Larry Kudlow is a free trader. Paul Krugman? Not so much. Kudlow supported the Trans-Pacific Partnership. Krugman lacked the courage to do so. Now Krugman sits in the bleachers condemning "zombie ideas" on trade while he hopes everyone will forget his own embrace of the same protectionist impulses Trump exploited to get elected.
2
Whenever he writes about this, I get angry with Krugman--not because he's wrong, but butcause he's falling into a trap. Of course Republicans know supply-side economics don't work. They're not that stupid. It's a diversionary tactic that allows them to pretend to have a legitimate reason for things, like cutting taxes on the rich, the electorate would never stand for otherwise. Analyzing it as a legitimate idea they just fail to realize is mistaken helps provide them the cover they need.
6
“the rocks in their heads fit the holes in his” — brilliant.
3
"...the rocks in their heads fit the holes in his:..."
The Trump administration described in deep detail in only ten words; brilliant!
Yes, there can be bitter laughter while the constitution goes up in smoke.
1
"the rocks in their heads fit the holes in his" A memorable line that promises to only get worse! A sign of mental illness is doing the same destructive act over and over, like slamming your fingers in a drawer! Yet, Republicans since their mythical idol Reagan have been preaching the same "Zombie" economics. You would think that perhaps "Kansas" might have spelled the demise of "Trickle Down" but apparently not!
1
Krugman, If BHO enacted tariffs, you'd be praising him as a genius. You're so partisan towards the left, you're creditability is nada.
1
It seems many commentators and Krugman avoid the fundamental question is Free Trade fair and really happening? Hint....when thier middle class grows and the US shrinks, when labor, welfare and environmental standards are undermined there are winners and losers.
1
Searching for Irving Kristol's WSJ article proudly reclaiming the label "the stupid party" for the GOP, I fell on this quite interesting article:
https://www.nytimes.com/2016/08/01/opinion/how-the-stupid-party-created-...
It traces the GOP's anti-intellectualism back to what Reagan explicitly stated during speeches, but then ... all of a sudden proposes to call people like Irving Kristol and Paul Ryan "thinkers".
This shows that even Republicans who WANT to cultivate a rational approach to policy, seem to be totally confused about what being an intellectual today actually means.
And THAT's how the GOP became the party of "zombie ideas". It's the entire conservative movement in this country that for decades now no longer studied science and philosophy long enough in order to know how to distinguish a hollow and corrupt demagogue like Paul Ryan from a serious intellectual.
And that's how fake television "economists" such as Kudlow are now promoted to high-level cabinet functions, and how ordinary citizens who still support the GOP (only 35% of the American people, though ...) and who, precisely because of GOP policies, never had any access to a decent education, celebrate in the streets when Trump sends yet another tweet attacking "the elites".
It's those same citizens who below in this comment section reject Krugman's main thesis here without feeling obliged to even try to THINK about providing some arguments that might refute that thesis.
2
It's simple, like Trump. These ideas dominate in the conservatives' cave man worldview - bigger is better, stronger is better; domination through demonstrations of toughness and brute strength is the goal. Power and strength must rule the day at all costs, even in the face of economic consequences, and especially to discredit those things that belong only in the realm of the wimps - facts, like statistics, history and knowledge.
3
While the balance of trade may drive capital flows (and vice versa,) the balance of trade number, (i.e., the trade deficit or surplus, as the case may be,) does not include capital flows, and only includes imports and exports of goods and services. For this reason, the balance of trade is all but irrelevant when viewed in isolation. Keying trade policy off of the fact that the U.S. may run a trade deficit with this country or that one is foolish, myopic and simple-minded.
Now we have to endure three more years of Krugman and the liberal elites blaming the G.O.P. for the continuing slide of the middle class, then we have to endure four years of the G.O.P. blaming the liberal elites: when will people figure out both sides are to blame? The ten percent know no political affiliation only the sound of money as it goes to the top, shouldn’t that be obvious by now as Goldman bankers donate heavily to whomever they think will win?
3
"Kudlow is a fervent believer in the infinite virtues of tax cuts"
That's the problem. President Trump many- a-time once upon a time was for raising taxes on the wealthy like him. Then he joined the chorus of other presidential candidates and proposed drastic tax-cuts. He went along with Speaker Ryan & company and managed to pass the tax-cut bill. Now we're stuck with $trillion+ deficits & greater debts, which some day will haunt us. Stock market is jittery about the prospects. To top it off Larry Kudlow is on board.
Kansas & Louisiana have taught us unnecessary tax-cuts are quite dangerous. But the Republican faith in supply-side theory can't fade! When will they budge?
This is the time to raise federal taxes on the rich to say, 50% but on over $15-20 million. 99.9% of taxpayers would be untouched.
Payroll tax ought to be cut to 1% on the $10K & to 2% on the second $10K. Raise the cap, better eliminate it but cut it to 1% on say, over $200K to be less taxing to the wealthy. This will help the real Trump-voters if he cares about them; if not, someday they will figure out Trump's a boldface liar.
2
Trump's vision of tariffs assume political economies are based on trade. They view economies as blocks of goods. They turn a blind eye to supply chains, pricing, demand, innovation, income, new markets, financing, and education--all keys parts of an economy. Tariffs put law and power first: They are an extension of the idea that economies operate by fiat and can be controlled because decisions have a single effect and no more.
This view is incredibly wrong! It blames China while hiding the real reasons for China's success. China's major project is a trillion dollar infrastructure project (BRT), criss-crossing Asia, moving west across Asia Minor and the Arabian peninsula to Istanbul and Rotterdam on new roads and rails, and sailing to India and East Africa port cities with new facilities. The project, well on its way, represents 60% of global GNP and 80% of the new emerging middle class, reaching 6 billion in size by 2025.
China is acting as its own supplier. It is building cement plants along the routes, 37 to date. Its largest coal company merged with the country's largest power generator to create the world's largest power company. It will service the routes. Helping global trade, taking the lead, setting standards, developing financing, China is helping itself; guaranteeing long term, structural, financial, and regulatory access to new markets. Only India is pushing back, and the size of the project makes it difficult for India to avoid being drawn in.
(Part 2 below.)
2
*Part 2
The new coal and power company signed a memorandum of understanding with West Virginia, not for coal, but for chemical products, liquefied natural gas and underground storage, drawn by the strength of WV 5 county Chemical Alliance Zone with the world's largest chemical companies exporting over a $1 billion annually in chemical products. the MOU was for investments totaling $84 billion—larger than the state's GDP!
China;s nestled, reinforcing economic movements create new supply chains, build new demand and markets, raise income--and establish Chinese standards as the global default. This cannot be stopped by tariffs!
China represents only 3% of US steel imports. If your economy (or its steel sector) depends on 3 cents out of a dollar, it because you have done a lousy job with the other 97 cents! This is Trump. He loads the cart, but knows nothing of the horses who pull it and make it go. He is a blind mule, naive and stubborn, with no idea what or which end is important. His win only works if everything comes to a standstill. But blind mules are frozen in time.
3
“Trade surpluses are often a sign of weakness, trade deficits sometimes a sign of strength (as a matter of arithmetic, a country that attracts more inward investment from foreigners than it invests abroad must run a trade deficit).”
This is bizarre. Krugman fails to make a distinction between real and financial investment in his arguments in this regard. According to Bureau of Economic Analysis’ statistics less than 25% of foreign investment in the United States is Direct Foreign Investment (DFI), and the bulk of DFI involves the purchase of existing real and financial assets rather than newly produced real assets.
Selling our assets off to foreigners is not exactly the kind of thing that makes the US prosperous. This is the way foreign countries, such as Japan and China, peg their currencies to the US dollar so as to keep our exchange rates low an our exchange rate high which has been devastating to our manufacturing sector over the past 40 years.
4
That should read: This is the way foreign countries, such as Japan and China, peg their currencies to the US dollar so as to keep THEIR exchange rates low an our exchange rate high which has been devastating to our manufacturing sector over the past 40 years. Sorry about that,
1
Mr. Blackford: Spot on! You should be writing the column on economics, one that is not drawn from political hubris but from real world transactions.
1
Any intelligent person should be able to understand after decades of experience that trickle-down economics doesn't work. It's not difficult. Just look at your own pocketbook. Each time the Republicans enact such policies, Democrats have to come in and raise taxes to fix the problems the GOP caused.
Example: My son and his wife bought a house 14 years ago for $250,000 in a good middle class neighborhood outside New Haven, CT. Fast forward to now, when they want to sell it. Asking price: $269,000, not much gain for so many years. If this were an investment, we'd expect the house to be worth at least $450,000 by now, if not more. Meanwhile, the house is freshly painted, has some new appliances, a new deck and new French doors, plus a new furnace, but has appreciated very little, thanks to trickle-down economics, which have not trickled down to my son.
Bravo Professor. Pass the popcorn indeed.
The more I read of WSJ Opinion pieces and sundry comments from (what I would earlier have thought were Russian) trollworks, I realise that this is indeed a government of the stupid, by the stupid and for the stupid.
We sentient beings must stand aside and reap the crop of our low turnout.
You give me hope in life Sir. The fact that someone could be wrong about everything and still have a job at Bear Stearns and later have a life in the Treasury is heartening. Coupled with Mr. Mnuchin's sycophancy, there's a future for those of us who have rarely been right !
May these days continue. Hot-dogs with the popcorns please. :-)
2
"and when it comes to policy, he don’t need no education." You made my day Dr. Krugman, thanks!
Most western developed nations grew with the help of tariffs and subsidies. Mercantilism, I think, is the operative term. Germany has a large surplus with the US and the UK. China does as well. Japan too. All have policies and tariffs that protect their domestic manufacturing. In China you have to take on a Chinese company as a partner. Tellingly, GE had to build a massive R&D facility in order to gain access to the Chinese markets. As you lose your manufacturing so too do you lose your future. The new technologies in the industry will come from wherever you shipped your jobs too. Trump will probably botch the job, but I believe he is correct. The cost to our country under the laissez faire, 'free trade' policies has been incalculable.
1
Except that like any other country, the US of course ALREADY has a huge tariff system in place.
So the question is rather: if America starts to unilaterally increase its tariffs - and as such hurting Europe's economy, for instance - then how will Europe react?
Everything indicates that it will retaliate and impose higher tariffs on American products too. That means that the US will sell less stuff abroad, whereas it's not by imposing tariffs that all of a sudden more jobs in the steel industry at home will be created - on the contrary, as now there will even be less products sold.
That's why Krugman is right when he talks about "zombie" ideas: they SOUND good, IF you really don't know anything about international trade and economics.
Now compare this to what Obama did, who de facto managed to save the US auto industry and to bring back manufacturing jobs to the US for the first time in decades: he created a stimulus for manufacturing plants, containing an intelligent mix of tax cuts and subsidies (all linked to increasing production and job growth) all while making basic services such as healthcare and education more affordable for ordinary citizens, so that they could buy more products.
He combined that with international trade agreements that lower tariffs on US products, AND that increase local labor laws abroad, so that the unfair concurrence due to bad treatment of local workers gets reduced, over time.
Compared to that, Trump's idea is just foolish ...
1
" (...) what both sides in this dispute share is a general propensity for invincible ignorance, which makes them Trump’s kind of people."
It's no coincidence that these are also the people who try to dismantle the - already quite weak, compared to international standards - US education system, and who try to get political support for such a "policy" by denouncing, as elites, "the elites".
The anti-intellectualism that characterizes Trump and his favorite cabinet picks isn't just a result of their own lack of education, it's, within the GOP, also a consequence of the adoption of neoconservatism as an ideology.
You could call neoconservatism a philosophy, if it weren't for the fact that it lacks all aspects of the many great philosophies the West has produced since 2,500 years already. So it IS a mere ideology, and what's even more, it believes that conservative "virtues" are a matter of "sentiment" and will never win in intellectual debates, as Irving Kristol, one of its founding fathers, wrote 40 years ago already (in an op-ed for the WSJ).
As long as intellectuals like Paul Krugman don't start to call out the GOP on its ideology and the ideological reasons why they systematically cultivate anti-intellectualism, I'm afraid that zombie ideas will continue to determine US policy, as by definition, no conservative is interested in the proven facts that he brings up time and again to debunk their zombie ideas ...
Economics is based on cycles: everyone will be right at some point.
In that case, why hasn't there ever been a "cycle" where those who systematically claim that taking money from the 99%, through new laws, and shifting it to the 1% wealthiest citizens, is what will accelerate economic growth, job growth and wage increases, have been right ... ?
Krugman just gave you the answer: it's because they're proposing "zombie ideas".
3
Somehow, the zombie factions will find a way to unite their quackery, and simultaneously engage in mercantilist behavior while jacking up the exchange rate and interest rates, leading to drying up of liquidity, and eventually leading to another crash and recession, which will once again, coincide with Democrats regaining control of one of the branches of the Federal government.
2
The Fed has implemented a stronger dollar and higher interest rates as its fundamental policy for 100 years. Thank you for identifying that as a zombie policy.
China has embraced low rates and high economic growth.
Let's not forget the third set of ideas in Trump's realm - Trump's own belligerent, confrontational crazy. A trade war with China is Trump's idea of a win-lose conflict in economics.
He doesn't know the consequences and doesn't think things through - characteristics that he shares with his friend Vladimir.
2
This isn't a question of "understanding the issues." This is a question of what constitutes reality and what constitutes knowledge. Reality, to many, is what I FEEL. Knowledge is a description of the world that fits with what I feel. Integrity, therefore, is simply sticking with your feelings no matter what contrary evidence might present itself. If you change your mind based on new "information" you're just a "flip-flopper." If you try to have a rational discussion you "just don't get it." Our culture has been telling us this for 30 years. Is it any wonder we, and the man just less than half of us elected president, believe it?
1
I couldn't agree more.
And there's a reason why the US has become anti-intellectualist: its philosophers have abandoned philosophy for decades now already, whereas it's precisely Plato, the inventor of philosophy, who showed why philosophy/science is needed.
Philosophy fights "doxophily": the love (= "philein", in ancient Greek) of "doxa", mere opinions. Opinions CAN sometimes be right and contain ideas that are true, but they are characterized by the fact that you merely "feel" their truth, rather than being able to "prove" it.
Philosophy/science, however, is investigating opinions and proving them to be true/false. And in case that an opinion cannot be proven to be true or false, philosophy/science (before the 16th century invention of experimental science, both were synonyms), philosophy shows THAT that's the case, and more importantly, comes up with different ways of thinking, which allow us to choose which ideas will guide our actions, rather than to be enslaved to our own/culturally determined opinions.
Analytical philosophy, invented by the Anglo-American academic world, rejects all concepts that cannot be proven to be true, thereby de facto abandoning any serious philosophical activity, now that it's science that does the proving/refuting. Now philosophy classes are mere places where people "debate" opinions, rather than learning how to build philosophical concepts.
And THAT's how people no longer know how to distinguish opinions from intellectually sound ideas.
You get where I'm coming from! Re-reading "The Open Society and Its Enemies," whether you agree with it's arguments or not (I more or less do) is scary, considering when it was written. There are some definite parallels.
@ TvdV (second comment)
I'd tend to think that Popper's theory about what science is, is a bit outdated today, in the sense that new epistemological theories might be more useful (see for instance Ian Hawking or Bruno Latour).
That being said, the very essence here seems to be indeed that no matter how you define science or philosophy, it's absolutely crucial to value these kinds of activities and make sure that all citizens understand why they're crucial in order for a democracy to thrive.
That's why the GOP's anti-intellectualism (which started in the 1970s already, with the invention of neoconservatism) is undermining democracy itself - and as a consequence, of course, the very "greatness" of the US.
