Treasury Secretary Tim Geithner served up another big cup of hot, steaming economic fail on Meet The Press, Sunday morning and, a few hours later, Nobel Prize-winning economist Paul Krugman righteously nailed the administration (and just about everyone else in our nation's capital, for that matter) for their anti-Keynesian, revisionist fairy tales about our economy.
Krugman (and fellow Nobel Prize-winner Joe Stiglitz are widely considered to be two of the world’s leading New Keynesian economic thinkers, not to be confused with the neo-Keynesian mentality prevalent among many in Washington, today) is legitimately pissed, so much so that, in addition to his blog post on Sunday, he carried this theme through to his op-ed column in today’s (Monday’s) NY Times, as well.
Here’s Geithner (h/t Zero Hedge, albeit from a totally ass-backwards political perspective, but their links to the source material were good) attempting to revise history on MTP on Sunday morning; click HERE for the video.
And, here’s the LINK to the eight-second clip, about 15:20 into it.
Among other things, Geithner stated the following on MTP:
We don’t have the ability (because of the overhang in housing and the problems in the financial sector) to engineer artificially a stronger recovery.
Just a few hours later, Krugman posted this on his NY Times’ blog:
Where The Money Went
New York Times’ Blog
July 10, 2011, 2:54 pm
Somehow I missed the BEA’s very useful page tracking the Recovery Act and how it is translated into taxes and spending. (Thanks to the commenter who mentioned it). It’s especially useful for thinking about what the Obama stimulus really involved — and what it didn’t.
Look at the peak quarter of stimulus (pdf), which was the first quarter of 2010. I’m going to rearrange the categories a bit. Here’s how I read it: at annual rates (in other words, actual numbers in the quarter were only 1/4 as large), the total budget impact was $357 billion. Of that, we had:
Tax cuts and refundable tax credits: $151 billion
Aid to individuals (mainly unemployment insurance and food stamps): $70 billion
Aid to state and local governments: $103 billion
Everything else: $33 billion
So much for “we tried Keynesian policies and they didn’t work.”
Bold type is diarist’s emphasis.
This morning, in his NY Times’ Op-Ed, Krugman states the following...
No, We Can’t? Or Won’t?
New York Times
July 11, 2011
…The fact is, the United States economy has been stuck in a rut for a year and a half.
Yet a destructive passivity has overtaken our discourse. Turn on your TV and you’ll see some self-satisfied pundit declaring that nothing much can be done about the economy’s short-run problems (reminder: this “short run” is now in its fourth year), that we should focus on the long run instead.
This gets things exactly wrong. The truth is that creating jobs in a depressed economy is something government could and should be doing. Yes, there are huge political obstacles to action — notably, the fact that the House is controlled by a party that benefits from the economy’s weakness. But political gridlock should not be conflated with economic reality.
Our failure to create jobs is a choice, not a necessity — a choice rationalized by an ever-shifting set of excuses…
Krugman then continues on to list four “excuses”…
1.) ”Just around the corner, there’s a rainbow in the sky. “
He notes that the focus was on “green shoots” and public relations. He calls them “delusions of recovery,” The reality, he notes — which is something I’ve been focusing upon for 2-1/2 years, much to the chagrin of some in this community — “the jobs crisis festers.”
2.) ”Fear the bond market. “
He calls out the propaganda of tea partiers such as Wisconsin Representative Paul Ryan, who rails about “taking pressure off the interest rates,” when the fact of the matter is that they’re already at “near-record lows.”
3. ”It’s the workers’ fault.”
Krugman points to the failed “structural” versus “fiscal” unemployment argument, something I’ve blogged about, extensively. He notes: “…average wages actually fell last month,” which pretty much blows holes through the entire concept that the U.S. workforce lacks the skills needed to fill the jobs that are available.
Towards his conclusion, he zeroes in on comments echoed by Treasury Secretary Geithner on Meet The Press, yesterday.
4. ”We tried to stimulate the economy, and it didn’t work.”
Everybody knows that President Obama tried to stimulate the economy with a huge increase in government spending, and that it didn’t work. But what everyone knows is wrong.
Bold type is diarist’s emphasis.
He asks: “…what happened to the stimulus?”
The reality, as Krugman reminds us, is that much of it was comprised of tax cuts, not stimulus spending. And, here is where the Princeton professor reminds us that he has somewhat of a license to bitch: “…some of us warned from the beginning that tax cuts would be ineffective and that the proposed spending was woefully inadequate. And so it proved.”
Krugman also brings up the quite inconvenient facts surrounding the government’s abysmal record with regard to helping homeowners facing foreclosure. (Of $46 billion set aside to help those in foreclosure, less than $2 billion has actually been distributed.)
So let’s summarize: The economy isn’t fixing itself. Nor are there real obstacles to government action: both the bond vigilantes and structural unemployment exist only in the imaginations of pundits. And if stimulus seems to have failed, it’s because it was never actually tried.
Listening to what supposedly serious people say about the economy, you’d think the problem was “no, we can’t.” But the reality is “no, we won’t.” And every pundit who reinforces that destructive passivity is part of the problem.
The writing has been on the wall since almost the day the President took office. Aside from Krugman, many, including yours truly, have been writing about it—and catching a lot of grief for that--too.
Now, if you think this is tough treatment from the “professional left,” perhaps you should consider the field day the Republican media machine will have with these inconvenient realities in their 2012 election messaging?
Unfortunately, as I have noted in recent diaries, the reality is much more harsh than even this. Our government’s bailout of Wall Street continues. (The truths about this are far more outlandish than most even realize. See: HERE, HERE, and especially HERE. But, I’ll save that for another time.) As for Main Street, as far as our government is concerned, it’s just excuses from folks like Secretary Geithner, along with propaganda that insults our intelligence about how “the banks have paid off their bailouts,” when NOTHING could be farther from the truth.
At this point, I’m virtually certain that history will look upon President Obama’s appointment of the head of the New York Federal Reserve Branch -- the person directly responsible for “overseeing” Wall Street’s unbridled greed-gone-wild in the run-up to our nation’s mortgage/financial meltdown – as his chief manager of all things economic as the biggest mistake of his presidency, to date.