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Mar. 16 2010 - 9:41 pm | 1,231 views | 6 recommendations | 39 comments

Krugmanesia: (n.) An economic memory lapse

Long-term unemployment is the wrench in the recovery story

Long-term unemployment is the wrench in the recovery story (click to enlarge)

Nobel-prize winning economist Paul Krugman had a hissy fit in his column the other day, charging Republicans in the Senate with both intellectual and moral turpitude — especially when it comes to the question of extended benefits for jobless Americans.

More than 6 million adults have been out of work for more than 26 weeks — that’s 4.0% of the civilian workforce (see graphic above) or 40% of the unemployed. To date, Congress has extended jobless benefits to this unfortunate cohort. That would seem to be the course of compassion. But the compassion may be misdirected, which brings me to this story of Krugmanesia.

From his perch in the much-mortgaged New York Times glass tower in midtown Manhattan, Krugman gives a lesson in economics while soundly rapping the knuckles of any who appear indifferent to the plight of the unemployed.  Krugman extemporizes that those who support extending benefits (Democrats) live in one world while those who oppose extending benefits (Republicans) live in a Second Life-like world. Krugman lectures like the Princeton University professor he once was still is:

Take the question of helping the unemployed in the middle of a deep slump. What Democrats believe is what textbook economics says: that when the economy is deeply depressed, extending unemployment benefits not only helps those in need, it also reduces unemployment. That’s because the economy’s problem right now is lack of sufficient demand, and cash-strapped unemployed workers are likely to spend their benefits. In fact, the Congressional Budget Office says that aid to the unemployed is one of the most effective forms of economic stimulus, as measured by jobs created per dollar of outlay.

But that’s not how Republicans see it. Here’s what Senator Jon Kyl of Arizona, the second-ranking Republican in the Senate, had to say when defending… [Kentucky's Sen. Jim] Bunning’s position (although not joining his blockade [to extend benefits]): unemployment relief “doesn’t create new jobs. In fact, if anything, continuing to pay people unemployment compensation is a disincentive for them to seek new work.”

via Op-Ed Columnist – Senator Bunning’s Universe – NYTimes.com.

The ever-curious James Taranto decided to investigate just exactly what classical economics textbooks say about benefits for the long-term unemployed. And here’s what he found in one popular economics textbook:

Public policy designed to help workers who lose their jobs can lead to structural unemployment as an unintended side effect. . . . In other countries, particularly in Europe, benefits are more generous and last longer. The drawback to this generosity is that it reduces a worker’s incentive to quickly find a new job. Generous unemployment benefits in some European countries are widely believed to be one of the main causes of “Eurosclerosis,” the persistent high unemployment that affects a number of European countries.

So those Second Life Seantors turn out to be quite up to snuff on economic theory. They might even be more than avatars when it comes to compassion. Of course, Krugman might dismiss this particular textbook; so many are laced with political bias. Not to worry. This particular tome, called Macroeconomics, was written by Paul Krugman and his wife Robin Wells.

It’s easy to make fun of economists — they are in the business of making predictions and models that often seem divorced from reality. It’s even easier to make fun of economists who contradict themselves on the basics. But in these extraordinary times we can’t afford to err on the side of generosity — or make dire missteps in rebuilding the labor force. No labor force, no real economic recovery. Period. In fact, consider these distressing facts: Transfer payments from the federal government now accounts for a record 18% of personal income in the U.S., says David Rosenberg, an economist few can mock (the worst you can say is that he’s a permabear). The outlays come at a time when monthly debt service for our national borrowings have touched $17 billion, or nearly 16% of monthly receipts, an alarming ratio.

Click here for Taranto’s podcast from his daily Best of the Web column. It’s worth hearing Taranto tell the story of Krugman and the two worlds of the cooked and the uncooked.

Graphic courtesy of Calculated Risk
H/T Gregor Macdonald and MacroTwits for Treasury data


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  1. collapse expand

    Great hearing from you, Nancy. And re

    “… This particular tome, called Macroeconomics, was written by Paul Krugman and his wife Robin Wells.”

    nicely-done.