In the 1970s neocon founding father Irving Kristol wrote in the Wall Street Journal that intellectuals HAVE to be "marginal" in order to obtain a "healthy society", as conservatism needs "sentiment" that cannot possibly be proven through intellectual activities.
THAT, for me, is where the absence of any serious philosophy all of a sudden has been translated into an ideology of anti-intellectualism in a VERY explicit and political way.
The current GOP, Fox News and Trump are merely the latest - and most dangerous - result of decades of cultivating a hatred of what made America great in the first place ...
Years ago, almost everything that we bought for our daily use was made in Japan, South Korea, Taiwan, Thailand and the Philippines. Then we moved to China and continued enjoying low prices, then to Vietnam, Bangladesh, etc. What would we have done if we had to buy US made products?
1
"Why has Trump hired people with such conflicting notions about international economic policy?"
Because Trump doesn't want anyone around who is smarter than he is.
Eschewing the scientific method, based on careful systematic observation and letting the results drive the discussion and conclusion, Trump, Fox, the big GOP donors such as the Kochs and Mercers, work the opposite way.
1. Conclusion first
2. If necessary, find assorted arguments; cherry-picked, out-of-context facts; well chosen anecdotes, etc. to support the foregone conclusion.
3. Repeat #2 often until the Conclusion becomes the accepted conclusion.
We are all living in the Kochs' and Brownback's Kansas now. It is the new reality TV show.
1
Zombie ideas and "Kudlow appears to share Malpass’s worldview!" If Kudlow or anyone in the GOP has a worldview, let’s consider that their worldviews did not just fall from the clouds and transform them—except in rare cases. Saul of Tarsus fell off his horse and became Paul. On the other hand, Paul Ryan read Ayn Rand and thought he’d become something different; but he remains a cradle Catholic. Most conservatives are born and raised, not created by books or charismatic individuals. Feelings often persist from childhood. At home, the young Donald Trump was exposed to racist ideas and seems never to have outgrown them. Charles Koch, the real threat to our Republic, also grew up with racist and anti-government influences all around him. (His father was a founder of the John Birch Society). Yesterday, I heard, on tape, a representative of Cambridge Analytica say something like: voting is often about how people feel about candidates and not about policy. Kudlow’s bias in economics reflects no great brain power but a lost life of negative education.
1
"[T]he rocks in their heads fit the holes in his" -- brilliant!
2
My state LA had to go through this with the wunderkid Bobby Jindal. Conservative ideology doesn't want government to work on any level because then we'll just be a nation of "takers"...as these same "conservatives" push through a tax bill that adds to the deficit. You really can't make this stuff up. The out right lying going on here is stomach curdling, and yet voters in LA and much of the south still vote these folks in. Can't help but see race involved in all of this. We're a scarred country with enough baggage to trudge through it could take us another generation to finally makes forward progress, if ever. For now we cycle through all the zombie ideas, well at least until they eat us all alive.
As long as the American people keep falling for it the idea that “give me more money and eventually it will make you rich”, the Republicans will keep doing it.
It’s the perfect crime.
4
All the EPZ’s (Economic Policy Zombies) should be well understood by those who have been reading your column year after year! But “…because it appeals to the prejudices of wealthy and powerful people.”
It's not about believing anything. Republicans have the principles of cannibals. Can we quit refuting their blatherings as if they meant anything serious or legitimate?
They want all the wealth that can possibly be transferred to themselves just shy of popular revolution, and their trickle-down absurdities achieve just that among the stupid and ignorant. Their best salesmen have been media actors skilled at pretense and their long-term goal of legal brobery and commercial sponsorship of politicians had worked perfectly. Ideology, if by that we mean some set of ideas and principles that are meant to lead to the best outcome for the most citizens, is not a factor. Greed and the worship of cash is their religion (thus a "prosperity gospel" which is 180 degrees contrary to the actual gospel).
You might as well debate economic theory with your cat for all the success you will have -- Republicans are just as principled, qualified and interested.
Today's GOP is a party of bad ideas that only work for a tiny portion of the population. Time for Americans to WAKE UP!!!
Trump lacks the cranial capacity to understand that
1. A strong dollar - which makes us strong-
could possibly increase
2. A trade deficit - which makes us weak.
Strong cannot make weak. Strong can only make strong.
Weak cannot make strong. Weak can only make weak.
Thus reflects Trump.
Isn't the intention behind the Republican tax philosophy really a red herring? It's been my understanding the true purpose of tax cuts is to starve the respective governments of the funds necessary to operate at current levels of expenditure theoretically forcing cutbacks to assistance programs that never really happen. Or is it simply to redistribute wealth upward?
Krugman must really like being consistently wrong. The trade deficit also affects GDP in a negative way. The elites and major companies like free trade because it raises there final profit but at the expense of the American worker. When we see money going overseas in a deficit the average American is losing and the elites along with the Chamber of Commerce and K street lobbyist are blowing smoke saying free trade helps.
The GOP in Iowa, at least in the Senate, seem to believe in supply side economics as it relates to reducing taxes. Maybe they are trying to become the next Kansas. Over the last 2 years, the state government has needed to make major cut backs in spending because of tax revenue being well below projections. So in their "wisdom", the state senate passed a tax bill that would reduce taxes by $1 billion annually where the annual budget is $7 billion. With this kind of thinking we will be able to overtake Kansas by 2020.
2
VAT Confusion. In the US our 13% payroll tax pays for Social Security and Medicare. In Europe their VAT pays for their Retirement and Healthcare.
When European goods are sold in US, no VAT and no US payroll tax -> advantage Europe. When US goods are sold in Europe, VAT plus US payroll tax -> advantage Europe. The VAT is neutral as PK states.
US disadvantage in both markets comes from our payroll tax in our US products but not in European products. For a level field our payroll tax must be removed and replaced with a US VAT.
3
Today's NYT also has articles and editorials about how the invasion of Iraq made things worse there and across the Middle East, to say nothing of the monetary and diplomatic cost America still bears. Bush and his cabal led by Cheney and Rumsfeld brought us a military and diplomatic strategy that was just plain wrong, and brought lasting damage to the United States. Can we also forget how wrong Bush and his advisers were on the economy? The economic meltdown that they brought us should be fresh in the memories of all but the youngest voters. Being a good Republican zombie requires blotting out the Bush administration, but they should not be able to do it so easily.
4
With twelve wives and counting among them the only trade surplus and deficit that matters to Donald Trump, Steven Mnuchin, Wilbur Ross and William Kudlow is a dearth of wives among their team. Gary Cohn had a mere Mike Pence one and only wife.
3
Supply side economics increase the federal debt and produce a Keynesian effect of a recovery, usually through expanded military spending.
But this recovery is debt driven, not consumer driven.
A sign that consumer spending is falling is that is that the velocity of money has been steadily decreasing since 2008.
Gary Cohn, and the other "adults in the room" are the ones who gave us rising inequality for the past twenty years, and most recently, the Tax Cut Giveaway to Corporations at the Expense of Workers (designed and built by Mr. Cohn).
Who can blame the common man for losing faith in the supposedly expert opinion of people like that? As if he was on the side of working people. Good riddance to Gary Cohn.
Defending Gary Cohn, Krugman puts his own reputation at risk. I believe Paul Krugman does care about American workers, but he shouldn't be defending people who don't, and never did.
1
"Still, they have Trump’s ear, because the rocks in their heads fit the holes in his."
I think I wake up in the morning so that I can read lines like this in the NYT.
4
It's selfish, amoral greed that is covered up with the fig leaf of supply-side and trickle-down--a simple explanation that goes along with the zombie metaphor. Its moral focus (sham) is a stupid, clumsy way to hide the rest of the decaying body. That leaf is the only way they can hide their self-centered, self-rewarding intentions, to the detriment of the common good in this country (and world-wide). The the leaf keeps shriveling is totally irrelevant -- they still need it rather than just clearly defying outcries from Krugman and others.
1
simpleton and simplistic ideas/values.
embarrassing.SAD!
Of course trump wants Larry Kudlow on his 'team'!!
Larry is on TV. Larry is telegenic. Larry sounds like he knows what he's talking about. Has Larry ever had any real responsibility in running a financial business? Has Larry ever written anything economically worthwhile? Has he been right about **anything** more than half the time? No, no and no, but who cares, right?
Larry Kudlow is a stock picker, disguised as an economic 'expert', and not even a good one at that.
But since his new boss is a corrupt, amoral, delusionally self-aggrandizing, intellectually vacuous failure, disguised as a business 'stable genius', Mr. Kudlow would appear to be the perfect fit.
3
The Trump White House is the coalition of the willing, the ship of fools, birds of a feather, led by the moron-in-chief. All three wings of the US government are overstuffed with members of the same tribe. It conjures up the picture of a ball of sardines, dashing here or there in opposite directions. Meanwhile the circling whales and dolphins in international waters are rounding them up for a feast. It's an entertaining show of Nature.
3
Popcorn? More like pas the box of tissues.
Hey! Teacher! Leave them kids alone!
1
It all makes sense once you realize they are all working for Putin...
1
Mr. Krugman left out that bloated, arrogant blowhard in La Jolla, Calif. Harold Laffer who still shows up here and there with his "Laffer Curve" nonsense he proposed during the Reagan era.
2
Here's the thing and there's no getting around it. A stupid vote and an informed vote count exactly the same. Trade war...good. America First...good. Trump...good. Whereas, voting should be an essay exam, for most people, it's multiple choice. The answer is always R and I don't need to know anything to guess. Forget photo identification for voting... "yep, that be me". Instead, explain the effects of a trade war, and what's the position on the issue of the person for whom you're voting today"? Nah, would require the election official to know something as well...never mind!
2
As the sherif said ,in the first zombie movie, “Night of the Living Dead”, “ you gotta shoot em in the head, the only way to stop them, cause they’re already dead !” Oh well a bit of Trumpian logic.
For years I've had the deranged fantasy of doing just that...with goopy spitballs. Everytime they lie, whammo, spitball to the forehead.
We've received a couple of messages from friends in Europe telling us that we should read Dr. Krugman's columns. One contained a link. Seems that thinking people in the rest of the world are starting to assume all Americans are sheep-like idiots, just like the members of our government.
1
I think the Times should use Mr Chait's quote as the headline to every Trump story: "Has elevated flamboyant __________ to a form of performance art". And you can fill in the blank for every story: Wrongness for this one. But lying also could be used. Immorality is another. Bullying? Yes. Misogny? Of course. Racism? Check. And so on. The fish stinks from the head on down.
Jason vs. Freddy.
Pass the popcorn indeed...
Dear Dr. Krugman,
You don't need popcorn. You need cricket bats to fight these zombies.
Good luck! (Brain, brain, brain...I can't find any brain...)
1
And Trump boasts he went to Wharton. Heckuva education.
Of course you don't really need to learn any economics when Daddy's a slumlord and your entire business model is conning people into investing in your projects, stiff in your contractors, and skimming off the top in management fees whether or not your project ever makes a dime for the suckers who invested -- and that includes all of courtesy of Uncle Sam who gave tax abatements that went right into his pockets.
3
"they have Trump’s ear, because the rocks in their heads fit the holes in his"
Bravo: another Nobel is warranted for Dr. K--this time for literature!
1
Trump's just greasing the skids for the oligarchs.
3
Enjoyed!
He IS a Zombie. But instead of bodies, he consumes souls.
2
We have an ignorant and ill informed President who is increasingly surrounded by mindless sycophants willing to do anything to gain personal power. How can this possibly go wrong?
You asked for this American and boy are you going to get it. Pass the popcorn indeed!
1
"Still, they have Trump’s ear, because the rocks in their heads fit the holes in his"
This is not the level of discourse that I expect in the New York Times.
And the fact that so many commenters seemed to enjoy it so much is deeply disturbing, and reflects quite poorly on the brand of this newspaper.
"Why has Trump hired people with such conflicting notions about international economic policy?"
Unbridled stupidity.
"they have Trump’s ear, because the rocks in their heads fit the holes in his"
Thanks, Paul. You gave me my morning chuckle.
1
Both Malpas and Kudlow were fixtures on CNBC. After a while, I muted the network when Kudlow started to talk because he spewed pure gibberish. During the mortgage crisis, Kudlow turned into a pure racist as he stated several times that financial institutions needed to stop making loans to minorities.
It was a continuing meme on that network and no one else said boo when Kudlow and Mozilo blamed dark people for the mortgage crisis.
1
Trickle down is for hucksters. They take your money and run. Real estate huckster and con man Donald trump is a perfect example .
But how do we get rid of them ?
2
They believe the fault is in the Fed
A stronger dollar is burned into their head
They don’t remember the last thing they said
Even though it was from data they misread
These economist’s ideas are certainly inbred
Which happens when you follow the Walking Dead
3
I’m not an economist, and I don’t even have a beer with any, so here’s a question that seems important. How much can an administration’s zombies or savants damage or improve the common weal? The global clockworks underlying trade, technology, ecology, and all that must have enormous momentum, connected to enormous mass. (I do physics). Can the world ride over the Trump bump with just a minor jostle, or do we slam against some reality wall so hard that the Dark Ages start to look like the Good Old Days? C’mon, all you professionals and enlightened amateur pundits: how much should we care about the zombie advice and the brain dead president?
16
Trump's mistakes would be expensive, but it's only money.
For scale, Brexit has been estimated to cost 1% GDP growth annually. If Trump succeeds in dismantling Nafta and gets a trade war going that kills the WTO, he will have destroyed the free trade regime that has underpinned worldwide economic prosperity since 1945.
The ramifications are almost too vast to contemplate. A recession would be inevitable, and our stubbornly stupid plutocratic congress might well decide that "expansionary austerity" is just the ticket. The loss would be calculated in the tens of trillions of dollars, perhaps more.
That assumes peace. The economic dislocation from an untethered recession in a time of shrinking trade would resemble the conditions that led to World War II. Certainly it's not unimaginable that China or the US, or Russia might find war attractive, either to gain new territory (and resources no longer accessible through trade) or as a popular distraction. Scapegoats are Trump's stock in trade, after all.
The prospect is not pretty.
1
If you come from the physics world, it should be simple to understand macroeconomics. Take "Q - W = delta U" and replace energy with wealth. That leaves you with wealth produced (or imported) - wealth consumed (or exported) = change in wealth. Of course, if you agree with any of this you be branded as a racist, homophobic, bigoted supply-sider.
Trump will just declare bankruptcy for the US....wait...
The supply-side policy has been wrong for decades, and now we will have to see if it can really send the US and the world into a depression. How much debt is too much? Since we are gong to approach 30 trillion dollars soon (five to 10 years--and likely closer to five.), we are going to take the supply-side experiment to its illogical conclusion. And the only thing the GOP is good for is blaming everyone else for any and all problems.
I'm curious why Krugman never talks about the biggest "zombie idea" of them all: socialism. Socialism has resulted in massive suffering and misery wherever it has been implemented (see the starvation in Venezuela for only the latest example), yet it retains its hold on much of the American left. If we only give "true socialism" a shot, they insist, we will finally achieve its promised utopia.
1
America runs on greed. Always has. Just hire people whose personal wealth gain indicates a successful leveraging of that trait and entrust the management of economic policy to them. What's the problem here?
1
The Republican party has failed America and has done so in three ways: they have failed to lead the nation when given the chance to do so; they have failed to protect the lawful government institutions on which our nation depends; and, they have failed to inculcate their president with the responsibilities of his office.
'as a matter of arithmetic, a country that attracts more inward investment from foreigners than it invests abroad must run a trade deficit'. Dr. Krugman, would you care to explain that? Thanks!
The pattern has nearly destroyed the country.
Reagan/Bush purposely created the deficits, making us a debtor nation, all because their rich pals didn't like to pay taxes.
