Krugman's Ireland analysis used in US presidential campaign

donegal_road

I saw this yesterday. Paul Krugman uses Ireland as an example of how USA will end up under Romney's presidency if he gets elected. Wonder how this has affected Ireland's image across the water?

"Ireland is Romney economics in practice I think Ireland is America's future if Romney is president. They've laid off a large fraction of their public workforce, they've slashed spending, they've had extreme austerity programs, they haven't really raised taxes on corporations or the rich at all, they have 14 percent unemployment, 30 percent youth unemployment, zero economic growth," Colbert Report 18/6/12


http://www.huffingtonpost.com/2012/06/19/paul-krugman-ireland-is-r_n_1609089.html

p1akuw47h5r3it

donegal_road wrote: »

I saw this yesterday. Paul Krugman uses Ireland as an example of how USA will end up under Romney's presidency if he gets elected. Wonder how this has affected Ireland's image across the water?

"Ireland is Romney economics in practice I think Ireland is America's future if Romney is president. They've laid off a large fraction of their public workforce

Not true, we haven't laid off anyone. The decrease in numbers has been mainly due to retirements, and I'd dispute the use of the word "large". Also, the reduction in public sector workers is needed, as numbers are too large. I don; think the comparison between the American and irish public sector is an accurate one.

They've slashed spending

Again I wouldn't say we have slashed spending. It's obviously been decreased.

they've had extreme austerity programs, they haven't really raised taxes on corporations or the rich at all,

Again extreme is a bit strong. Austerity, yes. Extreme austerity, certainly not. Also, whilst taxes on corporations have not been increased, there was a chart in another thread showing how richer people have been taxed more than middle and working class people (I'll try find it).

they have 14 percent unemployment, 30 percent youth unemployment, zero economic growth," Colbert Report 18/6/12

I actually didn't know our youth employment were so high, though maybe this figure doesn't translate well to America as we have a way higher percentage of young people in 3rd level education??


http://www.huffingtonpost.com/2012/06/19/paul-krugman-ireland-is-r_n_1609089.html[/QUOTE]

donegal_road

yes I agree with all that, but are Krugman's remarks likely to further tarnish Ireland's reputation seeing as he is a person who's words carry a lot of weight?

woodoo

DanDan6592 wrote: »

Not true, we haven't laid off anyone. The decrease in numbers has been mainly due to retirements, and I'd dispute the use of the word "large". Also, the reduction in public sector workers is needed, as numbers are too large. I don; think the comparison between the American and irish public sector is an accurate one.

There are thousands of staff gone and the remaining staff are doing the work. Money is being saved. He is right about the public workforce being reduced. Just not the manner of the reduction. Which always upsets people here who just want to see Brian Dobson announce on the 6:01 news that public servants are getting sacked. And then you can revel in the interviews of upset PS staff explaining on the news how devastated they are. Blood hungry.

hyperborean

donegal_road wrote: »

yes I agree with all that, but are Krugman's remarks likely to further tarnish Ireland's reputation seeing as he is a person who's words carry a lot of weight?

Might be the opposite, the right love romney and money, bankers/shylocks are all right leaning. comparing Ireland inc to USA inc under romney might shine positive light on Ireland.

Sand

Krugmans totally disinterested in Ireland or gaining any real understanding of the Irish economic/fiscal/political situation so its unsurprising he makes basic mistakes in recognising whats actually happened and is happening.

All he is interested in is using Ireland as a strawman to beat his political opponents with in the Red vs. Blue wars in the US. He knows no one is going to fact check his claims, and even if they do he can dismiss it as irrelevant. His interventions into Irish (or indeed British, given he regularly pokes his nose in there as well) affairs are unhelpful because he never, ever, ever bothers to actually engage with the issue he is commentating on. He is always, always positioning his comments and views to serve his trench warfare with the US republican party.

Dave!

^
Indeed. It's annoying when he gets rolled out as "nobel prize winning economist Paul Krugman", and everyone is expected to have their hair blown back no matter what he says. He may be very smart, but he's so immersed in the ideological warfare in the US that it taints everything he says.

eire4

Dave! wrote: »

^
Indeed. It's annoying when he gets rolled out as "nobel prize winning economist Paul Krugman", and everyone is expected to have their hair blown back no matter what he says. He may be very smart, but he's so immersed in the ideological warfare in the US that it taints everything he says.

I agree with you that it is very annoying when he makes comments like this which show his lack of real interest in the situation in Ireland and that he is only using a superficial analysis of Ireland to bolster his own arguments in the USA.

I will disagree with you about his arguments in the USA though. His main contention right now in the USA is that the economy there is getting so top heavy that the country is heading for disaster. With the super rich owning about 85% of the wealth in the country and that figure increasing it means the people at the bottom and middle have less to spend. Given that they make up the vast majority of the US population and they tend to spend large portions if not most of their income the less money they have the worse the US economy gets as less people are buying. The super rich don't keep buying yachts with more and more money.
What we have seen in the US since the crazy citizens united decision by their supreme court is how dangerous allowing corporations to fund politicans to an unlimited degree is. The current election cycle in the US is flooded with money and the main direction of the money seems to be super wealthy elites basically buying what ever policy they want. Now this is not new in US politics but it is new at the levels we are now seeing. Democracy is in danger of being completely killed offf in the US and being replaced with a very unbalanced society of super wealthy and masses that are poor. Given how important the US economy is to both Ireland and the world economy this is not a good trend to put it mildly and I would have to say I am would be in agreement with Krugman in speaking against this trend in the USA.

Delancey

donegal_road wrote: »

yes I agree with all that, but are Krugman's remarks likely to further tarnish Ireland's reputation seeing as he is a person who's words carry a lot of weight?

On the whole the answer must be yes - we loved to read stories how Ireland was held up as an example of great economic growth by candidates in US state elections and elsewhere.
Conversely , holding Ireland up as an example of how not to run an economy can only harm our reputation abroad - certainly cannot be making the IDA's job any easier.

ardmacha

It is troubling that this guy is saying something he almost certainly knows to be untrue, for local political advantage. There is a lot of nonsense posted here on boards for similar reasons, but sometimes because people haven't a clue other than some trite headline in the Evening Herald. This guy does know better, and knows where to get the information, but still misrepresents it using his status to give credibility to his bias.

