Krugman discovers birth of FIRE!

[Chomsky]

Better late than never?

http://www.nytimes.com/2009/06/01/op...gman.html?_r=1

We weren’t always a nation of big debts and low savings: in the 1970s Americans saved almost 10 percent of their income, slightly more than in the 1960s. It was only after the Reagan deregulation that thrift gradually disappeared from the American way of life, culminating in the near-zero savings rate that prevailed on the eve of the great crisis. Household debt was only 60 percent of income when Reagan took office, about the same as it was during the Kennedy administration. By 2007 it was up to 119 percent.

[rjwjr]

Re: Krugman discovers birth of FIRE!

IMO, Krugman is hurting his credibility with each passing opinion. This latest one is a real stretch. He's definitely becoming an administration/Democratic party bullhorn. I had gained some respect for him when I recently read "The Return of Depression Economics" as I thought it was informative and quite apolitical. Not Nobel prize worthy, but a good read. Lately, however, he's really getting on my nerves with his blatantly party-line gibberish.

[Raz]

Re: Krugman discovers birth of FIRE!

That evil Reagan inhereted a military in disaray with morale as low as a snake's belly in a wagon rut. And anyone who was born after 1959 should remember Brehznev and the HUGE Soviet threat in Central Europe together with their MASSIVE buildup of strategic nuclear and naval forces. I'm sure that LBJ and Nixon squandering a decade's worth of military procurement in Vietnam plus the grand "leadership" of Jimmy "Peanut Brain" Carter had little to do with the problems Reagan encountered.:rolleyes:

Seems that by Reagan's last year in office Tax Receipts to the Treasury were up about 188% - even with all those "help the rich" tax cuts in 1981.
Does Krugman remember Thomas P. "Tip" O'Neil? Jim "Sideburns" Wright? Tom Foley?
Tip's "dead-on-arrival" declaration to every budget the Reagan White House sent to Congress?
Why did they more than double Federal Spending over eight years while inflation was steadily declining? (Hint: buying votes.)

Reagan wasn't the answer to all of America's problems, and everything he did certainly wasn't good for the economy.
But why do the Demonrats get off scott free? Do you think perhaps that Krugman just might be a tad biased?

[rjwjr]

Re: Krugman discovers birth of FIRE!

This Krugman opinion piece has me a little more ticked-off than I first realized. I have to ask; "Who do you think is to blame?"

For example, should we blame the bankers and mortgage brokers who provided loans to people that couldn't afford them or do we blame the people that committed themselves to those loans?

I believe it is the people that committed themselves. I believe that personal responsibility trumps all other blame in our current situation.

Don't get me wrong, I think the actions of many of the mortgage brokers, real estate agents and others are despicable, however, there are many, many people out there with suspect intentions of which we must all be aware. This no secret. However, these thieves disappear in an environment of personal responsibility; including educating oneself, making the effort to conduct proper due diligence, etc. Many of these "suckers" got what they deserved. Most of these "suckers" will also learn a better lesson by enduring the full wrath of their poor decisions rather than the government rushing to their defense. IMO, "good intentions" are dumbing-down our society thus making us weaker as a people and as a Nation. That is also despicable.

Reagan and his advisors allowed our best and brightest to succeed wildly by getting government out of the way, whereas Barney Frank and his gang caused the good times to collapse as a result of their good intentions (of home ownership for everyone).

I apologize for my hyposcrisy, since I stated in a previous post in another thread that I dislike it when our economic discussions turn political, however, Reagan is an icon to us conservatives. As such, I get irked when some liberal economist feels the need to trample on his grave and his memory. Reagan embodied the spirit of personal responsibility whereas the liberal ideas of good intentions have resulted in failed program after failed program. But this is not a "party line" mindset as I'll take Reagan, Kennedy, or Clinton policies over Carter, Roosevelt, or Bush policies any day. To me, it's not Republican vs Democrat, it's personal responsibility vs nanny state. I'm fed-up with nanny state; for individuals, for corporations, for unions, for the FIRE economy. I'm gonna pay, you're gonna pay, our children are gonna pay, our grandchildren are gonna pay. Enough is enough. Time for a political revolution...Liberterian?...I don't know, but we've got to dislodge these career poiticans from power and throw them out on their ears. As I've said before, let's start simple...term limits and a presidential line item veto. That will get the ball rolling and maybe we can attract some true "public servants" rather than self-serving public scumbags.

