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Thread: Pain Without Gain

  1. #1
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    Pain Without Gain

    [SIZE="4"][B]Pain Without Gain[/B][/SIZE]

    By PAUL KRUGMAN
    Last week the European Commission confirmed what everyone suspected: the economies it surveys are shrinking, not growing. It’s not an official recession yet, but the only real question is how deep the downturn will be.

    And this downturn is hitting nations that have never recovered from the last recession. For all America’s troubles, its gross domestic product has finally surpassed its pre-crisis peak; Europe’s has not. And some nations are suffering Great Depression-level pain: Greece and Ireland have had double-digit declines in output, Spain has 23 percent unemployment, Britain’s slump has now gone on longer than its slump in the 1930s.

    Worse yet, European leaders — and quite a few influential players here — are still wedded to the economic doctrine responsible for this disaster.

    For things didn’t have to be this bad. Greece would have been in deep trouble no matter what policy decisions were taken, and the same is true, to a lesser extent, of other nations around Europe’s periphery. But matters were made far worse than necessary by the way Europe’s leaders, and more broadly its policy elite, substituted moralizing for analysis, fantasies for the lessons of history.

    Specifically, in early 2010 austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in “confidence,” that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you’re right: It does and he did.

    Now the results are in — and they’re exactly what three generations’ worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.

    Furthermore, bond markets keep refusing to cooperate. Even austerity’s star pupils, countries that, like Portugal and Ireland, have done everything that was demanded of them, still face sky-high borrowing costs. Why? Because spending cuts have deeply depressed their economies, undermining their tax bases to such an extent that the ratio of debt to G.D.P., the standard indicator of fiscal progress, is getting worse rather than better.

    Meanwhile, countries that didn’t jump on the austerity train — most notably, Japan and the United States — continue to have very low borrowing costs, defying the dire predictions of fiscal hawks.

    Now, not everything has gone wrong. Late last year Spanish and Italian borrowing costs shot up, threatening a general financial meltdown. Those costs have now subsided, amid general sighs of relief. But this good news was actually a triumph of anti-austerity: Mario Draghi, the new president of the European Central Bank, brushed aside the inflation-worriers and engineered a large expansion of credit, which was just what the doctor ordered.

    So what will it take to convince the Pain Caucus, the people on both sides of the Atlantic who insist that we can cut our way to prosperity, that they are wrong?

    After all, the usual suspects were quick to pronounce the idea of fiscal stimulus dead for all time after President Obama’s efforts failed to produce a quick fall in unemployment — even though many economists warned in advance that the stimulus was too small. Yet as far as I can tell, austerity is still considered responsible and necessary despite its catastrophic failure in practice.

    The point is that we could actually do a lot to help our economies simply by reversing the destructive austerity of the last two years. That’s true even in America, which has avoided full-fledged austerity at the federal level but has seen big spending and employment cuts at the state and local level. Remember all the fuss about whether there were enough “shovel ready” projects to make large-scale stimulus feasible? Well, never mind: all the federal government needs to do to give the economy a big boost is provide aid to lower-level governments, allowing these governments to rehire the hundreds of thousands of schoolteachers they have laid off and restart the building and maintenance projects they have canceled.

    Look, I understand why influential people are reluctant to admit that policy ideas they thought reflected deep wisdom actually amounted to utter, destructive folly. But it’s time to put delusional beliefs about the virtues of austerity in a depressed economy behind us.

    [url]http://www.nytimes.com/2012/02/20/opinion/krugman-pain-without-gain.html?_r=1&pagewanted=print[/url]

  2. #2
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    Who in their right mind is going to buy the bonds of Greece, Italy or Spain without Germany backstopping them? Why would the German people want to take on additional debt to build public projects in Greece, Italy and Spain when they have lived beyond their means for years and at the first sign of belt tightening have gone to the streets and destroyed property?

    Without a shared culture and the trust that these people who aren't German are actually going to be productive, pay taxes and stop bleeding resources from the German people for another generation there will not be the political will for Germans to reduce their incomes and future for those of Greeks or Italians.

    This is what happens when you are dependent on the labor of others who don't share your basic values. This is exactly where the US is heading if we keep giving more freedom to people to take other people's labor without being responsible for themselves and sharing the same values of the people they are asking to subsidize their life style.

    The Germans will take this burden on up to a point, but the Greeks, Italians, Spainish and the rest of Europe is going to have to give something up, their freedom to live off of others labor without responsability.
    Last edited by Winstonbiggs; 02-20-2012 at 08:25 AM.

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    Crocodile tears from libs who have voted and will continue to vote to enable the same of economic destruction here.

    What big cuts at the state and local level? A half million compared to millions lost in the private sector?

    Oh, did we forget the ironclad pensions and parachutes that offset the economic impact of losing a public sector job? Sure we did.

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    [QUOTE=Jungle Shift Jet;4372184]Crocodile tears from libs who have voted and will continue to vote to enable the same of economic destruction here.

    What big cuts at the state and local level? A half million compared to millions lost in the private sector?

    Oh, did we forget the ironclad pensions and parachutes that offset the economic impact of losing a public sector job? Sure we did.[/QUOTE]

    There is enough blame to go around, public sector jobs are getting cut left and right.

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    [QUOTE=cr726;4372190]There is enough blame to go around, public sector jobs are getting cut left and right.[/QUOTE]

    And they should. If worker productivity goes up its only logical that less workers will produce the same labor. Why should the public sector be immune to the productivity gains of technology?

    The public sector has grown like a bloated hog.

