Classic Upon Classic

The head cheerleader for the left exhorts the faithful (aka, the few, the proud, the oblivious) to ignore the latest jobs report:

The headline number came in a bit below expectations, but that’s probably just the noisiness in the data. The best hypothesis about the US economy this past year and more is that it has been steadily adding jobs at a pace roughly fast enough to keep up with but not get ahead of population growth. Today’s report was consistent with a continuation of that story. Nothing to see here.

These aren't the alarming stats you've been looking for.

But Krugman delivered the real comedy gold in his previous post, where he explained that Obama's speech sounded like Soviet-era science fiction, and that was a good thing. I kid you not:

A while back I mentioned, in a quite different context, an essay by Isaac Asimov (?) on Soviet science fiction, in which he argued that the two main themes of Western sci-fi — “what if” and “if only” — were ruled out; instead, writers wrote on the theme “if only this goes on”.

And that was the theme of Obama’s speech last night. And you know what? That was perfectly fine.

Whatever, comrade.

Finally, on a substantive point Krugman posts some economic modeling that supports the McKinsey study of 2010, updated for 2012. The gist, from McKinsey (my emphasis):

Debt and deleveraging: Uneven progress on the path to growth

Safely reducing debt and clearing the way for economic growth in the aftermath of the global credit bubble will take many years and involve difficult choices, as MGI’s 2010 report showed.

Two years later, major economies have only just begun deleveraging. In only three of the largest mature economies—the United States, Australia, and South Korea—has the ratio of total debt relative to GDP fallen. The private sector leads in debt reduction, and government debt has continued to rise, due to recession. However, history shows that, under the right conditions, private-sector deleveraging leads to renewed economic growth and then public-sector debt reduction.

The McKinsey study emphasizes the differing role and significance of household debt and government debt. From the executive summary:

The deleveraging episodes of Sweden and Finland in the 1990s are particularly relevant today. They show two distinct phases of deleveraging. In the first, households, corporations, and financial institutions reduce debt significantly over several years, while economic growth is negative or minimal and government debt rises. In the second phase, growth rebounds and government debt is reduced gradually over many years.

In short, the government becomes the borrower of last resort while private borrowers reduce their leverage.

In a recent post, Krugman cites this notion as the surest sign that the US economy is on the mend:

But is the economy being cleaned up?

The best case for that proposition, I think, comes if you believe that excessive household debt was at the core of the issue. Obviously this is a view I like; Gauti Eggertsson and I have done some formal modeling (pdf), and Atif Mian and Amir Sufi (pdf) have provided strong empirical evidence.

And if that’s what you think the problem is, we have in fact made significant progress. Here’s the ratio of household liabilities to GDP:

...

Between debt repayment, defaults, and — since recovery began in mid-2009 — rising income, the US has made a lot of progress in deleveraging.

Hmm, per McKinsey (January 2012), "Two-thirds of household debt reduction is due to defaults on home loans and consumer debt." Then I guess one-third is due to repayments and rising income.

In any case, an obvious implication is that tax cuts for individuals that are saved rather than spent still are helpful in restoring the economy because they reduce household debt, with an offsetting increase in government debt. What, then is Krugman's current objection to tax cuts as non-stimulative?

Well, in his recent model of the household debt effect he introduces a new variation on his opposition to tax cuts for the rich:

Also note the middle term: in this model tax cuts and transfer payments are effective in
raising aggregate demand, as long as they fall on debt-constrained agents. In practice, of course, it’s presumably impossible to target such cuts entirely on the debt-constrained, so the old fashioned notion that government spending gets more bang for the buck than taxes or transfers survives. And the model also suggests that if tax cuts are the tool chosen, it matters greatly who receives them.

Conceptually, I am sure there were some people so well off that none of the financial turbulence of the last few years affected their likely consumption/savings decisions in a way that would have been significantly altered by a tax cut.

However, Obama wants to raise taxes on "the rich" starting at $250,000 per year, which is not really the land of private jets and Cayman accounts. Is Krugman really sure that most small business owners netting $300,000 per year have not had any trouble getting a small business loan in the last few years?

And how about high-earning lawyers and financiers whose incomes have fallen (if they kept their job) and whose home is no longer a ready financial backstop by way of a second mortgage - are they really not debt constrained at all as they pack their kids off to college or private school, put their parents in nursing homes, and do all the other hateful things "the rich" do?

People who want to base our national tax policy on the lifestyle of Donald Trump and Warren Buffet are making a mistake.

Comments

[Frau Neinsagerin]

Obama?

[Frau Neinsagerin]

Njet!