    @ debt service, I don’t know if you’ve had time to read Michael Pollaro’s nightmare scenarios on the subject, but it’s done well and well worth it.

  2. collapse expand

    This misses the point Krugman was making, which is that unemployment benefits are a very efficient stimulus — in fact unemployment benefits DO create jobs. Sure they reduce the incentive to find a new job — somewhat — but that’s pretty unimportant in an economy that is still losing jobs every month due to the collapse of aggregate demand.

  3. collapse expand

    This post completely misses the primary problem, which is that the economy is not producing any new jobs, and it has not produced new jobs for more than a decade. It is one thing if unmotivated people are lazily goofing off on government unemployment benefits, and quite another if there are no jobs to be had. Throwing someone off unemployment benefits when there are no jobs is nothing but cruel. The problem is to get the economy creating new jobs again. Once there are plenty of jobs to go around, then we can talk about cutting unemployment benefits. For now, unpalatable as a governmental solution is to some people, it’s all we have.

  4. collapse expand

    “We can’t afford to err on the side of generosity.” (compassionate conservative alert)

    I wouldn’t worry about that too much. Helping out our fellow man has never been our strong suit. Especially in the inner-city where unemployment runs between 40 and 60 percent.

    Did Paul and his wife write the book after the crash? Isn’t amnesia where you forget something?

  5. collapse expand

    Wow. Very clever “gotcha” of Paul Krugman — except for the fact that what he wrote is completely unrelated to unemployment in the US in 2010. If the intent of this piece is to support the ludicrous argument that unemployment benefits disincent job seeking, that is an argument Ms. Miller would have a better perspective on if she herself was unemployed right now. Oh, wait, isn’t writing for a blog that doesn’t have any ads on it virtually indistinguishable from being unemployed?

  6. collapse expand

    She neither wants nor needs help. She’s a boot-strapper. A “real” American. Not like those dole welfare queens in the limos living it up with lobster and St. Bart’s time shares.

  7. collapse expand

    Strawman alert!
    Are our unemployment benefits as generous as those in “Europe”? Do we pay enough in unemployment benefits to create an opportunity cost of working? This assumes that there are jobs for the unemployed to obtain.
    And, the premise of unemployment benefits is that it is from an insurance fund that employers pay into, underwritten by the states and federal government, much like flood or catastrophic natural disaster insurance.

  8. collapse expand

    Being unemployed is a series of difficult situations. If any of us know more than 10 people, we likely have vivid, first-hand accounts of how difficult it is. I’m just not getting any sense of ~”Let them eat cake” in this post that some commenters are reading into it.

    This post is about economic policy more than the human condition around unemployment. That paying unemployment benefits may provide disincentive for some seeking employment is a minor point in the piece. The thrust even of that point is the *same economist* once made claims, citing “classical economics,” about the potential damage long-term unemployment assistance can have on underlying economic structures; he then later made an opposing claim referring to the same “classical economics.”

    Responsible, economic policy can’t be solely “responsible, economic policy when all is going perfectly well;” good policy takes downturns into account.

    I won’t accuse our government (any of them) of too much economic responsibility, but we do have provisions for unemployment in the form of insurance to cover the unfortunate people joblessness effects for a period of time. We’ve recently extended those provisions significantly.

    Putting 10% of the workforce on some kind of permanent payment plan – a plan funded by little other than the near-literal printing of more money – has ill effects on the economy as a whole. Nancy made the point, e.g., that we’re already spending $16 of every $100 tax dollars received to service debt – not to invest in new energy, pave roads nor to keep libraries open, but to pay down interest on money we’ve already borrowed. This is problematic for those working and paying taxes, and it’s worsening. Exacerbating it by borrowing and / or printing more dollars hurts the unemployed and the employed, individuals and the companies that hire and pay their wages.

    Understood this kind of argument isn’t particularly popular, but it’s (a part of) the truth.

    • collapse expand

      Precisely, Steve. I wouldn’t have gone after Krugman’s column if he had said I used to believe this but now I believe something else. Or even if he had said in most cases this is how economic theory would work but in the aftermath of the Great Recession, we need to tweak theory. No, he not only conveniently forgets what he has taught others but lashes into them for believing his lessons.