[*T*]

Re: Krugman discovers birth of FIRE!

Enough is enough. Time for a political revolution...Liberterian?...I don't know, but we've got to dislodge these career poiticans from power and throw them out on their ears. As I've said before, let's start simple...term limits and a presidential line item veto. That will get the ball rolling and maybe we can attract some true "public servants" rather than self-serving public scumbags.

Same here in the UK with NewLabour. I totally agree with this.

Your lefty friend,

t

[santafe2]

Re: Krugman discovers birth of FIRE!

Better late than never?

http://www.nytimes.com/2009/06/01/op...gman.html?_r=1

It seems disingenuous to lay the blame at the door of the Reagan administration. This was a bi-partisan bill that passed the house 272-91 and Charles Schumer was one of 28 co-sponsors.
http://en.wikipedia.org/wiki/Garn_-_...stitutions_Act

My problem with Krugman is that he's just playing to his base in New York but I doubt even he really believes that the Reagan administration is solely responsible for this legislation.

Reagan and his allies were, and are, in favor of free markets and against regulation. But if Dems are against these things why did they not only allow it, but support it?

Politicizing this issue gets us nowhere. We're still heading down the same easy credit road with the Obama administration. Last I looked, there were few Chicago School, free market idealogues in this administration.

I seriously doubt anyone on iTulip thinks the course was well chosen over the last 30 years. If Krugman wants to relieve the Democrats of all blame he does a disservice to his reputation and to all of us.

[sunskyfan]

Re: Krugman discovers birth of FIRE!

Sorry folks but Reagan is to blame. These guys started the "I want to believe" economy in spades. They created and then used the deficit to prevent us from building schools and invest wisely in infrastructure. They placed our energy future in the hands of a Persian Gulf defended by the Pentagon gambit that has triggered three wars and a major terrorist attack on the US. They created caricature political assasination (perfected by Rush Limbaugh) and they taught us to "believe" rather than know. I liked Ronald Reagan but I also liked my Uncle Jesse and they were both full of it.

[Orforded]

Re: Krugman discovers birth of FIRE!

Looking for someone or something to blame? How about blaming the Judeo/Christian Moral Ethic and the Capitalist/Free Market dichotomy? Meaning that while capital has no morals, we as a nation are supposed to. The free market essentially means survival of the fittest. In one sense this is ok with me. I've been blessed with enough ability to be successfully self-employed since 1979. In dog eat dog I usually get to do the eating. On the other hand I was taught by my parents at an early age that we all have a responsibility to help those who cannot help themselves, and all my life I've taken that responsibility to heart.

The bottom line is that, when applied on a macro scale, Free Market Capitalism and the Judeo/Christian Moral Ethic are simply incompatible. It is the effort to make them so that has caused all the problems.

The reality is that there never was and never will be a "Free Market" for anything legal. (You want free market look at the illegal drug trade or prostitution that's true free market) Every legal transaction that takes place in the world, from buying a loaf of bread to the restructuring of General Motors, is taxed and regulated in one form or another. Once the transaction is taxed or regulated it is thereby influenced by something other than the "free market"

Ronald Regan, God Bless Him, (I loved him as the host of the Twenty Mule Team Borax Show or was that the GE Theater, I never can remember) and all the other politicians who drink the free market Kool-Aid never seem to understand this relatively simple concept. The less you regulate the more you open the door to dog eat dog capitalism and thereby imperil the Moral Ethic to which we as a civilization ascribe.

On the other hand, the liberals who believe that we can have a chicken in every pot and still live in a capitalist society are kidding themselves as well.