Clinton started to get the mess under control.
Bush 2 continued dad's madness, and crashed the economy.
What's galling is that even when Obama saved the 401k's, the ingrates still attacked him as if HE created the original mess.
Trump then grants more tax cuts to billionaires, exploding deficits out of spite.
1
Krugman is assuming zombie ideas are actually ideas and not simply justifications. I can't conceive Malpass' misunderstanding. He doesn't really have an excuse. I'll only note that chief economist at Bear Stearns is not exactly a glowing accolade. From Trump's perspective though, we know he's ignorant. However, Trump only thinks politically anyway. More accurately, Trump only interprets political economy from the perspective of ratings on down. Real world economic outcomes are not on his radar. If the he crashes the ship, he'll point the finger at a different iceberg.
So again, Trump is seeking justification for uniformed and irrational actions. He appears to have found his man for now in David Malpass.
Kudlow? Who says the GOP doesn't believe in science and dinosaurs. Trump man has an unerring instinct for the 70's - if there was a Secretary of Dancing, he'd appoint John Travolta.
1
The only good thing about Larry Kudlow going to work for Trump is that no one has to listen to his empty suit nonsense on CNBC. Trump wants yes men/women for his cabinet and people who will rubber stamp his world view. Republicans and the likes of Kudlow believe that we are going to tax cut the USA into prosperity. Even David Stockton the father of trickle down economics doesn't believe anymore that supply side economics works. Nonsense and the other side of good reasoning are the hallmarks of the Trump Administration and the modern Republican Party.
2
It has always amazed me that we punish "evil" countries by denying them access to trade and finance with economic sanctions, yet here we are doing this again, to our own country. Is this some type of ironic justice?
1
But, but, but Donald Trump graduated from the Wharton School. At the top of his class, he says (although the 1968 commencement printed program listing graduates neglected to list his honors). Let's be fair. How can he possibly not know what he's talking about? After all, he's a very stable genius; he says so himself.
1
Jeff,
Even engineers such as myself had to take some college History, Government and English courses and I appreciated the easy grade points as a college student.
Donald Trump says that he has a college degree from the University of Pennsylvania Wharton business school, but did he really attend very many of his college classes?
Why didn’t Donald Trump learn any basic Economics, History, Government, Economics or English? He does not talk as if he attended any college English classes.
Maybe he did like Rodney Dangerfield in the movie "Back to School" and just hired other students to attend his classes and take his tests for him.
I do not remember any of my college class instructors requesting that I produce a picture ID to prove that I was really the person taking that class, so maybe that is/was possible.
Even a high school graduate or a high school dropout will know how government operates and not believe everything that they hear on the radio, see on TV, read on the internet, or even read in a newspaper?
2
You mean pass the Scotch, don't you?
The last 35+ years we have watched the battle between facts and fictions in our government. republicans have been shoving their supply sided austerity economy down our throats and it has devastated the parts of the Country that vote for them locally and statewide. Instead of being a breadbasket Kansas is now a deplorable basket.
When an entire party bases its dogma on fairy tales instead of facts we are in trouble.
2
We are in an age where the simple, all-encompassing idea is king. Dead or alive, a conspiracy or policy that will magically explain or fix everything is what Americans want so they can move on to the truly important task of checking their Twitter feed or catching up on the latest news on Facebook. Details, fact checking, logic based argument, discussion of pros and cons spins the brain, requiring concentration. Trump has long understood the importance of the shiny object and the comforting lie.
We are the richest country on the planet GDP / capita. The free market has not fixed poverty or healthcare or education. There are parts of America with infant mortality rates the same as Botswana.
The libertarian “philosophy” would have us competing with China for minimum wage and polluted air and water rather than competing with Germany for skills.
I had a small manufacturing company. Tax cuts will not make me hire someone. Only more demand.
I lived in Brazil where a plumber makes in US dollars US$6,000. A plumber in the US makes US$40,000. Similar rations for nurses, computer programmers, etc.
GM sells a lot more cars per capita in the US than Brazil. It is a lot more trickle up than trickle down.
It is sad all the time we spend fighting this misinformation that could be better spent fixing healthcare and poverty and education.
1
The 4 percent of value that China extracts from Apple when it manufacturers the I phone is an example of how large international corporations systematically devalue labor. If the I phone was manufactured in the US the labor in producing it would be valued more. The phone itself would probably not change in price but the quality of the life of the laborers would increase dramatically
Currently are accumulated trade deficit is close to 20 trillion dollars and anyone who does not think that deficit will not affect our quality of life is naive , has never been to Detroit or Flint or tried to buy a house in Southern California. But don't take my word for it read Warren Buffet's 2003 article in Fortune magazine titled "The growing trade deficit is selling America out from under us " http://www4.ncsu.edu/~mcelroy/302/wrap/warren_buffett_in_fortune_magazin...
Paul, How many billions are you worth
Why is it that people who wouldn’t dream of telling Aviation engineers how to design an airplane think they understand economics better than economists? The things said in this column on economics and trade are mainstream economics, shared by economists of every stripe. But every time Mr Krugman writes on this topic, he draws dozens or hundreds of comments from people who are sure that their intuitions about economics are better than the virtually unanimous views of economists
9
Off topic,.......I totally agree with your comment, but there are actually some people who do tell engineers how to design airplanes & engines. Whenever there is a crash of a commercial airliner and they recover the 'black box', there are always those who ask 'why don't they make the whole airplane from the black box material?' When 'Sully' landed his A320 in the Hudson River after the engines ingested some Canada geese right after takeoff, the question was 'why don't they just put a screen in front of the engine to keep the birds out?'
3
NAFTA is the classic example of how all parties benefit from a good trade deal. When will Krugman get around to writing about this and the degree to which the economies of Canada, the U.S. and Mexico are now integrated? There seems to be a lack of understanding about the numbers of American jobs in manufacturing but also in services that are dependant on this integration.
Given the current state of NAFTA negotiations, the topic is of immediate relevance.
7
The notion of trade surplus and deficit is counter-intuitive. Here's how I undserstand it; I think it's correct (of course :-) ), but I'm not sure.
If your country has a trade deficit with mine, that means we sold more to you than you sold to us. That means we have a lot of your cash. The only place we can spend your cash is your countyr, so we have to buy more of your stuff, directly from you, or indirectly via intermediate trading partners who buy and sell to both of us. So it's to your country's advantage to have a trade deficit with my country, because it means that one way or another you will be able to sell more stuff. In other words, it means demand for your stuff, which means more jobs for you. And if the number are too large, there could well be fewer jobs in my country.
1
Dear Mr. Krugman,
thank you for this refreshing analysis, in contrast to some former comments I don't see you and your rational dissection of wrong-doing as belonging to the past. Though it is tempting to think that the current US administrations' policy seems impermeable to whatever argument and (history-based) evidence, an "ostrich-technique" of burying our heads in the ground, because we can't stand the present anymore, will most likely not at all improve the situation on the ground.
Yet, I wonder if this administration is with full heart willing to run the tanker into the next rock, I just can't imagine them to be so short-sighted & selfish.But as it proves they are, a solely description of (wide) visions on how to do better will hardly touch their hearts and minds. What I lack in the whole debate, and even more in the non-Trump-voting society, is solutions beside intellectual gaming. This alone will most likely not change views and votes!) within the huge camp of those who voted for the current administration. Taking example from the beginning of the environmental protection movement (in Germany and elsewhere) in early 80th, it was the protesting society itself that implemented changes. In other words, they stopped yowling outside the palace but started to build their own house, based on their own visions, in its backyard, and thus bridged the gap between society and throne. It is yowling at politicians and politics itself which seems to me as belonging to the past.
This is a great demonstration of a fundamental fact of life: the fervor with which ideas are held has little to do with empirical facts and a lot to do with the power of the people whose interests the ideas support. Supply side economics is the best example ever: absolutely no evidence, or economic analysis, that tax cuts for rich people stimulate the economy, but they sure help rich people. and rich people run our country. If you want to stimulate the economy with tax cuts--never as good as increased spending--they have to go to people who will spend the money. What's amazing to me--I'm a psychologist, not an economist--is that the Republican Party keeps being able to sell supply side nonsense to the majority of voters--and this goes all the way back to the Whigs in one form or another. It helps, of course, to have an opposition that is too incompetent to explain the situation to voters.
6
Taxable wealth creation and the economic capability of any nation is reflected in the new creation of privately held TAXABLE National Wealth that can only be created by greedy businesses and then confiscated by government agencies to pay for common government activities only when greedy businessmen of that nation performs one or more of the following wealth creating tasks:
1. Plant, grow, and/or harvest something of commercial value from the earth;
2. Extract something of commercial value from the earth;
3. Manufacture something of commercial value that is consumable;
4. Construct a building that is permanently useful for rental income;
5. Tourism income from foreign tourists;
6. Provide services (professional licensed services such as doctors, lawyers, architects, engineers, land surveyors, and certified public accountants, etc., and also licensed tradesmen services such as plumbers, electricians, auto mechanics, aircraft and power plant mechanics, HVAC mechanics, barbers, real estate agents, and other licensed trades);
And then if their citizen businessmen trade, sell, lease, or rent these items and/or services to parties outside of their family (or outside of their nation), in return for a net transfer of gold, currency, or commodities from other parties outside of their family into their own family, that entire family (state or nation) is enriched and accumulates taxable national wealth for the government to confiscate and then spend on government activities.
2
and also
7. Collect payment for patent and copyright uses;
8. Buy things from foreigners in foreign nations, transport them to another other foreign nation, and then sell them to that other foreign nation at a profit; and deposit the profits in a US bank,
The taxable wealth that is created and owned by greedy private businesses and greedy capitalist individuals in any nation is (almost) the only source of wealth available for the federal and local governments to forcibly take or confiscate a portion of in the form of taxes in order for the government to raise funds to pay for all of the WEALTH CONSUMING bureaucratic employee payrolls, government services, entitlements, government contracts, military contracts, “Pay to Play” business deals, political power influenced “Pay to Play” no-bid contract awards, unemployment benefits, income equalization, gigantic Military-Industrial-Complex type no-bid military contract(s), no-bid pork barrel INFRASTRUCTURE improvements, Solyndra type “Pay to Play” government guarantee business loan then bankruptcy deals, CGI Federal political power influenced “Pay to Play” no-bid contract awards, wars, welfare, unemployment benefits, repay existing of future bond obligations (borrowed money), and other government expenses that pay citizens by expending national wealth for these wealth consuming activities that actually consumes and destroys the nation's wealth and national government economic capabilities.
1
how does Stormy Daniels' $130,000. hushmoney payoff fit into this economic theory? is it taxable/confiscatable? is it income? is it legal? is her wealth creating formula more like the work of a licensed professional architect, a marijuana grower in certain progressive states, or a mining operation?
Referring to the economic benefits of tax cuts for the rich as "ideas" is already a disservice to the truth. Most of the people touting said tax cuts don't believe they will actually boost the economy. But they need a cover story to win the support of the very people who will be most harmed by them.
Let's call support for tax cuts what it is: a bait and switch, a cover story, a sales job, window dressing, choose your metaphor. Anything but ideas.
6
No one in North America quite understands a Value Added Tax system like a British Columbia business owner who had such a tax and then lost it to a referendum lead by a misinformed public. As such a person, I can unequivocally state there is no simpler nor fairer form of taxation for a business. The very fact that the tax is a net of inputs makes it inherently transparent and virtually eliminates it being buried or concealed within the markup of any goods or services. I truly wish you would speak more to educating others on why and how a VAT could be used to fairly fund required infrastructure and services at virtually all levels of government. Fair and transparent reasonable taxation is the solution to funding any democracy, not the culprit.
10
"Still, they have Trump’s ear, because the rocks in their heads fit the holes in his".
Thank you my good doctor, I needed a giggle this morning and you provided it.
7
Those of us who know better wish that Trump would be the one financially ruined by the beliefs and actions of all these useful idiots, but I doubt that will be the result and it's no time for passing the popcorn.
the Trump Organization gets all the money it needs from Russia. Eric said so.
I believe that extensive research has shown that cutting taxes on the wealthy only helps an economy when those marginal rates are already above 80%. Optimal marginal tax rates on high earners are around 60-70%: above or below this range leads to slower growth.
https://en.m.wikipedia.org/wiki/Optimal_tax
1
@Robert: Exactly.
Furthermore, the economic fig leaf that republicans use as the theory to back up their claims that lower tax rates on the wealthy can actually increase revenues is the well-worn 'Laffer curve', which is really a re-tread of the prior ideas that you cited.
The catch though is that they leave out half of Laffer's argument. That part about when you decrease rates that are already below the optimal rate.
1
Robert and Mikeweb: I agree with your comments. Add this: in an economy where income and wealth inequality is so grotesque, cutting taxes on the income and wealth of those who have been grotesquely enriched-- is even more disgusting. And long-term, just plain dumb. In Nor-Cal we are about to boost bridge tolls from the current $5.00 (not a small amount of money for many) to $8.00. This is regressive taxation on steroids and just removes money from the real economy, as that extra 3 bucks vanishes from the consumer economy. Meanwhile those like Zuck and Cook who are demanding we need this for infrastructure (read to make doing business in nor-cal easier for them) will not suffer in the least.
1
Given it’s sad outcome in the Reagan administration, can’t we call it the “laughter” curve?
1
Follow the money.
Trump's zombies fall into 2 groups: those that believe the nonsensical economic and trade policies will work, and those that KNOW it won't but push it to benefit a select few.
That is, to benefit their benefactors and fellows, right-wing billionaires who don't give a DAMN about what the policies do to the nation as long as it benefits them, the Kochs, the Mercers, the Waltons, and, of course, the Trumps. The Secretary of Education's billions come from the biggest successful Ponzi scheme in history, Amway. It's about their greed and power, and their hunger for more. Look at the "think tanks", ie propaganda mills the Kochs fund. And, even worse, the Mercers fund Cambridge Analytica, a firm that employs KGB tactics to entrap opponents (of their customers) and brags about affecting (that is skewing and tainting ) over 200 elections around the world. They know Zombie Economics is fake. But it provides them great benefits.
Follow the money.
7
Facts are boring, emotions are exciting. People prefer to ride the emotional roller-coaster instead of attending the lecture. Emotions, and the hormones that drive them are what Freud called the "ID." It is that part of the brain that we don't control until after we become conscious of it but usually too late - the roller-coaster has started.
Hayek's theories have been proven wrong more than once but how do you argue with the emotional argument that: "You don't get a job from a poor person, only a rich one!" The same is true for trade particularly when all we understand is hard goods not services and absolutely don't understand intellectual property.
The RNC has been surfing the emotional wave for a long time while the DNC has appointed themselves the school-teachers of the nation. Countering the emotional high by sending Americans to school isn't going to work. Humans believe what they want to believe - facts be damned - emotions are more fun!
1
Jonathan Chait ought to get a medal for that quote "has elevated flamboyant wrongness to a form of performance art." Damn, I wish I could think of something like that.
2
"Still, they have Trump’s ear, because the rocks in their heads fit the holes in his:"
As an old geology major: The zombie analogy should have been "the necrotic tissue in their heads fit the holes in his."
In the sixties we said "They who rule the waves , waive the rules."
The last "ruler" of the waves was the UK, I believe, Brexit, a divided Ireland , and perhaps a secessionist Scotland point the way for our current MAGA leaders.
As an economic aside: I went to Brooklyn College (B.S. Geology) with no tuition and bought used books. I paid back in taxes my "free education" in the first two years of full time employment.
3
If Statistics is the art of lying with numbers, Economics is its corollary: How to believe anything in spite of what the numbers say.