      In response to another comment. See in context »
  9. collapse expand

    Steve McNally has it right. The research shows that most people wait until their benefits expire to seriously look for work. More fundamentally, where does the money for extended benefits come from? It comes from taxes on businesses and people who are working. This sucks money out of the economy that could be used by employers to hire more people or consumers to by more goods which adds to corporate revenues. Compassion is important but it has to be balanced against a high tax environment that costs jobs and sends the economy into a death spiral. The failed European social welfare states that are blowing up as we speak exemplify this.

  10. collapse expand

    Please do your research before making grand proclamations on your blog. Krugman already covered this about two weeks ago.

    http://krugman.blogs.nytimes.com/2010/03/07/supply-demand-and-unemployment/

    • collapse expand

      Thanks for the link. Krugman’s response is interesting for its vagueness, which coming from an economist at Krugman’s level is pretty surprising. In the original column Krugman conflated theory and morality and, in my opinion, came up short. His blog response continues in the vain of “I’m right because I’m right.” You could argue — it would be stretch — given his well known Keynesian philosophy that I could have taken his explanation of classical economics with a grain of salt. But he was using theory to wrap himself in the flag of moral superiority. And his blog response continues in that vein. No one said as Krugman states that “high unemployment in the first quarter of 2010 has anything to do with workers getting excessively generous benefits.”

      Krugman doesn’t mind being snide about others points of view but is clearly pretty thin-skinned about criticism.

      In response to another comment. See in context »
  11. collapse expand

    It looks like there are a couple of disconnects with this comparison. 1) Krugman’s column clearly states “..that when the economy is deeply depressed…”. Is his text book referring to this type of situation or an economy that is in it’s natural or balanced state (not depressed)? This is an important qualifier because there is no “incentive” to find a job when there are no jobs to find. 2) The text book is assuming “generous” benefits that exist in Europe, the column refers to benefits in the US. Are US benefits “generous”? Do they provide a “disincentive” to find a job in a depressed economy? I would argue that they are not generous at all. The average benefit check is just 36 percent of a worker’s previous salary (National Employment Law Project). How in the holy hell can 36% of what you made be “generous” or a “disincentive to work”?

    • collapse expand

      Points taken. This still doesn’t address a critical question that we face: At what point does doing the right thing boomerang? Printing money endlessly debases the economy — causing more harm to everyone. And the data you share lead me to ask the larger question concerning job creation. Krugman argues that demand leads all. But I can’t help but wonder if it wouldn’t be more efficient to be thinking of more creative ways to foster job creation — mainly through rules and incentives that enable entrepreneurs to do what they do best — create, invent, and hire.

      In my next comment, below, I’ll address the bailout of Wall Street and the plight of Main Street.

      In response to another comment. See in context »
  12. collapse expand

    I’m sorry, perhaps it’s stupid of me- but I don’t quite get the point of your essay. I mean, it’s easy to find self-contradictions in anybody’s body of published work, especially if one’s work is as large and public as the Right Reverend Doctor Krugman’s. This invalidates Dr.Krugman’s position re the extension of unemployment benefits how? As a self-proclaimed Keynesian, his position on deficit spending is quite clear- we shouldn’t do it in good times, because we must do it during bad times. (He’s said this often enough, that I’m not going to bother citing it- Nancy, in your reply to Steve, you imply that that is not in fact the case. Watch out, you’re coming dangerously close to lying.) What will happen when inevitably, those benefits run out, as they will whether we temporarily extend them or not? If you think that all of those lazy, complacent workers will dust the Cheetos out of their laps, bounce off the couch, and bound out of the house, immediately to find jobs as good, or nearly as good, as the ones that they lost, you’re living in a dream world. (Again, sorry to let my contempt seep through into my last sentence, but I don’t think that either you, or Steve, understand just how much contempt for the unemployed you’ve expressed in this post.) Anyhow, here’s my question- what will happen to demand, should we cut off benefits, and the people on them remain unemployed? You should consider that, because that’s what’s going to happen.

