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When Zombies Win - NYTimes.com

December 19, 2010
When Zombies Win
By PAUL KRUGMAN

When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything — yet they now dominate the political scene more thoroughly than ever.

How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed? How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?

The answer from the right is that the economic failures of the Obama administration show that big-government policies don’t work. But the response should be, what big-government policies?

For the fact is that the Obama stimulus — which itself was almost 40 percent tax cuts — was far too cautious to turn the economy around. And that’s not 20-20 hindsight: many economists, myself included, warned from the beginning that the plan was grossly inadequate. Put it this way: A policy under which government employment actually fell, under which government spending on goods and services grew more slowly than during the Bush years, hardly constitutes a test of Keynesian economics.

Now, maybe it wasn’t possible for President Obama to get more in the face of Congressional skepticism about government. But even if that’s true, it only demonstrates the continuing hold of a failed doctrine over our politics.

It’s also worth pointing out that everything the right said about why Obamanomics would fail was wrong. For two years we’ve been warned that government borrowing would send interest rates sky-high; in fact, rates have fluctuated with optimism or pessimism about recovery, but stayed consistently low by historical standards. For two years we’ve been warned that inflation, even hyperinflation, was just around the corner; instead, disinflation has continued, with core inflation — which excludes volatile food and energy prices — now at a half-century low.

The free-market fundamentalists have been as wrong about events abroad as they have about events in America — and suffered equally few consequences. “Ireland,” declared George Osborne in 2006, “stands as a shining example of the art of the possible in long-term economic policymaking.” Whoops. But Mr. Osborne is now Britain’s top economic official.

And in his new position, he’s setting out to emulate the austerity policies Ireland implemented after its bubble burst. After all, conservatives on both sides of the Atlantic spent much of the past year hailing Irish austerity as a resounding success. “The Irish approach worked in 1987-89 — and it’s working now,” declared Alan Reynolds of the Cato Institute last June. Whoops, again.

But such failures don’t seem to matter. To borrow the title of a recent book by the Australian economist John Quiggin on doctrines that the crisis should have killed but didn’t, we’re still — perhaps more than ever — ruled by “zombie economics.” Why?

Part of the answer, surely, is that people who should have been trying to slay zombie ideas have tried to compromise with them instead. And this is especially, though not only, true of the president.

People tend to forget that Ronald Reagan often gave ground on policy substance — most notably, he ended up enacting multiple tax increases. But he never wavered on ideas, never backed down from the position that his ideology was right and his opponents were wrong.

President Obama, by contrast, has consistently tried to reach across the aisle by lending cover to right-wing myths. He has praised Reagan for restoring American dynamism (when was the last time you heard a Republican praising F.D.R.?), adopted G.O.P. rhetoric about the need for the government to tighten its belt even in the face of recession, offered symbolic freezes on spending and federal wages.

None of this stopped the right from denouncing him as a socialist. But it helped empower bad ideas, in ways that can do quite immediate harm. Right now Mr. Obama is hailing the tax-cut deal as a boost to the economy — but Republicans are already talking about spending cuts that would offset any positive effects from the deal. And how effectively can he oppose these demands, when he himself has embraced the rhetoric of belt-tightening?

Yes, politics is the art of the possible. We all understand the need to deal with one’s political enemies. But it’s one thing to make deals to advance your goals; it’s another to open the door to zombie ideas. When you do that, the zombies end up eating your brain — and quite possibly your economy too.

Wall Street Whitewash - NYTimes.com

December 16, 2010
Wall Street Whitewash
By PAUL KRUGMAN

When the financial crisis struck, many people — myself included — considered it a teachable moment. Above all, we expected the crisis to remind everyone why banks need to be effectively regulated.

How naïve we were. We should have realized that the modern Republican Party is utterly dedicated to the Reaganite slogan that government is always the problem, never the solution. And, therefore, we should have realized that party loyalists, confronted with facts that don’t fit the slogan, would adjust the facts.

Which brings me to the case of the collapsing crisis commission.

The bipartisan Financial Crisis Inquiry Commission was established by law to “examine the causes, domestic and global, of the current financial and economic crisis in the United States.” The hope was that it would be a modern version of the Pecora investigation of the 1930s, which documented Wall Street abuses and helped pave the way for financial reform.

Instead, however, the commission has broken down along partisan lines, unable to agree on even the most basic points.

It’s not as if the story of the crisis is particularly obscure. First, there was a widely spread housing bubble, not just in the United States, but in Ireland, Spain, and other countries as well. This bubble was inflated by irresponsible lending, made possible both by bank deregulation and the failure to extend regulation to “shadow banks,” which weren’t covered by traditional regulation but nonetheless engaged in banking activities and created bank-type risks.

Then the bubble burst, with hugely disruptive consequences. It turned out that Wall Street had created a web of interconnection nobody understood, so that the failure of Lehman Brothers, a medium-size investment bank, could threaten to take down the whole world financial system.

It’s a straightforward story, but a story that the Republican members of the commission don’t want told. Literally.

Last week, reports Shahien Nasiripour of The Huffington Post, all four Republicans on the commission voted to exclude the following terms from the report: “deregulation,” “shadow banking,” “interconnection,” and, yes, “Wall Street.”

When Democratic members refused to go along with this insistence that the story of Hamlet be told without the prince, the Republicans went ahead and issued their own report, which did, indeed, avoid using any of the banned terms.

That report is all of nine pages long, with few facts and hardly any numbers. Beyond that, it tells a story that has been widely and repeatedly debunked — without responding at all to the debunkers.

In the world according to the G.O.P. commissioners, it’s all the fault of government do-gooders, who used various levers — especially Fannie Mae and Freddie Mac, the government-sponsored loan-guarantee agencies — to promote loans to low-income borrowers. Wall Street — I mean, the private sector — erred only to the extent that it got suckered into going along with this government-created bubble.

It’s hard to overstate how wrongheaded all of this is. For one thing, as I’ve already noted, the housing bubble was international — and Fannie and Freddie weren’t guaranteeing mortgages in Latvia. Nor were they guaranteeing loans in commercial real estate, which also experienced a huge bubble.

Beyond that, the timing shows that private players weren’t suckered into a government-created bubble. It was the other way around. During the peak years of housing inflation, Fannie and Freddie were pushed to the sidelines; they only got into dubious lending late in the game, as they tried to regain market share.

But the G.O.P. commissioners are just doing their job, which is to sustain the conservative narrative. And a narrative that absolves the banks of any wrongdoing, that places all the blame on meddling politicians, is especially important now that Republicans are about to take over the House.

Last week, Spencer Bachus, the incoming G.O.P. chairman of the House Financial Services Committee, told The Birmingham News that “in Washington, the view is that the banks are to be regulated, and my view is that Washington and the regulators are there to serve the banks.”

He later tried to walk the remark back, but there’s no question that he and his colleagues will do everything they can to block effective regulation of the people and institutions responsible for the economic nightmare of recent years. So they need a cover story saying that it was all the government’s fault.

In the end, those of us who expected the crisis to provide a teachable moment were right, but not in the way we expected. Never mind relearning the case for bank regulation; what we learned, instead, is what happens when an ideology backed by vast wealth and immense power confronts inconvenient facts. And the answer is, the facts lose.

