Since when have we been austere?

Another view?

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The Sun recently published column by Paul Krugman titled “The 1 percent’s solution” wherein he argues that there is a need for increased spending by the government.

He uses ambiguous references, but the topper was a sentence that I could not let pass, that says: “What is true, however, is that the years since we turned to austerity have been dismal for workers …”

My question is, when this did happen? I must have missed something?

The federal government’s budget has not decreased, and in fact has accelerated to the point that the United States needs to borrow massive amounts of funds to sustain current levels of funding and owes a mind-boggling $16.8 trillion.

The administration and Congress can’t even agree to a decrease in the inflation accelerator, much less to existing funding levels.

If Krugman and his Keynesian friends could demonstrate (with facts) how and when increased spending by the government would benefit the economy, they might have an argument to sway me, but until then, I’ll have to agree with former Treasury Secretary Henry M. Paulson Jr., who wrote “We must also demonstrate our commitment to rebuilding our economy, fixing our regulatory system, and getting the government out of the private sector as soon as possible. The world needs to know that we are serious about reducing our budget deficit and cleaning up our other messes.”

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  1. "we should tax top wage earners more because not doing so would hold down economic growth"

    This is the type of non sequitur logic Keynesians employ ad nauseum. How can we have economic growth by taxing away the wealth and saved capital essential for sustainable growth? Contrary to the apparatchik Krugman and the Keynesians, "hoarding" only applies when you stuff it into your mattress. Otherwise it is in the private pool of real saved wealth.

    The fact that private investment has not been sufficient to spur the growth necessary for recovery is not due to a lack of liquidity or of idle resources. Since '08 we've had a very distorted capital structure. We had a very destructive period of capital consumption--as the exploding trade deficit showed--that would take only time to recover from. Except we got massive bailouts and QE-ad nausea by the Fed (which caused all of our problems to begin with) that are only serving to prolong recovery by attempting to re-inflate the bubble.

    The fact that the government can put a shovel in your hands and give you a paycheck doesn't create wealth or economic growth. Massive amounts of stimulus, even at a level the apparatchik Krugman would advocate, cannot negate the law of opportunity cost or the law of scarcity. It's just pie-in-the-sky rhetoric as gov't enriches themselves and their cronies.

    The entire Keynesian framework is replete with the "cum hoc ergo propter hoc" logical fallacy as its foundation, and it's time we stamp it out once and for all. For it is nothing more than intellectual cover for the ever-expanding federal leviathan.

  2. I have 3 persons for Dr. Krugman to read and learn more about: Mises, Hayek, and Friedman. John Maynard Keynes was wrong and still is.

    Carmine D

  3. Krugman's article does not represent that the United States has tried auterity, at least not to the extent that Europe has. The results are record unemployment rates there including over 25% unemployment in Spain and Greece. Meanwhile, the unemployment rate is 7.5% in the U. S. --unacceptably high, but slowly improving.

    The anti-Keynesians will tell you that austere government spending does not slow or contract economic growth, but will also argue that increased taxes do. The truth is there is not a dime's worth of difference between removing $80 billion in spending power from the economy via tax increases or doing the same via $80 billion in sequestered spending cuts.

  4. Apparently we were austere during the entire G.W. Bush administration. After all, what else would account for engaging in two unfunded, totally off the books wars, an unfunded Medicare drug mandate, and a massive reduction in income taxes for the wealthiest Americans. That's the kind of austerity I can live without. Unfortunately, Americans will be living with his failed supply side legacy for decades.

  5. Austerity in government programs would help weed out waste, abuse and fraud. Austerity at all levels, from personal to federal, would ensure our economy could recover. Forget about the government stepping in and "helping" you with every problem and want you can dream up and DO FOR YOURSELF. If it's not worth your working for it, it's not worth our giving it to you.

  6. Because of the ridiculous cuts, Europe is back in recession. Unemployment in Europe is currently at 12% with some countries seeing 25%. Countries are in trouble because they can no longer print their own money. The weak countries rely on the strong countries for help. It's a lousy system.