Conversely , holding Ireland up as an example of how not to run an economy can only harm our reputation abroad - certainly cannot be making the IDA's job any easier

Ireland can certainly be held up as an example of how not to run an economy. However its portrayal as a place will low tax on corporations, lowish tax on the rich and reduced public spending might actually seem OK to some businesses the IDA may want to talk to. Many of these people actually see Romney as a practical Republican who did OK in Massachusetts.

southsiderosie

ardmacha wrote: »

Ireland can certainly be held up as an example of how not to run an economy. However its portrayal as a place will low tax on corporations, lowish tax on the rich and reduced public spending might actually seem OK to some businesses the IDA may want to talk to.

I think this is the crux of the issue. Unlike, say, France, Irish political elites haven't made a lot of noise about soaking the rich in order to make up budget shortfalls. So I would think that Ireland would be seen by investors as a relatively safe place to do business within the euro zone, especially since local costs are falling.

As for Krugman, to be fair 9 out of 10 articles about Ireland in the US don't reflect the modern realities of the island so I can't say that this is surprising.

ardmacha

As for Krugman, to be fair 9 out of 10 articles about Ireland in the US don't reflect the modern realities of the island so I can't say that this is surprising.

Articles written by hack journalists are one thing, comments on economics by Noblel prize winners might well be expected to be better.

Sand

ardmacha wrote: »

Articles written by hack journalists are one thing, comments on economics by Noblel prize winners might well be expected to be better.

I've seen an interview with Krugman where he acknowledges that his wife goes over his columns before they're published, to ensure they're politically strong enough.

When he has a draft, he gives it to Wells to edit. Early on, she edited a lot—she had, they felt, a better sense than he did of how to communicate economics to the layperson. (She is also an economist—they met when she was a postdoc at M.I.T. and he was teaching there.) But he’s much better at that now, and these days she focusses on making him less dry, less abstract, angrier. Recently, he gave her a draft of an article he’d done for Rolling Stone. He had written, “As Obama tries to deal with the crisis, he will get no help from Republican leaders,” and after this she inserted the sentence “Worse yet, he’ll get obstruction and lies.” Where he had written that the stimulus bill would at best “mitigate the slump, not cure it,” she crossed out that phrase and substituted “somewhat soften the economic hardship that we face for the next few years.” Here and there, she suggested things for him to add. “This would be a good place to flesh out the vehement objections from the G.O.P. and bankers to nationalization,” she wrote on page 9. “Show us all their huffing and puffing before you dismiss it as nonsense in the following graf.”

I dont think it absolves Krugman of responsibility - afterall, he could submit his articles without his wife acting as ghost writer - but Krugman columns are at edited by someone who doesnt even aspire to hack journalist status which might explain the tone of them sometimes.

St Mikael

Krugman isn't pretending to be a neutral observer. He regularly, and openly, says that his work is basically an attempt to convince people that right-wing/Republican/whatever economics is bunk - and massively damaging for millions of people. Whether you agree or not is one thing (and in my view, he has been completely correct on almost every major issue over the past four years), but calling it 'hackery' is ridiculous. This is what journalists are supposed to do: point out when powerful people are failing to do their jobs.

As for his Ireland analysis, as far as I'm aware his only point is that austerity cannot stimulate economic growth. Having a debate about whether cutting X amount of public sector jobs amounts to 'slashing' spending or merely 'cutting spending if you like, but the big picture is, again, that he's obviously correct.

Sand

@St Mikael

Krugman isn't pretending to be a neutral observer. He regularly, and openly, says that his work is basically an attempt to convince people that right-wing/Republican/whatever economics is bunk - and massively damaging for millions of people. Whether you agree or not is one thing (and in my view, he has been completely correct on almost every major issue over the past four years), but calling it 'hackery' is ridiculous. This is what journalists are supposed to do: point out when powerful people are failing to do their jobs.

If Krugman is starting from a position where he believes its his purpose to disprove a Republican economic perspective regardless of its own merit, then hes a hack.

As for his Ireland analysis, as far as I'm aware his only point is that austerity cannot stimulate economic growth. Having a debate about whether cutting X amount of public sector jobs amounts to 'slashing' spending or merely 'cutting spending if you like, but the big picture is, again, that he's obviously correct.

Its unclear what Krugmans point is as he is comparing apples and oranges - he makes points about austerity using a tiny wide open economy without the ability to set its own monetary policy (and now the inability to set its own fiscal policy), which is hugely indebted on all counts and unable to borrow and then uses that to draw implications for the pursuit of austerity in a huge, fairly closed economy which has the ability to set its own monetary and fiscal policy which is (uniquely) able to borrow.

I actually believe Krugman might be able to make some coherent points about the US situation - though he is remarkably calm about pushing US fiscal credibility to the edge. However, if he is seriously thinking that the US and Ireland have the same set of options, and that the same policy options will yield the same results then hes being either dishonest or a fool.

I'm being kind by presuming hes just being dishonest and playing politics for the US domestic audience. Id wish though he'd stop with his clueless interventions into the Irish situation which only give fuel to those in Ireland who think Ireland has the same options as the US in terms of austerity vs. stimulus.

southsiderosie

Sand wrote: »

@St Mikael


If Krugman is starting from a position where he believes its his purpose to disprove a Republican economic perspective regardless of its own merit, then hes a hack.

Its unclear what Krugmans point is as he is comparing apples and oranges - he makes points about austerity using a tiny wide open economy without the ability to set its own monetary policy (and now the inability to set its own fiscal policy), which is hugely indebted on all counts and unable to borrow and then uses that to draw implications for the pursuit of austerity in a huge, fairly closed economy which has the ability to set its own monetary and fiscal policy which is (uniquely) able to borrow.