Epigones of Orgonomy The Incredible History of Wilhelm Reich and his Followers by Joel Carlinsky Wilhelm Reich in 1946—his unusual hair style appears in many photos of him from this period and has not been exaggerated in this drawing. (click to enlarge) In 1957 Wilhelm Reich, famed psychiatrist and “discoverer” of Orgone energy, died in a Federal prison while serving a two-year term for contempt of court. Many people, not least the Food and Drug Administration which had brought charges against him, thought that that was the last anyone would hear of Orgone Accumulators and the rest of Reich’s highly original ideas. They were wrong. Today, 37 years after Reich’s death, Orgonomy, the “science” of the Life Energy, is stronger than ever. The basis of this revival of Reich’s “scientific” and psychiatric theories is a group called the American College of Orgonomy (A.C.O.), based in Princeton, New Jersey. The A.C.O. is composed mostly of psychiatrists who use Reich’s method of psychotherapy, which is called “Orgone Therapy.” The A.C.O. is very far to the right of the political spectrum. The A.C.O. is into a lot more than just scamming a quick buck from gullible patients who have been led to think their sex life will be better if they pay an Orgonomist to fix it. They are also involved in Wilhelm Reich’s method of rainmaking in a big way. Known as “cloudbusting,” this technique was invented by Reich in 1952 and consists of pointing hollow metal pipes at the sky and grounding the other end into water. By aiming the pipes properly, and, according to one recent issue of the Journal of Orgonomy, by having the proper “intent” (whatever that means), the operator can withdraw Orgone energy from the sky and induce rainfall. Wilhelm Reich was a figure unique in 20th century fringe movements. Once regarded as Freud’s most brilliant pupil and probable successor, the courageous anti-Nazi activist parted company with mainstream science when he decided that Pasteur was wrong about spontaneous generation. A few years later Reich “discovered” the cosmic Life Energy which he named “Orgone,” and spent the rest of his eventful life doing research on Orgone energy. The “science” of Orgonomy, which he founded, included medical treatments claimed to be far more effective than anything known to orthodox medicine, meant to neutralize radioactivity; a motor that can run without fuel on free and unlimited cosmic energy; and a technology of weather control that he claimed could save the world from droughts and desertification. The Food and Drug Administration however, did not accept Reich’s medical claims and eventually Reich wound up in Federal prison, where he died. Reich and his theories, however, were resurrected in the late 1960s. Dr. Ellsworth Baker, a psychiatrist who had studied under Reich, founded the American College of Orgonomy in 1967. The college publishes a slick, professional-looking journal called the Journal of Orgonomy. This journal publishes reports on weather control with Reich’s cloudbuster; cancer research with the Orgone Accumulator (which concentrates Orgone energy out of the air); creation of life by means of “Bion” experiments; and their unique form of psychiatric treatment, called “Orgone Therapy.” Political articles of a far right orientation are standard fare, especially attacking “liberals” as mentally ill and therefore a form of social cancer. Most of the 30 or so members of the A.C.O. are psychiatrists. Most of the 4,000 or so people who have donated money to the A.C.O. fundraising campaign ($5,000,000 to date) are patients or former patients. This exploitation of emotionally vulnerable people is facilitated by the fact that Orgone Therapy seems to render the patient more or less permanently emotionally dependent on the therapist. In any case, it is a flagrant breach of ethics for psychiatrists to solicit funds from patients for a cause in which the doctor has an interest. The A.C.O. has a very active outreach program to spread the word. They encourage gift subscriptions of their journal to university libraries. They have a speakers’ bureau. They hold frequent conventions here and abroad, and offer training programs and laboratory courses. Almost all of the people who get involved have had Orgone Therapy or go into Orgone Therapy subsequently; indeed, it is claimed that one cannot do successful work in Orgonomic biology, physics, or meteorology without having had “psychiatric restructuring” by Orgone Therapy. Their theories on medicine, psychiatry, microbiology, physics, biophysics, sociology, politics, meteorology, astronomy, childraising, ancient history, and just about every other subject imaginable are totally at odds with those of establishment science. In spite of this (or because of it) they constantly reiterate the theme that Reich was the greatest genius in history and was persecuted as Christ was; that Orgonomists today are persecuted; that they have great knowledge and wisdom unknown to the rest of humanity (and that cannot be understood or appreciated by those who have not had Orgone Therapy); and that all social and environmental problems can be dealt with only by their enlightened leadership. The Cloud Buster — While running an experiment in which he hoped to neutralize the effects of radiation with orgone energy, Reich observed a gloomy, persistent weather pattern. Since he felt his actions had created the threatening clouds, he invented the cloudbuster to dispel them. Water flowed through the metal cables. It was said to be "powered" by a milligram of orur — radium that had been treated with orgone energy. He claimed that it could both dissipate clouds and attract them. (click to enlarge) The most prominent member of the organization is not a psychiatrist. James Demeo, author of The Orgone Accumulator Handbook, did his M.A. thesis on the Reich cloudbuster at the University of Kansas. He met with some faculty opposition but the degree was granted. He later did his Ph.D. work on a sociological and historical theory that all social problems — yes, all — including war, violence, injustice, patriarchial families, mental illness, environmental destruction, etc., are due solely to droughts and desertification. Dr. Demeo now makes his living doing lectures and workshops on Orgonomy all over the world, selling books and devices related to Orgonomy, and using his cloudbuster to “break droughts.” His “Drought Abatement Outreach Program” has been advertised in midwestern farm journals, and cloudbusting expeditions to bring rain have been paid for by drought-stricken farmers in Montana and elsewhere. Dr. Demeo claims to be responsible for most of the rain that has fallen in California in recent years, although he is silent on the subject of liability for flood damage. He also claims to have made rain in Germany, Greece, Israel, Arizona, and various other places, all of which, he asserts, were in dire need of his services. In fact, he claims, the rapid spreading of deserts threatens to engulf the entire world and can only be fought with cloudbusters, which only he and his associates are qualified to utilize properly. Demeo solicits donations to his “research fund” through a tax-exempt non-profit foundation he has set up. On at least one occasion funds contributed for one purpose seem to have been used for another purpose. He also is a partner in a commercial business venture using the cloudbuster. Currently, he is asking for $300,000 to establish a laboratory in northern California. He just might get it; his mentor and close associate, Dr. Richard Blasband, former President of the A.C.O., got $144,000, $48,000 of it from Lawrence Rockefeller via the Rockefeller Foundation, to do a study designed to prove the Orgone Accumulator violates the Second Law of Thermodynamics. Demeo publishes articles in the Journal of Orgonomy frequently. But he also publishes his own journal, Pulse of the Planet, which documents his weather control activities and energetically denounces anyone who dares to criticize him. He has also published a number of pamphlets as well as the The Orgone Accumulator Handbook, but has not managed to get anything into the refereed scientific journals. He claims otherwise. He also claims expertise in an impressively (and impossibly) large number of fields. In fact, one gets a distinct impression from his resume that if Wilhelm Reich once wrote about it, James Demeo is an expert on it. While much concerned with scientific respectability, Demeo also loses no opportunity to gain exposure to a “New Age” audience. He has been frequently published and interviewed in Wildfire, a magazine put out by the “Bear Tribe Medicine Society,” a new-age type cult of white middle-class converts to Native American religions founded by the late Sun Bear, a medicine man who was criticized by his fellow Indians for mass-marketing their religion and culture to white dilettantes. Demeo has been a teacher at their “Medicine Wheel Gatherings” and has received thousands of dollars in contributions from well-intentioned yuppies who think they are thereby helping the earth by funding his rainmaking work. Another frequent outlet for Demeo’s promotional articles, interviews, and advertising for rainmaking services is Acres USA, a New Age farm journal published in Kansas City, with a circulation of about 10,000 midwestern farmers. Acres mixes radionics machines for improving crop yields and homeopathy for farm animals, with farm-oriented conspiracy theories and support for the Posse Commitatus movement. (The conspiracy is by government, banking, and big business against the farmer.) Some of their readers have hired Demeo to break droughts. “…Reich was solidly convinced that the Food and Drug Administration’s legal case against him was due to a communist conspiracy ordered by the KGB to discredit his work in the United States so Russia could gain a monopoly on Orgonomic science.” Although psychiatry is still the major source of income in Orgonomy, a new organization was recently formed exclusively for cloudbusting. Called the CORE (for Cosmic Orgone Engineering) network, it held a conference in Oregon. Attending was Matt Ryan, former editor of Wildfire, who is now employed by a New Age guru at Mt. Shasta. Mr. Ryan, who seems to have given up being a neo-Indian, was trained in cloudbusting by the late Jerome Eden, author of numerous books and articles in which he argued that hostile UFOs were the cause of droughts, an idea first promulgated by Reich in the 1950s. Also present, but perhaps unlikely to remain active in Orgonomy for much longer, was Dr. Blasband, who has recently become a devotee of a popular faith-healer to whom he is now recommending to his medical colleagues that they send their patients. In his last few years Reich was solidly convinced that the Food and Drug Administration’s legal case against him was due to a communist conspiracy ordered by the KGB to discredit his work in the United States so Russia could gain a monopoly on Orgonomic science. Not surprisingly, many of today’s Reichians are conspiracy buffs of one kind or another. One, James Martin, a publisher and small-press mail order book and magazine distributor, has a regular Reichian-conspiracy column in the conspiracy journal Steamshovel Press, which publishes any and all conspiracy theories, no matter how improbable. Martin, who also publishes his own conspiracy-oriented magazine and book catalog, called Flatland, thinks AIDS is due to bio-logical warfare; in this he differs with his good friend Jim Demeo, who thinks AIDS does not exist and is all a hoax by the government to scare teenagers away from sex. Orgonomy is not confined to the United States. The A.C.O. has held conferences in Germany, France, and Argentina. Orgonomic groups exist in Greece, Israel, Japan, and especially Germany. The Greek and Israeli groups have done cloudbusting under Demeo’s supervision and the German group, which is large, well- funded, and based in Berlin, has had him over there several times for lectures and workshops. They have a large, well-equipped laboratory in Berlin and another in the town of Eberfürt. Most of the members of the German group are medical doctors and, unlike their colleagues in the United States, they are free to use Orgone Accumulators on patients with cancer and other serious illnesses and they do so. Orgonomy is growing and it will not likely go away. Psychiatrists and mental health professionals take courses in Orgonomic procedures and faculty members at various colleges and universities arrange for Orgonomists to give guest lectures. Many educators and childcare professionals are heavily influenced by Orgonomic theories. I venture to predict that Orgonomy will be one of the key New Age movements to watch in the decade ahead. (Statements and facts within can be found in the various journals cited in this essay.) ________________________________________

Freezing Out Hope - NYTimes.com

 

December 2, 2010

Freezing Out Hope

 

By PAUL KRUGMAN

After the Democratic “shellacking” in the midterm elections, everyone wondered how President Obama would respond. Would he show what he was made of? Would he stand firm for the values he believes in, even in the face of political adversity?

On Monday, we got the answer: he announced a pay freeze for federal workers. This was an announcement that had it all. It was transparently cynical; it was trivial in scale, but misguided in direction; and by making the announcement, Mr. Obama effectively conceded the policy argument to the very people who are seeking — successfully, it seems — to destroy him.

So I guess we are, in fact, seeing what Mr. Obama is made of.

About that pay freeze: the president likes to talk about “teachable moments.” Well, in this case he seems eager to teach Americans something false.

The truth is that America’s long-run deficit problem has nothing at all to do with overpaid federal workers. For one thing, those workers aren’t overpaid. Federal salaries are, on average, somewhat less than those of private-sector workers with equivalent qualifications. And, anyway, employee pay is only a small fraction of federal expenses; even cutting the payroll in half would reduce total spending less than 3 percent.

So freezing federal pay is cynical deficit-reduction theater. It’s a (literally) cheap trick that only sounds impressive to people who don’t know anything about budget realities. The actual savings, about $5 billion over two years, are chump change given the scale of the deficit.

Anyway, slashing federal spending at a time when the economy is depressed is exactly the wrong thing to do. Just ask Federal Reserve officials, who have lately been more or less pleading for some help in their efforts to promote faster job growth.

Meanwhile, there’s a real deficit issue on the table: whether tax cuts for the wealthy will, as Republicans demand, be extended. Just as a reminder, over the next 75 years the cost of making those tax cuts permanent would be roughly equal to the entire expected financial shortfall of Social Security. Mr. Obama’s pay ploy might, just might, have been justified if he had used the announcement of a freeze as an occasion to take a strong stand against Republican demands — to declare that at a time when deficits are an important issue, tax breaks for the wealthiest aren’t acceptable.

But he didn’t. Instead, he apparently intended the pay freeze announcement as a peace gesture to Republicans the day before a bipartisan summit. At that meeting, Mr. Obama, who has faced two years of complete scorched-earth opposition, declared that he had failed to reach out sufficiently to his implacable enemies. He did not, as far as anyone knows, wear a sign on his back saying “Kick me,” although he might as well have.

There were no comparable gestures from the other side. Instead, Senate Republicans declared that none of the rest of the legislation on the table — legislation that includes such things as a strategic arms treaty that’s vital to national security — would be acted on until the tax-cut issue was resolved, presumably on their terms.

It’s hard to escape the impression that Republicans have taken Mr. Obama’s measure — that they’re calling his bluff in the belief that he can be counted on to fold. And it’s also hard to escape the impression that they’re right.

The real question is what Mr. Obama and his inner circle are thinking. Do they really believe, after all this time, that gestures of appeasement to the G.O.P. will elicit a good-faith response?

What’s even more puzzling is the apparent indifference of the Obama team to the effect of such gestures on their supporters. One would have expected a candidate who rode the enthusiasm of activists to an upset victory in the Democratic primary to realize that this enthusiasm was an important asset. Instead, however, Mr. Obama almost seems as if he’s trying, systematically, to disappoint his once-fervent supporters, to convince the people who put him where he is that they made an embarrassing mistake.

Whatever is going on inside the White House, from the outside it looks like moral collapse — a complete failure of purpose and loss of direction.

