In a recent New York Times editorial, Mr. Krugman noted that "I don't think many people grasp just how much job creation we need to climb out of the hole we're in. You can't just look at the eight million jobs that America has lost since the recession began, because the nation needs to keep adding jobs - more than 100,000 a month - to keep up with a growing population. And that means that we need really big job gains, month after month, if we want to see America return to anything that feels like full employment. How big? My back of the envelope calculation says that we need to add around 18 million jobs over the next five years, or 300,000 a month. This puts last week's employment report, which showed job losses of "only" 11,000 in November, in perspective. It was basically a terrible report, which was reported as good news only because we've been down so long that it looks like up to the financial press."
This is an unusually candid admission by the Nobel Prize winning Economics professor (Princeton). This writer fully expected the liberal apologist to dig into how the loss of "only" 11,000 jobs in November was evidence of the success of the stimulus package championed by our dear President Obama. To his credit, Mr. Krugman does an excellent job of describing the landscape that policymakers will have to navigate in the coming years. But of course, the peculiar experience of finding myself in complete agreement with this rogue economist does not last past the fourth paragraph. Alas, we all knew the spin was coming... What follows is the implied debate between myself and one of the leading liberal economists of our time.
Me: So Mr. Krugman, why do we find ourselves in this horrendous employment situation?
Paul Krugman: Well David, "Clearly, the administration proposed a stimulus package that was too small to begin with and was whittled down further by “centrists” in the Senate".
Me: Listen Paul, there are two kinds of people who get economics degrees, there are those who want to learn the discipline, and there are those who learn the discipline to try to justify liberal social policies (i.e. the ones that were heavily funded by said stimulus). Would it be a stretch for me to maintain that you are the latter? My readers are all going to switch over to TMZ to find out where Tiger and Mrs. Woods are hiding out if we don't stay on topic here, so what do you suggest we do about this unemployment problem?
Paul Krugman: What we should do is "expand credit by buying a further $2 trillion in assets. Such a program could do a lot to promote faster growth, while having hardly any downside". (By the way, this is what $1 Trillion looks like..
http://www.pagetutor.com/trillion/index.html)
Me: You do realize that the reason that we are in a "credit crisis" is because the federal reserve flooded the market with too much credit right? Easy money from the federal reserve at low interest rates let home buyers, consumers, businesses, asset management firms, and the government take on excessive leverage (debt). Now that the day of reckoning has come, the players mentioned above are cleaning up their balance sheets by, among other things, laying off employees (except for the government of course). So now you, Paul Krugman, save the day by suggesting that the solution to our employment crisis is to flood the economy with even more credit?
Listen, I get it, there are small businesses out there that can't get access to credit to stay afloat through this crisis. We want to save the jobs these businesses provide, and you want to give them access to credit to do that. But those same small businesses need to clean up their balance sheets somehow, and loading them up with more debt is not the way to make them profitable again! It might be a bit unsettling for you, and indeed for much of the Obama team, but why don't you put yourself the shoes of these small businesses. They are trimming costs by laying off employees, so why don't you just help them cut costs someplace else? Like taxes!!!
Let me ask you this one question: If we gave every business in America, large and small, a 30% reduction in taxes for 10-years, what do you think they would do with the money that would free up? Would they use it to club baby seals? Drop trees in the rainforest? Oh I know how you despise businesses, especially when they get to choose how they spend their own money! Actually, I would think that they would use that extra cash to clean up their books, retain and hire new employees, and invest in new capital. But that is just me.
By the way, my beard looks much better than yours.
http://www.nytimes.com/2009/12/11/opinion/11krugman.html?th&emc=th
http://www.flickr.com/photos/chicagoyrs/4044032393/
Comments
Additional Support
Also, to support my claim that small businesses need to clean up their balance sheets more than find loans, the following is a quote from a Wall Street Journal editorial titled "Banker Baiting 101" on 12/15/09,
"A recent NFIB survey of small-business owners found only 10% reporting problems obtaining financing. The government's own data tell a similar story. The Federal Reserve reports that business loan demand remains at depressed levels, while data from the Federal Deposit Insurance Corporation show $6 trillion of unused lending commitments at FDIC-insured institutions".
What businesses do with their money
Great post! I like the dialogue! And 'tis very true that progressives do not trust business owners with money ("look what happened when they can do whatever they want!", they say, completely ignoring the loose lending promoted by Rep. Barney Frank and Sen. Chris Dodd that played a major role in getting us in this mess). And it's so true that for the most part, people who have not owned their own business -- or who have not even taken a business class -- cannot understand how businesses work. This of course is surprising from Nobel Prize-winning economists (though to be fair Krugman won it for work he did years ago for something actually good).
In any case, not all business owners are greedy profiteers. They are not all Mr. Potters. They are more often like George Bailey!
Katy K
www.conservativecabal.com
nice ending touch
Way to sock it to him with the beard comment :-)
Also, I find it scary that a renowned economist can seem so wrong