I take no position at this time on socialism, communisim, feudalism, fascisim or any alternate economic system. I simply point out that trying to put square pegs in round holes fucks up both the pegs and the holes. And what we have now are a lot of broken pegs and misshapen holes. We've propped up our supposed middle class with easy credit for the past few decades to fulfill our moral/ethical duty and now we find out that those efforts are completely antagnostic to our capitalistic economic system. So its good bye Ozzie and Harriet USA. It was good while it lasted.

[we_are_toast]

Re: Krugman discovers birth of FIRE!

Sorry folks but Reagan is to blame. These guys started the "I want to believe" economy in spades. They created and then used the deficit to prevent us from building schools and invest wisely in infrastructure. They placed our energy future in the hands of a Persian Gulf defended by the Pentagon gambit that has triggered three wars and a major terrorist attack on the US. They created caricature political assasination (perfected by Rush Limbaugh) and they taught us to "believe" rather than know. I liked Ronald Reagan but I also liked my Uncle Jesse and they were both full of it.

Bingo! Supply-side laugher curves that told America you can have it all and you don't have to pay for it.

The Dems certainly turned gutless after the 80 Reagan landslide, but it wouldn't have happened under anyone but the Reaganites.

[Raz]

Re: Krugman discovers birth of FIRE!

Bingo! Supply-side laugher curves that told America you can have it all and you don't have to pay for it.

The Dems certainly turned gutless after the 80 Reagan landslide, but it wouldn't have happened under anyone but the Reaganites.

It would be interesting [to me] and germain to the points I'm about to make to know how old you and Sunskyfan were in 1965.

That was the year when Lyndon Johnson went to Howard University and gave his famous "Great Society" speech. He not only absolved the students there of personal responsibility but proceeded to promise the American people what no government in all of recorded history has been able to deliver: "free" stuff. Over the following years Uncle Walter Cronkite, John Chancellor and most of the network newsrooms together with the print media helped him sell a set of totally unrealistic expectations to the nation during the absolute zenith of American economic power. The world was awash in crude oil in 1965-68 and energy was seen as practically inexaustable. Science and technology were finding solutions to many problems and it was an era of "can do anything".

It was the DEMOCRATS who concieved, created, expanded, and used the whole idea of "entitlements" to purchase and expand their political power while ignoring the demographic certainty that these programs would not be sustainable. (In 1950 there were 16 workers contributing for one Social Security recipient; by 1960 there were only 6; today there are slightly more than 3.) And that doesn't take into account the never ending expansion of benefits by the Democrats who controlled Congress for all of the period from 1964 thru 1980. These outlays have been carved in stone and represent approximately 54% of ALL Federal spending. And there are other "transfer payment programs" that the Democrats created in addition to these.
There is an analogy to be drawn when a household reaches a comfortable level of income at the peak of an economic cycle and then obligates itself for spending that assumes the good times will just roll on and on without a hitch.

When Reagan entered office the top Federal tax rate was 70%. Does that sound fair to you? And he inherited a tiny little problem called the Soviet Union. Why couldn't the Democrats in Congress freeze their entitlements for several years to allow us to rebuild our defenses in the face of a malignant Soviet threat? While tax receipts almost doubled during Reagan's eight years in office the Congress far more than doubled Federal outlays. Is the President to blame in every case for the overspending of the House of Representatives?

Arthur Laffer is a laughing stock, and the Bush Tax Cuts were not only misguided but ridiculous when he kept them in place after 9/11.
But your attempt to lay all the blame for our present economic problems at the feet of Ronald Reagan is not accurate.

[sunskyfan]

Re: Krugman discovers birth of FIRE!

I was 2 in 1965 but I remember Vietnam and walking on the moon.

With respect to the thread ...

The malignant Soviet threat was overblown to justify extensive investment in an aerospace based military. Reagan was correct in his rhetoric but wrong in the necessity to spend at the levels that he did and on the things that he did. Ironically in was Jimmy Carter's defense secretary Harold Brown that invested in the research of smart weapons that created the powerful weapons used in Desert Storm and then on not RR. RR invested in duds like the B1 bomber and the fantasy of SDI.