So what are Democrats to do? The answer, increasingly, seems to be that they’ll have to strike out on their own. In particular, Democrats in Congress still have the ability to put their opponents on the spot — as they did on Thursday when they forced a vote on extending middle-class tax cuts, putting Republicans in the awkward position of voting against the middle class to safeguard tax cuts for the rich.

It would be much easier, of course, for Democrats to draw a line if Mr. Obama would do his part. But all indications are that the party will have to look elsewhere for the leadership it needs.

 

 

Obama’s Hostage Deal - NYTimes.com

December 9, 2010
Obama’s Hostage Deal
By PAUL KRUGMAN

I’ve spent the past couple of days trying to make my peace with the Obama-McConnell tax-cut deal. President Obama did, after all, extract more concessions than most of us expected.

Yet I remain deeply uneasy — not because I’m one of those “purists” Mr. Obama denounced on Tuesday but because this isn’t the end of the story. Specifically: Mr. Obama has bought the release of some hostages only by providing the G.O.P. with new hostages.

About the deal: Republicans got what they wanted — an extension of all the Bush tax cuts, including those for the wealthy. This part of the deal was bad all around. Yes, some of those tax cuts would be spent, boosting the economy to some extent. But a large part of the tax cuts, especially those for the wealthy, would not be spent, so the tax-cut extension increases the budget deficit a lot while doing little to reduce unemployment.

And by stringing things along, the extension increases the chances that the Bush tax cuts will be made permanent, with devastating effects on the budget and the long-term prospects for Social Security and Medicare.

In return for this bad stuff, Mr. Obama got a significant amount of short-term stimulus. Unemployment benefits were extended; there was a temporary cut in the payroll tax; and there were tax breaks for investment. Incidentally: how, exactly, did we get to the point where Democrats must plead with Republicans to accept lower corporate taxes?

Unemployment benefits aside, all of this is very much second-best policy: consumers would probably spend only part of the payroll tax break, and it’s unclear whether the business break would do much to spur investment given the excess capacity in the economy. Still, it would be a noticeable net positive for the economy next year.

But here’s the thing: while the bad stuff in the deal lasts for two years, the not-so-bad stuff expires at the end of 2011. This means that we’re talking about a boost to growth next year — but growth in 2012 that would actually be slower than in the absence of the deal.

This has big political implications. Political scientists tell us that voting is much more strongly affected by the economy’s direction in the year or less preceding an election than by how well the nation is doing in some absolute sense.

When Ronald Reagan ran for re-election in 1984, the unemployment rate was almost exactly the same as it had been just before the 1980 election — but because the economic trend in 1980 was down while the trend in 1984 was up, an unemployment rate that spelled defeat for Jimmy Carter translated into landslide victory for Reagan.

This political reality makes the tax deal a bad bargain for Democrats. Think of it this way: The deal essentially sets up 2011-2012 to be a repeat of 2009-2010. Once again, there would be initial benefits from the stimulus, and decent growth a year before the election. But as the stimulus faded, growth would tend to stall — and this stall would, once again, come in the months leading up to the election, with seriously negative consequences for Mr. Obama and his party.

You may say that economic policy shouldn’t be affected by partisan considerations. But even if you believe that — how’s the weather on your planet? — you have to consider the situation likely to prevail a year from now, as the good parts of the Obama-McConnell deal are about to expire. Wouldn’t there be pressure on Democrats to offer Republicans something, anything, to improve economic prospects for 2012? And wouldn’t that be a recipe for another bad deal?

Surely the answer to both questions is yes. And that means that Mr. Obama is, as I said, paying for the release of some hostages — getting an extension of unemployment benefits and some more stimulus — by giving Republicans new hostages, which they may well use to make new, destructive demands a year from now.

One big concern: Republicans may try using the prospect of a rise in the payroll tax to undermine Social Security finances.

Which brings me back to Mr. Obama’s press conference, where — showing much more passion than he seems able to muster against Republicans — he denounced purists on the left, who supposedly refuse to accept compromises in the national interest.

Well, concerns about the tax deal reflect realism, not purism: Mr. Obama is setting up another hostage situation a year down the road. And given that fact, the last thing we need is the kind of self-indulgent behavior he showed by lashing out at progressives who he feels aren’t giving him enough credit.

The point is that by seeming angrier at worried supporters than he is at the hostage-takers, Mr. Obama is already signaling weakness, giving Republicans every reason to believe that they can extract another ransom.

And they can be counted on to act accordingly.

Freezing Out Hope - NYTimes.com

December 2, 2010
Freezing Out Hope
By PAUL KRUGMAN

After the Democratic “shellacking” in the midterm elections, everyone wondered how President Obama would respond. Would he show what he was made of? Would he stand firm for the values he believes in, even in the face of political adversity?

On Monday, we got the answer: he announced a pay freeze for federal workers. This was an announcement that had it all. It was transparently cynical; it was trivial in scale, but misguided in direction; and by making the announcement, Mr. Obama effectively conceded the policy argument to the very people who are seeking — successfully, it seems — to destroy him.

So I guess we are, in fact, seeing what Mr. Obama is made of.

About that pay freeze: the president likes to talk about “teachable moments.” Well, in this case he seems eager to teach Americans something false.

The truth is that America’s long-run deficit problem has nothing at all to do with overpaid federal workers. For one thing, those workers aren’t overpaid. Federal salaries are, on average, somewhat less than those of private-sector workers with equivalent qualifications. And, anyway, employee pay is only a small fraction of federal expenses; even cutting the payroll in half would reduce total spending less than 3 percent.

So freezing federal pay is cynical deficit-reduction theater. It’s a (literally) cheap trick that only sounds impressive to people who don’t know anything about budget realities. The actual savings, about $5 billion over two years, are chump change given the scale of the deficit.

Anyway, slashing federal spending at a time when the economy is depressed is exactly the wrong thing to do. Just ask Federal Reserve officials, who have lately been more or less pleading for some help in their efforts to promote faster job growth.

Meanwhile, there’s a real deficit issue on the table: whether tax cuts for the wealthy will, as Republicans demand, be extended. Just as a reminder, over the next 75 years the cost of making those tax cuts permanent would be roughly equal to the entire expected financial shortfall of Social Security. Mr. Obama’s pay ploy might, just might, have been justified if he had used the announcement of a freeze as an occasion to take a strong stand against Republican demands — to declare that at a time when deficits are an important issue, tax breaks for the wealthiest aren’t acceptable.

But he didn’t. Instead, he apparently intended the pay freeze announcement as a peace gesture to Republicans the day before a bipartisan summit. At that meeting, Mr. Obama, who has faced two years of complete scorched-earth opposition, declared that he had failed to reach out sufficiently to his implacable enemies. He did not, as far as anyone knows, wear a sign on his back saying “Kick me,” although he might as well have.

There were no comparable gestures from the other side. Instead, Senate Republicans declared that none of the rest of the legislation on the table — legislation that includes such things as a strategic arms treaty that’s vital to national security — would be acted on until the tax-cut issue was resolved, presumably on their terms.

It’s hard to escape the impression that Republicans have taken Mr. Obama’s measure — that they’re calling his bluff in the belief that he can be counted on to fold. And it’s also hard to escape the impression that they’re right.

The real question is what Mr. Obama and his inner circle are thinking. Do they really believe, after all this time, that gestures of appeasement to the G.O.P. will elicit a good-faith response?

What’s even more puzzling is the apparent indifference of the Obama team to the effect of such gestures on their supporters. One would have expected a candidate who rode the enthusiasm of activists to an upset victory in the Democratic primary to realize that this enthusiasm was an important asset. Instead, however, Mr. Obama almost seems as if he’s trying, systematically, to disappoint his once-fervent supporters, to convince the people who put him where he is that they made an embarrassing mistake.

Whatever is going on inside the White House, from the outside it looks like moral collapse — a complete failure of purpose and loss of direction.

So what are Democrats to do? The answer, increasingly, seems to be that they’ll have to strike out on their own. In particular, Democrats in Congress still have the ability to put their opponents on the spot — as they did on Thursday when they forced a vote on extending middle-class tax cuts, putting Republicans in the awkward position of voting against the middle class to safeguard tax cuts for the rich.

It would be much easier, of course, for Democrats to draw a line if Mr. Obama would do his part. But all indications are that the party will have to look elsewhere for the leadership it needs.

November 22, 2010

There Will Be Blood

By PAUL KRUGMAN

Former Senator Alan Simpson is a Very Serious Person. He must be — after all, President Obama appointed him as co-chairman of a special commission on deficit reduction.

So here’s what the very serious Mr. Simpson said on Friday: “I can’t wait for the blood bath in April. ... When debt limit time comes, they’re going to look around and say, ‘What in the hell do we do now? We’ve got guys who will not approve the debt limit extension unless we give ’em a piece of meat, real meat,’ ” meaning spending cuts. “And boy, the blood bath will be extraordinary,” he continued.

Think of Mr. Simpson’s blood lust as one more piece of evidence that our nation is in much worse shape, much closer to a political breakdown, than most people realize.

Some explanation: There’s a legal limit to federal debt, which must be raised periodically if the government keeps running deficits; the limit will be reached again this spring. And since nobody, not even the hawkiest of deficit hawks, thinks the budget can be balanced immediately, the debt limit must be raised to avoid a government shutdown. But Republicans will probably try to blackmail the president into policy concessions by, in effect, holding the government hostage; they’ve done it before.

Now, you might think that the prospect of this kind of standoff, which might deny many Americans essential services, wreak havoc in financial markets and undermine America’s role in the world, would worry all men of good will. But no, Mr. Simpson “can’t wait.” And he’s what passes, these days, for a reasonable Republican.

The fact is that one of our two great political parties has made it clear that it has no interest in making America governable, unless it’s doing the governing. And that party now controls one house of Congress, which means that the country will not, in fact, be governable without that party’s cooperation — cooperation that won’t be forthcoming.

Elite opinion has been slow to recognize this reality. Thus on the same day that Mr. Simpson rejoiced in the prospect of chaos, Ben Bernanke, the Federal Reserve chairman, appealed for help in confronting mass unemployment. He asked for “a fiscal program that combines near-term measures to enhance growth with strong, confidence-inducing steps to reduce longer-term structural deficits.”

My immediate thought was, why not ask for a pony, too? After all, the G.O.P. isn’t interested in helping the economy as long as a Democrat is in the White House. Indeed, far from being willing to help Mr. Bernanke’s efforts, Republicans are trying to bully the Fed itself into giving up completely on trying to reduce unemployment.

And on matters fiscal, the G.O.P. program is to do almost exactly the opposite of what Mr. Bernanke called for. On one side, Republicans oppose just about everything that might reduce structural deficits: they demand that the Bush tax cuts be made permanent while demagoguing efforts to limit the rise in Medicare costs, which are essential to any attempts to get the budget under control. On the other, the G.O.P. opposes anything that might help sustain demand in a depressed economy — even aid to small businesses, which the party claims to love.