After the proposed “face to face” with President Kim of North Korea, President Trump should do a “face to face” with Professor Krugman. Although the latter meeting probably wouldn’t steal the headlines from Stormy-Trump, the U.S. and world economies would be better off in the long run if Trump followed Krugman’s tutorials.
1
It's just too depressing to see US politics collapse into the typical muck and mire of tin pot dictator politics seen elsewhere, and throughout history. The fallout from this has to be terrible for all of us. Can you actually say you live in a democracy when there is no accountability in government.
1
We'll never know how much Trump "benefitted" money wise on his tax cut. No shame....pure greed.
Larry Kudlow refused to acknowledge the recession of 2007. He kept saying GOLDILOCKS the economy is not too hot and not too cold. Always wrong but strong in his beliefs, he will be a perfect fit for Trump: the president who knows nothing, and and doesn't know he knows nothing. Woe is us!!! B
1
Holy debonkers, just when I thought things couldn't get any worse ...
Just when, please, is this horror movie over? It is just a movie, right? Because I couldn't bear it if it were reality.
1
Donald Trump’s stunning ignorance on a number of subjects important for any American president is known, and it mirrors what we have seen before in presidents like Ronald Reagan and George W. Bush.
What is different with Trump is the combination of ignorance and hyper-ego.
Donald Trump believes that the well-credentialed experts who are part of the mainstream scholars in their fields must be wrong, because their views conflict with his unschooled instincts.
After all, Trump has honed those amazing gut impulses of his by spending hours – usually late at night -in front of the TV, watching “the shows.”
Fasten your seatbelts.
3
Zombies would starve to death if they had to rely on republican brains for feeding. lol!
An excellent comparative that rings so true. Time after time the electorate puts these mindless money grubbers in charge and time after time we have to spend years recovering from damage done. We will probably decades recovering from this current congressional obomination.
1
The GOP was once the party of free trade. But fear of being defeated in primaries by Trump's frenzied base has taken all the backbone out of congressional Republicans. Now, the GOP is submissively allowing control of trade and our economy by presidential fiat. And to make matters worse, this so-called president is impulsive, irrational and vindictive.
The GOP has become a party of abject, spineless, unprincipled cowards.
2
Sorry, when the zombies are done, I won't be able to afford popcorn.
2
Supply-side economics isn’t really an idea. It’s a scam. Few Republican politicians sincerely believe that tax cuts for the rich benefit everyone else. That’s just how they fool voters and rationalize their well-paid servitude to their real bosses.
Don't forget Hanlon's Razor - Never attributed to malice that which can be explained by stupidity. But don't rule out malice.
2
Love it. "Still, they have Trump’s ear, because the rocks in their heads fit the holes in his: They’re telling him what he wants to hear, because their errors play to his gut instincts, and when it comes to policy, he don’t need no education."
Ah, but while "Pass the popcorn" is apt for zombie movies, one worries that in the real world, popcorn and entertainment might be toxic. What then?
3
"Still, they have Trump’s ear, because the rocks in their heads fit the holes in his"
"And what both sides in this dispute share is a general propensity for invincible ignorance, which makes them Trump’s kind of people."
Classic, Dr. K. Thanks, as usual.
1
"...because the rocks in their heads fit the holes in his" - well put!
It never ceases to amaze me how Republicans take, as an article of faith, that corporate leaders would pass tax cuts on to their employees because, oh, I guess because they're just such nice people.
Never mind the fact that every executive in this nation has a line of people a mile long hoping to replace them, and that the corporation they oversee is in constant cutthroat competition with their rivals who will not be handing out money will nilly because congress handed it to them.
And even more ridiculous, Republicans overlook the time-honored tradition of using extra profits to buy back stock, thereby enriching investors and (surpirse!) the board members themselves.
But sure, tell the people that your tax cuts will be handed over to employees. And shame on them for believing anything you say.
2
There are two kinds of supply-siders: those that know the theory is a crock but find it a convenient ploy for shifting wealth to the already filthy rich and those who are true believers despite all empirical evidence against the theory.
We just don't know which type of zombie Larry Kudlow is.
The major problem here is less that the Trump administration's economic ideas are bad as it is that the ideas are simultaneously bad and internally inconsistent. The result, almost by definition, is chaotic economic policy.
Unless a government is willing to erect trade barriers so high as to strangle economic development, it cannot have an artificially inflated currency and trade surplus at the same time. The math doesn't work.
In this regard, appointing Larry Kurlow as Trump's Chief Economic Adviser is downright terrifying.
1
“Wrong about everything” pretty much describes the entire Trump administration. Economic ineptitude is only their most glaring aspect.
Their attempt to recind the ACA, for example, not only results in fewer people being covered, but also costs more.
Blocking the Paris Accord on climate change will only hasten the change.
Pulling out of the Iran nuclear accord will not only open the door for a nuclear Iran, but also alienate our European allies.
I could go on, but you get the point.
Ignorance in this case is not bliss, it’s at minimum the end of the American Experiment.
Unfortunately, you can’t fix stupid.
2
Somebody ought to make a movie out of this.
How about "Administration of the Living Dead?"
4
We live in a time of mental disability elevated to high office. It's weirdly necessary to state the obvious: tariffs are taxes - essentially regressive sales taxes. The slightly lower income tax rate is going to be completely gobbled up by inflated prices. Trump's and his zombies are basically proposing to impose a regime of economic sanctions on ourselves. This Trump crew is ridiculously incompetent - they cannot be replaced soon enough.
108
I would like to start a movement to stop using the term " from the gut or gut instincts" and call it what it really is Lazy thinking. Or not thinking at all just grabbing the shortest of short cuts in the thinking process in your brain.
1
After watching, often attempting to watch, for years on CNBC one thing for sure about Kudlow = he enjoys speaking in an authoritarian manner, his remarks often ending in upstrokes - a practiced, deliberate speaking style very similar to Trump's. Kudlow is so very sure of himself and so very sure the CNBC audience agrees with him!
Not a good sign from where I stand!
3
Republicans with their constant bashing of regulations and tax cuts say that they believe in a hands off economic policy that allows for as much freedom for corporations as possible. But when it comes down to the nitty gritty they tinker in our economy for only one reason, to make the rich richer. If it hurts the economy and the little guy it does not matter because they are not the cash cows that feed their power and elections. The Donald and his GOP conspirators have duped their followers into believing that they represent the interests of their voters, but when the chips are down they will tinker with economic policy until they get what they want which is only good for their rich patrons. Trade gaps and deficit spending in the end are only tools to this end.
The problem is, Trump nor his cronies have any desire to help others. So any decision they make is purely out of self interest. Trump is the the biggest narcissist in history and makes Obama look like Mother Teresa. The irony is, even taken purely from a self interest perspective, Trumpsters still don't know what's good for them.
2
Republicans missed the memo that GDP growth, job creation, and stock market returns are historically better under Democratic Presidents (see The Economist-"Timing is Everything"). The economy grew faster under Clinton than Reagan, and faster under Obama than Bush 43.
You wouldn't go to a doctor that prescribes the same solution no matter what the ailment is, yet that is what Republicans do. The list of zombie Republican dogma (ideas is too kind a word) is long indeed and keeps extending.
1. Tax cuts for the rich and corporations pay for themselves.
2. Deficits only matter when Democrats are in charge.
3. Austerity is the right path in a downturn.
4. Government forced banks to make bad loans, causing the 2008 crisis (never mind that investment banks don't originate mortgages and were essentially unregulated in terms of their risk-taking).
5. Regulation is always bad (even regulations that reduce externalities like pollution or force oligopoly/monopoly industries towards perfectly competitive industries).
6. We have a spending problem not a revenue problem.
7. Climate change is neither risky nor man influenced.
8. Trade deficits are always bad, surpluses always good.
9. Stimulus during a downturn is ineffective.
One would think Republican credibility would suffer, but in their world it only gets stronger by repeating the party line, no matter how bad the outcome.
4
The idea that trade deficits are bad started in grade school with a story about a certain group of Native American who sold Manhattan to Europeans for a handful of trinkets, and lost their homeland as a result.
Later, the story was revised. That tribe didn't "own" it, so what they sold was not really theirs to sell, so they got the trinkets for free. But the damage was done; the idea of selling real estate to buy trinkets was permanently fixed in our minds as a bad idea.
‘invincible ignorance’. Great phrase describing Republicans. Thanks.
Come on! Face reality! We have tried free trade for the past 30+ years. Has it been good for us? Closed factories, broken lives.... Free traders always talk theoretical... the elites benefit, that’s why they support. But now the people have risen!
Correction: we have had free trade that was framed by trade agreements that were written by and for the benefit of business owners and shareholders only.
Stipulations to protect workers and the environment in signee nations were not included.
Ironically, free trade is like the right to own firearms. Both are not necessarily bad things, but they need to be well regulated, and take into account the rights and welfare of all people.
1
Really?!? You think this nation’s farmers and their suppliers feel that way? They are sweating bullets over these tariffs and the possibility of NAFTA going away. NAFTA literally wiped out Mexico’s farming population to our advantage(and thus added to our illegal immigration). Do think the people at Boeing and all of their thousands of aircraft suppliers feel that way? Half of what they make goes overseas and Airbus is begging Trump to start a trade war with China to take over the cancelled orders from them.
We have a $230 billion global trade surplus in services (financials, software, entertainment, consulting and the like) where nobody can touch us. But your answer is go back to the 50s? Go back to industries where other countries have taken over because of cheaper labor and where our current costs would never allow us to lead in the future. Instead of investing in new energy industries that have huge growing employment, (like China is doing) lets go BACK to coal. Insane!
Trade HAS made us better overall. But not everyone. It never does. But going backward? We were never a country like that. We always looked ahead and many dislocated industries occurred along the way. But our people moved on. We literally moved to new areas. We won’t do that anymore and our government will not help those in the dislocated industries (as we eliminate the Appalachian economic commission).
So no I don’t think it is a good idea to go back to cars getting 10 MPG. Ah the good olde days!
2
I think we need to move past accusations like "ignorant" and "hypocrisy." The men and women Trump selects are not stupid. Their ideas may not work in the world but that's because they don't care at all for the world. Their focus is on making their donors richer. These folks may be wrong but they're always paid. That's where we need to focus. Being flabbergasted that they're still on TV distracts from the real question, whom do they serve?
2
I was was raised in a Republican family in the South after WWII and never questioned their views. The Democratic Party was for New York blacks, immigrants and other godless freeloaders. Then I started looking around me at the inherent racism in such a platform, the arrogance and selfishness of the rich. Thirty years ago I decided that I would rather vote for the DEVIL than a Republican. I appreciated the resuscitation of Whitman, David.
2
Further corroborating Krugman, Trump made clear his ignorance of trade policy when he recounted his exchange with Canadian PM Trudeau.
If you look at the actual text of Trump's recollection, Trump says that Canada is running a deficit with the United States -- in which case the United States must be running a surplus with Canada. It's astonishing, but from the way he frames this conversation, Trump does not even understand that when one country in a bilateral relationship is running a deficit, the other must be running a surplus. Instead, Trump ends up saying the opposite of what he falsely claims elsewhere about the U.S.-Canada trade balance.
This is Trump's mangled story, which makes no sense:
"Trudeau came to see me. He's a good guy, Justin. He said, 'No, no, we have no trade deficit with you, we have none. Donald, please.' Nice guy, good-looking guy, comes in — 'Donald, we have no trade deficit.' He's very proud because everybody else, you know, we're getting killed. ...
"So, he's proud. I said, 'Wrong, Justin, you do.' I didn't even know. ... I had no idea. I just said, 'You're wrong.' You know why? Because we're so stupid. ... And I thought they were smart. I said, 'You're wrong, Justin.' He said, 'Nope, we have no trade deficit. I said, 'Well, in that case, I feel differently,' I said, 'but I don't believe it.' I sent one of our guys out, his guy, my guy, they went out, I said, 'Check, because I can't believe it.'"
Invincible ignorance indeed. Hope we survive.
I quit watching CNBC because of Kudlow.
2
"America is broken and only I can fix it" may well be the explanation for his deliberate ignorance. Like all demagogues before him, he has identified a problem that doesn't exist to provide a solution that doesn't work to show his supporters how he is defending them. In that context, a trade war is good, because he can then have external enemies who are responsible for every ill that besets America.
1
CNBC has Kudlow's columns going back over 10 years. I did some searching, I particularly liked this one from Feb 2008 - featuring Hillary and Obama views on trade:
https://www.cnbc.com/id/23371906
title: A Protectionist Lie
1st 2 para's:
"One of the great, unchallenged, political assertions out there right now is that NAFTA costs American jobs. Hill-Bama busied themselves with this protectionist canard during their debate last night. It happens to be nonsense.
We’re witnessing an unprecedented attack on free trade. It’s been growing for some time, and may wind up being the biggest protectionist assault since the days of Herbert Hoover. Believe me, if this canard ever flies, the stock market is going to head south in a hurry."
I agree with Kudlow on this (i.e. on NAFTA). What's funny is that Trump has the opposite view of Kudlow. Given the title of the above piece, I guess we could say that Kudlow was the 1st one in the administration to call Trump a liar.
2
Tax cuts. >>> Want to build a big wall. Want to build new military weapons. Want to repair the infrastructure. Want to build offshore oil rigs. Want a big parade. Want to continue coal mining. Want tariffs.
Wanna, wanna, wanna.
Whenever I wanna, I gotta save money. Or not wanna any more.
1
That's all fine though. Trump's team, fielding ideas that are both crazy and stupid, will probably fail. But it's for the best that they fail.
People elected Trump because they were angry with politics, eager for an outsider to shake things up and change their economic situation for them. These people were deluded that Trump was a good businessman, that he understood economics, and that he had their interests in mind. They were also too lazy to try to improve their own situations.
But the only way they will learn from their mistake is if they suffer for it. If Trump's chaotic thrashing around somehow got them huge raises and great benefits, out of the blue, they'd think they made the right choice by him. That would be terrible, so our best hope is that they suffer. I'm willing to suffer a bit too, as long as they do.
Dr K got it right. Kudlow is a mirror image of Trumponomics—lots of bluster, lots of risk taking, no successful endeavors to speak of other than a TV presence, and no facts or evidence. We are doomed folks with these fools in charge. They think they can get China to bend to their will? That’s hysterical but frightening. Those with the most to lose, as usual, are the “base” Trump supporters.
1
once again Trump shows he knows nothing about nothing.
the zombie supply side lie will never die.
Yet, Krugman does not offer any non-zombie ideas that place the functioning of CCP-led economy in a comprehensible international economics.
He's gonna need more tax cuts. LOL.
and it will trickle down upon the masses
it's Bizarro world's team of rivals...
Why is it that when I try to follow the reasoning of people like Malpass and Kudlow, I get a spinning sensation and a headache?
The GOP has sold two ideas to its base that are the meanest zombies. 1) Government is bad. 2) Trickle down actually helps those that are not rich. Number 1 is just their favorite gong to bash, a one-stop-fits-all way to defame the government and everyone in it. Which surprisingly includes the GOP themselves. Somehow they sidestep the mud they sling on others.
Number 1 makes it easier to go number 2. If government is bad, then de-fund it and watch the magic of this non-existent free market mechanism save us all. Ask Kansas how that's going. Come to Ohio and see how Kasich's state budget cuts are destroying our schools and making big holes in the safety nets, while our infrastructure crumbles.
Seeing a lot of people blaming the media for these issues. That's GOP zombie #3. There were thousands of articles that documented the failure of supply-side economics, but the snake-oil draw of easy money papered right over them. The public has to wake up and read well-sourced information about the failures of bad economics. Believe objective analysis. Reject dog-whistles and republican drum beating that refutes truth and reality. It's not widely known but you can kill a zombie idea if you don't believe in it.