    Austerity cuts in the US have been relatively minor. In the last five years the dollar has been the strongest currency in the world. Our financial markets have been among the strongest in the world. The insurance and banking industry have stabilized and they are now on a strong footing. Housing and autos have also done extremely well

    GDP is now running at 2.5% per the report last week. That is the gold standard of the developed world. Given what's going on in the world we are doing unbelievably well. To have any growth at all is nothing less than a staggering accomplishment. 30% of our economy is government spending and exports. Both have been weak.

    We have debt because of some of the lowest tax rates in our history and 30 years of runaway medical inflation. Medical runs over $200 billion a month with Medicare and Medicaid getting stuck with a big chunk of the bill. Reducing medical costs would eliminate the deficits very quickly.

  7. Jeff,

    Austerity aside, do you really believe that the response to the Benghazi attack was not botched and that the administration has not tried to cover up the mistakes?

    It is obvious that the R's want to use Benghazi for political purposes and that is wrong, but really...

    ...it does appear as more and more information is released that in their effort to put forth a narrative that the war on terror was almost over, the Americans in Benghazi were not provided enough security and as a result, the attackers murdered several Americans that very possibly could have been saved with better security and a better response.

    I am very willing to admit how badly the Bush administration botched the war in Iraq. In this instance, it appears that the Obama administration botched the security and response in Benghazi and then tried to cover up the truth.

    This is soooo true on both sides, but when someone rightfully criticizes one side but refuses to criticize 'his' or 'her' side for mistakes, it is much more difficult to grant credibility to the criticism.

    Michael

  8. Rosalinda,

    Reading your previous comments leads me to believe you won't be buying what Brtaylor is selling.

    America once had a decent combination of capitalism and a social contract. Over time, as would be expected, human nature has eroded the social contract here. In my opinion, too many people on the right resist the social contract and Brtaylor and others resist Capitalism and embrace the social contract as a 'fix all'.

    We need to find a middle ground, where the social contract is strong, but not strong enough to try to make all inequities always found in a Capitalist system go away.

    Our businesses have become too large, as has our government and when that happens, their shear size, power and financial clout allows them to do things smaller entities could not get away with doing. We have allowed too much consolidation and now wealth, and power are too concentrated, both in government and the private sector.

    People like Brtaylor think we can fix the inequities this has created by enlarging the government, have it confiscate even more wealth and re-distribute it. Too many conservatives, on the other hand see nothing wrong with how big everything has become and would allow that to continue.

    Both views are incorrect and what we see today should say that loud and clear.

    Michael

  9. VidiVeritas made a well founded point, there is a communications bubble or an echo chamber the far right speak in.

    Supply side economics has been a failure. Since we've heard about "trickle down" economics the working and middle classes have taken a financial beating and is steadily shrinking. Poverty levels increased as union membership declined. American capiltalism now translates to privatize profits and socialize loses. Since the slow recovery from the 2008 financial fiasco, the top 1% of the population received 93% of financial gains. You fools and your offspring ignoring these facts will eventually get bitten by not understanding you vote against your own best interest because of whatever perceived prejudices you hold for liberals, Democrats or this president.

    http://www.nytimes.com/2012/03/26/opinio...

  10. Michael,

    I'd like to point out that Benghazi could very well have been a result of austerity. Hillary Clinton did ask for funds to secure embassies and the House of Representative shot those funds down.

    http://www.washingtonpost.com/opinions/d...

    "For fiscal 2013, the GOP-controlled House proposed spending $1.934 billion for the State Department's Worldwide Security Protection program -- well below the $2.15 billion requested by the Obama administration. House Republicans cut the administration's request for embassy security funding by $128 million in fiscal 2011 and $331 million in fiscal 2012. (Negotiations with the Democrat-controlled Senate restored about $88 million of the administration's request.) Last year, Secretary of State Hillary Clinton warned that Republicans' proposed cuts to her department would be "detrimental to America's national security" -- a charge Republicans rejected."