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    [QUOTE=Winstonbiggs;4372213]And they should. If worker productivity goes up its only logical that less workers will produce the same labor. Why should the public sector be immune to the productivity gains of technology?

    The public sector has grown like a bloated hog.[/QUOTE]

    Where else can you be paid more for less productivity and w/ less credentials?

    [URL]http://www.cbo.gov/doc.cfm?index=12696[/URL]

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    [QUOTE=Winstonbiggs;4372213]And they should. If worker productivity goes up its only logical that less workers will produce the same labor. Why should the public sector be immune to the productivity gains of technology?

    The public sector has grown like a bloated hog.[/QUOTE]

    One major factor is you can't outsource and the gov't is using contractors like crazy.

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    [QUOTE=cr726;4372222]One major factor is you can't outsource and the gov't is using contractors like crazy.[/QUOTE]

    We continue to expand government workers and they continue to become unfunded liabilities.

    We could outsource most of the teaching profession if we used the teleconfrencing technology in our schools today.

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    [QUOTE=Winstonbiggs;4372228]We continue to expand government workers and they continue to become unfunded liabilities.

    We could outsource most of the teaching profession if we used the teleconfrencing technology in our schools today.[/QUOTE]

    Expand?

  10. #10
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    [QUOTE=cr726;4372239]Expand?[/QUOTE]

    People are getting advanced degrees online in this country right now. No reason a great science, math, civics, history, language, music, art teacher can't be beemed into thousands of classrooms across the country today. We don't need to operate the classrooms in this country like it was 1960 anymore.

  11. #11
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    [QUOTE=Winstonbiggs;4372244]People are getting advanced degrees online in this country right now. No reason a great science, math, civics, history, language, music, art teacher can't be beemed into thousands of classrooms across the country today. We don't need to operate the classrooms in this country like it was 1960 anymore.[/QUOTE]

    Comparing college degrees for adults to small/teenage children is apple to oranges. Our children need socialization and education.

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    [QUOTE=cr726;4372247]Comparing college degrees for adults to small/teenage children is apple to oranges. Our children need socialization and education.[/QUOTE]

    Our children need two parent families committed to their families and that tipping point has already been breached.

    Substituting unionized institutionalization for the nuclear 2 parent family is a complete waste of time, money and resources.

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    [QUOTE=Winstonbiggs;4372251]Our children need two parent families committed to their families and that tipping point has already been breached.

    Substituting unionized institutionalization for the nuclear 2 parent family is a complete waste of time, money and resources.[/QUOTE]

    Substituting? No one said anything about substituting.

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    Krugman is right!!! We need to spend,spend, spend our way into prosperity!!! Greece here we come!!!!!!

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    [QUOTE=acepepe;4372337]Krugman is right!!! We need to spend,spend, spend our way into prosperity!!! Greece here we come!!!!!![/QUOTE]

    This is true.....think of all the people in the US who rely on government, through entitlements, employment, early retirement, etc... sounds like GREECE.

  16. #16
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    [QUOTE=cr726;4372276]Substituting? No one said anything about substituting.[/QUOTE]

    What qualifies a math or sociel studies teacher to socialize our children? Membership in a Union?

  17. #17
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    [QUOTE=Winstonbiggs;4372379]What qualifies a math or sociel studies teacher to socialize our children? Membership in a Union?[/QUOTE]

    The interaction between their peers on a daily basis is an important thing.

  18. #18
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    [QUOTE=southparkcpa;4372352]This is true.....think of all the people in the US who rely on government, through entitlements, employment, early retirement, etc... sounds like GREECE.[/QUOTE]

    BS alarmist post. :yes:

  19. #19
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    [QUOTE=Winstonbiggs;4372173]Who in their right mind is going to buy the bonds of Greece, Italy or Spain without Germany backstopping them? Why would the German people want to take on additional debt to build public projects in Greece, Italy and Spain when they have lived beyond their means for years and at the first sign of belt tightening have gone to the streets and destroyed property?

    Without a shared culture and the trust that these people who aren't German are actually going to be productive, pay taxes and stop bleeding resources from the German people for another generation there will not be the political will for Germans to reduce their incomes and future for those of Greeks or Italians.

    This is what happens when you are dependent on the labor of others who don't share your basic values. This is exactly where the US is heading if we keep giving more freedom to people to take other people's labor without being responsible for themselves and sharing the same values of the people they are asking to subsidize their life style.

    The Germans will take this burden on up to a point, but the Greeks, Italians, Spainish and the rest of Europe is going to have to give something up, their freedom to live off of others labor without responsability.[/QUOTE]

    +1

    So we have a small growth and it is all because of the stimulus and has absolutely nothing to do with the juggernaut that is the American economy, the perseverance and ingenuity of our people and the strength of an almost free market.

    Who is to say that we wouldn't have come out stronger if trillions of dollars weren't poured down the drain? How can you say that making America more socialist between Obamacare, the auto bailout and the stimulus bringing us closer to the Greece model with high debt to GDP ratio with no end in sight is why prospered but it is very evident that Greece's problems stemmed from the same kind of unsustainable entitlements and subsequent debt.

    I also don't think that it is an apples to apples comparison between the US and Greek economies but I wonder if we looked back into the past of the Greek economy and looked at spending, debt, entitlements and GDP would we see that there was a point where they thought that their economy was doing better because of spending and entitlements too?

  20. #20
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    [QUOTE=cr726;4372943]The interaction between their peers on a daily basis is an important thing.[/QUOTE]

    And why couldn't they have that with a teachers aid and broadcast interactive lectures from top people. These kids communicate with their parents and friends through texting and face book. The 60's happened 50 plus years ago.

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