Saturday, January 03, 2004

Over-reaching by Krugman,

The problem is that this recession has never been all that bad. It was only bad in relative comparison to the recent peaks of the go-go nineties. Anyone with perspective could have told you that the suffering was quite a bit worse in the recession of the early 90's, and that in turn psychologically wasn't as bad as the Reagan recession, and that in turn was nowhere as near as bad as the slump in the 70's. The recession was probably affected maybe on the order of a few percent either way by the domestic policies of GW Bush. The way the business cycle works, as well as the sheer size of the American economy compared to the discretionary portion of the Federal budget expenditures means that any President has at best minimal short-term impact. By short term it means anything from 1-2 years. Mid-term or from about 3-4 years a President has some modest impact that usually presents itself as a shift in the momentum of the economy's growth. The true impact of a President's policies are often not felt for a decade, or many more, after their term.

It was amusing to watch Democrats take pot-shots at GW Bush on the present state of the economy. Likewise it is unfair to blame the downturn on President Clinton. The delusions of avant-garde economic pundits on the demise of the business cycle proved nothing more than the vapid chattering of those whose good sense was swept away by a financial bubble. It was with somewhat darker humor that I regarded the squirming of the Democrats when the economy began perking up, more or less on schedule. The last recession and the recession before that lasted a similar amount of time.

Of particular note, Krugman as a political commentator from his perch at the NY-Times staked a considerable portion of his prestige on predicting in a full-length book named "The Great Unraveling," in which he blamed the economic down-turn on GW Bush's policies. Krugman is an economist of considerable prestige who has had a fairly good track record down through the years in the prediction department. The problem is that in attempting to make a more general point, Krugman has like many liberal commentators allowed himself to be seduced into making a bad argument and now that the economy is showing short-term improvement it's biting him in the ass.

The problem is that the Bush Administration is really a financially irresponsible set of penny-pinching assholes. Their penny-pinching which has included proposing cutting combat bonus pay to families of soldiers in the line of fire in Iraq, has known no bounds. Their policies are not only merely wrong, they are positively mean-spirited and overall stupid. It has undoubtedly worsened the pain suffered by many families during this recession. Among their tactics has been going soft on corporate criminals, helping to let those who have defrauded millions of American families in order to get off with nothing more than a mere legal slap on the wrist. This has been a veritable signal to corporate criminals that it is not only business as usual, but no one is minding the candy-store.

While this has increased the pain of Americans in these ways and many more, the aggregate economic impact in the short-term has been as noted minimal. The Bush Administration policies are a real disaster, which hold the potential to derail the status of America in the future as the predominant economic leader of the world. But the real costs of their neglicence and mistakes will not be fully realized before the 2004 election.

The frustrating part is the long-term insanity of the Bush Adminsitration policies ("voodoo economics") will not be apparent to the casual observer for many years. Until then, their ideas about charging up the accounts today and paying them off tomorrow will probably be popular in that they promise everything under the sun with no downsides. There is no such thing as a free lunch of course, but this sort of long-term planning and determination is frustratingly hard to convey to ordinary people. The worst part is that there are so-called educated individuals who through wishful thinking and allowing themselves to talk-up what they cannot possibly deliver upon exist in order to make the implausible sound half-way possible to the person on the street. It must be remembered that such individuals also existed in abundance in the latter days of the internet bubble on Wall Street. Their voices since then have been conspicuously silent as reality has come crashing down on the party. Indeed, it was not mere wishful thinking but as Elliot Spitzer has exposed since then it was part of a deliberate concerted effort to defraud millions of small investors at the expense of rich insiders in no less than criminal con-artistry in a multiple array of schemes.

In the same way, similar enablers have through their strong verbal defense of the indefensible helped muddy the waters of what otherwise should be a cut and dried matter to anyone of common sense. Unfortunately it must be said that liberals such as Paul Krugman have lent some credibility to the arguments of such deceivers by allowing themselves to be baited into making a false argument. GW Bush is not significantly responsible for the present state of the economy. He shouldn't be blamed for the downturn and he shouldn't get much credit for the present recovery in economic indicators such as GDP, unemployment, etc. By trying to get a cheap shot in while things looked bad, now commentators like Krugman have allowed themselves to be discredited because things have begun to turn around - just as they would have under pretty much any President.

In a post today on Anrew Sullivann's blog as the guest-blogger, Daniel Drezner has deconstructed some of Krugman's recent criticism regarding the improvement of the unemployment numbers. Daniel Drezner's commentary, drawing from numbers posted by de Long and others is a solid rebuttal of Krugman's rationalization. It however misses the forest for the trees. Yes, by over-reaching Krugman and other liberal opponents have gotten egg on their faces. The problem is that they really are right in the long run. GW Bush's policies are fiscal suicide and threaten to drive this country at full speed into an economic brickwall. These future consequences will however probably kick in when the Bush 43rd Administration is no longer in power or accountable to face the music for their blatant irresponsibility. That is the big picture that has been regrettably obscured by the over-reaching by Paul Krugman and others, in their understandable but erroneous attempt to tar GW Bush for something that was obvious when he seemed to be on the verge of getting away with doing something far worse but not immediately obvious.

People get the leaders they deserve, and not the ones they need. If the American people really are passive enough to lay down and take it when their leaders let crooks hit the road scott-free and lay up economic ruin for future generations by enacting foolish policies today, then maybe we really do deserve what we are going to get. This afterall is a democracy. If we fail to hold our leaders to account for being criminal accomplices after the fact and for being spend-thrifts then maybe we don't deserve any better.


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