I actually believe Krugman might be able to make some coherent points about the US situation - though he is remarkably calm about pushing US fiscal credibility to the edge. However, if he is seriously thinking that the US and Ireland have the same set of options, and that the same policy options will yield the same results then hes being either dishonest or a fool.

I'm being kind by presuming hes just being dishonest and playing politics for the US domestic audience. Id wish though he'd stop with his clueless interventions into the Irish situation which only give fuel to those in Ireland who think Ireland has the same options as the US in terms of austerity vs. stimulus.

Krugman is writing op-eds and has a clearly stated ideological position (hence the title of his book 'The Conscience of a Liberal'), as do most opinion writers at any major magazine or newspaper. From his position, he has frequently attacked the Obama administration as well, so he is at least ideologically consistent. Frankly, I don't think the fact that he has a stated position makes him a hack. What is more problematic is the comparison of Ireland and the US.

St Mikael

Sand wrote: »

@St Mikael


If Krugman is starting from a position where he believes its his purpose to disprove a Republican economic perspective regardless of its own merit, then hes a hack.

I don't know what you mean by 'hack' to be honest. He's clearly not trying to discredit Republican economics 'regardless of its own merit' - his position is that Republican economics has no merit, and deserves to be roundly condemned.

If arguing for something you believe in (with evidence) makes you a 'hack', then I guess he's a hack, but that strikes me as something of an unfair label...

Its unclear what Krugmans point is as he is comparing apples and oranges - he makes points about austerity using a tiny wide open economy without the ability to set its own monetary policy (and now the inability to set its own fiscal policy), which is hugely indebted on all counts and unable to borrow and then uses that to draw implications for the pursuit of austerity in a huge, fairly closed economy which has the ability to set its own monetary and fiscal policy which is (uniquely) able to borrow.

I actually believe Krugman might be able to make some coherent points about the US situation - though he is remarkably calm about pushing US fiscal credibility to the edge. However, if he is seriously thinking that the US and Ireland have the same set of options, and that the same policy options will yield the same results then hes being either dishonest or a fool.

I'm being kind by presuming hes just being dishonest and playing politics for the US domestic audience. Id wish though he'd stop with his clueless interventions into the Irish situation which only give fuel to those in Ireland who think Ireland has the same options as the US in terms of austerity vs. stimulus.

His claim is not that Ireland has the same options as the US. In fact, in his criticism of the Conservatives in the UK he has repeatedly said that Cameron and Osborne's policies are particularly stupid since they are - uniquely - implementing austerity despite not actually having to (unlike the PIIGS, which have had the policy forced on them, or the Obama administration, which has been hamstrung by an obstructionist Congress).

His point is that, two or three years ago, there were many many people making the argument that government austerity measures would promote economic growth, because they would foster business and consumer confidence. Krugman's view is that this is hokum, and that in recessionary/depressionary conditions, the only thing that can promote economic growth are fiscal and monetary stimulus - i.e. the precise opposite of austerity. He uses Ireland as a case in point, because we have been the poster boy for austerity supporters, yet have seen no real pickup in economic growth or 'confidence'.

It's a fair point as far as I can tell.

population

St Mikael wrote: »

I don't know what you mean by 'hack' to be honest. He's clearly not trying to discredit Republican economics 'regardless of its own merit' - his position is that Republican economics has no merit, and deserves to be roundly condemned.

If arguing for something you believe in (with evidence) makes you a 'hack', then I guess he's a hack, but that strikes me as something of an unfair label...




His claim is not that Ireland has the same options as the US. In fact, in his criticism of the Conservatives in the UK he has repeatedly said that Cameron and Osborne's policies are particularly stupid since they are - uniquely - implementing austerity despite not actually having to (unlike the PIIGS, which have had the policy forced on them, or the Obama administration, which has been hamstrung by an obstructionist Congress).

His point is that, two or three years ago, there were many many people making the argument that government austerity measures would promote economic growth, because they would foster business and consumer confidence. Krugman's view is that this is hokum, and that in recessionary/depressionary conditions, the only thing that can promote economic growth are fiscal and monetary stimulus - i.e. the precise opposite of austerity. He uses Ireland as a case in point, because we have been the poster boy for austerity supporters, yet have seen no real pickup in economic growth or 'confidence'.

It's a fair point as far as I can tell.

I like Krugman. Do not agree with everything he says but I agree with you that he has no choice but to nail his colours to the mast, politically speaking, in support of what he believes will help to fix the US economy. But there is no getting away from the fact that this piece is not a fair reflection of the Irish situation and that he is using a case study that essentially does not exist to back up his arguments.

St Mikael

population wrote: »

I like Krugman. Do not agree with everything he says but I agree with you that he has no choice but to nail his colours to the mast, politically speaking, in support of what he believes will help to fix the US economy. But there is no getting away from the fact that this piece is not a fair reflection of the Irish situation and that he is using a case study that essentially does not exist to back up his arguments.

His argument is that cutting government spending in recession/depression is a bad idea, if it can be avoided, as it makes things worse. Ireland is a good example of that.

Here is government spending:




And here is unemployment:



Granted, Ireland cannot avoid cutting spending, given our current situation. But the US can, so why follow us down this route?

I dunno, it seems to me that people are mistakenly interpreting his comments as an argument that Ireland should be doing something different. I don't think he's necessarily saying that, just using us an example of how economics works.

Sand

@St Mikael

I don't know what you mean by 'hack' to be honest. He's clearly not trying to discredit Republican economics 'regardless of its own merit' - his position is that Republican economics has no merit, and deserves to be roundly condemned.

If arguing for something you believe in (with evidence) makes you a 'hack', then I guess he's a hack, but that strikes me as something of an unfair label...

I'm giving him more credit than you are by being * disappointed* by a Nobel prize winning economist devolving into political trench warfare. You view it as being acceptable that Republican economics (whatever that means) deserves to be roundly condemned...without much further investigation than identifying it as Republican presumably.

Anyone with an opinion and a blog could do that - Id hope for Krugman (nobel prize winning economist...) to do a little more. But given his wife seems to have a significant role in the writing of his articles, perhaps the blame is not solely his.

His claim is not that Ireland has the same options as the US.