[Sara]

3 Krugman threads?

[daddy]

The very people who claim there is no voter fraud committed voter fraud at their own convention with the nation watching.

Ha! Right on.

[Ignatz]

Considering the f***ing Pauly Peanuts would like to administer us, are we sure it isn't the McKinsey Institute?

[Jim Eagle]

Maguire, you do realize that every time you parse and fisk Krugman it is an American form of Science Fiction on par with Harry Turtledove's alternate history series.

If Economics is considered a science than Krugman is a "fiction of science" one might say.

The only thing classic about Krugman is that his philosophy is working so well in Greece.

[Rob Crawford]

Appropriate that Krugman is a fan of Soviet science fiction. He's a fan of their economic fiction as well.

[Sara]

Romney said: 'If last night was the party, this morning is the hangover. For every net new job created, nearly four Americans gave up looking for work entirely. This is more of the same for middle class families who are suffering through the worst economic recovery since the Great Depression.
'After 43 straight months of unemployment above eight per cent, it is clear that President Obama just hasn't lived up to his promises and his policies haven't worked. We aren’t better off than they were four years ago. My plan for a stronger middle class will create 12 million new jobs by the end of my first term. America deserves new leadership that will get our economy moving again.'

Read more: http://www.dailymail.co.uk/news/article-2199815/Obamas-DNC-2012-speech-Bleak-unemployment-numbers-morning-Obama-tells-DNC-problems-solved.html#ixzz25oXxvBqI

[Neo]

When Evan Thomas said "I mean in a way Obama’s standing above the country, above – above the world, he’s sort of God", we had no idea he was talking about Feceus, the Lonely God of Shit.

[Steven W.]

I can't believe Obama's economic advisors think if they can keep removing 380,000 people from the work rolls each month over the next four years then that's how they hope to get unemployment below 6% - as they've removed 8+ million people over past 3+ years (not to mention the dead and retired) - Obama has truly brought this country to the verge of economic collapse.

[Clarice]

Puhlease! I saw the video. His base thinks profits should be outlawed. He can play with these figures as much as he wants. They are far too stupid to catch on.

[DrJ]

Is Krugman really sure that most small business owners ... have not had any trouble getting a small business loan in the last few years?

Indeed. My company is unable even to get a credit line, backed by company and personal assets, in spite of having business collateral and cash on deposit with the institution each with twice the amount of the requested credit line. Sheesh.

[NK]

TM-- please keep discussing this series of issues. Why-- this goes to the heart of the fiscal/debt mess the Politicians and Academic economists have gotten us all into. Krugman says 5TRILLION+ new Obama debt in 4 years is FINE, gov't borrower of last resort (of course, according to Krugman, Bush's 4 Trilion debt in 8 years was BAAAAD, let's put that aside) But what if Krugman is wrong and the government debt is merely undermining consumer and business attempts to deleverage their debt, so in effect consumers and businesses (i.e. Taxpayers )are paying TWICE, first to deleverage themselves, and next to pay the interest on the sovereign debt politicians have loaded up. If Krugman and the politicians have been wrong, they have screwed the economic pooch for our kids and at least another generation after that. Other than war, DEBT and its consequences, is the most pressing series of related issues facing Americans.

[Danube of Thought]

"that’s probably just the noisiness in the data"

And. This is true because...?

[NK]

.. because Herr Doktor Krugman is a Wiley Coyote-Like SUPERGENIUS.

[Frau Neinsagerin]

I notice TM forgot to add "former Enron advisor" Krugman, but the rest of us will help remind readers.

[Melinda Romanoff]

Soviet Science Fiction is a subject taught under a different name here.

It's called History.

[Extraneus]

His base thinks profits should be outlawed.

That video could be the basis for a variation on the "He's a nice, well-meaning guy, but he just wasn't able to handle the job" strategy.

Something along the lines of: "When you voted for Barack Obama, are these the people you thought you agreed with?"

Then just show them in their own words.

In the previous thread, several people advocated attacking the MSM for failing to give voters the information they needed. Let's say the voters themselves were nice, well-meaning people, but they just didn't know who they were allying themselves with, or what the Democrat Party really believes in.

Then try to convince them that they're actually more like Republicans then Democrats.

[Threadkiller]

http://illinoispaytoplay.com/2012/09/07/u-s-attorney-patrick-fitzgerald-gives-the-united-states-of-america-its-first-tin-pot-dictator-barack-hussein-obama/

[Dave Schuler]

There's a big difference between deleveraging due to default and deleveraging due to paying down the debt: the wealth effect.

[Melinda Romanoff]

And which do you think is the more prevalent phenomena in the current cycle?