2
Oh, didn't you hear that Trump likes conflicts? What could be better than a conflict between zombies?
"propensity for invincible ignorance," Thanks! professor Krugman for a turn of phrase that should be yeoman for the rest of this term.
1
Paul, this writing proves that you, not the people you write about, are in the Dark Ages. What these people think is irrelevant. What is of utmost importance is how they look on TV. Do they snarl? Do they rely primarily on monosyllabic terms to present a forceful case? Do they look like economists should look? If the answers to these questions is affirmative, then they should join the president's team. They will be welcomed with open arms and keep their positions as long as they openly tell the president they love working for him.
I hope you will now stop with these cerebral-based arguments. Those are so last-administration.
81
Anyone who thinks a $566 Billion trade deficit is the sign of a healthy economy is suffering from cerebral palsies. Ask China if it wants to improve its economy by building up a $357 Billion trade deficit with the US. China apparently does not take advice from dumb economists.
I saw Paul on TV and thought he looked pretty good
Reagan cut taxes resulting a huge increase in deficit / debt. It is the reason they put the debt clock in Manhattan. We got 16 Million jobs.
Clinton raised taxes and balanced the budget, zero deficit. We got 23 Million jobs, almost 50% more than Reagan.
W Bush took that balanced budget, zero deficit, gave us two “tax cuts for the job creators” and gave Obama a whopping $1.4 Trillion deficit. We got 3 Million jobs. Bush ended with the worst recession since the Great Depression.
Obama saved the auto industry and got us through the Great Recession. Obama gave us the “jobs killing Obama-care” and cut the deficit by almost 2/3 to $550 Billion. We got 11.5 Million jobs, almost 400% more than W Bush.
And 20 Million people got healthcare.
6
American workers manufacturing the products that drive the consumer economy. American workers paying taxes on their earnings into the treasury that supports government spending. American workers spending their weekly paychecks at the small and large businesses in the communities in which they live. The more of that we have the better it is for everyone. Anything else is an end run around the American worker and the progress we have made in this country in the last 100 years.
21
That's a very narrow view of the entire economy. We're a world wide trader & consumer, as well as banker & investment holder. Those aspects of our economy are important too.
It is hard to know where to start in addressing your view of yourself. I assume you have no children as they would suffer from the huge deficits you will be leaving them. The American worker in general does not manufacture products, it creates services that are frequently multi-national in character. I believe your view of the world is based on an automotive worker with no children concerned solely with the impact on that one person.
The world has never been that simple, but if you want a simple concept: Nobody ever gave you something for free. Look at the implications in 5 or 10 years.
And the world wars, the casualties, the dislocations and rivalries in the last 118 years.
Problem is, even if Trump knew any better he can't get most reputable people to work for him. (And of the few willing competents, only a profound egotist would willingly join Trump's quagmire, mistakenly believing that they can protect the country from his malpractice).
1
"Economics" is often a jumble of jargon used to obscure and enable hidden elements of a tricky business plan, aka, a "Scam".
Case in point: Federal Reserve President Alan Greenspan's praise of Wall Street's creation of the bogus banking and investment "opportunities" that crashed the U.S. economy in 2008.
On a smaller scale: Bernard Madoff's investment firm and
Trump University.
Moral: Believe at your own risk.
1
The republican administration: the blind leading the blind. No wonder it seems as though the US is falling apart. It is. Our blind leaders just fell off the cliff as they wandered about an unfamiliar landscape.
Vote for sanity in 2018.
2
Dear Professor;
I'm afraid you are wasting your ink if you think that any of this will influence what Trump and his minions think, say, or do. Of these, actions speak the loudest, and as you note in this essay: their policies are rationalized "because it appeals to the prejudices of wealthy and powerful people."
It seems rational that our national leaders of the largest economy on earth would act to support the health of that economy and the nation's citizens.
However, it is obvious that Trump and All The President's Selfish Men care not a whit for their sworn duty to the nation. They will use every executive lever available to them to divert wealth to themselves and their wealthy peers, and probably leave the mess for the Democrats to clean up. May that happen soon!
2
In the past, I have occasionally broke out into laughter listening to Larry Kudlow's prognostications.
I am no longer laughing.
2
It would be nice if, in this era of zombienomics, the Democrats got their act together and issued a statement of principles on economics and trade, as well as policies to implement those principles. It's all very well and good to look at the (R)s and observe that their economic idea have all the integrity of a burning barn, but I'd feel better if the Democrats availed themselves of the opportunity to present something better.
I'm waiting...
1
Trump is just a symptom of a much bigger problem: America's Boomers.
Trump himself if a boomer and reflects the preoccupations and attitudes of his age cohort. The boomers inherited a rich, dynamic country and have gradually bankrupted it. They habitually cut their own taxes and borrow money without any concern for future burdens. They’ve spent virtually all our money and assets on themselves and in the process have left a financial disaster for their children.
Most of our problems have not been addressed because that would require higher taxes and therefore a sense of social obligation to our fellow citizens. But again, the boomers seem to have no appreciation for social solidarity.
Dealing with these problems - public education, infrastructure, climate change, public debt - has simply been irrelevant to the largest political class in the country — the boomers. There’s nothing conspiratorial about that. Politicians respond to the most important part of the electorate, and that’s been the boomers for decades. And it just so happens that the boomers are not socially inclined and have a ton of maladaptive personality characteristics.
Think of the boomers as a generational trust-fund baby: They inherited a country they had no part in building, failed to appreciate it, and seized on all the benefits while leaving nothing behind.
Trump's modus operandi in a nutshell.
D.P. Moynihan provides an excellent guide to the “transmigration of the Republican soul.”
Moynihan had a negative obsession to Johnson’s civil rights agenda, efforts to eliminate poverty and organization of the poor, all three which he supplied intellectual Republican rationales in his book “Maximum Feasible Misunderstanding.”
Next, as Nixon’s advisor on domestic affairs—a position Bannon occupied in the Trump administration—he suggested “benign neglect” of minority issues as a way of refocusing on the issue of middle-income whites.
Whatever form they have now become—attacks on racial and religious minorities (including Jews and Muslims), income inequality and wealth redistribution, opposition to unions and voter suppression were ideas, Moynihan, as Democrat in good-standing, offered to the Republicans—and they bought them.
Moynihan’s very persuasive critiques of the Democrat’s gave great weight to the current Republican philosophy of “just say no” to everything Democrat.
Anyone who thinks that Trump is a GOP anomaly, a man gorged on misconceptions, needs only to refer to Republican economic policy circa as long as I can remember.
The religious nature of con economics is revealed when policies that have failed miserably are promoted by zealots who assert that the policies haven't really failed, and if they have failed, it was because those executing them lost their nerve, didn't do enough, weren't pure enough.
I imagine that much of this fairy tale nonsense, economics presented as if it were an eight-crayon Crayola set accompanied by a starter coloring book with sharp black lines, began as a ruse to gull hourly wage workers into believing that poor people, who often cannot afford lobbyists, had hijacked the economy, starring Robert Mercer as an abject Captain Phillips.
However, at some point the GOP started to eat their own cooking. Truly bizarre specimens like Stephen Moore became ubiquitous, spouting bromides couched as wisdom. For our starboard friends, like listening to Yoda it must have been. Didn't understand a word, but darn the man sounded confident.
A confidence man. Now, with the Playboy centerfold of confidence men exercising his thumbs day and night, the GOP has the opportunity it's always wanted to impose its childlike economic vision on fellow citizens. Voter apathy might not be indictable, but choices have consequences.
Larry Kudlow. Like taking monetary advice from your bankrupt brother-in-law. Pass the Kool-Aid, please.
2
You've been saying things like "as a matter of arithmetic, a country that attracts more inward investment from foreigners than it invests abroad must run a trade deficit," for years, but you never explain it in a way those of us who only went to state schools can understand.
Only investment counts? Sales and purchases of goods and services don't count?
What on earth are you talking about?
Mr. Krugman's comment that both sides in the faulty economic theories adopted by the Republican party are "invincible" ignorance might better be described as "vincible" ignorance, defined in Catholic ethics as ignorance that a person could remove by applying reasonable diligence in the given set of circumstances.
Perhaps I just believe that the people Trump has hired are guilty because their actions are antithetical to the common good.
1
I doubt Repubs actually believe a lot of this stuff. It's much more crass than that. What's really happening is they knowingly repeat the lies because it generates campaign contributions for them from their true clients, the plutocrat class, who give it to them on the condition that they use the cash for ads and all the rest of it to bamboozle ordinary folks, and win elections to stay in power and pass still more laws that favor the plutocrats. Rinse and repeat. Works for everybody--plutocrats stay rich, politicians stay in office, and the rest of us pick up the tab. Neat!
1
"Even the Losers" seemed important to me.
'Don't come around around here no more" was an anthem in my head.
Nobody wants me around. They all wonder why I'm not normal. But I'm not. They all act like I'm normal, but I'm not.
"Somewhere somehow somebody must have pushed around you some..."
There's something about Tom Petty that I loved. I still love him now, and he was a great beyond his time. He understood a lot that I won't mention, because it will be misunderstood.
That love from early on, that confused identity, that feeling of being about 14 , it is best remembered with this.
Oh my god!
The chief economist of Bear Stearns-a failed bank- hired for such an important post, says it all.
1
Malpass the former "Chief Economist" at Bear Stearns and Kudlow now as economic advisors highlight the sad truth of our country: people who most often rise to leadership now are not smart, hardworking, and knowledgeable; they simply lack morals, a conscience, and possess a rapacious greed that earns money for themselves and their masters.
2
Great piece ! .. Paul is best when sticking to economics. Take on Kudlow and Malpass (they do not even have economics degrees). Malpass took physics and Kudlow took TV broadcasting or something.
2
Trump has demonstrated his keen mastery of international trade and finance issues based upon his highly successful management of giant casinos in New Jersey ( which New Yorkers know as a foreign land) into bankruptcy as well as his manufacturing a golf club in Scotland, a giant hotel in Moscow, and the top rated, high quality dramas "The Apprentice" and "The Miss Universe Pageant". in short, he knows absolutely nothing about international trade, monetary policy, or anything else.
He is so "eager to learn" about these important things that he will hire apparent sycophants to whisper sweet nothings in his ear. Sometimes, as we have seen the required level of sycophancy is too much for some of the sycophants and they cannot stomach it. Some fall on their swords and some are pushed on to their swords for failure to be sufficiently sycophantic.
1
Trump's enablers betray their country. The list is growing, and they will have much to answer for after the Trump debacles end.
2
This is a comment from today's article on Trump reshuffling his legal team - I thought it was so important it should be repeated:
Having been a NYC commercial real estate lawyer for 36 years, I can confirm that Donald Trump has always been notorious in the industry for capriciously and impulsively hiring and firing a motley pantheon of aggressive, rapacious, truculent and near-sociopathic NYC lawyers and law firms. This pattern continues as before, the only difference being that he now controls the USA's nuclear weapons arsenal.
1
What about China allegedly manipulating its currency down to keep its exports up? Are the Chinese wrong? Can't be. Trump's hero -- right after Putin -- is China's top dog.
The key issue for the US to address is the enormous increase in inequality.
That soul crushing inequality translates into inequality of opportunity and a deep sense of despair. Someone/something needs to be blamed: Immigrants and foreign countries.
You mentioned the attraction of government influenced higher interest rates for our oligarchs.
I don't know economics, so I rely on you to enlighten me. But I can solve the following problem in economics:
You have two guys, a poor one P and a rich one R. All you know is that one is paying interest to the other. Which is the payer?
Interesting that David Malpass and Larry Kudlow were both chief economists at Bear Stearns. Is that a reason why this bank isn't around any more?
It is astounding to me that conservative Republicans and the lemmings that follow them do not listen more to 'experts' in this important field. But, I guess, put 'Nobel Laureate' in front of a writer's name with 'Ph.D.' at the end and instantly that person becomes an 'elite,' and therefore, not one to be heard. But stupidly nonsensical ideas are heard and discussed by Very Serious People.
Our country is headed to the bottom, folks. We in the choir better start looking for a new church. After all, he-who-shall-not-be-named depends not on experts and briefings, but on his own instincts.
And they worked so well for him in his business career. They did, right?
1
Ignorance in not bliss at least in economic policy.
When it comes to the limited attention span, curiosity, and intelligence of Trump, this augurs a disaster. Any economic trouble will be treated to an ideological response likely doomed to worsen the crisis.
This sounds like 1929 again with the failure to realize the need for vigorous government spending to invest and protect the economy with Keynesian approaches.
Depression anyone?
I hope that Trump and his economic advisers implement their ideas, because like in the case of Kansas, they would be like crazy experiments that would find their place in future textbooks.
It is indeed amazing than Kudlow and Malpass not only were wrong on everything but were consistently wrong. Even the worst of the worst manage to get sometimes something right out of sheer luck. So being constantly wrong requires you to be not only totally incompetent but also be afflicted by extremely bad luck. Not the kind of people you would want around…
Dr. Krugman, we need something stronger than popcorn to get us through this administration.
3
The same people who argue for a strong dollar (remember the screams from the right that Obama was debasing the dollar) accuse the Chinese of debasing their currency, so they are in effect admitting that a weaker currency is a good thing. Talk about cognitive dissonance!
1
Zombie economics thrives, not to validate itself, but to profit a handful of people who bet against American interests. Trump is hiring and listening to zombies who he believes will make the Trump family actually wealthy. Once their Russian funds dry up. And before their prison sentences begins.
Up until this time, the Trump administration has been a slow motion train wreck but now the train is going at top speed and the rails are loose.
These Republican "experts" are religious zealots -- who believe in faith-based ideas about trickle down, etc, etc -- masquerading as economists. The financial crisis of ten years ago proved that the treated-as-gospel central tenants of the American religion of money worship (aka economics) are pure vapor. But the true believers put on blindfolds and still believe.
Trump presumably “doesn’t understand the issues well enough to realize that the conflict exists”.
I'm sure that's right; “Nobody knew healthcare could be so complicated.”
2
Lowering "flamboyant wrongness to a form of performance art” aptly describes Trump, his Cabinet and their Republican enablers. Now that he has settled into the job and feels "emboldened," Trump revels in a newfound freedom to spout whatever Ideas enter his fevered brain -- like executing drug dealers -- without the guidance of adults in the White House day care center. And he is surrounding himself with yes-men like Pompeo, Kudlow and Navarro to egg him on. A recipe for disaster if there ever was one.
1
The GOP doesn't believe in zombie ideas, they don't believe in supply side trickle down or whatever. They wanted tax cuts for the rich because that is what their rich contributors told them they wanted. But in order to pass such legislation they had to pretend that it would benefit every body. They lied. Are you really surprised, Dr K.
Ant the same scenario is played out for all their owners pet projects, be it abortion, guns, immigration ( by the coloured people), for profit education, big oil, big pharma, you name it.
They pass the Laws that are expected of them and will say whatever it takes to prevent the masses from revolting. And they wrap the lies in the Flag and God and history and tradition so as to make any and all criticism seem unpatriotic.
And it has worked out fine this far.
2
Personally I hope Trump hires more TV personalities and people with a track record of being wrong. This enhances the possibility of continued chaos and abjectly ignorant decisions. Add that to the total lack of ideas being pushed by the GOP and the voters have a chance to cut the heads off the twin Zombies, the GOP and Trump, in the mid term election. That is assuming Bobby Three Sticks doesn't get Trump first.
2
And all the while they're thinking, "Yeah, but you guys predicted that the economy would tank when Trump got elected." So...
1
The other side to this economic tension and mindlessly superficial policymaking is what is happening on the international front. Trump is dumping the US influence value into the same hole in his head that Krugman described.