  11. http://voices.washingtonpost.com/federal...
    Mr. Casler says our government has become too large?? Give me a break. The federal government currently employs the same number of people it did when Harry Truman was in office. When you factor in population increases federal employment is half of what it was 50 years ago. It's one of the reasons for massive financial and medical corruption. There is no one to keep an eye on the punch bowl while the corrupt people in our society piss in it.

    One massive financial crisis after another combined with staggering medical costs have left two thirds of the country completely broke. The suicide rate among people 35 to 64 years of age is climbing. These people have nothing and are looking at a future in which they're going to have to survive off of a $1100 month Social Security check. Many are making the decision that it's better to blow their brains out.

    http://www.bostonglobe.com/news/nation/2...

  12. Vernos,

    I am open to that possibility but.... it is much the same as the sequester. The Federal budget has been in the mid 3 TRILLION dollar range for several years now. If you, or the administration would like to argue that with that amount of money available and what we 'knew' was a dangerous situation in Benghazi, people in the State Department decided we had to scrimp on security in Benghazi, be my guest.

    If that's true, you 'could' blame that decision on R's, with some justification but a fair minded person would also have to ask.... do we have the right people in charge at State, that would allow lax security at a dangerous outpost in Benghazi, (that had asked for more security), because even though the budget was mid 3 TRILLION dollars, they could not find the money for Benghazi security.

    If people want to ding the R's for not allowing the budget to be bigger than mid 3 TRILLION dollars, they have ever right to do so. However, it is really a long stretch to claim that out of a 3 plus TRILLION budget, you can't properly defend Benghazi and you absolutely "MUST" lay off air traffic controllers.

    Michael

  13. Jeff,

    That is certainly fair and what I think we all should do. And yes, the R's are trying to create Benghazigate. No doubt about that. It is also possible that the personnel in the outpost just met a bad end in a dangerous situation.

    It was also possible that former President Bush could have been right to declare victory on the aircraft carrier and disband the the Iraqi military, except that it turned out he wasn't. That smelled bad and turned out to be bad. This also smells bad.... so we will see. I am glad these people get to say their piece... and I am not a fan of the partisan ISSA either.

    Michael

  14. http://www.nytimes.com/2013/05/06/opinio...
    "So the whole notion of perma-stimulus is fantasy posing as hardheaded realism. Still, even if you don't believe that stimulus is forever, Keynesian economics says not just that you should run deficits in bad times, but that you should pay down debt in good times. And it's silly to imagine that this will happen, right?

    Wrong. 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.

    And there's a reason for that association: U.S. conservatives have long followed a strategy of "starving the beast," slashing taxes so as to deprive the government of the revenue it needs to pay for popular programs.

    The funny thing is that right now these same hard-line conservatives declare that we must not run deficits in times of economic crisis. Why? Because, they say, politicians won't do the right thing and pay down the debt in good times. And who are these irresponsible politicians they're talking about? Why, themselves."

  15. Why pay down the debt? Borrowing costs are near zero. As the above commentor correctly states our debt is about one year's GDP. A tiny fraction of the Quad trillion dollars worth of economic activity that's going to take place over the next 50 years.

    The debt of Japan is rapidly approaching three times GDP. Our unemployment rate is about 7 1/2%. The Japanese unemployment rate is at 4 1/2%. The debt is a lot to do about nothing.

    In terms of Benghazi and other extremist acts. More Americans blow the hell out of each other in a few weeks then have been killed by extremists in the entire history of the country. Gun violence has killed over 1 million Americans in the last few decades and people whine about a couple people killed in Benghazi. Another bunch of nonsense! the Middle East and Africa are dangerous places to work. Periodically people are going to killed. That's life.