    Actually, what I learned from this post, is something I already knew- Wall St. hates Paul Krugman. Hell, didn’t the man propose that we “go Swedish” on the Too-Mighty-to-Fail Wall St. players? He does imply that we erred on the side of generosity when we saved the Mighty- all still firmly affixed to the public teat- from the conflagaration they caused. You’re saying that now that they’ve been saved, the generosity must stop and it’s tough love for displaced workers. And you’re suprised at the bitterness of the comments. Now, that is weird.

  13. collapse expand

    michaeleg, David Black, squeakyrat and others beat me to it.
    Are you two – McNally and Miller — really that stupid?
    I imagine so.
    Either of you ever been out of work for a year, two years? Gone from a just making it salary to 1/3 of that for 26 weeks? 52 weeks? whatever? when there are no jobs to be had?
    Read all Krugman’s columns before writing this elitist drivel, and yes, it does come off like ‘let them eat cake.’ Or get off your lazy butt and get a job.
    .
    Christ, people are worried sick, contemplating suicide and you’re playing ‘gotcha’.
    “This post is about economic policy more than the human condition around unemployment.”
    Classic, McNally, classic.

    • collapse expand

      Thanks, mecormany.

      You want to make the conversation about “out of work … people worried sick.” I can tell you that, despite how true that is, undermining significant underpinnings of the economy – by printing and borrowing money – is not the way to address the issue in the (not-even-so) long run.

      I don’t recall – or see upon re-reading – expressing any contempt for the unemployed. I don’t see anywhere I’ve minimized the plight of joblessness. I’m talking cold, hard facts: you simply can’t send money on a ongoing basis to 10% of the American workforce. It’s not sustainable in the current scenario.

      Again, I do undertand the allure and ease with which the “but what about the PEOPLE” and ad hominem attacks can be made, but it leaves the underlying issues unaddressed. Agreed: I am bad and stupid; you, virtuous and bright.

      Have a lovely day.

      In response to another comment. See in context »
      • collapse expand

        Hey. I didn’t call you stupid. Or bad. But you- and the WSJ worldview you and Nancy seem to be speaking for- scare the hell out of me. You seriously can’t see the contempt in the statement “can’t afford to err on the side of generosity”? It may seem coldly rational, and benignly distant to you, but that one landed like a gob of spit out here in Main St. “You’ve been limping along for too long now, Buster- time to man up, anyhow I’m here to repossess those crutches…” Granted, that may not have been how it sounded to you, or Nancy, but this blog isn’t aimed at the investor class, and the conventional wisdom current in your community might not be happily recieved outside of it. The very use of the word “generosity”- after TARP- aimed at benefits for people who are not of Wall Street, for people who were damaged by Wall Street misbehavior, positively drips with contempt; it tells me a lot about you and Nancy that you can’t see that. FYI, a lot of that unemployment $ goes to people who already HAVE gotten new jobs- if someone loses an 18$ hr job, goes out and gets an 8.50$ hr job, unemployment comp will make up a lot of the lost difference- for now. Sooner, or later, those benefits run out. Nobody answered my question about what happens to Demand then.

        What do YOU think we should do about the plight of joblessness? So far, all I get from this post, and your comments, is that we can’t carry the unemployed and the underemployed forever. Agreed. Revise the tax code to reward job creation, and punish offshoring? What? You’re down on stimulative spending re unemployment benefits- do you reject any and all stimulative spending? Whatever you do think, telling masses of unemployed Americans that they’re going to have to tighten their belts for a few years, until the markets self-correct is not going to fly.

        I notice that we’ve gotten away from the point of Nancy’s post, which seems to be Krugman = intellectually inconsistent hypocrite. michaeleg’s comment seems to have punctured that; so I guess that much is now moot.

        By the way, should the Market urgently require a massive infusion of taxpayer cash again- like if the commercial real-estate market collapses, or if the speculative behavior explodes again (are they actually bundling life-insurance policies now? Taibbi says they are, but you probably don’t like him either) will we be able to afford to do so, seeing as we can’t currently afford to subsidize the class of people who paid for the last misbehavior and bailout?