Goodwill has been the stable factor on the US's balance sheet for decades. Not any more. The ship is sailing to the land of make-believe captained by a TV president and his celebrity advisors with a powder keg of extorting, lying and disparaging aimed right at the allied boats warning of pirates ahead.
50
A corollary to Krugman's and the commenter's case is that if we mess up the reputation of the US as a stable place to invest, then foreigners will stop bringing money here. That creates a host of problems like higher borrowing costs, difficulty in funding trade deficit, etc. That is the gift that Trump and the GOP will leave for us when he/they finally leave.
Goodwill for whom? The US balance sheet has been massively negative for decades. China probably thinks its $357 Billion trade surplus with the US is good will, but it sure as blankety-blank is not good will for Americans who are not producing the goods that Americans aren't producing. The hole-in-the-head is Krugman and his ilk who are clueless about macroeconomics. Balance sheets written in red ink are recipes for disaster.
In the next to the last paragraph the Good Professor says: "both sides in this dispute share a general propensity for invincible ignorance, which makes them Trump's kind of people." That is trump and his administration in a nut shell -- ignorance and arrogance. He is weeding out the people who have enough intelligence or backbone for independent thought.
1
Details, details, details, Dr. Krugman, when you are reshaping the world, making America great again, transforming rust belt into a manufacturing behemoth, who has time to bother studying the numbers...Anyway, when Trump single-handedly takes our economy from boom to bust, he will blame Obama.
1
Huh? What a muddle. Deficits aren't a sign of weakness because they reflect interest in owning financial assets? Those untold trillions in dollar reserves held offshore earning zero aren't a reflection of confidence in our economic strength, they're the outcome of deliberate manipulation on the part of countries who have seen their middle classes thrive and economies grow, while our working class has withered away.
In general Paul, you have an admirable ability to admit error and move on. On the global trading system you're as bad as Kudlow with tax cuts. Your model simply doesn't allow for the massive manipulation that has in fact occurred that has devastated the heartland while others have thrived. And given rise to Trumpism, which you so despise.
For Trump, it's not about economics. It's about words. "Strong" is good. "Strong is what real men are. "Strong" is what a great America is. So "Strong" is what a dollar should be and "Strong" is what American exports should be. Unless you use the word "Strong" he will never listen to anything you say.
3
" debacle in Kansas, " I know Kansas gets a lot of credit for being the worst run state in the union but I contend that my beloved Oklahoma is by far the worst: 90 school districts open 4 days a week, teachers salaries at or near the bottom, obesity near the top, health and drug abuse near the top, poverty near the top, and a law that says 75% of both houses in the state legislature must approve a tax increase which leaves the state with a massive budget shortfall. Guess which party owns the governorship and both houses of the state legislature? And as a side note anti-abortion protestors screaming murderer if you decline to sign their petitions.
21
The concept of "free trade" or just international trade as envisaged before globalization really happened is also an incipient zombie idea. Things have just not worked the way the experts thought they would and of course they refuse to admit error. This piece details some of the ways that trade went wrong:
https://washingtonmonthly.com/magazine/junejulyaug-2016/free-trade-is-dead/
2
OK, I'm confused. You say, "as a matter of arithmetic, a country that attracts more inward investment from foreigners than it invests abroad must run a trade deficit." But if net investment is BY foreigners OF domestic assets, isn't that a SURPLUS, because cash is coming in and ownership of assets is going out?
2
Someone buying our assets is not trade. The trade came earlier when they amassed the dollars they are using for the asset purchase. When foreigners buy our debt we owe them money plus interest. Eventually it is possible that the service on this debt will exceed our ability to produce and our entire budget will be allocated to this non-trade sector.
4
Here's one thing we know about globalization: most Americans have not been winners because of it. It can't have improved GDP growth much, since economists talk about "secular stagnation". The current relatively good performance should have been reached at a much earlier stage in the recovery - Krugman still talks about the need for fiscal stimulation (not the phony Trumpian infrastructure variety). Wage growth is still poor - also not what it should be in this kind of economy. Krugman and other globalization apologists continue to evade the stark fact that it has not benefited lower-income Americans. Many of those in question are well aware of that fact, and this was undoubtedly a factor in the election of Trump.
Trump's blunders could be an opportunity for Democrats and liberals in general- why not propose trade policies that could really benefit American workers? Instead they are an occasion for most opinion writers and reporters in the media to try to suppress any objections to the way trade is carried on for the benefit of corporate profits. This is not likely to be a winning approach in the upcoming elections.
8
Back in a century long long ago, I was a "buy side" guy who had the benefit (if that's the right word) of the opinions of "sell side" analysts about the economic and financial market effects of government policies. Kudlow and Malpass were a team at Bear Stearns (now failed), a tag team of propagandists posing as economists who could be relied upon to provide 'analysis' that invariably appealed to the prejudices of the money manager b-school set who had taken Econ 101 and figured they had it down pat. Often wrong, never in doubt -- we should give credit, where it is due, for consistency. And endurance.
6
So there is nothing good in any of this for the US? We should run up huge trade deficits with China, let them take our intellectual property, and go after whatever industry they chose and undermine it? Having had to deal with Chinese dumping for years, it is refreshing that we are finally negotiating. I think Krugman loses credibility because everything is negative, he cannot find one positive, not even trying to deal with intellectual property theft, so he comes across as partisan as anyone on the right.
14
You make good points. Krugman asserts that trade deficits are a sign of strength and that imports & exports somehow constitute “investments.” If that’s the prevailing school of “thought” these days, my “investment” in a German car is good for all of us.
5
Is China at fault for the “Chinese dumping”, or the greed of the corporate beast in the board rooms and the Wall Street casino croupiers that enable the Chinese dumping.
Who is at the negotiating table that can speak to Trump lackeys with a straight face?
Trump showed his hand with tha Canadian P.M. in his ignorance of trade.
Time to stop being a Trump apologist and face the reality of things-What comes out of the Trump administration can be used as fertilizer, a nod it is not top shelf fertilizer.
3
"So there is nothing good in any of this for the US? We should run up huge trade deficits with China, let them take our intellectual property, and go after whatever industry they chose and undermine it? Having had to deal with Chinese dumping for years, it is refreshing that we are finally negotiating."
China is not mentioned once in Dr. Krugman's editorial, nor is intellectual property theft. How does a response that is so completely off topic get selected as "Times Pick?"
2
The reason faith in these crackpot ideas has been able to survive despite clear evidence to the contrary is that the mainstream media for years refused to debunk these claims. The media rarely made it clear that Saint Reagan nearly tripled our national debt. Then in the early nineties media obsessed about the debt (remember the debt clock) but clammed up when the Clinton surplus began paying it down. When Bush ran on blowing that surplus with tax cuts while Gore favored continuing to pay down the debt, the media decided to have fun mocking Gore ("lawk box) and praising Bush as a regular guy who would be more fun to have a beer with.
224
Theodora, we are lucky Gore did not continue to pay down the debt. Clinton paid down the debt 9% and all 6 times we paid down the debt 10% or more, we fell into a terrible depression. Here is the history:
The federal government has balanced the budget, eliminated deficits for more than three years, and paid down the debt more than 10% in just six periods since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, and 1920-30. The debt was paid down 29%. 100%, 59%, 27%, 57%, and 38% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
Of course, since the Bush deficits were mostly less than our trade deficit, money still was sucked out of the private sector so eventually in 2008 we paid the price.
Never understood that one. I didn't want to have a beer with W, though I think he would be a jovial host -- I would far prefer a martini with Al Gore. There would be much better conversation. The people who preferred a beer with Bush are probably also people I wouldn't've wanted to have a beer with. So call me an elite snob!
Germany is known for manufacturing.
They have faced the same globalization we have.
They have better education for the working class, train people for trades and for high-tech manufacturing.
After 35 years of trickle-down Reaganomics, we got an opioid crisis.
125
Not to mention universal health care and free university including medical school (!).
35 years after the New Deal America was humming along; building a solid middle class, highways and sending men to the moon.
35 years after Reagan and we can't fill our pot holes. Or build bridges that stay up.
1
The only flaw in Dr. Krugman's reasoning is that transnational capitalists have become so powerful that they can reward these zombie ideas when republicans are in office, or alternatively, punish democrats when they they're elected and try to institute rational policies, making it a self-fulfilling prophecy.
How much of our current prosperity is due to the rational policies instituted by the Obama administration? Why did economic investment jump when Trump was elected even though there was not much substantial change? Why do deficits no longer matter to republicans?
The problem with zombie ideas is that they're wrong, and will therefore eventually fail. This won't bother transnational capitalists, whose worth is measured in real property owned, rather than the fluctuating value of a currency.
6
This pick brings out the cynic in me. Kudlow. Another guy on tv. One who talks awfully loud. He's 70 years old. He and Trump have that in common.
And he's not an economist.
Kudlow wrote off the Great Recession as a mild correction. I remember it well. He's wrong more than he's right. They have that in common as well.
20
I would love to become an expatriate and move to Scotland. There are no guns in that country. Even the police don't carry guns. They have universal health care. The Scots are far more liberal than Americans---there is little racism or homophobia. They're not hung up on religion. And it is the most beautiful country in the world. But I can't go because the dollar is approximately 40% weaker than the pound, so I would lose 2/5 of my purchasing power because of the exchange rate. My pension and my investments are in dollars. In the old days Americans went to Europe to get bargains. Now it's the other way around.
4
I love Paul. I really do. But he's approaching Trump & Team Trump trying to make arguments of fact & logic. They depend on pixie dust & fits of pique that refuse to use the usual intellectual toolbox.
Supply side & protectionism are square pegs attempting to fit into round holes. Neither works alone and you can't put them together successfully.
Working economic theory is never their point. Passing more income to the 1% is where they focus. On that they've been successful beyond their wildest dreams.
I got into a Twitter argument with a nice economist trying to defend his supply side friend. His blog post was not political he wrote after I attacked a particularly egregious argument that buybacks do no harm.
Until the left develops a spine to actually fight the destruction they've done to an entire generation of middle class folks we deserve what we get. Mitt Romney is a walking example of the point I"m making. Bain made a very few folks very rich and millions of hard working folks poor. He's now hailed as a great statesmen. Paul Ryan is the same. He looks normal but underneath the buttoned down exterior is a 1% thief for the modern robber barons.
10
A young Paul Ryan read Ayn(rhymes with swine) Rand's weird novels and thought to himself "That's the way to make a fortune! Steal it from the tax paying people and while sermonizing about personal responsibility and blaming those who are armed for their helplessness distribute it to yourself and a few rich cronies".
Et voila!
Cutting taxes on the rich will now allow many more people to buy that second yacht, remodel their third home, fill that 8 car garage, and donate to their children's private school. That creates jobs for the rest of us.
And if we keep cutting back laws and regulation and enforcement, they can "earn" even more obscene income.
7
It's very hard if not impossible to convince any person of the worth of an idea when their salary depends upon its opposite, no matter how nonsensical that is. For the last 38 years the GOP has pushed the idea that tax cuts, trickle down economics, as few worker protections as possible, as little government oversight as possible is the best way to run a country and, therefore the economy. And they keep on getting away with it because of greed and a lack of understanding on the part of most Americans when it comes to how taxes and government are supposed to work.
The idea is that we pay taxes to fund the government to do the things we cannot do on our own or to make certain standards nationwide. But we also believe in state and local government (which is why we had Jim Crow laws for so long) and having the states decide certain things for themselves.
George H. W. Bush was correct when he described Reagan's economic plans as voodoo economics. Too bad he discontinued that description when he was selected to be Reagan's running mate. The plan started then, to starve the government, has reverberated down through the decades and led directly to the position we're in today: an ignorant president and a Congress that refuse to spend money where it's needed and do not understand (or care) that their actions can destroy our economy and the lives of millions of Americans.
Pass the hypocritical representatives and president a helping of real poverty, not rich poverty.
29
Professor you’re right in trade, and Trump is clueless there,
But you’re got your own set of zombie ideas that cling to. Such as that higher top marginal tax rates in the post-war period, or booming Clinton years, are evidence that higher taxes are fine.
Both have obvious explanations. The US was the only fully functioning industrial economy in the former, and the cuts and subsequent innovation from the 80’s led to the tech boom in the 90’s. Everyone did well in the 90’s, not just the US, from that boom. And every leader, not just Clinton, took credit in their own country.
3
The R's predicted disaster as a result the Clinton tax increases. This did not happen. That's one of the points of the column.
Pass the popcorn. Exactly. Having watched a slew of new classical economic theories (all wildly applauded by twits like Malpass and Kudlow) produce the worst crash for nearly 80 years it increasingly looks as if there could be an encore.
19
In my mind the #1 economic problem we have is Income/Wealth Inequality.
Fixing that (holistically, rationally, and scientifically - not punitively or with demagoguery) will immensely lift many things.
Probably the only "down side" would be that across time more than comfortably rich people may become "only" comfortably rich.
To explain this fully I'd have to be much more eloquent/articulate than I am and then require more space and time. So forget the underpinnings. I'll bottom line:
Scenario: working family of 4 (2 adults/2 children)
Setup 1: Graded Middle Class (MC) where Income 1 Almost, 2 Entry, 3 Solid, 4 Very Solid, Upper 5, Etc.
Setup 2: Worker Points Based on Skill, Education, Profession. Earner Points 50 Semi-Skilled; 100 Highly Skilled; 200 Professional; 300 Specialty Professional. Note 2 Full-time Semi-Skilled give 100 Points; Combos allowed.
View 1: MC Level achieved with average GDP income.
Eisenhower 6.67
Kennedy /Johnson 6.68
Nixon/Ford 4.56
Carter 3.15
Reagan 2.53
Bush 1 2.39
Clinton 2.22
Bush 2 2.01
Obama 1.84
View 2: Earner Points to Achieve MC Level 4
Eisenhower 120
Kennedy /Johnson 120
Nixon/Ford 170
Carter 230
Reagan 270
Bush 1 280
Clinton 290
Bush 2 310
Obama 330
View 3: Minimum Wage of $20/Hour @ 40 Hours MC Level Today
About 1.54
Conclusion: Technology/Knowledge requires we enhance all levels of Education; Minimum Income to give more a fighting chance. None of this achieved with tax cuts, tariffs, or destroying EPA/Ed Dept!
9
Excellent idea. But you're forgetting about reversing the decades-long erosion of legal protections for labor unions.
Is Krugman trying to get Trump re-elected? One can usually applaud Krugman’s debunking of trickle down economics, and the accepted wisdom of Wall Street/Republican economics. But on International Trade Krugman please go see Free Trade in Action.... in Asia , NAFTA , EU (the protectionist bloc eager to block Brexit Britain access). Limitless Tariffs, quotas, licences, certificates, double standards, investment embargos, compelled joint ventures, forced transfer of Intellectual property. Selective Tax breaks for the chosen few, ad
finitum. If Democrats remain in denial on phony free trade and the link to offshoring of jobs then they are gifting votes to Trump.
5
@Dactta Bangkok
The spaghetti bowl nature of free trade means that there are at least as many winners in the US as losers, in fact probably many more. This is what makes it difficult to build a majority for protection. In the case of steel/aluminum the fact is many more Americans build and make things with them than manufacture them. Reality.
8
Republican use the belief in the benefits of lower taxes to justify lower taxes. I suspect that they do not really believe there will be the benefits that are claimed, they simply want to pay less in taxes and need a justification to sell it to the public. This is like deficits. Deficits are bad when Democrats control Congress. The evil of deficits is a selling point in elections. It is not a core ro sincere belief. In fact, deficits are not relevant when Republicans control Congress.