Right now, in particular, Republicans are blocking an extension of unemployment benefits — an action that will both cause immense hardship and drain purchasing power from an already sputtering economy. But there’s no point appealing to the better angels of their nature; America just doesn’t work that way anymore.

And opposition for the sake of opposition isn’t limited to economic policy. Politics, they used to tell us, stops at the water’s edge — but that was then.

These days, national security experts are tearing their hair out over the decision of Senate Republicans to block a desperately needed new strategic arms treaty. And everyone knows that these Republicans oppose the treaty, not because of legitimate objections, but simply because it’s an Obama administration initiative; if sabotaging the president endangers the nation, so be it.

How does this end? Mr. Obama is still talking about bipartisan outreach, and maybe if he caves in sufficiently he can avoid a federal shutdown this spring. But any respite would be only temporary; again, the G.O.P. is just not interested in helping a Democrat govern.

My sense is that most Americans still don’t understand this reality. They still imagine that when push comes to shove, our politicians will come together to do what’s necessary. But that was another country.

It’s hard to see how this situation is resolved without a major crisis of some kind. Mr. Simpson may or may not get the blood bath he craves this April, but there will be blood sooner or later. And we can only hope that the nation that emerges from that blood bath is still one we recognize.

The World as Obama Finds It - NYTimes.com

November 14, 2010
The World as He Finds It
By PAUL KRUGMAN

On Wednesday David Axelrod, President Obama’s top political adviser, appeared to signal that the White House was ready to cave on tax cuts — to give in to Republican demands that tax cuts be extended for the wealthy as well as the middle class. “We have to deal with the world as we find it,” he declared.

The White House then tried to walk back what Mr. Axelrod had said. But it was a telling remark, in more ways than one.

The obvious point is the contrast between the administration’s current whipped-dog demeanor and Mr. Obama’s soaring rhetoric as a candidate. How did we get from “We are the ones we’ve been waiting for” to here?

But the bitter irony goes deeper than that: the main reason Mr. Obama finds himself in this situation is that two years ago he was not, in fact, prepared to deal with the world as he was going to find it. And it seems as if he still isn’t.

In retrospect, the roots of current Democratic despond go all the way back to the way Mr. Obama ran for president. Again and again, he defined America’s problem as one of process, not substance — we were in trouble not because we had been governed by people with the wrong ideas, but because partisan divisions and politics as usual had prevented men and women of good will from coming together to solve our problems. And he promised to transcend those partisan divisions.

This promise of transcendence may have been good general election politics, although even that is questionable: people forget how close the presidential race was at the beginning of September 2008, how worried Democrats were until Sarah Palin and Lehman Brothers pushed them over the hump. But the real question was whether Mr. Obama could change his tune when he ran into the partisan firestorm everyone who remembered the 1990s knew was coming. He could do uplift — but could he fight?

So far the answer has been no.

Right at the beginning of his administration, what Mr. Obama needed to do, above all, was fight for an economic plan commensurate with the scale of the crisis. Instead, he negotiated with himself before he ever got around to negotiating with Congress, proposing a plan that was clearly, grossly inadequate — then allowed that plan to be scaled back even further without protest. And the failure to act forcefully on the economy, more than anything else, accounts for the midterm “shellacking.”

Even given the economy’s troubles, however, the administration’s efforts to limit the political damage were amazingly weak. There were no catchy slogans, no clear statements of principle; the administration’s political messaging was not so much ineffective as invisible. How many voters even noticed the ever-changing campaign themes — does anyone remember the “Summer of Recovery” — that were rolled out as catastrophe loomed?

And things haven’t improved since the election. Consider Mr. Obama’s recent remarks on two fronts.

At the predictably unproductive G-20 summit meeting in South Korea, the president faced demands from China and Germany that the Federal Reserve stop its policy of “quantitative easing” — which is, given Republican obstructionism, one of the few tools available to promote U.S. economic recovery. What Mr. Obama should have said is that nations’ running huge trade surpluses — and in China’s case, doing so thanks to currency manipulation on a scale unprecedented in world history — have no business telling the United States that it can’t act to help its own economy.

But what he actually said was “From everything I can see, this decision was not one designed to have an impact on the currency, on the dollar.” Fighting words!

And then there’s the tax-cut issue. Mr. Obama could and should be hammering Republicans for trying to hold the middle class hostage to secure tax cuts for the wealthy. He could be pointing out that making the Bush tax cuts for the wealthy permanent is a huge budget issue — over the next 75 years it would cost as much as the entire Social Security shortfall. Instead, however, he is once again negotiating with himself, long before he actually gets to the table with the G.O.P.

Here’s the thing: Mr. Obama still has immense power, if he chooses to use it. At home, he has the veto pen, control of the Senate and the bully pulpit. He still has substantial executive authority to act on things like mortgage relief — there are billions of dollars not yet spent, not to mention the enormous leverage the government has via its ownership of Fannie and Freddie. Abroad, he still leads the world’s greatest economic power — and one area where he surely would get bipartisan support would be taking a tougher stand on China and other international bad actors.

But none of this will matter unless the president can find it within himself to use his power, to actually take a stand. And the signs aren’t good.

AlterNet: 16 of the Dumbest Things Americans Believe -- And the Right-Wing Lies Behind Them

16 of the Dumbest Things Americans Believe -- And the Right-Wing Lies Behind Them
By Sarah Seltzer, AlterNet
Posted on November 13, 2010, Printed on November 14, 2010
http://www.alternet.org/story/148826/

Americans are often misinformed, occasionally downright dumb, and easily misled by juicy-sounding rumors. But while the right wing is taking full advantage of this reality, the Left worries that calling out lies is "rude."

Remember when Congressman Joe Wilson stood up during Obama’s State of the Union address and shouted “You lie”? He was chastised soundly by the pundit class. But mostly he drew heat for being impolite, and was compared to Kanye West and other famous interrupters.

Revisiting Wilson's foolish tirade underscores the state of our upside-down political world. Wilson shouted “you lie” in the face of truth, but President Obama is hesitant to speak up when he’s being slandered with bald, glaring untruths. The dark irony will continue as the Republicans take over the House this winter and the rumors and insinuations from extremist right-wing pundits keep circulating. It feels like no one with a loud enough megaphone has the courage to call a spade a spade, or more accurately a lie a lie.

We’ve gone far beyond Stephen Colbert’s “truthiness” into a more “truth-be-damned” environment; what Rick Perlstein described in the Daily Beast as a “mendocracy. As in, rule by liars.”

Here are some examples of recent ways we have made inroads in ignorance:

* Polling data during and after last week’s midterm elections suggested that many Americans genuinely believe President Obama has raised their taxes -- even though the reality is that our president actually lowered them for most of us. This means that people trust pundits like Rush Limbaugh, a major force behind spreading that lie, over the numbers on their own tax returns.
* Another recent phenomenon? Half of new Congressmen don’t believe in the reality of global warming. It’s not that they don’t just disagree on the source or the severity of the problem. They flat out don’t think the world is getting warmer--despite the evidence outside their windows.
* The new Congress will probably try to restore millions of dollars of funding for scientifically inaccurate, largely disastrous abstinence-only curriculum in schools, many of which have been shown to spread lies like "condoms don't work" and "abortion causes cancer."
* News outlets picked up a wildly inflated and completely outlandish claim from an Indian blog that Obama’s trip abroad cost $200 million a day--and listeners have swallowed it. (In this case, the White House flat-out denied it.)

The scary thing is, these kinds of rumors have a way of taking root in the popular consciousness. Just as the election season began heating up earlier this year, Newsweek published a list of “Dumb Things Americans Believe.” While some of them are garden-variety lunacy, a surprising number are lies that were fed to Americans by our leaders on the far-Right. This demonstrates that media-fed lies can easily become ingrained in the collective memory if they’re not countered quickly and surely. Newsweek’s list included the following 12 statistics taken from recent and semi-recent polls and surveys. The first half are directly related to right-wing rumormongering.

* Nearly one-fifth of Americans think Obama is a Muslim. Thanks, Fox news, for acting like this was a matter of opinion, not fact.
* 25 percent of Americans don’t believe in Darwin’s theory of evolution while less than 40 percent do. Consider the fact that several of our newly elected officials, specifically newly elected Kansas Governor Sam Brownback, share that belief.
* Earlier this year, nearly 40 percent of Americans still believed the Sarah Palin-supported lie about "death panels" being included in health care reform.
* As of just a few years ago, about half of Americans still suspected a connection between Saddam Hussein and the attacks of September 11, a lie that was reinforced by none other than Dick Cheney.
* While a hefty amount of this demonstrable cluelessness gets better as the respondents get younger, all is not well in the below-30 demographic. A majority of “young Americans” cannot identify Iraq or Afghanistan--the places their peers are fighting and dying--on a map.
* Two out of five Americans, despite the whole separation of church and state being a foundation of our democracy thing, think teachers should be able to lead prayer in classrooms. So it seems those right-wingers clamoring to tear down the wall between church and state aren’t the only ones who don’t know their constitutional principles.
* Many Americans still believe in witchcraft, ESP and other supernatural phenomena. Does that explain why Christine O’Donnell was so quick to deny her “dabbling”?
* Speaking of antiquated religious beliefs, about a decade ago, 20 percent of Americans still believed that the sun revolves around the earth. That's just sad, considering that even the Vatican has let Galileo off the hook for being right.
* Only about half of Americans realize that Judaism is the oldest of the three monotheistic religions. Other examples of wild misunderstanding about religion and the separation of church and state can be found in this fall’s Pew survey on Americans’ religious knowledge.
* This one made a huge splash when it appeared. In 2006 more Americans were able to name two of the “seven dwarves” than two of the Supreme Court justices. And that was before Kagan and Sotomayor showed up. To be fair, Happy and Sleepy are easy to remember.
* More Americans can identify the Three Stooges than the three branches of government--you know, the ones who are jockeying over our welfare.

So what to do in a political and cultural landscape in which well-told lies have more validity than fact-based truth? Perlstein explained how this environment gets created by explaining what happened on Election Day this year:

“...by a two-to-one margin likely voters thought their taxes had gone up, when, for almost all of them, they had actually gone down. Republican politicians, and conservative commentators, told them Barack Obama was a tax-mad lunatic. They lied. The mainstream media did not do their job and correct them. The White House was too polite—"civil," just like Obama promised—to say much. So people believed the lie.”

We’ve entered a bizzarro world in which calling out lies is considered rude, says Perlstein, so liars are allowed to sit tight and dominate the discourse. This gels with Bill Maher’s critique of the Rally for Sanity, that calling for “balance for balance’s sake” ignores two important aspects of news reporting: facts and evidence.