No, thats the claim of the people who listen to his dull insights on the Irish position from Ireland.

In the US, his claim is that the US options and results are the same as the Irish options and results.

His point is that, two or three years ago, there were many many people making the argument that government austerity measures would promote economic growth, because they would foster business and consumer confidence.

Yes, a particularly dull argument because Ireland and indeed most of Europe have not been engaging in austerity. Instead, Ireland has run huge deficits to fund a massive stimulus - paying wages, social welfare, pensions etc that cannot be sustained. The self serving argument being that austerity would hurt Irish economic growth. Ireland ran a 32% budget deficit in 2010.... the highest recorded by any developed state outside of wartime. We ran a 13.1% deficit in 2011, the highest in the EU. Some austerity.

Yet Ireland's is much worse off now than we were 2 or 3 years ago - so much for stimulus saving the day. Europe (Spain, Italy, France.. even Germany) have also continued to run deficits and here we are in an existential economic crisis. This is the main problem with Krugmans opinion - his strawman, Ireland, is not engaged in austerity. Quite the opposite.

Ireland is a lousy straw-man because we are in quite simply the worst position possible being heavily indebted on all measures, in all sectors without any monetary or fiscal sovereignty. Krugman *ought* to know this, but he either doesn't know or doesn't care to learn. I'm presuming the latter.

@Southsiderosie

Krugman is writing op-eds and has a clearly stated ideological position (hence the title of his book 'The Conscience of a Liberal'), as do most opinion writers at any major magazine or newspaper. From his position, he has frequently attacked the Obama administration as well, so he is at least ideologically consistent. Frankly, I don't think the fact that he has a stated position makes him a hack. What is more problematic is the comparison of Ireland and the US.

Unfortunately, hes not just an opinion writer. Hes a nobel prize winning economist, and thus his voice carries some weight on economic policy matters. Also unfortunately, he allows his wife...whose not an nobel prize winning economist and is a recognised idealogical influence on his columns to edit his printed views.

St Mikael

Sand wrote: »

Yes, a particularly dull argument because Ireland and indeed most of Europe have not been engaging in austerity. Instead, Ireland has run huge deficits to fund a massive stimulus - paying wages, social welfare, pensions etc that cannot be sustained. The self serving argument being that austerity would hurt Irish economic growth. Ireland ran a 32% budget deficit in 2010.... the highest recorded by any developed state outside of wartime. We ran a 13.1% deficit in 2011, the highest in the EU. Some austerity.

Yet Ireland's is much worse off now than we were 2 or 3 years ago - so much for stimulus saving the day. Europe (Spain, Italy, France.. even Germany) have also continued to run deficits and here we are in an existential economic crisis. This is the main problem with Krugmans opinion - his strawman, Ireland, is not engaged in austerity. Quite the opposite.

Ireland is a lousy straw-man because we are in quite simply the worst position possible being heavily indebted on all measures, in all sectors without any monetary or fiscal sovereignty. Krugman *ought* to know this, but he either doesn't know or doesn't care to learn. I'm presuming the latter.

To point you once again to this chart...



... I'm not sure how you can claim that we haven't been engaged in austerity. As you well know the 30% of GDP deficit was simply a result of having to bail out the banks, that money did not make it into the economy.

'Stimulus' does not just mean that the government runs a deficit. It's about the change in spending. Obviously our deficit has risen since before the crisis, because the tax base has collapsed, and unemployment benefits are now more costly, because there are more unemployed people. The question is, now that we are in a funk, how do we get out of it? Textbook macroeconomics - and Krugman - say that the only way for it to happen is for the government to increase spending. Instead, most governments in the world are cutting spending.

Now, for Ireland, the game is up - we cannot increase spending anymore. But for the likes of the UK, the US, Germany - all of whom are being begged by bond markets to borrow more money - this is not the case.

4.legs.good

St Mikael wrote: »

To point you once again to this chart...

Correlation is not causation, and neither are the 2 graphs correlated much for that matter

As for "austerity" who are you kidding? :rolleyes:

Take a look at the governments own budget documents
The bulk of "austerity" so far has been achieved by cutting once off capital spending.


The US is not Ireland, to compare the two is highly disingenuous of Krugman for many reasons.

Sand

And I once against point you to the facts:

2008 Deficit: -7.3%
2009 Deficit: -14.0%
2010 Deficit: -31.2%
2011 Deficit: -13.1%

And the chart youre pointing to is a *component* of total government spending. Going by the OECD stats, government spending in 2010 is up on 2006 - even if we discount the 32 billion paid to the banks in that year. Government spending on public sector wages in 2010 is up on 2006. Social transfers in 2010 are up on 2006 figures (unsurprisingly)

In what way is this austerity? The government is running massive deficits. The extent of its austerity to date has been minor trimmings. Government spending is not down, its up.

'Stimulus' does not just mean that the government runs a deficit. It's about the change in spending. Obviously our deficit has risen since before the crisis, because the tax base has collapsed, and unemployment benefits are now more costly, because there are more unemployed people. The question is, now that we are in a funk, how do we get out of it? Textbook macroeconomics - and Krugman - say that the only way for it to happen is for the government to increase spending. Instead, most governments in the world are cutting spending.

Now, for Ireland, the game is up - we cannot increase spending anymore. But for the likes of the UK, the US, Germany - all of whom are being begged by bond markets to borrow more money - this is not the case.

Actually, Keynes noted that it didnt really matter what the government stimulus was spent on. Afterall, the government loses control over how the money is spent after they themselves have paid it to somebody. The money paid to the banks is paid to its bondholders and employees, who spend it on goods and services, etc, etc.

Ireland has not run an austerity response to the crisis. Instead, they have followed Krugmans playbook perfectly. They have borrowed from official sources, and spent and spent and spent. Spending is up on 2006 both in absolute terms and as a deficit %. The government has bought up everyone's losses, and kept spending and making losses good. Going by Krugmans views, Ireland should be thriving. And yet Ireland is not working.

Now, that doesnt mean that Krugman's ideas would have the same results in the US. Ireland is not the US. The US is not Ireland. Krugman ought to know this.