Reagan could have used his popularity to address the demographic issue you point out in SS and Medicare but instead endorsed the idea of raising the SS tax and Medicare tax that hits the lower end so hard (essentially a 15% flat tax on the lower third) that to complain about a 70% marginal tax rate (that was easily avoided) at the top seems really unfair. This flat tax on the lower tear created and still creates a surplus in SS and Medicare that covered up the enormity of the nominal Reagan deficits.

Lyndon Johnson's great society was an overreach but it targeted an income shift to the poor which was necessary to stabilize society after the healthy disruption of the civil rights movement. Most of the Great Society was blunted by Reagan and killed by Clinton. It is not to blame for our woes.

Is Reagan totally to blame? No. But he created the "you can BELIEVE your way out of any problem" and lit the fire of ignoring our economic excesses to service our belief based desires.

[cjppjc]

Re: Krugman discovers birth of FIRE!

I think all this proves being President of the United States is one tough job. I can't think of any President in my life who upon reflection I am happy with. I was at the time happy with Reagan, but later it has become apparent that the deficits he presided over are his legacy. For all the good he did, that is a huge negative. The old frog in boiling water.

[flintlock]

Re: Krugman discovers birth of FIRE!

I think all this proves being President of the United States is one tough job. I can't think of any President in my life who upon reflection I am happy with. I was at the time happy with Reagan, but later it has become apparent that the deficits he presided over are his legacy. For all the good he did, that is a huge negative. The old frog in boiling water.

In the end, they all were still just politicians being politicians.

[Raz]

Re: Krugman discovers birth of FIRE!

I was 2 in 1965 but I remember Vietnam and walking on the moon.

With respect to the thread ...

The malignant Soviet threat was overblown to justify extensive investment in an aerospace based military. Reagan was correct in his rhetoric but wrong in the necessity to spend at the levels that he did and on the things that he did. Ironically in was Jimmy Carter's defense secretary Harold Brown that invested in the research of smart weapons that created the powerful weapons used in Desert Storm and then on not RR. RR invested in duds like the B1 bomber and the fantasy of SDI.

Reagan could have used his popularity to address the demographic issue you point out in SS and Medicare but instead endorsed the idea of raising the SS tax and Medicare tax that hits the lower end so hard (essentially a 15% flat tax on the lower third) that to complain about a 70% marginal tax rate (that was easily avoided) at the top seems really unfair. This flat tax on the lower tear created and still creates a surplus in SS and Medicare that covered up the enormity of the nominal Reagan deficits.

Lyndon Johnson's great society was an overreach but it targeted an income shift to the poor which was necessary to stabilize society after the healthy disruption of the civil rights movement. Most of the Great Society was blunted by Reagan and killed by Clinton. It is not to blame for our woes.

Is Reagan totally to blame? No. But he created the "you can BELIEVE your way out of any problem" and lit the fire of ignoring our economic excesses to service our belief based desires.

You brushed over my points. Let's take a close look at yours.

"The malignant Soviet threat was overblown to justify extensive investment in an aerospace based military."

With all due respect to you, and to President Eisenhower's Farewell Address (with which address I completely concur) the military threat from the Soviet Union in 1979-86 was very real indeed. I began reading Foreign Affairs and The Bulletin in the early 1970s, and though I don't have an online subscription at present I do have an extensive library of their print material. Volume 67, No. 2 (Winter 1988/89) has an extremely detailed article on Soviet Military Doctrine which also detailed the MASSIVE Soviet military - double what ours was in the early 1980s. You may read the abstract for free at this url: http://www.foreignaffairs.com/articl...itary-doctrine

In the second section the author began with this statement: "Today's Soviet forces are so large that one must ask why they have been created and deployed." And eight sentences later we find this quote from none other than former Secretary of Defense Harold Brown: "When we build, they build; when we stop, they build. Certainly the size and nature of Western forces affect Soviet decisions, but the popular image of an arms race is increasingly difficult to support.