  16. Mr. Schaffer.. Stimulus is forever. Social Security, Medicare, Medicaid as well as veterans benefits are all forms of stimulus. Entitlement programs were first enacted in Germany in the 1860s under von Bismarck, and they've been going strong worldwide ever since. Roads are falling apart. Bridges are falling apart. In some parts of the country they get water from wood pipes that were put in in the 1800s.

    All this stuff is going to be fixed over the next hundred years. It's going to cost trillions to fix all this crap and that spending is nothing more than an ongoing stimulus program.

  17. Jeff, my lad, you are as wrong about Mises, Hayek, and Friedman [and John Maynard Keynes], as you are about Benghazi. Always were and still are.

    Carmine D

  18. Jeff, lad, at least 3 Nobel winners in Economics were awarded the prize for disputing theories expounded by Keynes. And, as I told you and others here before, Krugman's was not in economics. It was in international trade.

    Know your facts, lad.

    Carmine D

  19. Obama's got the strongest economy in the developed world. That's not a bad start. Read the latest report from the Brookings Institution. It discusses austerity and government employment.
    To a large extent job creation is being hampered by the slowest global growth rate in decades and stagnant government spending. A Philadelphia Fed report issued about a year ago reflected 12 years to get the unemployment rate back down to 5% with 3% GDP growth. It's going to take a very long time to normalize unemployment.

    http://www.brookings.edu/blogs/jobs/post...

  20. I could care less about Keynes, Krugman or anyone else. Every country in the developed world is suffering dislocations from the economic crisis and having to pay for aging populations. They are all handling the problem differently. In the countries that have enacted severe austerity cuts they are rioting in the streets daily. As I stated above unemployment and some of these countries is in the neighborhood of 25%.

    Countries that are carrying on business as usual have unemployment rates below 10% and no riots. Take your pick.

  21. RefNV - "Bush has been out of office for 4 years now."

    Unfortunately Bush's wars and their cost didn't leave with him.

  22. Could Carmine please post his CV and papers published on economics? I mean such a genius in economics must be well respected by other economists right???

  23. "Dearest CDF, in your post at 3:15 pm you state there were 3 economists that won Nobel prizes in economics for disputing Keynes."

    Well lad, if you know your econ, do a search on Nobel winners and figure it out. Here's my deal. You do the search, choose the one or ones [Nobel winners] who you think debunk Keynes theories and ask me if you're right. I'll be happy to tell you 'yes' or 'no.'

    Carmine D

  24. "Could Carmine please post his CV and papers published on economics? "

    I could but it would be useless to you. I suggest you stick with FOX and Pulitzers. The two topics now for their awards are Gosnell and Benghazi.

    Carmine D

  25. CarmineD (Carmine DiFazio) yesterday at 3:15 p.m. you stated "Jeff, lad, at least 3 Nobel winners in Economics were awarded the prize for disputing theories expounded by Keynes. And, as I told you and others here before, Krugman's was not in economics. It was in international trade.

    Know your facts, lad."

    You need to tell that to the Economics Prize Committee of the Royal Swedish Academy of Sciences and its board of expert advisers. After all they are the ones awarding Mr Krugman the ONLY Nobel Prize in ECONOMICS in 2008. You might also tell Yale University, which granted Mr Krugman his B.A. and Ph.D. in ECONOMICS. And don't forget to tell M.I.T., Stanford, and Princeton where he has been professor of ECONOMICS. And, of course, mention your idea to "Journal of International Economics," "Journal of Political Economy," "American Economic Review," and the other peer-reviewed journals which have published his works as ECONOMICS. His C.V is on line - we can fact-check his credentials. Where is YOUR C.V. so we can fact-check it?

    To say that Krugman's Nobel award for "...analysis of trade patterns and location of economic activity..." (See http://www.nobelprize.org/nobel_prizes/e... ) was not for "economics" is the same as saying that the award of half the prize to Kobayashi and Maskawa for "...the discovery of the origin of the broken symmetry which predicts the existence of at least three families of quarks in nature" (Ibid) was not for "physics."

  26. Jeff, lad, my work would have more meaning and understanding in public restrooms than here with you and others like you.