In fact, Ireland desperately desperately needs economies like the US, UK and Germany to spend like drunken sailors so I wish him well on that. However, Id really wish hed stop using Ireland as a strawman, giving false aid to people who think Ireland has choices and point to a "nobel prize winning economist" as their backup. Or if he is going to comment - he should at least do some research on the issue.

southsiderosie

Sand wrote: »

@Southsiderosie
Unfortunately, hes not just an opinion writer. Hes a nobel prize winning economist, and thus his voice carries some weight on economic policy matters. Also unfortunately, he allows his wife...whose not an nobel prize winning economist and is a recognised idealogical influence on his columns to edit his printed views.

So because he has won a Nobel Prize, he should stay silent on political matters? Given that most big-name American economists have been close political advisors to multiple governments (at home and abroad), I hardly think it is expected of them to remain locked in the ivory tower. It seems to be a bit of a moot point anyway - Krugman won the Nobel after almost a decade as a columnist at the NY Times. His influence largely stems from his long history of writing op-eds and books on economic policy for public consumption. His current prominent place as an opinion writer at a 'newspaper of record' is the base of his public influence - the Nobel (which was for trade policy, not macroeconomics) is a nice add-on, but he had a visible platform to air his views long before he won.

As for the influence of his wife, she may be egging him on in terms of hyperbole, but Krugman was chosen as a NY Times columnist because of the clarity of his writing and the strength of his opinions - something which is obvious even in his earlier academic papers. And as any of his current and former colleagues at Princeton and MIT will tell you, he has never had a problem sticking the knife in to make a point!

4.legs.good

Nobel "Memorial" (there is no Nobel prize in economics btw, its considered the dismal science for good reason) winner economist or not.

Its one thing to stay quiet its another to knowingly lie, exaggerate and mislead thousands if not millions of people who read his articles.

If for example some Nobel Prize winner XYZ came out and strongly opposed "climate change" there would be an uproar for him/her misleading the public, yet when Krugman is at its ok?

Once again Ireland and US are different, not only that but the World and US are different, the US could default on all external debts tomorrow and there is **** all any country or company could do considering they have by far the largest military machine and THE reserve currency. Not that it would be a wise thing to do but its just an illustration that the US is "special" when it comes politics and economics.

K-9

Sand wrote: »

Yes, a particularly dull argument because Ireland and indeed most of Europe have not been engaging in austerity. Instead, Ireland has run huge deficits to fund a massive stimulus - paying wages, social welfare, pensions etc that cannot be sustained. The self serving argument being that austerity would hurt Irish economic growth. Ireland ran a 32% budget deficit in 2010.... the highest recorded by any developed state outside of wartime. We ran a 13.1% deficit in 2011, the highest in the EU. Some austerity.

Yet Ireland's is much worse off now than we were 2 or 3 years ago - so much for stimulus saving the day. Europe (Spain, Italy, France.. even Germany) have also continued to run deficits and here we are in an existential economic crisis. This is the main problem with Krugmans opinion - his strawman, Ireland, is not engaged in austerity. Quite the opposite.

How is a 19 percentage point drop in the deficit a stimulus?

Sand wrote: »

And I once against point you to the facts:

2008 Deficit: -7.3%
2009 Deficit: -14.0%
2010 Deficit: -31.2%
2011 Deficit: -13.1%

And the chart youre pointing to is a *component* of total government spending. Going by the OECD stats, government spending in 2010 is up on 2006 - even if we discount the 32 billion paid to the banks in that year. Government spending on public sector wages in 2010 is up on 2006. Social transfers in 2010 are up on 2006 figures (unsurprisingly)

In what way is this austerity? The government is running massive deficits. The extent of its austerity to date has been minor trimmings. Government spending is not down, its up.

Why are you using 2006 figures? spending didn't peak in 2006.

Blowfish

St Mikael wrote: »

Krugman isn't pretending to be a neutral observer. He regularly, and openly, says that his work is basically an attempt to convince people that right-wing/Republican/whatever economics is bunk - and massively damaging for millions of people. Whether you agree or not is one thing (and in my view, he has been completely correct on almost every major issue over the past four years), but calling it 'hackery' is ridiculous.

You are missing one extremely important point, that is what Krugman was promoting prior to the last 4 years and what resulted from it.

The US had a recession at the turn of the century due to the dot com crash. Krugman at that point was one of the champion's of Greenspan's action of cutting the interest rates in order to promote 'stimulus' through an increase in housing. Naturally, this was one of the prime factors in leading to the bubble and bust in the US. Here are some of his quotes:

During phases of weak growth there are always those who say that lower interest rates will not help. They overlook the fact that low interest rates act through several channels. For instance, more housing is built, which expands the building sector. You must ask the opposite question: why in the world shouldn't you lower interest rates?" To the question "...because that would only promote inflation instead of growth?" he responded "There is no danger of that!"
-Krugman 1998

Cut interest rates a couple of percentage points, provide plenty of liquidity, and call me in the morning.
-Krugman December 27, 2000

Millions of Americans have decided that low interest rates offer a good opportunity to refinance their homes or buy new ones
-Krugman May 2, 2001

KRUGMAN: "I think frankly it’s got to be — business investment is not going to be the driving force in this recovery. It has to come from things like housing, things that have not been (UNINTELLIGIBLE)."
DOBBS: "We see, Paul, housing at near record levels, we see automobile purchases near record levels. The consumer is still very much in this economy. Can he or she — or I should say he and she, can they bring back this economy?"
KRUGMAN: "Well, as far as the arithmetic goes, yes, it is possible. Will the Fed cut interest rates enough? Will long-term rates fall enough to get the consumer, get the housing sector there in time? We don’t know"

Low interest rates, which promote spending on housing and other durable goods, are the main answer
-Krugman October 7, 2001

The Fed's dramatic interest rate cuts helped keep housing strong
-Krugman December 28, 2001

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble. Judging by Mr. Greenspan's remarkably cheerful recent testimony, he still thinks he can pull that off.
-Krugman August 9, 2002

In other words, what the US is experiencing now is in a large part due to using Krugman style 'stimulus' to recover from the dot com boom, a fact even Greenspan himself admitted later.

thebman

I think he realises there is a large Irish population in America so they will be more familiar with what is going on in Ireland than any of the other PIIGS so he uses it as an example that it is those policies will hurt and have negative social side effects and maybe the US should not aspire to them.