        In response to another comment. See in context »
        • collapse expand

          ncfromke:
          “this blog isn’t aimed at the investor class” — au contraire. This blog is for the nerdy investor willing to grapple with numbers but who wants insights into the economy; I also add a dollop of satire because the reality is sometimes too crushing.

          I want to thank you and all of the other commenters who consider me to be a spokesperson either for the Wall Street Journal or Wall Street. I fear my pay is too close to the unemployed on Main Street and my views too idiosyncratic for that position.

          This post clearly hit a nerve: The market crack-up of 2007-08 has caused untold pain. In California, the broadest measure of unemployment exceeds 20%. You can read about that on the blogs of fellow T/Sers Michael Roston (http://trueslant.com/level/2010/03/11/california-unemployment-and-oklahomas-growth-its-the-grapes-of-wrath-in-reverse/) and Japhy Grant (http://trueslant.com/japhygrant/2010/03/16/is-california-becoming-a-third-world-nation/)
          Meanwhile, Wall Street investment banks are raking in record profits. And would you like to hear something that will really make your blood boil? The $20+ billion in bonuses Wall Street received in 2009 are largely offset by the $31.3 billion in tax credits the firms “earned” after losing more than $35 bln in 2008. (See http://www.osc.state.ny.us/press/releases/feb10/022310.htm and http://www.osc.state.ny.us/press/releases/jan09/012809.htm)

          Now the question of fairness taunts taxpayers wondering why there was more than enough to save the people who keep Patek and Winston’s in business but who never step foot into the local retailer with modestly priced goods.In my year end post, I stated quite clearly that Treasury, etal, got the bailout completely backwards. http://trueslant.com/nancymiller/2009/12/31/splash-safe-landing-for-the-economy-but-too-much-was-lost/ Unlike Capt Sully, we lost the people but saved the fuselage.

          Having said that, I want to take you back to the fall of 2008. It’s hard to remember just how scared we were back then. It appeared that the entire financial system was about to be destroyed. I was re-reading some magazine pieces from that time and I got a shiver just remembering the run on not just the investment banks but on the money market funds where every single person I know has stashed some cash — emergency funds for an unexpected run to the dentist or tutoring for a child.

          Washington extended a helping hand. Washington, of course, is metonomy for you and me. But what puzzles me to this day is that former Treasury Secretary Paulson wanted to gave the money to Wall Street with absolutely no strings attached. Can you imagine any investment banker cutting a deal with a foundering company and not demanding to share in any upside? Sure, the big firms left standing on Wall Street have repaid the TARP funds. But they have benefited and still continue to benefit from many other subsidies that we the people support. If you’re not outraged (but I know you are) you should be.

          This is a long way back to my post about Krugman and the eruption of anger to anyone or anything that appears to dismiss or minimize the needs and concern of Main Street. I am, in fact, a card-carrying member of Main Street – with kids, bills, a mangled retirement account; worse, I am part of an industry where pay is going down as one outlet after another shutters. For those very reasons, I am very worried about the growth of our debt and what “classic economics” has to say about how to handle a national economy that nosedives when it is already burdened with unprecedented levels of national and personal debt. I fear the wrong policies can only make things worse – and I see from the many comments on this blog that we all carry that same fear.

          In response to another comment. See in context »
      • collapse expand

        No, McNally, just unemployed and sick of it. Sick of the rejection, sick of the desperation, just sick of it. Never called you bad. Never said I’m virtuous. Or bright.
        But I don’t see any comments agreeing that Ms Miller could’ve checked a little and she’d have discovered Krugman already addressed this “contradiction”, or pointing out that Europe’s UI is a larger amount and lasts much longer. Just to mention specious attacks. Let’s make a bet on whether this recession is going to create a large leisure class of UI addicts. And of course, since it was just a “policy piece”, we should have all gone “oh well, it’s a policy piece, so that’s fine.”

        You do realize that that 10% goes to pay necessities, which help stores and their employees, suppliers and their employees etc. Every dollar of UI generates a buck fifty to $2.50 to a local economy. Those are also cold, hard facts. It’s not 10% of the guv’s money tossed down a dark hole or at useless wars that we’ll never see again, or propping up sick banks that use it to go back to what they were doing to gutter the economic system in the first place. But it’s just “allure and easy” to ask “but what about the people”. Thanks for allowing me to understand that too.