    Carmine D

  27. Robert, as usual you get the words right but miss the meanings.

    Economics is a huge umbrella for the Nobels. Trade is an esoteric little slither of a thread in the material and make up of the umbrella. Krugman lucked out. He took the little slither, mostly developed already by Swede economists, and added something. Boom, got an award. I think he did so because his work was based on the Swedes.

    Carmine D

  28. Robert, Jeff, Mark:

    Hope you're watching the news today on Benghazi. And contemplate how wrong you all were about this President and Hillary and Leon Panetta.

    Sad, that the big loser in this mess is Susan Rice. She did their beckoning on the Sunday news shows on September 16. She's through. Her career in politics is over. Obama and Clinton used her and threw her to the lions.

    Carmine D

  29. "In the early 1900s a theory of international trade was developed by two Swedish economists, Eli Heckscher and Bertil Ohlin. This theory has subsequently been known as the Heckscher-Ohlin model (H-O model). The results of the H-O model are that countries will produce and export goods that require resources (factors) which are relatively abundant and import goods that require resources which are in relative short supply.

    In the Heckscher-Ohlin model the pattern of international trade is determined by differences in factor endowments. It predicts that countries will export those goods that make intensive use of locally abundant factors and will import goods that make intensive use of factors that are locally scarce. Empirical problems with the H-O model, such as the Leontief paradox, were noted in empirical tests by Wassily Leontief who found that the United States tended to export labor-intensive goods despite having an abundance of capital.

    The H-O model makes the following core assumptions:
    1.Labor and capital flow freely between sectors
    2.The amount of labor and capital in two countries differ (difference in endowments)
    3.Technology is the same among countries (a long-term assumption)
    4.Tastes are the same."

    Okay Robert, so Dr. Krugman updated the "Swedes theories" [as in Nobel founder] for the 20 Century and won a Nobel in econ. More politics and popularity than prescience. IMHO

    Carmine D

  30. Now tell me econ wizards what on God's green earth does what the Swedes' [and hence Krugman] theories on international trade have to do with the econ nonsense that Krugman expounds in his political diatribes? The correct answer is nothing.

    Carmine D

  31. Carmine,
    Go ahead and post your CV and let's see if it is true. Meanwhile you are still clueless on Benghazi and will remain so. See tonight's Daily Show for a brilliant deconstruction of Faux News on this.

  32. Mark:

    YOU post yours first, and then I'll post mine.

    Carmine D

  33. Carmine,
    YOU are the one making claims to expertise you obviously don't have which is why you resorting to childish diversions. What claims to expertise have I made?

  34. Carmine,
    Not that you will watch the entire clip and maybe not even any of it but this segment of last night's Daily Show would break your cognitive dissonance:
    http://www.thedailyshow.com/watch/wed-ma...

  35. If you have no claims of expertise then you have no right to ask for mine Mark. When you do [have expertise LIKE ME] then I'll inform you of mine. Unless and until then, you don't get it from me.

    Carmine D

  36. Mark:

    FOX gets 2014 P-U-L-I-T-Z-E-R for Benghazi and/or Gosnell. Mark my words Mark. No pun intended.

    Carmine D

  37. "If you have no claims of expertise then you have no right to ask for mine" I have a magna cum laude Bachelor of Science in Environmental Studies and can differentiate between actual expertise and what the zero expertise you present.
    You were wrong about Fox and the Pulitzers in the past and you will continue to be wrong, as they are not eligible and the "reporting" is a mountain of B.S. (NOT the degree kind). Did you watch The Daily Show's deconstruction of Faux News at all? I thought not because you are incompetent.

  38. Thank you. I graduated Magna Cum Laude from Rutgers University with a triple major and BA in Econ, Accounting, and Business. Did it in 3 years under the GI Bill and owned and operated a successful family business all at the same time.

    Next..

    Carmine D

  39. Jeffery lad, weep not for me but for yourself.

    Carmine D