Blaming Americans for being ignorant unwashed masses--or taking potshots at an education system that doesn’t teach critical thinking-- would be the easy answer to this conundrum.

But the reality is that if messaging has such a big effect on Americans, then messaging matters. Folks on our end have to counter the lies with well-told, unabashed unironic, truth-telling. And we have to demand that our media, and our politicians, call out the other side. As Perlstein notes, “When one side breaks the social contract, and the other side makes a virtue of never calling them out on it, the liar always wins. When it becomes 'uncivil' to call out liars, lying becomes free.”

Even worse, once lies begin to spread, they become more than rumors--they become permanent beliefs.

Sarah Seltzer is an associate editor at Alternet, an RH Reality Check staff writer and a freelance journalist based in New York City. Her work can be found at www.sarahmseltzer.com.
© 2010 Independent Media Institute. All rights reserved.
View this story online at: http://www.alternet.org/story/148826/

Skepticblog » What Do You Believe In?

by Michael Shermer, Nov 09 2010

As a skeptic and atheist I am often asked, “What do you believe in?” The ending preposition implies something more than what factual claims are to be believed, such as evolution, quantum physics, or the big bang. What is suggested by the question is what values does one believe in or hold to, especially without belief in God and religion. Here is my answer.

I believe in the Principle of Freedom: All people are free to think, believe, and act as they choose, so long as they do not infringe on the equal freedom of others.

I believe in civil liberties, civil rights, and the freedoms guaranteed in the United States Constitution, including and especially freedom of speech, freedom of association, freedom to assemble peacefully, freedom to petition grievances, freedom to worship (or not), freedom of the press, freedom of reproductive choice, freedom to bear arms, etc.

I believe in the sanctity of private property, the rule of law, and equal treatment under the law.

I believe in free will, free choice, moral culpability, and personal responsibility.

I believe in truth seeking and truth telling.

I believe in trust and trustworthiness.

I believe in fairness and reciprocity.

I believe in love, marriage, and fidelity.

I believe in family, friendship, and community.

I believe in honor, loyalty, and commitment to family, friends, and community members.

I believe in forgiveness when it is genuinely asked for or offered.

I believe in kindness, generosity, and charity, especially voluntary aid to others in need.

I believe in science as the best method ever devised for understanding how the world works.

I believe in reason and logic and rationality as cognitive tools for answering questions, solving problems, and devising solutions to life’s many problems and quandaries.

I believe in technological growth, cultural advancement, and moral progress.

I believe in the almost illimitable capacity of human creativity and inventiveness for our species to flourish into the far future on this planet and others.

Ad astra per aspera!

So, if you are ever asked by a believer what you believe in, offer your own list along these lines of values that you honor, and then ask, “Why, what do you believe in? Do you not honor these values?”

The impetus for essay, which I penned on a plane to Los Angeles on October 15, 2010, was that I was asked this very question the night before during the Q&A after a talk I delivered before a sizable audience at the University of Minnesota in Minneapolis, sponsored by CASH (Campus Atheists, Skeptics, and Humanists), supported by several other Minnesota atheist and humanist groups, and attended as well by many believers. The woman who made the inquiry explained that as an atheist she is often asked this question in a tone implying that atheists cannot or do not believe in anything.

Nothing could be further from the truth, of course, but such is the delimiting effect of religious belief and the myth that without God anything goes. Quite the contrary. Without God, values matter more here and now than they ever could in any projected afterlife proscenium where the moral play is finally enacted.

P.S. The final line above translates as: To the stars with difficulty. The phrase originated with the Roman poet Seneca the Younger and was made famous on a plaque honoring the Apollo 1 astronauts who perished in a fire on the launch pad at Cape Canaveral.

We The People

We The People

Mugged by the Debt Moralizers - NYTimes.com

October 31, 2010
Mugged by the Moralizers
By PAUL KRUGMAN

“How many of you people want to pay for your neighbor’s mortgage that has an extra bathroom and can’t pay their bills?” That’s the question CNBC’s Rick Santelli famously asked in 2009, in a rant widely credited with giving birth to the Tea Party movement.

It’s a sentiment that resonates not just in America but in much of the world. The tone differs from place to place — listening to a German official denounce deficits, my wife whispered, “We’ll all be handed whips as we leave, so we can flagellate ourselves.” But the message is the same: debt is evil, debtors must pay for their sins, and from now on we all must live within our means.

And that kind of moralizing is the reason we’re mired in a seemingly endless slump.

The years leading up to the 2008 crisis were indeed marked by unsustainable borrowing, going far beyond the subprime loans many people still believe, wrongly, were at the heart of the problem. Real estate speculation ran wild in Florida and Nevada, but also in Spain, Ireland and Latvia. And all of it was paid for with borrowed money.

This borrowing made the world as a whole neither richer nor poorer: one person’s debt is another person’s asset. But it made the world vulnerable. When lenders suddenly decided that they had lent too much, that debt levels were excessive, debtors were forced to slash spending. This pushed the world into the deepest recession since the 1930s. And recovery, such as it is, has been weak and uncertain — which is exactly what we should have expected, given the overhang of debt.

The key thing to bear in mind is that for the world as a whole, spending equals income. If one group of people — those with excessive debts — is forced to cut spending to pay down its debts, one of two things must happen: either someone else must spend more, or world income will fall.

Yet those parts of the private sector not burdened by high levels of debt see little reason to increase spending. Corporations are flush with cash — but why expand when so much of the capacity they already have is sitting idle? Consumers who didn’t overborrow can get loans at low rates — but that incentive to spend is more than outweighed by worries about a weak job market. Nobody in the private sector is willing to fill the hole created by the debt overhang.

So what should we be doing? First, governments should be spending while the private sector won’t, so that debtors can pay down their debts without perpetuating a global slump. Second, governments should be promoting widespread debt relief: reducing obligations to levels the debtors can handle is the fastest way to eliminate that debt overhang.

But the moralizers will have none of it. They denounce deficit spending, declaring that you can’t solve debt problems with more debt. They denounce debt relief, calling it a reward for the undeserving.

And if you point out that their arguments don’t add up, they fly into a rage. Try to explain that when debtors spend less, the economy will be depressed unless somebody else spends more, and they call you a socialist. Try to explain why mortgage relief is better for America than foreclosing on homes that must be sold at a huge loss, and they start ranting like Mr. Santelli. No question about it: the moralizers are filled with a passionate intensity.

And those who should know better lack all conviction.

John Boehner, the House minority leader, was widely mocked last year when he declared that “It’s time for government to tighten their belts” — in the face of depressed private spending, the government should spend more, not less. But since then President Obama has repeatedly used the same metaphor, promising to match private belt-tightening with public belt-tightening. Does he lack the courage to challenge popular misconceptions, or is this just intellectual laziness? Either way, if the president won’t defend the logic of his own policies, who will?

Meanwhile, the administration’s mortgage modification program — the program that inspired the Santelli rant — has, in the end, accomplished almost nothing. At least part of the reason is that officials were so worried that they might be accused of helping the undeserving that they ended up helping almost nobody.

So the moralizers are winning. More and more voters, both here and in Europe, are convinced that what we need is not more stimulus but more punishment. Governments must tighten their belts; debtors must pay what they owe.

The irony is that in their determination to punish the undeserving, voters are punishing themselves: by rejecting fiscal stimulus and debt relief, they’re perpetuating high unemployment. They are, in effect, cutting off their own jobs to spite their neighbors.

But they don’t know that. And because they don’t, the slump will go on.

Op-Ed Contributor - Hey, Small Spender - NYTimes.com

October 10, 2010
Hey, Small Spender
By PAUL KRUGMAN

Here’s the narrative you hear everywhere: President Obama has presided over a huge expansion of government, but unemployment has remained high. And this proves that government spending can’t create jobs.

Here’s what you need to know: The whole story is a myth. There never was a big expansion of government spending. In fact, that has been the key problem with economic policy in the Obama years: we never had the kind of fiscal expansion that might have created the millions of jobs we need.

Ask yourself: What major new federal programs have started up since Mr. Obama took office? Health care reform, for the most part, hasn’t kicked in yet, so that can’t be it. So are there giant infrastructure projects under way? No. Are there huge new benefits for low-income workers or the poor? No. Where’s all that spending we keep hearing about? It never happened.

To be fair, spending on safety-net programs, mainly unemployment insurance and Medicaid, has risen — because, in case you haven’t noticed, there has been a surge in the number of Americans without jobs and badly in need of help. And there were also substantial outlays to rescue troubled financial institutions, although it appears that the government will get most of its money back. But when people denounce big government, they usually have in mind the creation of big bureaucracies and major new programs. And that just hasn’t taken place.

Consider, in particular, one fact that might surprise you: The total number of government workers in America has been falling, not rising, under Mr. Obama. A small increase in federal employment was swamped by sharp declines at the state and local level — most notably, by layoffs of schoolteachers. Total government payrolls have fallen by more than 350,000 since January 2009.

Now, direct employment isn’t a perfect measure of the government’s size, since the government also employs workers indirectly when it buys goods and services from the private sector. And government purchases of goods and services have gone up. But adjusted for inflation, they rose only 3 percent over the last two years — a pace slower than that of the previous two years, and slower than the economy’s normal rate of growth.

So as I said, the big government expansion everyone talks about never happened. This fact, however, raises two questions. First, we know that Congress enacted a stimulus bill in early 2009; why didn’t that translate into a big rise in government spending? Second, if the expansion never happened, why does everyone think it did?

Part of the answer to the first question is that the stimulus wasn’t actually all that big compared with the size of the economy. Furthermore, it wasn’t mainly focused on increasing government spending. Of the roughly $600 billion cost of the Recovery Act in 2009 and 2010, more than 40 percent came from tax cuts, while another large chunk consisted of aid to state and local governments. Only the remainder involved direct federal spending.

And federal aid to state and local governments wasn’t enough to make up for plunging tax receipts in the face of the economic slump. So states and cities, which can’t run large deficits, were forced into drastic spending cuts, more than offsetting the modest increase at the federal level.

The answer to the second question — why there’s a widespread perception that government spending has surged, when it hasn’t — is that there has been a disinformation campaign from the right, based on the usual combination of fact-free assertions and cooked numbers. And this campaign has been effective in part because the Obama administration hasn’t offered an effective reply.

Actually, the administration has had a messaging problem on economic policy ever since its first months in office, when it went for a stimulus plan that many of us warned from the beginning was inadequate given the size of the economy’s troubles. You can argue that Mr. Obama got all he could — that a larger plan wouldn’t have made it through Congress (which is questionable), and that an inadequate stimulus was much better than none at all (which it was). But that’s not an argument the administration ever made. Instead, it has insisted throughout that its original plan was just right, a position that has become increasingly awkward as the recovery stalls.