        I’ll venture a guess that between the two of us, it’s you that’ll have the lovely day. Even if you do come off as superior and clueless when you hit “submit comment”.

        Enjoy that lovely day, eh?

        In response to another comment. See in context »
        • collapse expand

          Gentlefolk –

          There’s nowhere in my comments or Nancy’s original post crying about the possibilities of a growing “leisure class” sucking at the teet of unemployment insurance. You’re free to read that into the conversation, but it simply isn’t there.

          From the outset, I’ve maintained ~”the prolonged cutting of checks from D.C. to 10% of the workforce is not a sustainable solution in the current scenario.” This is in no way saying “Get a job, lazy, and gimme them crutches.” This is to say “continually spending more than you’ve got doesn’t turn out well for anyone.” If I didn’t say so explicitly enough earlier, I will now: I applaud the fact we extended UI coverage. It’s a good example of working to compensate for the cr*p economic situation. If we found a way to fund another extension – really pay for it, not funded through “projected savings” or “curbed growth of Program X” – I’d be 100% for that, too.

          From a personal PoV, I’m the sole provider of a family of 5. While I am employed currently, I am far closer to the bottom rungs than the top. The eldest of my three daughters will be entering college in 2 years. I work in the Media & Publishing industry – being unemployed, therefore, is always a very real possibility. My spend on dental care, alone, in any given month is likely more than a month of UI would cover, and that’s to say nothing of grocery and mortgage bills.

          I have deep sympathy for the un- and underemployed; my friends and family members are among them. Despite accusations of elitism (among other personal attacks), I’d love to give everyone who needed it a chicken for every pot and a thousand-dollar bill. But fundamentals dictate this is likely to have the effect of driving the price of chicken through the roof (i.e. demand increase generally equates to price increase) and to make the value of the $1000 bill significantly less than it is currently (i.e. flooding the market with money decreases that money’s purchasing power). I didn’t make up these rules – I just live here, work to keep my eyes open and my head above water (making a wave when I can).

          How do we fix it? I don’t know and hope more capable people than I am working on it – I’ve got plenty of my own challenges to work through (c.f. three daughters, sole provider, dentistry). What I do know is continued governmental spending of money it doesn’t have does Bad Things for everyone under that government. Get as touchy-feely – and name-cally – as you want, this will still hold true.

          yrs in superior cluelessness –

          S

          In response to another comment. See in context »
          • collapse expand

            When will we come to the conclusion that Washington won’t fix “it” and the financial sector considers it fixed and is back to business as usual and the former regulators are bickering over how to revive a corpse. There is no blood left in the turnip and the day is coming when the socialists that are doing quite well will have to rescue us. The system is broken and we the people know it and can only sit helplessly listening to the fiddle.

            In response to another comment. See in context »
          • collapse expand

            Thanks for all your comments, Steve, and for the links on Pollaro’s series on the US debt burden. Very worthwhile: http://trueslant.com/michaelpollaro/2010/02/19/interest-on-u-s-government-debt-a-brewing-time-bomb/

            In response to another comment. See in context »
          • collapse expand

            Thanks Steve and also Nancy. 1st time i have tuned in, but the popst and comments have been “illuminating” to say the least. You are right that the long-term solution is NOT govt subsidies and stimulus packages, but since this recession has finally put an end to the ridiculous “trickle down” theories of the past 25 years, maybe we can start dealing with the reality of just how rigged our financial system has become.

            Do yourself a favor and read Michael Lewis’ new book “The Big Short”. It takes the investigative work that Matt Taibbi (the last investigative journalist left on the planet IMHO) to a whole new level. I saw Lewis on 60 Minutes Sunday so got the book MOnday. I actually could follow the complexity of credit default swaps and how they evolved and how they got completely out of control. What a scam?? Makes Enron and Madoff look like child’s play.