[GMax]

I dont read Krugman and I truly dont know why TM does any more either. The guy will say almost anything if it helps his home team, and contradict himself from only a few short years ago to do so if necessary.

Is it sporting to use a .357 magnum with the fish confined to such a small barrel?

[Extraneus]

Breitbart film bares roots of 'Occupy' movement

The Occupy Wall Street movement’s dark underbelly is on full display in an explosive new documentary set for release later this month.

"Occupy Unmasked," produced by the non-profit group Citizens United and the late Andrew Breitbart, in one of his last projects before his death last March, examines the movement and its possible links to organized labor and leftist groups. Its premiere in theaters on Sept. 21 follows the release of the documentary "2016: Obama's America," providing more cinematic fodder for the president’s critics ahead of the Nov. 6 election.

FoxNews.com was given an advanced screening of the 70-plus minute film in which Breitbart presents the case against the Occupy Movement, suggesting it was not a spontaneous event that sprouted up in downtown Manhattan, but a methodically planned uprising carefully organized by unions, left-wing activists and even members of the mainstream media.

[snip]

Bannon reiterates what Breitbart felt about the Occupy Movement being an attempt by the far left to the counter the Tea Party movement.

“They tried, but this was a failed attempt at a centrist-left movement,” Bannon said. “If the left had succeeded it would have been good. They wanted it to happen, but it didn’t.”

[PD]

Mrs. PD's response to watching Sandra Fluke.

[Janet]

PD....Wow! What a lovely post.

[Melinda Romanoff]

Very nice, PD

[centralcal]

Lovely, yes, PD - but also inspiring.

[Extraneus]

Missouri TV station cancels part of Akin ad buy due to lack of payment

Sheesh. I hate to bring this up, but am I the only one here who sent him money? Are we still praying that he drops out?

[Janet]

Here's the link - Todd Akin US Senate
Life
Life begins at conception.
2nd Amendment
This right is not to be questioned.
Public Healthcare
I stand against ObamaCare.
Spending
Start spending less, now!

[Frau Edith Steingehirn]

Thank you for sharing, PD.

[Janet]

Here's the address -
Todd Akin for Senate
P.O. Box 31222
St. Louis, MO 63131

[Danny Boy]

ARG national poll. Sept 4-6.

Obama 46%
Romney 49%

http://americanresearchgroup.com/

[PD]

I am a blessed man. She often brings this verse to mind:

Whoso findeth a wife findeth a good thing, and obtaineth favour of the LORD.
-- Proverbs 18:22

[Danny Boy]

ARG Poll is 1200 likely voters. Split, dem 38%, rep 34%, indep 28%.

[Frau Edith Steingehirn]

Where's the one about the husband? I am thrice blessed

[Sara]

Obama misses deadline for report to Congress on planned defense cuts

[PD]

Frau, you have three husbands?

[hit and run]

I don't know about thre husbands, but Frau has two anniversaries.

[PD]

So do I!

[Comanche Voter]

What's surprising is the comments that Krugman got from his readers. Usually the New York Times crowd can't wait to lay their lips on Krugman's pearly posterior and congratulate him on how smart he is. This time the crowd was restless--instead of kissing his posterior, they were chewing on it.

[hit and run]

PD:
So do I!

I knew that.

And I know I don't have to tell you that this year's is a big one for you...

[Jim,MtnView,Ca,USA]

I want this overlooking the freeway I use for MY commute!
http://www.thegatewaypundit.com/2012/09/terrific-clint-eastwood-and-empty-chairs-greet-glendale-highway-drivers/

[PD]

hit: Yes, and I'd better not fergit when the time rolls around. Er, when the times roll around.

[Jim,MtnView,Ca,USA]

"However, Obama wants to raise taxes on "the rich" starting at $250,000 per year, which is not really the land of private jets..."

Would it be incorrect to observe that when you hear "tax the rich", the policy eventually arrives at "tax people who have jobs"?

[Jane - It's gonna be a Tsunami in November]

I don't know about thre husbands, but Frau has two anniversaries.

That's nothing - Amy has 3 and counting - because if you are gay you have to get married in every state.

She is smart tho. The date of her civil union was 11-11. That's her anniversary. So she does that 7-7 or 6-6 thing every time. I have no idea what happens if she gets past 12 states.

(and no, it's not a sport. So far it's all about health insurance.)

[Ignatz]

So would she have to get divorced in every state?

[Gus]

Let me translate Krugman for you.

Obama is serving us a shit sandwich.
Does it taste better with Mayo or Miracle whip?

[Jane - It's gonna be a Tsunami in November]

So would she have to get divorced in every state?

Yup.