Harold Brown was one of the finest public servants the United States has ever had, and he deserves much if not most of the credit for the expansion of the Trident submarine and missle program and the high-tech weaponry like "stealth" which allowed us to provide a qualitative deterrent to the Soviets even while remaining in an inferior quantitative position, at least in most categories of conventional weaponry.
However, Dr. Brown promoted a policy of "essential equivalence" and spoke of "nuclear sufficiency". To our minds this was certainly reasonable when speaking of deterrence, but the Soviets NEVER accepted the idea that a nuclear war was unwinnable. By the early 1980s their entire military doctrine was predicated upon the belief that any type of war - even thermonuclear - was winnable. This is where Dr. Brown was mistaken: in his view of military strategy. Yet as a manager of the Pentagon and chooser of defence systems he excelled.
So I must totally disagree with you on this point - the Soviet military threat was most certainly NOT overestimated. No one in 1988, much less 1981, knew just how bad the Soviet economic system really was and everyone underestimated how quickly the entire rotten mess would collapse.

"Most of the Great Society was blunted by Reagan and killed by Clinton. It is not to blame for our woes."

This is another myth. As Reagan used to say, "It's not that our Liberal friends are lying, it's just that they know so many things that aren't true."
"In constant 1980 dollars, the federal government spent $66.2 billion on public aid from 1965 to 1969, more than double the amount spent in the previous five years under the Eisenhower and Kennedy budgets. But in the next five years, under Nixon, public aid spending increased another $80 billion. Poverty programs continued to grow after Nixon left office. Neither Reagan nor Bush gutted, slashed or even reduced welfare programs overall." Michael Fumento, "Is the Great Society to Blame?" (Investor's Business Daily, June 19, 1992) http://www.fumento.com/greatsociety.html
A couple of the Great Society programs were helpful -"Headstart" is one - but is it most certainly arguable that the expansion of AFDC was a disaster to the minority community and increased the existant social pathologies within said community.

"Is Reagan totally to blame? No. But he created the "you can BELIEVE your way out of any problem" ..."

Thank you for acknowledging that Reagan was not the singular cause of the FIRE disaster. He made some very bad moves - the S & L debacle comes to mind. But how do you think the Democrats would have reacted to any attempt by him to deal with the impending demographic crisis facing Medicare and Social Security? And who controlled the House during all this time? It wasn't the Republicans.
And it is the House - not the Senate - that controls the purse. The surplus that existed in Social Security receipts you fault Reagan for (I suppose that half of Americans should pay absolutely nothing and be only "tax eaters") was not set aside for the future, but was SPENT by "Tip" O'Neil and Jim Wright! Rather than work with the Reagan White House the Democratic leadership simply ignored their budget requests and kept spending more on everything.

[sunskyfan]

Re: Krugman discovers birth of FIRE!

First ... your views are obviously well thought out and defended. Its nice to have a good debate. Sorry it isn't over coffee.

I don't dispute the size of the Soviet Military nor its growth during that period. But growth or size is not an indication of intent. If it did we would be invading the entire world all of the time. Granted, it does seem like we are . The Soviet growth was due to the lack of another narrative for economic activity. If we had confidence in our own rhetoric about the problems with the communistic system we would have seen this as the cause of the large military.

There were lots on both sides who considered nuclear war winnable. The one fact that goes unconsidered in both the arms race debate as well as the SDI debate (in favor of SDI actually) is the probable fact that only 10% of the warheads would reach their target and detonate. The Soviet numbers were probably even worse. Only when nuclear winter concepts (even with a small percentage of weapons detonating) in the mid 80's were accepted as probable did the argument tilt to everyone accepting the nuclear war was unacceptable.

I agree that the Democratic congress would have had heartburn with Reagan being "honest" about SS and Medicare. But, he was President and he owed the America people the truth. I would be happy with the payroll tax if it did not end at $80k and went to infinity. I actually favor a national sales tax as I see income tax as unconstitutional.

I think that we can both agree the Harold Brown was one of the best SecDefs in history.

I agree that much of the Great Society was disfunctional but I think the caricature of it create or exploited by Reagan was wrong and increased the cynical divide that henders our politics today. I don't think it is ever wrong to help the poor or to educate the ignorant no matter their class. We justify a great many things that are very inefficient for the sake of goodness or spirit and common good will. Sometimes, even war.