            How can any economic theory be expected to have a chance to work when we have the scams being committed by a totally out of control and unchecked investment banking community??

            All of your comments about Krugman are trivial in the face of the criminal activities of Wall St. What they did with the creation of CDS’s and CDO’s is nothing more than a giant Ponsi scheme that our anemic regulatory groups (SEC, FED), ratings agencies (Moody’s) and Congress (Chris Dodd) allowed to happen at our expense.

            I am surprised Nancy that you are surprised by Hank Paulsen’s actions as Treasury Secretary. He was at the head of GS when the scams were created and helped get the final agreements to allow the banks to operate in total opacity and darkness.

            Its time to treat the banks that were abiled out wiht the same tough love that was given to GM and Crysler:
            1. Make CDS and CDO illegal for the mortgage backed bonds – They accelerated the sub-prime mortgage defaults by incenting loans to people that NEVER should have been given loans. EVER>
            2. Have the next 26 weeks of unemployment benefits funded by the top 5 banks that created these absurd instruments. The sole purpose of these instruments was to screw people who could not afford to be scammed.
            3. Pass strict regulations that create Ralph Nader style consumer protections to prevent the financial community from blatantly exploiting the working class and poor.
            4. Start prosecuting the bankers and mortgage lenders who were behind the scam. I’m sorry, Mr. Obama, but if we don’t start holding the people responsible for the melt-down accountable for their actions and taking them to court, the anger in the public will nev er subside. The Sheriff of Wall St (Spitzer) was hated by the street because he was the only one going after the crooks. I would love to see him and Vincent Bugliosi team up with Andrew Cuomo to go after guys like Cassano of AIG-FP. Its time.

            Sorry for the rant, but nit-picking Krugman while Wall St continues to operate freely as they have since Bush took office in 2000 is just hard to take. The longer the public allows our elected officials to bury their heads in the sand while these blatant abuses continue, the worse its going to get. These bankers think they are kings and queens and completely above it all – like in Clooney’s new movie.

            All i can think about these days is that movie where the network commentator keeps yelling, “I’m mad as hell and I am not going to take it anymore.” And the more I read and hear about just how wide-spread the Ponzi scheme has become, the madder I get.

            In response to another comment. See in context »
  14. collapse expand

    Alas, I’m also beaten to the punch, as Krugman addressed this issue before.

    ncfrommke has it exactly right: Wall Street (even the “new” Wall Street) hates Krugman. What else is new?

    People like this author are grasping at straws, looking for something, anything, that will justify their root goal: To re-inflate the bubble, or find a new one to expand. The emphasis has always been on getting out early enough, never on preventing a collapse.

    So, I’ll just sit and wait until the next Miller column that tries to out the Nobel laureate as a fraud. And within minutes, we’ll debunk it. Like shooting fish in a barrel.

  15. collapse expand

    Also … where are the called-out comments offering a different point of view? Afraid your thesis doesn’t hold up to a simple Google search?

  16. collapse expand

    Great post Nancy. Maybe the book was “ghost written” and he is not familiar with the contents.

  17. collapse expand

    Ms. Miller,

    You did not close the loop on your story. Dr. Krugman argues that unemployment benefits should be extended based on the stimulating economic effect it would have, aside from the practical benefits of keeping the unemployed from starving to death. Mr. Taranto counters this by citing an economic book which suggests that unemployment benefits keep unemployed people from looking for a job.

    However you then off on a tangent about “transfer payments” and never answer the question that you implicitly asked at the beginning of your piece – should unemployment benefits be extended? Your piece implies a “no” but it is not clear that this your conclusion.

    You seem to suggest, following Mr. Taranto’s lead, that unemployment benefits are keeping people from looking for jobs. This assumes that there are literally millions of jobs that are not filled and would be filled if the unemployed simply started looking for them.

    Is this your contention? I cannot tell.