And a side consequence of this awkward positioning is that officials can’t easily offer the obvious rebuttal to claims that big spending failed to fix the economy — namely, that thanks to the inadequate scale of the Recovery Act, big spending never happened in the first place.

But if they won’t say it, I will: if job-creating government spending has failed to bring down unemployment in the Obama era, it’s not because it doesn’t work; it’s because it wasn’t tried.

Op-Ed Columnist - Fear and Favor - NYTimes.com

October 3, 2010
Fear and Favor
By PAUL KRUGMAN

A note to Tea Party activists: This is not the movie you think it is. You probably imagine that you’re starring in “The Birth of a Nation,” but you’re actually just extras in a remake of “Citizen Kane.”

True, there have been some changes in the plot. In the original, Kane tried to buy high political office for himself. In the new version, he just puts politicians on his payroll.

I mean that literally. As Politico recently pointed out, every major contender for the 2012 Republican presidential nomination who isn’t currently holding office and isn’t named Mitt Romney is now a paid contributor to Fox News. Now, media moguls have often promoted the careers and campaigns of politicians they believe will serve their interests. But directly cutting checks to political favorites takes it to a whole new level of blatancy.

Arguably, this shouldn’t be surprising. Modern American conservatism is, in large part, a movement shaped by billionaires and their bank accounts, and assured paychecks for the ideologically loyal are an important part of the system. Scientists willing to deny the existence of man-made climate change, economists willing to declare that tax cuts for the rich are essential to growth, strategic thinkers willing to provide rationales for wars of choice, lawyers willing to provide defenses of torture, all can count on support from a network of organizations that may seem independent on the surface but are largely financed by a handful of ultrawealthy families.

And these organizations have long provided havens for conservative political figures not currently in office. Thus when Senator Rick Santorum was defeated in 2006, he got a new job as head of the America’s Enemies program at the Ethics and Public Policy Center, a think tank that has received funding from the usual sources: the Koch brothers, the Coors family, and so on.

Now Mr. Santorum is one of those paid Fox contributors contemplating a presidential run. What’s the difference?

Well, for one thing, Fox News seems to have decided that it no longer needs to maintain even the pretense of being nonpartisan.

Nobody who was paying attention has ever doubted that Fox is, in reality, a part of the Republican political machine; but the network — with its Orwellian slogan, “fair and balanced” — has always denied the obvious. Officially, it still does. But by hiring those G.O.P. candidates, while at the same time making million-dollar contributions to the Republican Governors Association and the rabidly anti-Obama United States Chamber of Commerce, Rupert Murdoch’s News Corporation, which owns Fox, is signaling that it no longer feels the need to make any effort to keep up appearances.

Something else has changed, too: increasingly, Fox News has gone from merely supporting Republican candidates to anointing them. Christine O’Donnell, the upset winner of the G.O.P. Senate primary in Delaware, is often described as the Tea Party candidate, but given the publicity the network gave her, she could equally well be described as the Fox News candidate. Anyway, there’s not much difference: the Tea Party movement owes much of its rise to enthusiastic Fox coverage.

As the Republican political analyst David Frum put it, “Republicans originally thought that Fox worked for us, and now we are discovering we work for Fox” — literally, in the case of all those non-Mitt-Romney presidential hopefuls. It was days later, by the way, that Mr. Frum was fired by the American Enterprise Institute. Conservatives criticize Fox at their peril.

So the Ministry of Propaganda has, in effect, seized control of the Politburo. What are the implications?

Perhaps the most important thing to realize is that when billionaires put their might behind “grass roots” right-wing action, it’s not just about ideology: it’s also about business. What the Koch brothers have bought with their huge political outlays is, above all, freedom to pollute. What Mr. Murdoch is acquiring with his expanded political role is the kind of influence that lets his media empire make its own rules.

Thus in Britain, a reporter at one of Mr. Murdoch’s papers, News of the World, was caught hacking into the voice mail of prominent citizens, including members of the royal family. But Scotland Yard showed little interest in getting to the bottom of the story. Now the editor who ran the paper when the hacking was taking place is chief of communications for the Conservative government — and that government is talking about slashing the budget of the BBC, which competes with the News Corporation.

So think of those paychecks to Sarah Palin and others as smart investments. After all, if you’re a media mogul, it’s always good to have friends in high places. And the most reliable friends are the ones who know they owe it all to you.

Op-Ed Columnist - The Angry Rich and Taxes - NYTimes.com

September 19, 2010
The Angry Rich
By PAUL KRUGMAN

Anger is sweeping America. True, this white-hot rage is a minority phenomenon, not something that characterizes most of our fellow citizens. But the angry minority is angry indeed, consisting of people who feel that things to which they are entitled are being taken away. And they’re out for revenge.

No, I’m not talking about the Tea Partiers. I’m talking about the rich.

These are terrible times for many people in this country. Poverty, especially acute poverty, has soared in the economic slump; millions of people have lost their homes. Young people can’t find jobs; laid-off 50-somethings fear that they’ll never work again.

Yet if you want to find real political rage — the kind of rage that makes people compare President Obama to Hitler, or accuse him of treason — you won’t find it among these suffering Americans. You’ll find it instead among the very privileged, people who don’t have to worry about losing their jobs, their homes, or their health insurance, but who are outraged, outraged, at the thought of paying modestly higher taxes.

The rage of the rich has been building ever since Mr. Obama took office. At first, however, it was largely confined to Wall Street. Thus when New York magazine published an article titled “The Wail Of the 1%,” it was talking about financial wheeler-dealers whose firms had been bailed out with taxpayer funds, but were furious at suggestions that the price of these bailouts should include temporary limits on bonuses. When the billionaire Stephen Schwarzman compared an Obama proposal to the Nazi invasion of Poland, the proposal in question would have closed a tax loophole that specifically benefits fund managers like him.

Now, however, as decision time looms for the fate of the Bush tax cuts — will top tax rates go back to Clinton-era levels? — the rage of the rich has broadened, and also in some ways changed its character.

For one thing, craziness has gone mainstream. It’s one thing when a billionaire rants at a dinner event. It’s another when Forbes magazine runs a cover story alleging that the president of the United States is deliberately trying to bring America down as part of his Kenyan, “anticolonialist” agenda, that “the U.S. is being ruled according to the dreams of a Luo tribesman of the 1950s.” When it comes to defending the interests of the rich, it seems, the normal rules of civilized (and rational) discourse no longer apply.

At the same time, self-pity among the privileged has become acceptable, even fashionable.

Tax-cut advocates used to pretend that they were mainly concerned about helping typical American families. Even tax breaks for the rich were justified in terms of trickle-down economics, the claim that lower taxes at the top would make the economy stronger for everyone.

These days, however, tax-cutters are hardly even trying to make the trickle-down case. Yes, Republicans are pushing the line that raising taxes at the top would hurt small businesses, but their hearts don’t really seem in it. Instead, it has become common to hear vehement denials that people making $400,000 or $500,000 a year are rich. I mean, look at the expenses of people in that income class — the property taxes they have to pay on their expensive houses, the cost of sending their kids to elite private schools, and so on. Why, they can barely make ends meet.

And among the undeniably rich, a belligerent sense of entitlement has taken hold: it’s their money, and they have the right to keep it. “Taxes are what we pay for civilized society,” said Oliver Wendell Holmes — but that was a long time ago.

The spectacle of high-income Americans, the world’s luckiest people, wallowing in self-pity and self-righteousness would be funny, except for one thing: they may well get their way. Never mind the $700 billion price tag for extending the high-end tax breaks: virtually all Republicans and some Democrats are rushing to the aid of the oppressed affluent.

You see, the rich are different from you and me: they have more influence. It’s partly a matter of campaign contributions, but it’s also a matter of social pressure, since politicians spend a lot of time hanging out with the wealthy. So when the rich face the prospect of paying an extra 3 or 4 percent of their income in taxes, politicians feel their pain — feel it much more acutely, it’s clear, than they feel the pain of families who are losing their jobs, their houses, and their hopes.

And when the tax fight is over, one way or another, you can be sure that the people currently defending the incomes of the elite will go back to demanding cuts in Social Security and aid to the unemployed. America must make hard choices, they’ll say; we all have to be willing to make sacrifices.

But when they say “we,” they mean “you.” Sacrifice is for the little people.

Op-Ed Columnist - The Tax-Cut Racket - NYTimes.com

September 16, 2010
The Tax-Cut Racket
By PAUL KRUGMAN

“Nice middle class you got here,” said Mitch McConnell, the Senate minority leader. “It would be a shame if something happened to it.”

O.K., he didn’t actually say that. But he might as well have, because that’s what the current confrontation over taxes amounts to. Mr. McConnell, who was self-righteously denouncing the budget deficit just the other day, now wants to blow that deficit up with big tax cuts for the rich. But he doesn’t have the votes. So he’s trying to get what he wants by pointing a gun at the heads of middle-class families, threatening to force a jump in their taxes unless he gets paid off with hugely expensive tax breaks for the wealthy.

Most discussion of the tax fight focuses either on the economics or on the politics — both of which suggest that Democrats should hang tough, for their own sakes as well as that of the country. But there’s an even bigger issue here — namely, the question of what constitutes acceptable behavior in American political life. Politics ain’t beanbag, but there’s a difference between playing hardball and engaging in outright extortion, which is what Mr. McConnell is now doing. And if he succeeds, it will set a disastrous precedent.

How did we get to this point? The proximate answer lies in the tactics the Bush administration used to push through tax cuts. The deeper answer lies in the radicalization of the Republican Party, its transformation into a movement willing to put the economy and the nation at risk for the sake of partisan victory.

So, about those tax cuts: back in 2001, the Bush administration bundled huge tax cuts for wealthy Americans with much smaller tax cuts for the middle class, then pretended that it was mainly offering tax breaks to ordinary families. Meanwhile, it circumvented Senate rules intended to prevent irresponsible fiscal actions — rules that would have forced it to find spending cuts to offset its $1.3 trillion tax cut — by putting an expiration date of Dec. 31, 2010, on the whole bill. And the witching hour is now upon us. If Congress doesn’t act, the Bush tax cuts will turn into a pumpkin at the end of this year, with tax rates reverting to Clinton-era levels.

In response, President Obama is proposing legislation that would keep tax rates essentially unchanged for 98 percent of Americans but allow rates on the richest 2 percent to rise. But Republicans are threatening to block that legislation, effectively raising taxes on the middle class, unless they get tax breaks for their wealthy friends.