[Ralph L]

So far it's all about health insurance.
You'll have to explain that. I've assumed my insurance covers me whereever I go.

[Jane - It's gonna be a Tsunami in November]

Ralph,

Her civil union was in VT -therefore she was not married in MA so not eligible to get on her wife's insurance policy. Since I didn't want to pay for her insurance when I hired her she had to get married in MA. Then her wife went to work in Ct which once again made her ineligible. (Altho I'm not sure she married in CT - they may have figured out a way around it.) And so on and so on.

It's just stupid.

She takes it all in stride because none of it has anything to do with her marriage, which they believe was the date of their CU. but I am always amazed by it.

[Ranger]

Would it be incorrect to observe that when you hear "tax the rich", the policy eventually arrives at "tax people who have jobs"?

I think you have a good take on the core o the idea of "spreading the wealth around."

[Sara]

"No one has asked to see my birth certificate." Remember that line from August 24th. That was said in a huge rally in MICHIGAN. A crowd of well over 10,000. The idea that Romney isn't planning to compete in Michigan is ludicrous. And the same with Wisconsin. I, personally, think that Romney takes PA too.

[Porchlight]

The idea that Romney isn't planning to compete in Michigan is ludicrous. And the same with Wisconsin.

I agree, Sara.

I think PA will be a reach but they'll try.

[Gus]

Romney/Ryan will win Wisconsin.

[Sara]

I think Romney has two things going for him in PA. First the miners and 2nd the new Voter ID law that will be in effect for this election.

[daddy]

Good Morning.

Alaska Roundup.

Last week, at about the time the DNC was running inside to avoid possible rain and I was swilling Heineken's at the Acropolis, we had a massive windstorm in Anchorage. According to the little map you can click on and enlarge in the left bottom of this ADN story, the winds down in our area "Potter Creek-McHugh", were between 75 and 88 miles an hour, but the asterisk at McHugh says "Equipment stopped reporting at these locations during the storm. Peak winds likely higher than reported."

E-mailing Momma to find out how she weathered it she simply replied "This place SUCKS." Ha!.

Anyhow, we have power back and apparently only lost 1 big tree.

The Wind Turbine Farm being erected on Fire Island, and that you are paying for, was shut down with no apparent damage.

Of possible interest is that as the result of the storm a 103 foot Flagpole blew over revealing a surprise 1960's Time Capsule (hidden in a Maxwell House Coffee can).
Possibly not as exciting as last weeks 100 year old Time Capsule revelation in Norway revealing MeFolkes great great great grandaddies killing Scots, but click on this Link to see what Time Capsule Secrets were revealed by the storm!

We had a 138.25 pound Cabbage at The State Fair: New World Record! And then bystanders at the Fair could watch the losing entries be fed to a local Grizzly.

It has already started snowing at Denali 168 miles north (Brrrr), and a Norwegian Oil Company, having already spent 23 Million for Chukchi Drilling Leases, says now "it is delaying plans to explore for oil offshore in the Alaska Arctic until at least 2015 because of concerns about regulatory challenges faced by rival and sometimes partner Shell Oil Co."

That's about it.

[daddy]

Oops. Messed up the Time Capsule link: Here it is.

[Jane - It's gonna be a Tsunami in November]

How do you grow an 138.25 pound Cabbage, particularly in a state with almost no summer?

[daddy]

Lots and lots of manure!

[hit and run]

Jane:
How do you grow an 138.25 pound Cabbage, particularly in a state with almost no summer?

The amount of sunlight per day makes growing those behemoths possible. Anchorage gets almost 20 hours of sunlight per day in summer.

[Jane - It's gonna be a Tsunami in November]

Ahhh. Why didn't I think of that?

[stan]

Krugman never lets reality interfere with his worship of his theories.

[sbw]

To fertilize, they cover the cabbage with the ADN.

[jorod]

Do you opine that Krugman has mastered doublethink?

[breaks]

Oy.

First, how is he wrong in regards to the jobs report being more of the same? Oh, wait, he's not. This isn't to say it was a good report; it was not. But we are more or less on the same path we've been on for months now: steady but still subpar growth.

Second, he has not claimed personal debt reduction is a bad thing. It's obviously a good thing, but it's more of a long-term issue. It takes time to pay down debt. The Republican argument was that income taxes should be cut, as opposed to payroll taxes, which would clearly help those who are more likely to spend it right away, which could help the overall economy. But while payroll tax cuts are good fiscal policy when it comes to taxes, they still aren't as good as direct spending.

It's not at all that hard to figure out, really. Krugman's thinking is in line with that of people like Robert Frank or someone you've cited in the past, Mark Zandi.