Don't think he really cares if it economically credible comparison on the level most people are talking about here since he already has the nobel prize :P

Maura74

I think we will have to be just happy with our lot as things are never going to change. This guy has got it right we have no say in anything anymore.

http://www.youtube.com/watch?v=LKsZ1hqHBHU&feature=related


http://www.youtube.com/watch?NR=1&feature=endscreen&v=NB-HZG1Zh7s

Icepick

This Paul Krugman? :rolleyes:

Sand

@K-9

How is a 19 percentage point drop in the deficit a stimulus?

How are double digit deficits for the past three years austerity? A 19 point drop is simply slightly less of a massive stimulus than in the prior year.

Why are you using 2006 figures? spending didn't peak in 2006.

I'm using 2006 figures as they were the last glory days of the Celtic Tiger - Gotterdammerung if you will.

You're right though - spending didn't peak in 2006. It kept on going up and up and up to 2010 which is the last year the OECD has stats for...which is the point. By every measure, Ireland is not engaged in any serious austerity. Instead Ireland has borrowed and spent, which is the Krugman approved gameplan.

@Southsiderosie

So because he has won a Nobel Prize, he should stay silent on political matters?

Nope, but he should try to keep his political views from *unduly* influencing his economic policy views. Fighting political trench warfare, egged on by his wife to stick the knife in as often as possible can only cloud his judgement - as demonstrated by his lazy and frankly wrong "analysis" of the Irish economic situation.

When a man has a hammer, every problem looks like a nail.

@Blowfish

You are missing one extremely important point, that is what Krugman was promoting prior to the last 4 years and what resulted from it.

Yup, Keynes isnt just for recessions. If his views are to have any realistic application then they must also be followed in booms, but he tends to be far less popular with everyone on the right *and* the left at those times.

K-9

Sand wrote: »

@K-9


How are double digit deficits for the past three years austerity? A 19 point drop is simply slightly less of a massive stimulus than in the prior year.

Answering a question with a question. A 19 point drop is huge, there's no doubt about it.

I'm using 2006 figures as they were the last glory days of the Celtic Tiger - Gotterdammerung if you will.

You're right though - spending didn't peak in 2006. It kept on going up and up and up to 2010 which is the last year the OECD has stats for...which is the point. By every measure, Ireland is not engaged in any serious austerity. Instead Ireland has borrowed and spent, which is the Krugman approved gameplan.

Unemployment has trebled from 2006, naturally that has resulted in huge difficulties getting expenditure under control, a few other minor budgetary problems too!

Sand

@K-9

Answering a question with a question. A 19 point drop is huge, there's no doubt about it.

A huge drop achieved by not bailing out Anglo-Irish again? That's to be celebrated as a success?

The deficit has barely shifted since 2009, and is significantly higher than 2008 - lets not even talk about 2007. Its ridiculous to describe the past 4 years in Ireland as austerity. The government has run a huge stimulus. This might be uncomfortable because it presents the question of what austerity would actually entail if this is a stimulus but those are the facts.

Unemployment has trebled from 2006, naturally that has resulted in huge difficulties getting expenditure under control, a few other minor budgetary problems too!

Sure, but how does that change the reality that the government is not pursuing an austerity agenda but is instead borrowing and spending?

What Ireland is engaged in is not austerity, its actually hysterity, where savage spending increases are ruthlessly targeting the most vulnerable in society!

The UK is another target of Krugmans ire - theyre also "doing it wrong". And again, Krugmans analysis is lazy and wrong: Those evil conservatives are planning to increase government spending every single year for the next 5 years - a ruthless imposition of cruel and heartless spending hikes....those bastards!

SBWife

Krugman's stimulus suggestions may very well work in the US where US workers manufacture a significant proportion of what US consumers want to buy. In such an economy putting more money into the hands of the average consumer using tax cuts etc. may very well lead to economic expansion with a positive feedback cycle. But it would be disastrous in an economy as open as Ireland, much of what our consumers would purchase with any stimulus windfall are produced abroad, therefore if we were to pursue a Krugman solution we'd end up with a higher deficit and the likes of BMW in Germany, Apple in China and Asian garment makers would end up with the jobs as consumers spent the excess on cars, iPads and clothing. Without the jobs being added here there would be no positive feedback cycle and we'd end up further in the hole.

creedp

SBWife wrote: »

Krugman's stimulus suggestions may very well work in the US where US workers manufacture a significant proportion of what US consumers want to buy. In such an economy putting more money into the hands of the average consumer using tax cuts etc. may very well lead to economic expansion with a positive feedback cycle. But it would be disastrous in an economy as open as Ireland, much of what our consumers would purchase with any stimulus windfall are produced abroad, therefore if we were to pursue a Krugman solution we'd end up with a higher deficit and the likes of BMW in Germany, Apple in China and Asian garment makers would end up with the jobs as consumers spent the excess on cars, iPads and clothing. Without the jobs being added here there would be no positive feedback cycle and we'd end up further in the hole.

Well is this not a consequence of concentrating on ensuring the environment is right for exporting multi-nationals to the detriment of ensuring the environment is supportive of home grown industry. Also is it not a bit overly simplistic to say that stimulus will not in any way be positive for the Irish economy? Surely what's important is to target stimulus to support indigenous industry providing goods and services in the Irish economy. In any case any policies which increase employment both in the export-led and indigenous sector leading to additional jobs and therefore tax revenue and lower demand for SW services is a stimulus whether or not those employees buy iphones or BMW's.