That’s an extraordinary step. Almost everyone agrees that raising taxes on the middle class in the middle of an economic slump is a bad idea, unless the effects are offset by other job-creation programs — and Republicans are blocking those, too. So the G.O.P. is, in effect, threatening to plunge the U.S. economy back into recession unless Democrats pay up.

What kind of political party would engage in that kind of brinksmanship? The answer is the same kind of party that shut down the federal government in 1995 in an attempt to force President Bill Clinton to accept steep cuts in Medicare, and is actively discussing doing the same to Mr. Obama. So, as I said, the deeper explanation of the tax-cut fight is that it’s ultimately about a radicalized Republican Party, which accepts no limits on partisanship.

So should Democrats give in?

On the economics, the answer is a clear no. Right now, fears about budget deficits are overblown — but that doesn’t mean that we should completely ignore deficit concerns. And the G.O.P. plan would add hugely to the deficit — about $700 billion over the next decade — while doing little to help the economy. On any kind of cost-benefit analysis, this is an idea not worth considering.

And, by the way, a compromise solution — temporary tax breaks for the rich — is no better; it would cost less, but it would also do even less for the economy.

On the politics, the answer is also a clear no. Polls show that a majority of Americans are opposed to maintaining tax breaks for the rich. Beyond that, this is no time for Democrats to play it safe: if the midterm election were held today, they would lose badly. They need to highlight their differences with the G.O.P. — and it’s hard to think of a better place for them to take a stand than on the issue of big giveaways to Wall Street and corporate C.E.O.’s.

But what’s even more important is the principle of the thing. Threats to punish innocent bystanders unless your political rivals give you what you want have no legitimate place in democratic politics. Giving in to such threats would be an economic and political mistake, but more important, it would be morally wrong — and it would encourage more such threats in the future.

It’s time for Democrats to take a stand, and say no to G.O.P. blackmail.

Stephen Hawking on God, Science and the Origins of the Universe - WSJ.com

Stephen Hawking on God, Science and the Origins of the Universe - WSJ.com

Op-Ed Columnist - 1938 in 2010 - NYTimes.com

September 5, 2010
1938 in 2010
By PAUL KRUGMAN

Here’s the situation: The U.S. economy has been crippled by a financial crisis. The president’s policies have limited the damage, but they were too cautious, and unemployment remains disastrously high. More action is clearly needed. Yet the public has soured on government activism, and seems poised to deal Democrats a severe defeat in the midterm elections.

The president in question is Franklin Delano Roosevelt; the year is 1938. Within a few years, of course, the Great Depression was over. But it’s both instructive and discouraging to look at the state of America circa 1938 — instructive because the nature of the recovery that followed refutes the arguments dominating today’s public debate, discouraging because it’s hard to see anything like the miracle of the 1940s happening again.

Now, we weren’t supposed to find ourselves replaying the late 1930s. President Obama’s economists promised not to repeat the mistakes of 1937, when F.D.R. pulled back fiscal stimulus too soon. But by making his program too small and too short-lived, Mr. Obama did just that: the stimulus raised growth while it lasted, but it made only a small dent in unemployment — and now it’s fading out.

And just as some of us feared, the inadequacy of the administration’s initial economic plan has landed it — and the nation — in a political trap. More stimulus is desperately needed, but in the public’s eyes the failure of the initial program to deliver a convincing recovery has discredited government action to create jobs.

In short, welcome to 1938.

The story of 1937, of F.D.R.’s disastrous decision to heed those who said that it was time to slash the deficit, is well known. What’s less well known is the extent to which the public drew the wrong conclusions from the recession that followed: far from calling for a resumption of New Deal programs, voters lost faith in fiscal expansion.

Consider Gallup polling from March 1938. Asked whether government spending should be increased to fight the slump, 63 percent of those polled said no. Asked whether it would be better to increase spending or to cut business taxes, only 15 percent favored spending; 63 percent favored tax cuts. And the 1938 election was a disaster for the Democrats, who lost 70 seats in the House and seven in the Senate.

Then came the war.

From an economic point of view World War II was, above all, a burst of deficit-financed government spending, on a scale that would never have been approved otherwise. Over the course of the war the federal government borrowed an amount equal to roughly twice the value of G.D.P. in 1940 — the equivalent of roughly $30 trillion today.

Had anyone proposed spending even a fraction that much before the war, people would have said the same things they’re saying today. They would have warned about crushing debt and runaway inflation. They would also have said, rightly, that the Depression was in large part caused by excess debt — and then have declared that it was impossible to fix this problem by issuing even more debt.

But guess what? Deficit spending created an economic boom — and the boom laid the foundation for long-run prosperity. Overall debt in the economy — public plus private — actually fell as a percentage of G.D.P., thanks to economic growth and, yes, some inflation, which reduced the real value of outstanding debts. And after the war, thanks to the improved financial position of the private sector, the economy was able to thrive without continuing deficits.

The economic moral is clear: when the economy is deeply depressed, the usual rules don’t apply. Austerity is self-defeating: when everyone tries to pay down debt at the same time, the result is depression and deflation, and debt problems grow even worse. And conversely, it is possible — indeed, necessary — for the nation as a whole to spend its way out of debt: a temporary surge of deficit spending, on a sufficient scale, can cure problems brought on by past excesses.

But the story of 1938 also shows how hard it is to apply these insights. Even under F.D.R., there was never the political will to do what was needed to end the Great Depression; its eventual resolution came essentially by accident.

I had hoped that we would do better this time. But it turns out that politicians and economists alike have spent decades unlearning the lessons of the 1930s, and are determined to repeat all the old mistakes. And it’s slightly sickening to realize that the big winners in the midterm elections are likely to be the very people who first got us into this mess, then did everything in their power to block action to get us out.

But always remember: this slump can be cured. All it will take is a little bit of intellectual clarity, and a lot of political will. Here’s hoping we find those virtues in the not too distant future.

Op-Ed Columnist - The Real Story - NYTimes.com

September 2, 2010
The Real Story
By PAUL KRUGMAN

Next week, President Obama is scheduled to propose new measures to boost the economy. I hope they’re bold and substantive, since the Republicans will oppose him regardless — if he came out for motherhood, the G.O.P. would declare motherhood un-American. So he should put them on the spot for standing in the way of real action.

But let’s put politics aside and talk about what we’ve actually learned about economic policy over the past 20 months.

When Mr. Obama first proposed $800 billion in fiscal stimulus, there were two groups of critics. Both argued that unemployment would stay high — but for very different reasons.

One group — the group that got almost all the attention — declared that the stimulus was much too large, and would lead to disaster. If you were, say, reading The Wall Street Journal’s opinion pages in early 2009, you would have been repeatedly informed that the Obama plan would lead to skyrocketing interest rates and soaring inflation.

The other group, which included yours truly, warned that the plan was much too small given the economic forecasts then available. As I pointed out in February 2009, the Congressional Budget Office was predicting a $2.9 trillion hole in the economy over the next two years; an $800 billion program, partly consisting of tax cuts that would have happened anyway, just wasn’t up to the task of filling that hole.

Critics in the second camp were particularly worried about what would happen this year, since the stimulus would have its maximum effect on growth in late 2009 then gradually fade out. Last year, many of us were already warning that the economy might stall in the second half of 2010.

So what actually happened? The administration’s optimistic forecast was wrong, but which group of pessimists was right about the reasons for that error?

Start with interest rates. Those who said the stimulus was too big predicted sharply rising rates. When rates rose in early 2009, The Wall Street Journal published an editorial titled “The Bond Vigilantes: The disciplinarians of U.S. policy makers return.” The editorial declared that it was all about fear of deficits, and concluded, “When in doubt, bet on the markets.”

But those who said the stimulus was too small argued that temporary deficits weren’t a problem as long as the economy remained depressed; we were awash in savings with nowhere to go. Interest rates, we said, would fluctuate with optimism or pessimism about future growth, not with government borrowing.

When in doubt, bet on the markets. The 10-year bond rate was over 3.7 percent when The Journal published that editorial; it’s under 2.7 percent now.

What about inflation? Amid the inflation hysteria of early 2009, the inadequate-stimulus critics pointed out that inflation always falls during sustained periods of high unemployment, and that this time should be no different. Sure enough, key measures of inflation have fallen from more than 2 percent before the economic crisis to 1 percent or less now, and Japanese-style deflation is looking like a real possibility.

Meanwhile, the timing of recent economic growth strongly supports the notion that stimulus does, indeed, boost the economy: growth accelerated last year, as the stimulus reached its predicted peak impact, but has fallen off — just as some of us feared — as the stimulus has faded.

Oh, and don’t tell me that Germany proves that austerity, not stimulus, is the way to go. Germany actually did quite a lot of stimulus — the austerity is all in the future. Also, it never had a housing bubble that burst. And with all that, German G.D.P. is still further below its precrisis peak than American G.D.P. True, Germany has done better in terms of employment — but that’s because strong unions and government policy have prevented American-style mass layoffs.

The actual lessons of 2009-2010, then, are that scare stories about stimulus are wrong, and that stimulus works when it is applied. But it wasn’t applied on a sufficient scale. And we need another round.

I know that getting that round is unlikely: Republicans and conservative Democrats won’t stand for it. And if, as expected, the G.O.P. wins big in November, this will be widely regarded as a vindication of the anti-stimulus position. Mr. Obama, we’ll be told, moved too far to the left, and his Keynesian economic doctrine was proved wrong.

But politics determines who has the power, not who has the truth. The economic theory behind the Obama stimulus has passed the test of recent events with flying colors; unfortunately, Mr. Obama, for whatever reason — yes, I’m aware that there were political constraints — initially offered a plan that was much too cautious given the scale of the economy’s problems.

So, as I said, here’s hoping that Mr. Obama goes big next week. If he does, he’ll have the facts on his side.

Op-Ed Columnist - It’s Witch-Hunt Season - NYTimes.com

August 29, 2010
It’s Witch-Hunt Season
By PAUL KRUGMAN

The last time a Democrat sat in the White House, he faced a nonstop witch hunt by his political opponents. Prominent figures on the right accused Bill and Hillary Clinton of everything from drug smuggling to murder. And once Republicans took control of Congress, they subjected the Clinton administration to unrelenting harassment — at one point taking 140 hours of sworn testimony over accusations that the White House had misused its Christmas card list.

Now it’s happening again — except that this time it’s even worse. Let’s turn the floor over to Rush Limbaugh: “Imam Hussein Obama,” he recently declared, is “probably the best anti-American president we’ve ever had.”

To get a sense of how much it matters when people like Mr. Limbaugh talk like this, bear in mind that he’s an utterly mainstream figure within the Republican Party; bear in mind, too, that unless something changes the political dynamics, Republicans will soon control at least one house of Congress. This is going to be very, very ugly.

So where is this rage coming from? Why is it flourishing? What will it do to America?