23
A new CBO study shows that the income of the top quintile was larger than the income of the bottom four quintiles combined in 2014. Paul, can you as a Nobel Laureate explain why this is a sign of bad policy, and not simply that one out of five Americans works as hard or contributes as much as four others? Is it that trickle-down doesn't work? Or that we live in a winner-takes-all society? Or that taxes and wages are too low? Or that most capital gains accrue to only a few? Can you bring some progressive clarity to the CBO report? Otherwise, zombies will call it more proof of the Pareto ratio... evidence that the population naturally splits into 20% morlocks and 80% eloi.
12
i'm not a Nobel Laureate in econ, but i did major in it, and i pay some attention to complex reality, so let me try to explain the findings of the study you cite.
First, and maybe most important, income is hardly a reliable, or for that matter, a valid measurement of true productivity. That CEO compensation has zoomed to many times that of the average corporate worker shows the folly of that proxy. Second, both "trickle-down" and the preponderance of the zero-sum "winner-takes-all" ethic in America are evidence of political economic societal sickness. Low taxes and wages (relatively speaking) are the result of both ridiculous beliefs. That the captains of industry and their syncophants can't see what Henry Ford saw, that he needed to make sure that his workers could afford to buy his products in order to be successful, is the summary for clarity.
1
The opposite of a zombie idea is an idea that economists refuse to accept despite its obvious merits. One such idea is peak oil. While economists and the rest of the world have largely forgotten this “false” notion, those in the energy business are acutely aware of it. No correlation is stronger than the link between economic growth and the oil supply. If oil prices go up our economy goes down. And despite what Cambridge Energy Associates would have us believe, oil is a finite resource. The faster you extract it, the faster it is gone. Perhaps Mr Krugman should have studied geology not economics.
2
Mr. Krugman is and always has been a strong advocate for renewable energy.
I agree Oil is finite. and as the price goes up the cost of all other items go up too.
My tax cut is mostly going to filling the cars so I can get to work...
Wife works too. The point being I will soon as will my son have to spend more on interest on loans, cost of goods, and someday increased taxes to pay for the debt we are creating today... Trump is creating a mess today and for the future... ugh
Not only Trump does not know that there is a conflict between his zombies but he also thinks that a strong dollar and trade surplus go hand in hand.
Not only as president "he don't need no education" but as a developer, he should understand that the tariffs he wants to impose to aluminum and steel will increase the cost of construction and the strong dollar will prevent foreign nationals to buy real estate. I guess he is not a good developer either. It was inheriting money and growing it through chapter 11s. The stock market will talk to him loud and clear.
19
Aurace: why do you think “ foreign nationals” ability to buy up our real estate is such a good idea, with all due respect it seems to be a primary reason for looming social unrest as native born people are no longer able to put a roof over their head or food on the table thanks to globalization, frenzied real estate speculation brought about by a complicit Fed and a weak dollar. We all know Wall Street loves it as you suggest, but what is good for a Wall Street has not worked out to well for the rest of us, no better example than in Miami where the booms and busts brought on by our manipulation of “free markets” have resulted in busts of legendary proportion.
2
Oh, btw, he used Japanese steel in his buildings.
Dr. Krugman's discussion of trade is as always spot on for both clarity and precision; the crucial issue remaining is why does DJT make such bizarre conclusions. Intellectual limitations and in-curiosity may play a role, but personal/corporate enrichment perhaps more so. The repayment of putative foreign debt maybe in non-USD, foreign hotel and other asset acquisition all cost less with increased USD valuation. Buying clothing produced for US sale from off-shore producers would cost less too. Higher USD value will decrease overall US incoming travel but given the Trump brand not much effect is likely at Trump properties - decreased overall occupation of all hotels may in fact drive downwards the operating costs of his hotels - again a good thing if you happen to own the Trump brand. A lower dollar is good on balance for exports and overal US economic performance, a higher dollar may favor DJT economic performance. Which outcome is likely to be favorably viewed through the selective lenses of DJT.
6
I recall a Doonesbury cartoon during the Reagan administration where the Doonesbury character has miniaturized himself and is walking around in Reagan's brain, a la Fantastic Voyage. He is behind Reagan's eye, and notes that the rose color he sees are glasses Reagan is wearing to reconcile tax cuts with increased defense spending. Sound familiar?
14
I fear that many readers will read a far too simplistic conclusion to your column. A strong ( and stable) currency is a very good thing. Currencies are "trade" after all. If a currency is debased, it is never a good ending. One should also acknowledge that any country that imports much finished goods, while exporting a commodity ( gas and oil) can't be prosperous. That is why Russia is a gas station masquerading as a country. Let's not follow them down that path.
4
The views of the neo-mercantilists and the neo-goldbugs are not completely opposite. They overlap in the area of tariffs: tariffs will reduce the trade deficit and are likely to cause the US dollar to strengthen.
The tragedy, of course, is that both of these things will lead to a zombie economy.
8
A weak dollar doesn’t mean a debased currency.
Conservatives always state that people will work harder to make more money right. So if I decrease your take home income wouldn't it follow under their logic that these same people will the work harder to replace that income. Thereby growing the economy not shrinking it.
4
NO!
Not as long as they can afford to run up household debt to the level of federal debt as was done in the first decade of the 21st century in the US.
1
Depends on why you decrease take home pay.
Work harder at what? More hours waiting on tables? More hours working retail at stores where nobody is buying anything. Thank you, Amazon and employers who work their employees to death where no one has time to shop anymore. The jobs aren't there even for people who want to work more. See what's happened to the 55-65 yo population or ask the 65-75 year olds who lost the last 10 years of their work lives in Bush's Great Recession.
1
Perfect question to put on the midterm for my international macro class: In the long term, is possible to simultaneously pursue policies which a) seek to strengthen the dollar, and b) improve trade balance? Justify your answer.
3
The wrong minded economic agenda for Trump and his minions is easily traced to the donor class that funds GOP electoral efforts, invests in think tanks to justify increasing donor wealth, and promotes economic individualism to limit government.
6
If high tariffs are the worse thing that you can do for an economy why is it that in the developing world the countries that have grown rapidly, including Japan, Korea and China, have done so behind high tariffs. I know that there are other countries that have also had high tariffs that have not grown quickly. Therefore what is the difference between these countries?
2
Larry Kudlow’s wish for a higher dollar will very likely come true, thanks to the tax cut and the twin deficits (google).
In order to fund the increase in the federal budget deficit caused by the tax cut, the Treasury will have to attract more dollars away from the foreign exchange markets. This will reduce the supply of dollars to the markets and, while the demand for dollars adjusts downwards, it will increase the price of the US dollar, strengthening it.
However, this will increase imports and reduce exports, increasing the trade deficit, tariffs notwithstanding.
3
Absolutely true assuming that foreigners are still keen to finance US deficits. If DJT goes ahead with tariffs on China, do you think they will still be willing to keep buying massive amounts of T-bills? If they don’t, who will?
3
In 1982, Ronald Reagan led the Congress to make the most profound restructuring of the tax code in our lifetimes. The result was a robust recovery, rebounding quickly from over 10 percent unemployment. He followed that up with more tax reform in 1986. And during the quarter century following the Reagan's steep tax cuts in 1982, the United States enjoyed its greatest prosperity ever. I know you want to give Bill Clinton the credit, but Clinton's $300 billon tax increase had negligible effects on the economy. In fact, a similar tax increase passed under George H.W. Bush, but both changes in the tax code were miniscule in the context of total GDP; we continued to operated under the fundamentals created by Reagan. During the 25 years following the 1982 tax cuts, we had only one very mild recession, and, as Reagan predicted, we grew our way out of deficits. Does Reagan deserve all the credit? Of course not. The prosperity was created in large part by increases in productivity that were the result of private sector innovations in information technology. However, those innovations were created in the context of a tax environment that encouraged more risk based on greater return, thanks to the tax reforms Reagan wrought. Compare Reagan's robust recovery to Obama's anemic recovery. Broad-based tax cuts work, targeted tax cuts or spending do not, because picking winners and losers fails to fully leverage the market.
14
Yep and since then every major city has a police department that openly does whatever it can to fleece the public because it simply doesn’t have enough money to operate otherwise. Our public schools are in a shambles as class sizes increase and teachers are paid less and less (taking inflation into account). We have a student loan crisis because again, college tuition even at state schools has inflated beyond imagination... again because they don’t have enough money. And then there’s our crumbling infastructure. So yeah, thanks Reagan.
39
Probably the biggest driver of the robust economy during the Reagan years was falling interest rates, not the tax cuts. Reagan took office at a time when interest rates had begun falling off record highs. As a valid comparison, look at the tepid effect that the Bush tax cuts had on the economy when interest rates were not a factor (they were low when he took office and remained low). And you forgot a couple of things. How about the enormous debt created by the Reagan tax cuts and the fact that Reagan agreed to several tax increases (as many as 12 according to some) to offset the debt his cuts created.
34
You forgot the computer and internet advances. This has caused a real advance in wealth, connectivity and efficiency in the entire world. The fundamental work in these areas was sponsored by the US government. Only when it was established did private firms enter these areas.
20
The problem is that the GOP formula works for them. They own both houses of Congress, The White House, and 3/4 of our state legislatures. Until their opponents discover and practice a policy that reverses this situation -- the one practiced now is not doing that -- things will remain as they are.
8
I love Prof. Krugman's writing and analyses. He makes complex concepts comprehensible, and his writing is terrific: always lucid and often humorous.
However, articles like this one should come with a warning -- not to be drinking anything while reading it! I literally LOL'd several times.
Thank you, Prof. Klugman, for explaining these economic concepts and the problems that the White House occupier is creating so clearly -- and for starting my day with laughter.
10
Yes! this was the best start to a paragraph I have read in weeks... "Still, they have Trump’s ear, because the rocks in their heads fit the holes in his..." Coffee spurt alert would have been helpful.
Reagan cut taxes resulting a huge increase in deficit / debt. It is the reason they put the debt clock in Manhattan. We got 16 Million jobs.
Clinton raised taxes and balanced the budget, zero deficit. We got 23 Million jobs, almost 50% more than Reagan.
W Bush took that balanced budget, zero deficit, gave us two “tax cuts for the job creators” and gave Obama a whopping $1.4 Trillion deficit. We got 3 Million jobs.
Obama gave us the “jobs killing Obama-care” and cut the deficit by almost 2/3 to $550 Billion. We got 11.5 Million jobs, almost 400% more than W Bush.
And 20 Million people got healthcare.
739
Thanks 'Independent'. Neat history lesson - says it all for me.
But as the song asks about powers-that-be - when will they ever learn ?
4
But if you ask a Trump/Republican supporter who gets his info from FOX and Breitbart, they would swear the numbers lie and that everyone did better under Reagan and Bush. That's the miracle of fake news.
5
You are too kind to Bush. You neglected to mention that at the end of his administration we were hemorrhaging jobs.
4
Maybe it's not so much bad ideas as goose stepping to Wall Street, the Koch brothers, Pharma, and the armaments industry. Unemployment and factual economic analysis are not on their radar. Only tax cuts get their attention,
and Congress and Trump have been quite obedient here.
There is plenty of historical precedent. Prior world leaders like Louis XVI and Czar Nicholas also surrounded themselves with sycophants, and their people paid terrible prices for it.
Keys to corporate and 1% rule are an ill educated and incurious population, kept that way by media companies whose missions is solely to sell products through advertising. An enlightened public is not in their interest.
What they forget is that unless our media companies awaken, things will continue to get worse. The ultimate result is today's Congress, exceeded in its mendacity only by the comical executive branch.
We like the Times, especially columnists like Krugman and Blow, but their silo is too small. Thinkers need to devise new and more responsible media companies. Bay Area Tech behaves like a branch of Wall Street, acting destructively while talking the talk. The disgraced Uber president was not an anomaly, and Zuckenberg and Bren give us no reasons to trust them.
Our best hope might be tech leaders who somehow, miraculously, discover their hearts. Having worked in that industry in its infancy, I'm not optimistic, but there is no other path to change.
8
My grandmother always said, "When Republicans are in office, get ready for bread lines." Looks like she's going to be right again.
65
Not "Get Ready for Breadlines" under Republicans, they are already here in the "Full Employment" economy. Ask anyone who works at a local food bank, it is getting worse.
Too many jobs pay so little (High rents to the investor class are also a factor) in the "25th Best Local Economy" in the country has over 60% of it's school children on "Free or Reduced Price Lunch" and our school system has to run a summer feeding program, or the Children literally won't eat.
3
Reminds me of Harry Truman's aphorism: "If you want to live like a Republican, vote Democratic!"
1
My grandfather told me Vote Democrat. You will be more prosperous. Republicans are just for the rich people. I though he was wrong as a young man. Now a grandfather myself I have found out he was right.
Thanks, Mr. Krugman.
You're a voice of sanity--a commodity that is in very short supply these days.
17
The GOP has given Trump ample time to prove that he can straighten himself out, and he has just gotten progressively worse. Republicans realize that Pence can do the same things for them, by way of promoting supply-side trickle down for the wealthy and working to kill the ACA, and the social safety net generally, while not being such an overt threat to national security.
When Mueller hands down his findings, the GOP will hang Trump out to dry, but they will wait until after the elections. Democrats have a good chance in November, and for the next two years after that they need to prove to the country that they deserve to recapture the presidency. In the end, the future of America will rest with how well they get that job done.
7
The Canadian VAT is called the Goods and Services Tax or "GST". NAFTA trade avoids GST on trade between US and Canadian entities. And even when GST is charged to a final customer on trade imported from the US into Canada, it is the same GST that a Canadian company wuld need to collect from a final customer.
The VAT argument used by US President Trump is bogus. Any discussion on GST with trade that may arise should be placed in context of a recoverable sales tax. The "Value-added" nature of VAT that is net tax paid by the final seller in a chained transaction is citizen-blind. The playing field is level. The key requirement remains: US/Canada Trade needs to conform to sourcing limits to avoid having China or other aggressive trader exporting parts into the USA/Canada indirectly by embedding the good or service into a North American part to do an end-run of tariffs and use NAFTA as a cloak to evade tax. The global supply-chain is sufficiently resilient to document parts/services sourcing assurance that excise tax and trade monitors rely. Information technology, including RFRID scanners that read imported parts codes effectively mitigate import=export cheating. Any evasion that succeeds requires major collusion and likely immaterial in the greater scheme of global trade.
5
At $350 billion a year, we have handed over $5 trillion of our wealth to China, Japan and other mercantilist countries. Sure, we can borrow from them or sell them our assets, but the theory of comparative advantage that underpins free trade is not intended to work this way.
This is one instance where the "Washington Consensus" and Paul Krugman are just wrong.
14
This is a product, in large part, of being the worlds reserve currency. To maintain that status as the world gets richer there need to be more dollars out there - so the US has to run a trade deficit to provide that growing pool of dollars and dollar denominated assets.
Unless you want America to loose the influence, and the vulnerability that comes with it? China has entwined their fate with ours for good or ill - neither side wants to cause a $5 Trillion problem.
So you see how Trade promotes peace, even (or especially) when there are deficits between countries...
2
... tariffs are not the remedy.... nor are tax cuts.
So, it bears repeating; investments in infrastructure, education, workforce training, among other things, are essential parts of a well constructed response to our ills.
2
Actually we didn't "hand"any money to China, we bought stuff from them, they have some dollars, we have some stuff. What's that you say? Their stuff is junk? Well the folks who bought it at Walmart didn't think so. Nobody forced them to buy China's junk. We do borrow from them, at very low interest rates.
2
Sorry, can't stomach popcorn at the moment. There's nothing entertaining in the prospect of zombie combat, not when the whole country is becoming collateral damage.
9
Kudlow loves lower taxes and strong dollar no matter what the economic situation.
