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Little Alex in Wonderland: The State with nothing to spend can't spend to stimulate the economy, no matter what the Keynesians say.

Today, Paul Krugman's New York Times opinion is a 'Stimulus Cheerleading for Dummies' pamphlet to counter arguments made against Pres. Obama's coming stimulus plans. He makes extremely valid counterpoints that:

  • Christian fascists injecting family-planning is a "cheap-shot";
  • There are miscalculations in the price per job numbers floating around; and
  • There's no more room for the Federal [sic] Reserve to cut interest rates.

These are true, but Mr. Krugman also makes the reckless analogy of tax cuts being equal to eliminating air traffic control tomorrow when Mr. Krugman consistently says that spending comes from three places:

  1. Investors
  2. Consumers
  3. The State

In a credit crunch, investors can't invest (because they invest on credit) and consumers are too deep in debt and/or are lacking confidence in the market. Translation: Mr. Krugman has the audacity to say that consumers who can consume that aren't consuming are 'saving too much'.

After the asinine analogy of planes crashing in a massive airspace slaughterhouse and implying that people not spending beyond their means is a bad thing, Mr. Krugman ignores the two most consistent and valid arguments against an Obama stimulus:

  1. Recession is the only cure for recession because a recession means that prices are too high to be affordable. The solution isn't more money to afford the prices. The solution is the fall of prices.
  2. The only spending entity left to spend when investors and consumers aren't doesn't produce revenue.

The first argument is self-explanitory, but if it's still confusing, Mr. Krugman's article reminded me of Dom Armentano's article simply titled, "The Obama Stimulus Plan Won't Work":

This may seem harsh but the ultimate cure for a recession is recession. Economic booms "malinvest" labor and capital and recessions are necessary to "clean out" these malinvestments. Declining prices allow consumers to more easily purchase products (homes, autos) in excess supply; inventories are reduced and supply and demand are brought into balance. And declining profits weed out business organizations and their managers that have invested poorly during the boom; bankruptcy allows resources to flow to more profitable areas of the economy. A sustainable recovery is now possible.

The second is simple once you cut through the Newspeak and get to reason. We're indoctrinated to believe in the State as this Godhead to solve all woes and the only argument is a complicated explanation of the State's inefficiency due to its bureaucratic complexities. The complexity makes the argument difficult to understand and it's a natural reaction for people to pass the buck onto people they trust can understand better than them.

Namely, the People resort to Mr. Obama's lazy statement from his inaugural speech: "The question we ask today is not whether our government is too big or too small, but whether it works."

This statement isn't only lazy, it's deceitful because it ignores the rational counter-claim to stimulus, the State as a spender to boost economies, and the size of government. Let's simplify this.

There are only three ways that one acquires anything:

  1. They sell goods or services/labor to acquire to means to acquire (capital);
  2. They steal it;
  3. They receive it as a gift; or
  4. They borrow it.

1.) The government doesn't produce anything, so #1 is out.

2.) Taxation is the State's method of theft, but a gross rise in taxation would be to the wealthy class of employers, owners, and super-managers who just pass the tax on to the consumers by raising prices and cutting jobs.

3.) No one is handing the State $1 trillion as a gift.

That only leaves one possibility for the State to have the money to spend in order to stimulate the economy.

The economy boosting spending State isn't a fallacy because there are people who just don't like poor people or don't like Democrats or don't like Mr. Obama or are still in a Red Scare. It's a fallacy because all the State has is a printing press. That printing press doesn't generate revenue to spend, it creates dollars to borrow that the taxpayers have to return at interest and raises the most regressive tax in our monetary policy: inflation.

State spending [sic] to help the middle class and working-poor actually damage the people State spending is supposed to help more than it helps.

But spending from the State has to help someone because it's spending, so it raises the question: Cui bono?

For this we can go back to Mr. Armentano:

In theory, the money to fund the stimulus will have to come from either massive federal borrowing, substantial tax hikes, or pure money inflation by the Federal Reserve. But none of this can remotely promote recovery in the private sector of the economy. All it will do is substitute some private/public sector jobs in one part of the economy for other private/public sector jobs in another part of the economy.