Anyone who remembered the 1990s could have predicted something like the current political craziness. What we learned from the Clinton years is that a significant number of Americans just don’t consider government by liberals — even very moderate liberals — legitimate. Mr. Obama’s election would have enraged those people even if he were white. Of course, the fact that he isn’t, and has an alien-sounding name, adds to the rage.

By the way, I’m not talking about the rage of the excluded and the dispossessed: Tea Partiers are relatively affluent, and nobody is angrier these days than the very, very rich. Wall Street has turned on Mr. Obama with a vengeance: last month Steve Schwarzman, the billionaire chairman of the Blackstone Group, the private equity giant, compared proposals to end tax loopholes for hedge fund managers with the Nazi invasion of Poland.

And powerful forces are promoting and exploiting this rage. Jane Mayer’s new article in The New Yorker about the superrich Koch brothers and their war against Mr. Obama has generated much-justified attention, but as Ms. Mayer herself points out, only the scale of their effort is new: billionaires like Richard Mellon Scaife waged a similar war against Bill Clinton.

Meanwhile, the right-wing media are replaying their greatest hits. In the 1990s, Mr. Limbaugh used innuendo to feed anti-Clinton mythology, notably the insinuation that Hillary Clinton was complicit in the death of Vince Foster. Now, as we’ve just seen, he’s doing his best to insinuate that Mr. Obama is a Muslim. Again, though, there’s an extra level of craziness this time around: Mr. Limbaugh is the same as he always was, but now seems tame compared with Glenn Beck.

And where, in all of this, are the responsible Republicans, leaders who will stand up and say that some partisans are going too far? Nowhere to be found.

To take a prime example: the hysteria over the proposed Islamic center in lower Manhattan almost makes one long for the days when former President George W. Bush tried to soothe religious hatred, declaring Islam a religion of peace. There were good reasons for his position: there are a billion Muslims in the world, and America can’t afford to make all of them its enemies.

But here’s the thing: Mr. Bush is still around, as are many of his former officials. Where are the statements, from the former president or those in his inner circle, preaching tolerance and denouncing anti-Islam hysteria? On this issue, as on many others, the G.O.P. establishment is offering a nearly uniform profile in cowardice.

So what will happen if, as expected, Republicans win control of the House? We already know part of the answer: Politico reports that they’re gearing up for a repeat performance of the 1990s, with a “wave of committee investigations” — several of them over supposed scandals that we already know are completely phony. We can expect the G.O.P. to play chicken over the federal budget, too; I’d put even odds on a 1995-type government shutdown sometime over the next couple of years.

It will be an ugly scene, and it will be dangerous, too. The 1990s were a time of peace and prosperity; this is a time of neither. In particular, we’re still suffering the after-effects of the worst economic crisis since the 1930s, and we can’t afford to have a federal government paralyzed by an opposition with no interest in helping the president govern. But that’s what we’re likely to get.

If I were President Obama, I’d be doing all I could to head off this prospect, offering some major new initiatives on the economic front in particular, if only to shake up the political dynamic. But my guess is that the president will continue to play it safe, all the way into catastrophe.

Op-Ed Columnist - Attacking Social Security - NYTimes.com

August 15, 2010
Attacking Social Security
By PAUL KRUGMAN

Social Security turned 75 last week. It should have been a joyous occasion, a time to celebrate a program that has brought dignity and decency to the lives of older Americans.

But the program is under attack, with some Democrats as well as nearly all Republicans joining the assault. Rumor has it that President Obama’s deficit commission may call for deep benefit cuts, in particular a sharp rise in the retirement age.

Social Security’s attackers claim that they’re concerned about the program’s financial future. But their math doesn’t add up, and their hostility isn’t really about dollars and cents. Instead, it’s about ideology and posturing. And underneath it all is ignorance of or indifference to the realities of life for many Americans.

About that math: Legally, Social Security has its own, dedicated funding, via the payroll tax (“FICA” on your pay statement). But it’s also part of the broader federal budget. This dual accounting means that there are two ways Social Security could face financial problems. First, that dedicated funding could prove inadequate, forcing the program either to cut benefits or to turn to Congress for aid. Second, Social Security costs could prove unsupportable for the federal budget as a whole.

But neither of these potential problems is a clear and present danger. Social Security has been running surpluses for the last quarter-century, banking those surpluses in a special account, the so-called trust fund. The program won’t have to turn to Congress for help or cut benefits until or unless the trust fund is exhausted, which the program’s actuaries don’t expect to happen until 2037 — and there’s a significant chance, according to their estimates, that that day will never come.

Meanwhile, an aging population will eventually (over the course of the next 20 years) cause the cost of paying Social Security benefits to rise from its current 4.8 percent of G.D.P. to about 6 percent of G.D.P. To give you some perspective, that’s a significantly smaller increase than the rise in defense spending since 2001, which Washington certainly didn’t consider a crisis, or even a reason to rethink some of the Bush tax cuts.

So where do claims of crisis come from? To a large extent they rely on bad-faith accounting. In particular, they rely on an exercise in three-card monte in which the surpluses Social Security has been running for a quarter-century don’t count — because hey, the program doesn’t have any independent existence; it’s just part of the general federal budget — while future Social Security deficits are unacceptable — because hey, the program has to stand on its own.

It would be easy to dismiss this bait-and-switch as obvious nonsense, except for one thing: many influential people — including Alan Simpson, co-chairman of the president’s deficit commission — are peddling this nonsense.

And having invented a crisis, what do Social Security’s attackers want to do? They don’t propose cutting benefits to current retirees; invariably the plan is, instead, to cut benefits many years in the future. So think about it this way: In order to avoid the possibility of future benefit cuts, we must cut future benefits. O.K.

What’s really going on here? Conservatives hate Social Security for ideological reasons: its success undermines their claim that government is always the problem, never the solution. But they receive crucial support from Washington insiders, for whom a declared willingness to cut Social Security has long served as a badge of fiscal seriousness, never mind the arithmetic.

And neither wing of the anti-Social-Security coalition seems to know or care about the hardship its favorite proposals would cause.

The currently fashionable idea of raising the retirement age even more than it will rise under existing law — it has already gone from 65 to 66, it’s scheduled to rise to 67, but now some are proposing that it go to 70 — is usually justified with assertions that life expectancy has risen, so people can easily work later into life. But that’s only true for affluent, white-collar workers — the people who need Social Security least.

I’m not just talking about the fact that it’s a lot easier to imagine working until you’re 70 if you have a comfortable office job than if you’re engaged in manual labor. America is becoming an increasingly unequal society — and the growing disparities extend to matters of life and death. Life expectancy at age 65 has risen a lot at the top of the income distribution, but much less for lower-income workers. And remember, the retirement age is already scheduled to rise under current law.

So let’s beat back this unnecessary, unfair and — let’s not mince words — cruel attack on working Americans. Big cuts in Social Security should not be on the table.

Op-Ed Columnist - Defining Prosperity Down - NYTimes.com

August 1, 2010
Defining Prosperity Down
By PAUL KRUGMAN

I’m starting to have a sick feeling about prospects for American workers — but not, or not entirely, for the reasons you might think.

Yes, growth is slowing, and the odds are that unemployment will rise, not fall, in the months ahead. That’s bad. But what’s worse is the growing evidence that our governing elite just doesn’t care — that a once-unthinkable level of economic distress is in the process of becoming the new normal.

And I worry that those in power, rather than taking responsibility for job creation, will soon declare that high unemployment is “structural,” a permanent part of the economic landscape — and that by condemning large numbers of Americans to long-term joblessness, they’ll turn that excuse into dismal reality.

Not long ago, anyone predicting that one in six American workers would soon be unemployed or underemployed, and that the average unemployed worker would have been jobless for 35 weeks, would have been dismissed as outlandishly pessimistic — in part because if anything like that happened, policy makers would surely be pulling out all the stops on behalf of job creation.

But now it has happened, and what do we see?

First, we see Congress sitting on its hands, with Republicans and conservative Democrats refusing to spend anything to create jobs, and unwilling even to mitigate the suffering of the jobless.

We’re told that we can’t afford to help the unemployed — that we must get budget deficits down immediately or the “bond vigilantes” will send U.S. borrowing costs sky-high. Some of us have tried to point out that those bond vigilantes are, as far as anyone can tell, figments of the deficit hawks’ imagination — far from fleeing U.S. debt, investors have been buying it eagerly, driving interest rates to historic lows. But the fearmongers are unmoved: fighting deficits, they insist, must take priority over everything else — everything else, that is, except tax cuts for the rich, which must be extended, no matter how much red ink they create.

The point is that a large part of Congress — large enough to block any action on jobs — cares a lot about taxes on the richest 1 percent of the population, but very little about the plight of Americans who can’t find work.

Well, if Congress won’t act, what about the Federal Reserve? The Fed, after all, is supposed to pursue two goals: full employment and price stability, usually defined in practice as an inflation rate of about 2 percent. Since unemployment is very high and inflation well below target, you might expect the Fed to be taking aggressive action to boost the economy. But it isn’t.

It’s true that the Fed has already pushed one pedal to the metal: short-term interest rates, its usual policy tool, are near zero. Still, Ben Bernanke, the Fed chairman, has assured us that he has other options, like holding more mortgage-backed securities and promising to keep short-term rates low. And a large body of research suggests that the Fed could boost the economy by committing to an inflation target higher than 2 percent.

But the Fed hasn’t done any of these things. Instead, some officials are defining success down.

For example, last week Richard Fisher, president of the Federal Reserve Bank of Dallas, argued that the Fed bears no responsibility for the economy’s weakness, which he attributed to business uncertainty about future regulations — a view that’s popular in conservative circles, but completely at odds with all the actual evidence. In effect, he responded to the Fed’s failure to achieve one of its two main goals by taking down the goalpost.

He then moved the other goalpost, defining the Fed’s aim not as roughly 2 percent inflation, but rather as that of “keeping inflation extremely low and stable.”

In short, it’s all good. And I predict — having seen this movie before, in Japan — that if and when prices start falling, when below-target inflation becomes deflation, some Fed officials will explain that that’s O.K., too.

What lies down this path? Here’s what I consider all too likely: Two years from now unemployment will still be extremely high, quite possibly higher than it is now. But instead of taking responsibility for fixing the situation, politicians and Fed officials alike will declare that high unemployment is structural, beyond their control. And as I said, over time these excuses may turn into a self-fulfilling prophecy, as the long-term unemployed lose their skills and their connections with the work force, and become unemployable.

I’d like to imagine that public outrage will prevent this outcome. But while Americans are indeed angry, their anger is unfocused. And so I worry that our governing elite, which just isn’t all that into the unemployed, will allow the jobs slump to go on and on and on.