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June 13, 2012

Conceal Your Shock

The NYT comes out squarely in favor of unsustainable economic policies that don't achieve their intended purpose:

Across the country, many states like Pennsylvania that happily accepted stimulus money to pay for existing employees are laying off those workers now that Congress has turned off the spigot. Over the last three years, at least 700,000 state and local government employees have lost their jobs, including teachers, sanitation workers and public safety personnel, contributing a full percentage point to the unemployment rate.

...Since the stimulus began in 2009, Washington has provided more than a third of state budgets, supporting as many as half-a-million other jobs, but that wasn’t enough to prevent layoffs, which have only increased since the money began running out.

Having dutifully informed us that the stimulus didn't actually manage to save public sector jobs or improve the economy, the Times would like Congress to double down on failure:

... putting educators and others back to work ultimately depends on Congress, where Republicans are blocking vital legislation to bolster a faltering economy.

Of course the fly in the Times' ointment is that the vast majority of job losses have occurred in the private sector:

... during the Great Recession so far, 92% of employment decline has been in the private sector. To some extent this is what we should expect, the private sector represented 84% of employment prior to the crash, that’s where the action is. Public sector employment has declined only half as much in relative terms as the private sector, and public employment is at any case too small a portion of the labor market in the United States to be the driving force.

... If we start counting at the start of Obama’s first full months of presidency instead of the start of the recession public sector job decline is 0.6 million, not much different. It takes Krugman-levels-of-delusion to convince oneself that this 0.4 or 0.6 million decline explains the disastrous job situation in a country with 133 million workers and 201 million working age adults.

Fortunately, Herr Krugman's capacity for delusional thinking appears to be America's one inexhaustable natural resource:

Austrians argue -- correctly, I believe -- that the real problem that becomes manifest during the boom is that investors are led down the wrong paths into investments that cannot be sustained, period. Take housing, for example. Since the Housing Bubble burst in 2007-08, the government has poured billions and billions of dollars into trying to reflate the bubble, yet overall housing prices are continuing to fall.

Keynesians have no answer for this, because in their view, if the government or private consumers continue to throw money at an asset, then it automatically should be sustained. Yet, it is obvious that the housing market it not behaving according to Keynesian dictates.

It's a strange world in which the solution for a recession triggered by the predictable collapse of unsustainable investments by private citizens turns out to be unsustainable investments by the federal government. Keep that in mind the next time the Obama Re-election Campaign accuses conservatives of doubling down on the very failed policies that got us into this mess.

Posted by Cassandra at June 13, 2012 08:09 AM

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It is a common theme amongst the Left that the reason their plans went wrong in the past is either because it was done wrong (see "Communism") or if failed because we didn't put enough money into it (see "everything else"). Great Society? Just needed more money. Failing test scores in schools? More money. Stimulus didn't work? More money. Great Leap Forward? They did it wrong. But more money probably would have helped too.

Posted by: MikeD at June 13, 2012 10:16 AM

I'm beginning to believe that maybe Paul Krugman is insane. Literally. He is not a stupid man be any means, but the lengths that that man goes to deny the obvious, to avoid appearing *gasp* wrong are not the signs of a healthy mind. Is narcissism the left's new religion?

From a good article in yesterday's WSJ:

Maybe Keynes was wrong and Milton Friedman was right when he warned that government spending is taxation and that government can't tax an economy into prosperity. Friedman made it clear time and again that restraining government spending stimulates the economy by liberating private resources.

"Maybe Keynes was wrong..." That's a question worth exploring, Krugman.

Posted by: spd rdr at June 13, 2012 11:48 AM

When I was tutoring calculus I noticed that when an otherwise bright/capable student just could not get a topic, there was usually some mistaken belief or concept getting in the way.

For Krugman, I think that may be the idea that conservatives are truly evil. If you think the other side is evil, you can't even contemplate the possibility that they might be right about even the smallest thing, because that would mean that Evil was Correct.

Of course it would also mean actually being open to new ideas (as opposed to just saying you're open to them over and over again...) :p

Posted by: Cass at June 13, 2012 01:32 PM

...the private sector represented 84% of employment prior to the crash....

Well, there's your problem.

...during the boom is that investors are led down the wrong paths into investments that cannot be sustained....

And so investors are just too d*mned stupid to manage their own money. We need more of them there Progressives. In government.

Cue Bill the Cat.

Eric Hines

Posted by: E Hines at June 13, 2012 02:54 PM

Ack! Pppth??!?!

Posted by: MikeD at June 13, 2012 04:44 PM

John Maynard Keynes.

Still dead. Right or wrong, in the long run Keynes is still dead.

Posted by: Don Brouhaha at June 13, 2012 11:31 PM

Attempting to follow the Time's fishwrap reasoning is too much for me when I haven't had enough coffee. And the fact that so many *cough economists *cough are still so stuck on Keynes when Keyne's lovely ideas continually fail . . . a case for not seeing the forest, the trees, and not even realizing what forest you're in!

I'm with Eric - Bill the Cat has better ideas than the Times or the economists do!! ;-)

Posted by: Nina Bookout at June 14, 2012 08:31 AM

...in the long run Keynes is still dead.

Unfortunately, no. He's alive and "well," multiply reincarnated in Schumer, Obama, Hollande, and others.

To slay this beast, we must slay all 100 heads....

Eric Hines

Posted by: E Hines at June 14, 2012 08:49 AM

"To slay this beast, we must slay all 100 heads...."

So it would seem...

Uh oh!

The old hun goes to the window, peers skyward looking for the circling craft, raises the window and shouts,
"We mean figuratively!"

Posted by: bt_VRWConspiritor_hun at June 14, 2012 09:35 AM