As to the argument that Ireland is not implementing austerity becasue it runs a deficit which is by defaulf a stimulus I think that is also overly simplistic. Govt policy which removes money from the taxpayer through additional taxation/stealth charges whgile at the same time cuts public services is pursuing an austerity policy. You can argue the scale of the policy but it is an austerity policy. The idea that you can't be pursuing austerity when you are borrowing does not stack up. It might if you were starting from a clean sheet or increased borrowing and did not introduce cuts.

However, as I'm not a Krugman or, unlike many here, do not have an economic expertise, I await the contrary analysis

SBWife

It's a consequence of being a very small market located on an island with a limited history of industrialisation. We have quite rightly IMO specialised and invested in manufacturing small high value added products both pills and chips are easy to transport to larger markets. Home grown industry of goods which have high transportantion costs will always be challenging as in order to take advantages of natural economies of scale we must be export oriented (the local market is just too small) and even with reductions in labor input costs transport costs make it difficult to be competitive with bulky goods produced closer to large markets. There is a simple reason the UK is our largest trading partner, geographic proximity.

Krugman's solutions are not based on incentivising the export oriented sector they are based on priming the domestic pump, essentially it's a Kenseyan solution where increased government spending and reduced taxes increase the amount of cash in the economy and a multiplier effect comes into play which moves the economy into growth. The government borrows in order to prime the pump in the hope/belief that the resulting growth will be sufficient to support the additional debt. All well and good in a closed system.

In an open system such as ours it's likely that a large portion of the stimulus monies will be used to purchase imported consumer goods, this means there will be no multiplier effect (or it'll be very limited). As result you end up with higher levels of government debt without the growth sufficient to support it, in effect a downward spiral as opposed to the upward spiral Krugman suggests.

Delancey

ESRI in their latest Quarterly Bulletin have warned specifically against a ' home grown ' stimulus package citing this country's previous failures with them.
I guess they are of the view that such a package benefits overseas economies more than ours which given it's size and openness is not surprising.

K-9

Sand wrote: »

The UK is another target of Krugmans ire - theyre also "doing it wrong". And again, Krugmans analysis is lazy and wrong: Those evil conservatives are planning to increase government spending every single year for the next 5 years - a ruthless imposition of cruel and heartless spending hikes....those bastards!

Just on this, I'm surprised to hear of expenditure increases in the UK, you have a link for that?

Medu

SBWife wrote: »

Krugman's stimulus suggestions may very well work in the US where US workers manufacture a significant proportion of what US consumers want to buy. In such an economy putting more money into the hands of the average consumer using tax cuts etc. may very well lead to economic expansion with a positive feedback cycle. But it would be disastrous in an economy as open as Ireland, much of what our consumers would purchase with any stimulus windfall are produced abroad, therefore if we were to pursue a Krugman solution we'd end up with a higher deficit and the likes of BMW in Germany, Apple in China and Asian garment makers would end up with the jobs as consumers spent the excess on cars, iPads and clothing. Without the jobs being added here there would be no positive feedback cycle and we'd end up further in the hole.

I can't see how stimulus will improve anything, it's just a continuation of the policy's that led to the whole mess. If the fundamental's of the economy was fine, but people were irrationally saving everything, then stimulus might be a good idea, but that is not the case. We had fake growth in Europe and the US, which has continued in the US as they pumped trillions into the system over the last few years and now that they have started to cut back on some of that spending their fictionally growth is once again slowing as NOBODY believes we are in a better place now than in ~2008/9.

I do wonder about the intelligence of these people when their counter argument is that austerity isn't working- look at X/Y/Z. Of course cutting spending isn't going to lead to short term growth, it's not about that, it's about starting to live within our means and building a solid foundation for future growth.

General Atomic

Medu wrote: »

I can't see how stimulus will improve anything, it's just a continuation of the policy's that led to the whole mess. If the fundamental's of the economy was fine, but people were irrationally saving everything, then stimulus might be a good idea, but that is not the case. We had fake growth in Europe and the US, which has continued in the US as they pumped trillions into the system over the last few years and now that they have started to cut back on some of that spending their fictionally growth is once again slowing as NOBODY believes we are in a better place now than in ~2008/9.

I do wonder about the intelligence of these people when their counter argument is that austerity isn't working- look at X/Y/Z. Of course cutting spending isn't going to lead to short term growth, it's not about that, it's about starting to live within our means and building a solid foundation for future growth.

The previous policy was hardly government stimulus, it was a buildup of private debt due to cheap money flowing from the core of Europe to our banks. People certainly are saving now compared to before and if they're not saving then they're on the dole and thus unable to provide economic demand on the scale required to create employment.

It's also ridiculous to talk about the U.S policy as if it was stimulus. Cheap money fed to banks does not get passed into the economy as a whole, most of those banks ended up buying government bonds rather than increasing lending. Those trillions you're talking about are sitting idle right now, they're not contributing in any way to the U.S economy. The tiny stimulus passed by Obama early in the crisis actually did quite a lot to shore up the U.S economy, it was simply inadequate given the scale of the losses involved.

This belt-tightening ****e is just pointless preaching. No-one is advocating that everyone take on some huge private debt. Without some growth in the economy, which austerity obviously cannot provide, the economy shrinks, more jobs are lost and tax revenues go down; making it even more difficult to pay off debts. How is that a solution?

Icepick

General Atomic wrote: »

Without some growth in the economy, which austerity obviously cannot provide, the economy shrinks, more jobs are lost and tax revenues go down; making it even more difficult to pay off debts. How is that a solution?

You - like Krugman - are wrong.

Sand

K-9 wrote: »

Just on this, I'm surprised to hear of expenditure increases in the UK, you have a link for that?

The UK 2012 budget plan - Table A1 on page 86

Total Managed Expenditure - Year Ending
683.4 Billion GBP - 2013
720 Billion GBP - 2014
733.5 Billion GBP - 2015
744 Billion GBP - 2016
756.3 Billion GBP - 2017

How the UK is planning to impose austerity is by increasing spending by slightly less than the projected rate of inflation over the next 5 years. I.E. they're going to inflate their way back to fiscal health. Brutal, cruel, heartless austerity.