With a federal deficit well over $10 trillion, the US just doesn't have the credit to borrow from other countries on such a massive scale. The last resort for the State to garnish the means with which to spend would be to inflate the money supply which is exactly why the US economy is where it is. After the people face massive price hikes and producers face higher taxes to cover the debt, the only winners in this game are the lenders who can collect interest, the banksters who engineered our economic crisis.

Every reason for the economic crisis agrees that reckless lending on credit not backed by assets and the housing bubble are the causes. "Housing bubble" has become a generic term, but think about it: when you chew bubble gum, what's the best way to assure that your bubble splatters all over your face and makes a gigantic mess? Inflate the bubble as large as you can.

House Financial Services Committee Chairman Rep. Barney Frank (D-MA) actually explicitly encourages giving more regulatory power to the unregulated Federal [sic] Reserve Board of banksters. Pres. Obama's new treasury secretary was the chieftain of the New York Fed that just printed and handed over $8.5 trillion to the banksters and VP Biden is already saying that the banks need more.

What happened to 'rebuilding the economy from the bottom-up'?

Again, this and nationalization of the banks of the government's arbitrary choosing is the very definition of fascism and it's addressed by Rep. Dennis Kucinich (D-OH) (1:27):

Any stimulus package within our current monetary policy would only be Mr. Obama and Congress further serving the elite to further prove the Investment Theory of Party.

In many parts of the Western world, the People have seen and viscerally reacted how the State has deceived them in order to serve the bankster elite. Mr. Obama and Mr. Krugman just want to inflate a dollar bubble and like all inflated bubbles will splatter all over our faces in the end.

Originally posted to 6dbl5321 on Mon Jan 26, 2009 at 03:33 PM PST.

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Comment Preferences

  •  ah good ole dennis (2+ / 0-)
    Recommended by:
    Joy Busey, ksingh

    http://politicz.wordpress.com/

    by GlowNZ on Mon Jan 26, 2009 at 03:34:05 PM PST

    •  Where is the creativity in DC (0+ / 0-)

      Is creativity weaned out of politicians?

      The only fix is to do the dumb and intolerable thing:

      STOP FORECLOSURES

      And give whoever is lucky enough to still be in a home a creative chance to make payments for the home.

      Then we need to save the damn planet by going green.

      Convert the Military Industrial Complex into the Environmental Industrial Complex.

      Lots of jobs will be created.  We can all stay busy for a couple of years and not become unhealthy unemployees.

      But, hey, I am talking creatively.  And OBAMA ET ALL isn't being creative.

      YET!  I am hopeful once the GOP is fully disgraced and shuts up ObamaCo will show some

      CREATIVITY..    Oh my gosh, do we ever learn?

      Poverty does not mean powerless. Unite!

      by War on Error on Mon Jan 26, 2009 at 03:41:34 PM PST

      [ Parent ]

  •  I dont really understand your diary. (15+ / 0-)

    and just think this is bullshit:

    Mr. Obama and Mr. Krugman just want to inflate a dollar bubble and like all inflated bubbles will splatter all over our faces in the end.

    http://politicz.wordpress.com/

    by GlowNZ on Mon Jan 26, 2009 at 03:36:23 PM PST

  •  Citing Lew Rockwell = (5+ / 0-)

    trolling one's own diary.

    No day but today--Obama '08

    by someotherguy86 on Mon Jan 26, 2009 at 03:41:12 PM PST

  •  During World War II, the U.S. was ... (8+ / 0-)

    ...broke, too. And there was nobody to borrow money from. But we did anyway, winding up with a debt far larger than the GNP and a rejuvenated economy. It can be done when you aren't buying tanks, M-1s and B-24s, too.

    Americans do not like to think of themselves as aggressors, but raw aggression is what took place in Iraq. - John Prados

    by Meteor Blades on Mon Jan 26, 2009 at 03:44:02 PM PST

  •  This is Libertarian (7+ / 0-)

    Nonsense yes but several key fallacies of "libertarian"  ideology are trotted out as fact. Libertarians routinely denounce government as a parasite on the private economy while ignoring the centrality of the "state" in creating money and property rights. When I was a working economic development wonk in both the public and private sector I have went from finding this point of view bizarre to dangerously unsound.

    When the going gets weird, the weird turn pro. HST

    by Rotegard on Mon Jan 26, 2009 at 03:48:06 PM PST

  •  The diarist is taking Krugman's statements out of (5+ / 0-)

    context.  