    • collapse expand

      davidlosangeles:
      Very astute. The post was not about whether I think unemployment benefits should be extended this month or indefinitely — it was about framing the argument. Before I read Krugman and Taranto, I had not focused on all the ramifications of extended benefits, which I had unquestioningly supported. The Krugman-Taranto set-to brought to focus for me reasonable questions to raise about how we as a society help one another, what the trade-offs are, and acknowledging the full costs of our actions. I like the way Steve McNally put it above (and I paraphrase): The ideal is to be sure there’s a chicken in every pot. But what if that act of caring undermines the economy — then who are we helping?
      For now, it seems unthinkable to stop extending benefits. But at what point do we say now it’s okay to stop extending benefits to the long-term unemployed? Who is to judge when someone is or is not “trying” to find a job? Or that jobs are available if the individual would accept less pay or move or make some other sacrifice? Those are questions that make us squirm. Even before the Great Recession, there were people who ran out of benefits. Were they not worthy of help?
      This highlights the uncomfortable relationship between government and the private sector. I have greater faith in entrepreneurs to bring us out of the recession than government. I don’t have a formula but I also don’t think vitriol and name-calling helps us think about how we as individuals and a society can improve things.

      In response to another comment. See in context »
  18. collapse expand

    Professor Krugman as James Taranto pointed out has apparently forgotten what he wrote a few years back. As we get older we tend to not remember many things that we said in the past either as a product of aging or a desire to not want to remember things that contradict our current positions.
    Thanks for an interesting article

  19. collapse expand

    I’m 99% sure I read where he addressed this and his contention was that we’re talking two different things – unemployment benefits when there are jobs to be found versus unemployment benefits when there are no jobs to be found. We exist in the later situation, so regardless of a particular unemployed’s virtuousness, putting them out on the street is not constructive – they are not going to be spured to find employment, because there is no employment to be found. Plus, to note, US unemployment is hardly generous if you’ve researched it – I certainly couldn’t live on it.

    I know it probably feels good to think you’ve upstaged a Nobel prize winner, but I don’t think you have.

    PS: See:

    http://krugman.blogs.nytimes.com/2010/03/08/how-little-they-know-the-world/
    http://krugman.blogs.nytimes.com/2010/03/07/supply-demand-and-unemployment/

    • collapse expand

      I actually don’t really agree with Krugman (although I DEFINITELY don’t agree with the perspectives of Miller) but she’s just being plain silly thinking she’s caught him out.

      Before you try to make a fool of others, make sure you’re not just making a fool of yourself.

      In response to another comment. See in context »
  20. collapse expand

    I suppose in a world where there are jobs to be had, where there is a healthy manufacturing base, where the GDP is spread over a wide variety of industries instead of being dominated by insurance and financial sectors the textbook might be correct. However that was then this is now.

  21. collapse expand

    I think PK is still a prof at Princeton, and I don’t care what he wrote in his textbook. I have no knowledge of economics, but I don’t think that assisting people out of work due to a convulsion in the economy as a result of reckless negligence of the financial sector and the regulators is not the time to start worrying about disincentivising people to seek work. In what way does the pittance doled out on the unemployed compare with the TARP monies showered on the entities who can’t be allowed to fail? Does morale hazard only apply to the unemployed? Maybe now is the time that Goldman and the others take a haircut.

  22. collapse expand

    Great article. Enjoyed very much.

  23. collapse expand

    rockannand:
    welcome to t/s. It’s true that Paulson preferred darkness to light while leading Goldman but as Secretary of Treasury he was charged with protecting the interest of taxpayers. Anger can be an agent for change. Although this blog is filled with angry comments I think the bigger danger now is complacency. I get the sense that many people feel that real change in Washington and Wall Street is unlikely. And, I agree, Wall Street should be made to answer and pay for the role it played in creating the credit bubble. It’s very disturbing that Wall Street can now offset much of its profits for the next couple of years with tax credits from 2008.

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    I am a financial writer and have worked for or contributed to a number of news publishers. As the song goes, "some are dead and some are living, but in my life, I have loved them all" -- Knight-Ridder Financial, USA Today, Quick Nikkei News, and Barron's -- to name a few. I am grateful to Wall Street for creating a spectacular market smash-up based on the mortgage securities market, my first beat. I'm ever so much more popular at dinner parties these days. I hope you enjoy my blog, it marks my return from the mommy track. There's no tantrum I can't handle.

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