Of course Krugman is disinterested in the UK as much as he is disinterested in Ireland. The current UK government have politically positioned themselves as the party of stern fiscal prudence, facing down wild and crazed plans by Labour to borrow and spend. They instead plan to...borrow and spend slightly less. That is what passes for austerity.

Krugman reads the headline, accepts the UK political posturing at face value and hijacks it as a strawman for his bitter tooth and nail fighting with political opponents in the US.

KyussBishop

Icepick wrote: »

You - like Krugman - are wrong.

From a 'senior fellow' at Cato no less; no chance of ideologically motivated arguments there.

At even the briefest research, Estonia's debt vs GDP ratio was and is extremely low, meaning they had little risk of deflation; great for Estonia, but not applicable for almost all other places, where debt vs GDP is much higher.

Historical Estonian debt vs GDP: (showing it's low value is not a result of austerity)
http://research.stlouisfed.org/fred2/series/DEBTTLEEA188A

Current debt vs GDP: (6%)
http://articles.businessinsider.com/2012-04-23/markets/31384533_1_gdp-government-debt-estonia

Also, Estonian historical GDP:
http://blogs-images.forbes.com/markadomanis/files/2012/06/Estonia-real-GDP.jpg


Additionally, with wages slashed in Estonia now, they are facing an increasing cost of living, as well as still-high unemployment at around 11-12%.
Their economy is also heavily dependent on exports, which puts their recovery in a vulnerable position should the situation across the EU deteriorate even more (which it looks to).

K-9

Sand wrote: »

The UK 2012 budget plan - Table A1 on page 86

Total Managed Expenditure - Year Ending
683.4 Billion GBP - 2013
720 Billion GBP - 2014
733.5 Billion GBP - 2015
744 Billion GBP - 2016
756.3 Billion GBP - 2017

How the UK is planning to impose austerity is by increasing spending by slightly less than the projected rate of inflation over the next 5 years. I.E. they're going to inflate their way back to fiscal health. Brutal, cruel, heartless austerity.

Of course Krugman is disinterested in the UK as much as he is disinterested in Ireland. The current UK government have politically positioned themselves as the party of stern fiscal prudence, facing down wild and crazed plans by Labour to borrow and spend. They instead plan to...borrow and spend slightly less. That is what passes for austerity.

Krugman reads the headline, accepts the UK political posturing at face value and hijacks it as a strawman for his bitter tooth and nail fighting with political opponents in the US.

Mad stuff, so I assume they propose to reduce the deficit by tax increases, inflation and GDP rises?

SupaNova

KyussBishop wrote: »

Historical Estonian debt vs GDP: (showing it's low value is not a result of austerity)
http://research.stlouisfed.org/fred2/series/DEBTTLEEA188A

I don't get it, can you explain how you think this chart shows that low debt to gdp is not because of austerity?

KyussBishop

SupaNova wrote: »

I don't get it, can you explain how you think this chart shows that low debt to gdp is not because of austerity?

It was just to show that it's not been historically high, so they weren't at a previously high ratio of debt vs GDP, only to have it lower due to austerity.

It's only a minor point really, aimed at preempting possible arguments saying the low debt is because of austerity (when it was low even before the economic crisis).

SupaNova

KyussBishop wrote: »

It's only a minor point really, aimed at preempting possible arguments saying the low debt is because of austerity (when it was low even before the economic crisis).

GDP will soar during a credit bubble, as well as tax revenues, thus reducing governments accumulation of new debt, and allowing them to pay down previous debt, making the ratio look better in boom time. This is what your graph, along with some others would show perfectly.

And if a government stuck to austerity at all times, living within its means and only spending what it takes in they would have a debt to gdp of 0%, so its hardly an absurd claim that austerity, going into less debt will result in lower debt to gdp.

KyussBishop

That's not what I contested, and is what I specifically pointed out I was not contesting in my previous post: The point I was making is that low debt-to-GDP was not caused by austerity, the low debt vs GDP was already low before austerity was enacted.

What evidence is there that Estonia was affected by any kind of credit bubble? (not saying there wasn't, just wondering if there was, what exact kind of bubble was that?)


If they were affected by a significant credit bubble, their debt to GDP would have increased far more than it appears to have; unless there is still a bubble yet to pop (which I don't think there is), in which case Estonia would be doing far worse in reality than appears in the stats (thus nullifying claims it is a poster child for austerity).


Also, austerity is not simply living within means, it is specifically a rapid reduction in expenditure over a very short period (due to sudden decrease in GDP), often disproportionately impacting welfare and public expenditure.

SupaNova

KyussBishop wrote: »

What evidence is there that Estonia was affected by any kind of credit bubble? (not saying there wasn't, just wondering if there was, what exact kind of bubble was that?)

They were effected by financial crises in 2008 just like most of the world, their stock market mirrored stock markets around the world and took a sharp dive. And they also had a housing bubble.

If they were affected by a significant credit bubble, their debt to GDP would have increased far more than it appears to have; unless there is still a bubble yet to pop (which I don't think there is),

Why are you making this assumption with no other facts or consideration of other factors? How much do you think debt to gdp should have rose, and why, what are you basing your claim that it should have rose higher on?

KyussBishop

Ya my reasoning was faulty there; it's hard to find good economic analysis on Estonia, as until this Krugman debate, its austerity policies do not seem to have garnered a lot of attention.

Here is a more detailed overview of this topic regarding Estonia:
http://triplecrisis.com/can-austerity-bring-growth/

Channel Zero

KyussBishop wrote: »

it's hard to find good economic analysis on Estonia

Here's a couple.
http://www.counterpunch.org/2011/10/24/destroying-estonia/
http://www.counterpunch.org/2012/06/25/latvias-fake-economic-model/



By the way it is amusing to me when people are agreeing about the supposed dishonesty of the article in the OP (it's essentially not in my opinion) in one breath and how ridiculous it is to compare Ireland and the U.S, and then go on to post something from a paid monkey from the Cato Institute (who as everyone knows, are pro-corporate, pro-tobacco, anti-wealth-taxing, anti-environment, climate-denying shills), comparing Estonia to the U.S.

Oh the irony!