    Recently I noticed an increase in comments with more than the usual amount of schadenfreude.  The economic collapes seems to have presented an oportunity for anarchists, class warriors, and anyone dissatisfied with their current position in the economic pecking order to propose counter productive policies.

    "Nothing is more powerful than an idea whose time has come." Victor Hugo

    by lordcopper on Mon Jan 26, 2009 at 03:49:02 PM PST

    •  Diarist doesn't even know what a recession is, (7+ / 0-)

      and neither does the apparent asshat he quotes:

      Recession is the only cure for recession because a recession means that prices are too high to be affordable. The solution isn't more money to afford the prices. The solution is the fall of prices.

      Prices only fall when you have deflation. We haven't seen full-on deflation … ever? When?

      Also, he begins to make the exact point Krugman makes, that the three spenders are investors, consumers, and the state; then he dismisses the state out of hand.

      Finally, he's clearly a trickle-down believer if he thinks that the only thing that happens when you tax the rich is that they just pass it onto the poor. That's ignorant Reaganite bullshit of the highest order.

      Denny Crane: But if he supports a law, and then agrees to let it lapse … then that would make him …

      Shirley Schmidt: A Democrat.

      by Jyrinx on Mon Jan 26, 2009 at 03:55:48 PM PST

      [ Parent ]

  •  Funny how deficits don't matter (5+ / 0-)

    when it's all about war but when we need to spend money domestically "some people" can only scream THE DEFICIT THE DEFICIT.  

    Prices can not come down.  The race to the "cheapest" is what got us where we are today.  Cost cutting is not the solution.  We need to go back to a concept of paying a fair pricing and providing fair wages.  

    I guess Krugman really does know what he is talking about.

  •  Let's (try to) take your arguments seriously: (1+ / 0-)
    Recommended by:
    liberalconservative

    looking at the core numbers coming regarding prices and consumer spending and your own statements to the effect that the economy is in a recession because prices are too high, what is the factual basis for your argument that inflation or hyperinflation is a threat that should dissuade us from the stimulus?

    Moreover, the use of indebtedness to finance the state's fiscal shortfalls has been standard the past three-hundred years, even with the horror of horrors that is interest.

    --Relative to the historic proportion of the national debt to the GDP, what is the evidence that you have that increasing the debt to the degree President Obama and the Democratic Congressional leadership want to do will destabilize the economy?

    --What is the the proportionate relationship of national debt to GDP of the United States when you compare it to European countries now, or to first world economies facing serious deflationary situations in past decades? In short, if the national debt will destabilize us, what's the threshold at which this apparently happens in other first world economies?

    These are the factual demonstrations we would have to be seeing for the diarist's economic arguments to be taken seriously. But unfortunately we are not dealing with bonddad or Jerome a Paris here. And for all the arguments, we see precious little numbers.

    Finally and more practically, I'm betting the diarist owns a credit card, a mortgage, a car loan or a student loan. As such he has personally made the choice that indebtedness is not an evil to be avoided no matter what the consequences, but that it is a cost against which one measures the benefits of what the debt is used to purchase. If one spends the debt to go to law school and earns back the loan proceeds in the first three years of a thirty year career, it's a good investment. If he starts a business that enables him to become wealthy after repaying his loan, that's a good investment. Likewise, a country that uses indebtedness to improve its human capital by rebuilding its schools makes a good investment, and a country that rebuilds its infrastructure and jumpstarts alternative energy production to improve future productivity makes a good investment.

    In short, I kind of think Paul Krugman may have the better of him, after all.

    "It's like we weren't made for this world, But I wouldn't really want to meet someone who was." --Of Montreal

    by andydoubtless on Mon Jan 26, 2009 at 04:00:42 PM PST

  •  Dinner tomorrow night (1+ / 0-)
    Recommended by:
    2d

    BARBECUED SPARE RIBS  

    SAUCE:

    1 med. onion, chopped
    1/2 c. butter
    1 c. vinegar
    1 c. chili sauce
    1/3 c. firmly packed brown sugar
    2 tsp. lemon juice
    1 tsp. Worcestershire sauce
    1 tsp. paprika
    1/2 tsp. dry mustard
    1/2 tsp. chili powder

    Saute onion in butter until tender; stir in remaining ingredients and simmer 15 minutes. Use on pork spareribs when grilling. Yield: 3 1/2 cups.
    GRILLING SPARERIBS: Cut ribs into serving size pieces. Wash thoroughly. Place in large pot and cook on low for 30 minutes. Drain well.

    Grill ribs 5" from heat, over slow coals, 45 minutes or until desired degree of doneness, turning frequently. Brush spareribs with sauce during last 15 minutes. Serve with remaining sauce. Very good.

    Two things are worse than being fearful. Fearing being fearfull. And fearing the fear of being fearfull. Three maybe - Fearing....

    by SecondComing on Mon Jan 26, 2009 at 04:02:02 PM PST

  •  Stopped reading at: (0+ / 0-)

    In a credit crunch, investors can't invest (because they invest on credit)...

    What FDR giveth; GWB taketh away.

    by Marie on Mon Jan 26, 2009 at 04:08:56 PM PST

  •  How to make a Depression 101 (2+ / 0-)
    Recommended by:
    ksingh, liberalconservative

    Oddly, this exactly the thinking that turned a major Recession in the 1920's to the Great Depression. If you think the world would enjoy that again, then feel free to run with that.

    Me, I think I'll support Obama and the Nobel Prize winning, depression studying economist.

  •  You give "the state does not produce anything" (3+ / 0-)

    as a basic premise for your economic dogma: this premise is hogwash.

    Try thinking of the state as the "company" that works to restrain excesses in markets, and that can make the long-term market investments that private markets simply scamper from.

    To put it simply, a purely private economy produces great wealth--along with insane superconcentrations of wealth that result in social convulsions and bloody revolutions.

    It is time for the wealthy to appreciate what social stability, just wages, and a multigenerational view of ecologic planetary health actually DOES for the preservation of wealth.

    Yes, governments can and do PRODUCE conditions which allow markets to flourish, including pockets of peace in a dangerous world, and supervision of inane greed-driven speculation that completely private markets foster among the financially "capable".

    Derivatives and related financial instruments might be "valued" at ten times the world's yearly gross domestic product: this is causing insecurity in the whole system, as nothing but greed backs much of these guarantees!

    REGULATE FINANCIAL MARKETS, restore firewalls across the world, AND TAX EXCESSES (at 70% and more) among speculators and irresponsible management that seeks to socialize both market risk AND its thefts (payscale & bonuses) from worker productivity increases. Lower taxes for SUCCESSFUL market initiatives that meet basic social and environmental markers.

    O.K.--you hit a nerve it seems; just read Krugman more carefully, and don't jump off ideological cliffs: we need smart ones like you to return to reality.

    Habeas Corpus:See Hamilton quoting Blackstone in The Federalist Papers, number 84.

    by Ignacio Magaloni on Mon Jan 26, 2009 at 04:11:36 PM PST

    •  Oh, I should add that M. Friedman's (0+ / 0-)

      theory about finance system liquidity being the vitamin shot that would have prevented a recession from turning into The Depression looks to be swirling down the drain of history. Money supply plays its part, but in a deflationary spiral of the magnitude such as we have entered, with a crisis in confidence among the members of the financial system, well, let's clearly add another way the government can do something to avoid the utter devastation a Depression would bring (yes, grass will grow back years after the forest burns down, with pine seedlings in view--and a generation blown down by requisite-sized human suffering while the rich wait out the economic storm is not the kind of economics I want discussed at my dinner table)--the point is that the government can create the demand by hiring workers at full employment until the capitalized classes feel comfy enough to enter the markets.

      Yes, the government does produce something useful if you don't let twits run it.

      Keynes won. But all bets are off if no full-employment effort is undertaken.

      Let the grass be re-sod at the Mall, then, let the hiring begin!

      Habeas Corpus:See Hamilton quoting Blackstone in The Federalist Papers, number 84.

      by Ignacio Magaloni on Mon Jan 26, 2009 at 08:30:49 PM PST

      [ Parent ]

  •  a bunch of verbiage (0+ / 0-)

    I find it interesting that you don't quote Krugman once throughout.  All you do is attack him and try to attribute nonsensical lines to him.

    Next time, refute his statements without just presenting your own ideology.

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