4
We have a president willing to burn down any institution to protect or advance himself. The failure of so many to recognize that Trump is all about "me, myself and I" is extremely disconcerting. This is not a man putting nation or world above his personal interests. Whether destroying the FBI to protect his reputation or our economy to benefit his real estate purchases abroad we have a president seeking "advantage Trump." Lincoln noted: "I have been driven many times upon my knees by the overwhelming conviction that I had nowhere else to go. My own wisdom and that of all about me seemed insufficient for that day." There is no such humility to be found with Trump. He is guided by what benefits himself. There is no need for wisdom that might benefit our nation or planet. We are being conned daily.
8
So just say it then, the economy goes south, and with it what little remains of tens of millions of people's lives. Good bye retirement pensions, education, the dream of owning a home. Does anyone think that any of these people, most of all Trump, could figure out what to do in a 2008 redux? No, of course they can't. And since all of the regulation put in place to prevent a repeat have just been stripped away by the Republican Congress — what's to prevent a really big recession now? And the Trade War is just the flame to start the fire. Popcorn in deed, pass the Hoover blankets (that's 1920's slang for newspapers)
16
Your words inspire me to ask, can zombie ideas for one term do a lot of damage to the economy? I think not. The real world must respond to Nature and ideas that change the human condition for better or worse. I personally lean toward the challenge of evolving away from fossil fuels to new energy sources.
This column brings to mind, the conclusions of John Maynard Keynes to his opus, The General Theory of Employment, Interest and Money, published, February, 1936
"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas. Not, indeed, immediately, but after a certain interval; for in the field of economic and political philosophy there are not many who are influenced by new theories after they are twenty-five or thirty years of age, so that the ideas which civil servants and politicians and even agitators apply to current events are not likely to be the newest. But, soon or late, it is ideas, not vested interests, which are dangerous for good or evil.”
5
Why mention only the Clinton administration and leave out Obama in discussing tax increases, mostly on the rich, and economic growth? You have often identified how the Medicare increases and the restoration of the top brackets have had a substantial impact on upper-income taxes. And the economy... has grown steadily since the increases. Similarly, Jerry Brown increased taxes on the rich in California, which is doing quite well. Could it be that public investment is more productive than providing the wealthy more money to buy financial assets such as derivatives and buy back their stock? Kinda the opposite of Kudlow.
23
Tax cuts DO work. To produce economic growth. But only if they are accompanied by decreases in government spending.
Unfortunately, Trump did not propose that.
We need to cut the Entitlement programs. We need to cut Social Security. We need to Means Test, both Social Security and Medicare. Rich People should not receive anything from SS or Medicare. These programs should be tailored to the truly destitute. These are Welfare Programs.
But if we did this, it would belie this "fiction" that "we all paid into it," and we are all getting "back what we paid." Like it is some real insurance program and not the Ponzi scheme that it is. Current payers paying for current retirees.
Well, as Alan Simpson said, today on CNBC the "Simple Math" will catch up with these Politicos, sooner rather than later. These "entitlements" will never be paid.
Or rather, they will be paid. But with such inflated $dollars, because the government is paying the benefits with printed $$$, that the $ will not buy, anything.
Governments can create printed dollars; they can't create Real Stuff.
re: Tax cuts DO work. To produce economic growth. But only if they are accompanied by decreases in government spending.
___________________________
Failed in Kansas. Seems your argument which has no successful example of your religion makes Krugman's point about invincible ignorance.
30
Social Security is not paid for by government spending, and is therefore not part of the real budget. The fact that many people, you included, do not understand how SS works, is alarming. But don't let that stop you from destroying the social safety net.
1
The average person collects their entire SS contribution within four years of claiming benefits. All the while, this is taking over 12% of the domestic payroll out of circulation.
1
If Paul’s assessment of Mr. Trump’s economic advisors is correct interesting to contrast Pres. Xi Jinping’s recent additions of economic advisors both of whom educated in the USA.
Liu He studied at Seton Hall University and Harvard and his new assistant Yi Gang earned a doctorate in economics at the University of Illinois at Urbana-Champaign and then taught economics at Indiana University in Indianapolis for eight years.
https://www.nytimes.com/2018/03/18/business/china-central-bank-yi-gang.html
And no one rises through the system without credits earned at other post along the way; but ideology there too has a role to play.
3
Tired of all the economic voodoo. Capitalism is operating in full : corporations are singing, helped by politicians swinging their axe at taxes. The republican notion of "less government, lower taxes" can only lead to where we stand now.....At the beginning of a cataclysmic decline led by corruption and greed that is not only evident among politicians and the white house, but in corporate boardrooms (see GE, Theranos, FB?) ... I wonder if Larry Kudlow has any economic ideas that can assist NYC subway riders getting to work on time (without resorting to UBER).
8
You don't need Larry's help since its plain to see: eliminate all the top heavy bureaucrats, eliminate the unions (MTA and construction) and spend the windfall wisely.
When the economy collapses, our Republican friends will just conclude that it is Hillary's fault and that salvation requires an authoritarian regime that will protect our job creators from the mob and allows the final triumph of pure capitalism over social responsibility.
Can anyone hear the fascist boots thumping down our streets?
The current ideas from Trump would do tariffs the wrong way for the wrong reasons.
However, total free trade is a problem too. It allows offshoring of pollution and dangerous labor conditions, and more.
Tariffs could be done differently, designed to offset specific extra expenses for American manufacturers, such as pollution controls, and health and safety standards.
"All tariffs are bad" is a zombie idea too. We can and should be more sophisticated about it.
6
“(…a country that attracts more inward investment from foreigners than it invests abroad must run a trade deficit).”
China has a surplus from our deficit and wishes to invest in the US using FDI to acquire assets eventually yielding income.
That is beneficial for US if counting GDP increase as positive as the FDI inflow is a US export. Most countries cheer foreign investment but the US worries about National Security when seeing Chinese interest and raise the issue even with the sale of the Waldorf – how curious.
1
Mr. Krugman, will you never wake up? For Mr.Trump and the Republicans, it is not about economic ideas. It is not about beliefs. It is not about theory. It is about cash. About what puts money in the pockets of the powerful more quickly. It's about slogans that manipulate voters. It's about seizing power and assets, not about guiding the economy. If someone can come up with a theory to assert that increasing their wealth will benefit the public from whom the wealth is stolen, then they will pay that person handsomely. Debating them as if they were acting in good faith only helps them.
62
@Martin
I disagree with your thesis, it is about rule and power, about subjugation of the populace, money is only secondary. Just as with the Third Reich, and Il Duce, it was not money, although some like the Krupps and Messerschmidt's became wealthy, it was domination of the country It allowed monstrous men to control the daily lives of the people under them. They had huge victorious parades for themselves, they had a core of followers who would attack any detractors on command, the ensconced themselves in lavish quarters, and they adulterated with mistresses and prostitutes.
Now does any of that sound familiar, if not, I suggest you read the history of Fascism and Nazism. just to refresh your memory, or if you are not as old as many of us who remember such things.
Google the Times editorial "Il Duce Trump," it should be required reading for all citizens.
5
@David Underwood
I agree with you up to the point that we're discussing Trump the individual. God knows how material greed and personal power rank against each other in his personal values, or if they're even distinguishable. But Trump and a few individuals aside, IMO the Republican party over the last 30 years has coalesced into an almost uniquely single-minded entity, whose motivation is greed. To the degree they address "other" issues, such as abortion, they use those issues as a political means to a material end, and they aim their repressions moreover, straight at the poor.
One of the reasons to want a strong dollar is if you are in a business in which you buy foreign stuff, instead of selling our stuff to them. Sounds like real estate to me. Want to build a hotel in Singapore? A strong dollar will help. Who wants to build hotels in foreign countries? Anyone we know?
74
“Faith in this doctrine [that cutting taxes on the rich reliably produces economic miracles, and conversely that raising taxes on the rich is a recipe for disaster] survived the boom that followed Bill Clinton’s tax hikes, the lackluster recovery and eventual catastrophe that followed George W. Bush’s tax cuts, the debacle in Kansas, and more.”
Faith? It is not faith. It is an ongoing ruse by Republican politicians and their puppet-masters in the 1% to keep the wealth flowing upward from the 99%. Their wealth is shrewdly utilized and invested to maintain power and thus divert ever more wealth upward, through divisive messaging, false messaging, gerrymandered districts, voter suppression, etc.
39
Without countervailing measures it is the nature of capitalism and capitalists to use the money and power they accumulate to use government for their own increasing enrichment etc. (Piketty). This is true regardless of the type of government that exists. Furthermore, as corporations become global they increasingly escape the ability of the nation state to rein in their destructive power. Most people, including legislators here, are way too focused on the short term to worry about or do anything about the problems of the global corporation as it more and more tells governments what to do or simply ignores a lot of what they do that runs negatively to their profit collections.
Prof Krugman, please do post a simple note on how the accounting identity that shows trade deficits must be matched by financial outflows- i dont think it is an easy concept to grasp
4
It's inflows. Basically deficit means you are net sending currency abroad in exchange for the goods/services. Foreigners have to use that currency to either buy goods/services from you which would balance the deficit, or to buy up your financial assets.
1
The accounting rules that nations agree to follow are OECD National Accounting rules. The Balance of Payments reconciliation includes trade surplus/deficits in investment flows - direct and indirect (or 'portfolio investments') investment as well as physical parts and intangible services that are denominated in terms of US dollars in real (inflation adjusted) or nominal (actual) prices. I apologize if professor Krugman would have preferred to present a more concise and definitive answer to your good question; I think he is being taxed by the exceptional flow of distorted economic theories weaponized by the Trump White House. The silver lining is that those of us that have graduated with economics majors at university are called to task and reconsider our understanding of economics and trade. Paul Krugman is a giant among professional economists, especially those who claim to have special expertise on trade economics.
5
Every thing you say here is fine. But, which solution do you propose for growing our economy? I don't think that our economy reached 3% growth in any of the Obama years ( I would have to check.) Neomercantilism seems to be a global trend, not restricted to the Trump's administration. It is important to propose a set of ideas now that the term elections are approaching so that democrats have a set of sound proposals to address the economic problems we face.
4
This is another GOP ruse - to measure an economy by the % of growth in one quarter or even a few years of a recovery.
Bush achieved up to 5% economic growth in some quarters.... but his policies increased public and private debt to a staggering degree, and eventually the economy collapsed.
Do you judge a pilot only by how high he flies a plane, or by whether or not he takes off and lands successfully while *not crashing the plane*?
3
I'm no economist, but Fortune points out that although there was never a 3% ANNUAL growth rate, there were many quarters when it was above 3%. They also point out that quarterly growth is not a good predictor of annual growth:
http://fortune.com/2017/08/30/donald-trump-springfield-mo-3-gdp/
Trickle-down / supply side economic theory is a form of modern day feudalism. Owners keeping as much as they choose, begrudgingly passing crumbs to their serfs. The serfs, in need of everything, welcome even a pittance more. I suppose this model is befitting for our Machiavellian POTUS.
18
The primary effect of the tax bill was NOT that it directly benefited the very wealthy by reducing their taxes and allowing them to keep more of what they’d earned, but that corporations would be taxed less. The hopes for “trickle-down” aren’t that at all, but focus on the Republican conviction that this tax treatment of corporations will cause them to grow, which will create demand for skills and bodies to help address the larger demand generated by an expanding economy; and that competition for skills and bodies will organically lift wages across the board and narrow wage inequality (there is a Texas ton more low-and-medium wage earners than there are high-earners).
Basically what we see happening – apparently, there are now more open jobs in America than there are officially “unemployed”, wages are going up as a result of the competition for bodies to fill them, and we’re seeing the long-term unemployed that have contributed so to our low labor participation rate RE-entering the job market to take higher-paying jobs. I can understand Paul’s concern, because if this pronounced trend continues into November, far from a Democratic “wave” election, we’re going to see Democrats crushed in the midterms.
In addition to this healthy news brought to us by Republicans and decidedly NOT Democrats, corporations now have less need for creative tax accountants, hopefully forcing practitioners into honest work.
But if zombies depended on eating politicians’ brains, they’d starve.
3
Actually, I’m one Republican who questions the value of a strong dollar. Dubya kept the value of the greenback artificially low, and we were outselling the Germans for steel for YEARS – in GERMANY. If you’re trying to bring back middle-class U.S. manufacturing jobs, a somewhat-weak dollar is immensely helpful. Just ask the Chinese. Traditional Republicans take note.
But I’m becoming concerned about some of our luminaries. It’s a disturbing sign of advancing age and its predictable effects that anything believed by those who disagree with you constitutes “invincible ignorance”.
3
So if tax cuts to the very very rich are just a side benefit of the recent tax bill (allowing them to keep more of what their mostly underpaid staff members have earned on their behalf) why did it need to happen at all? Why not just withhold that part of the tax cut or hand it over to the folks who could really use it- i.e., the working class? As it happens, Paul Ryan and his fellow supply-siders have already noted that the widening deficit is no laughing matter, and is reportedly considering cuts in SSA and Medicare yet again. And if he's the last person to get The Donald's ear we all know what will happen to Trump's promise that those programs are not to be touched. Think American workers will continue to cheer that whopping $25 per week in their paychecks when they see their parents scrounging for food and medicine?
76
Mr. Luettgen, corporations were already rolling in cash; now they just have more. Stock buybacks do not grow companies or grow the economy; they just make rich people richer. Companies grow when they have a reason to do so, i.e., when there is more demand for what they sell.
34
Pass the popcorn?
Paul, we're suffering here. All of us. Please at least tell us to eat cake, so it looks like you notice.
I dispute the obliviousness argument; this mostly mirrors your most excellent standing as someone who can cite his own opinions from decades ago. Yes, you're right. But no one thinks the emperor has clothes to begin with. Even the dullest political observers believe Trump acts for optics, not effects; conflicting opinions mean more colors in the palette.
I/we understand Trump's actions, particularly on trade, make things worse. The question for you is whether you can identify a policy that would have good optics and good effects but which he strenuously resists: that might indicate why he needs the optics in the first place.
6
" the “supply side” insistence that cutting taxes on the rich reliably produces economic miracles, and conversely that raising taxes on the rich is a recipe for disaster. "
I think that Dr. Krugman is being too generous with the Republicans in thinking that they really believe any of the supply side nonsense . It should be called for what it is - a mechanism by which money is borrowed from the Chinese and others and funneled to their wealthy donors. While the masses will be placated with a few dollars, the debt that remains will be theirs and their descendant's responsibility.
18
I agree that cutting taxes on the Rich is bad economics because the Rich spend less of their money and use the rest to speculate.
I agree that supply side is nonsense because businesses will nit invest unless they believe they will have more customers to buy the extra stuff they will produce, and thy know that they will NOT have more customers because the non-rich simply do not have enough money to buy more stuff.
I agree that we will borrow more money from the Chinese et al because that brings dollars back to the US where they can do some good.
BUT, I do not believe that the descendant of the masses will have to pay off the federal debt or even pay it down.
What about the enormous war debt the greatest generation left to the following generation? As a percentage of the economy that debt was almost 50% LARGER than the debt today. What about that terrible burden?
Well, from 1946 to 1973, the GDP averaged a 3.8% growth and real median household income surged 74%. How did we do that? Did we pay down the debt?
NO! During that 27 year period the debt grew 75%. We invested in America. We grew the economy so that debt became insignificant.
On the other hand, we also had a big war debt after WWI. Then we balanced the budget for 10 years and reduced the debt by 38%, In October of 1929, it was only 16% of the GDP. AND THEN WHAT HAPPENED?
8
On the time scale of our descendants paying off the debt, it will be inflated away to a tiny fraction. It will never be paid in current dollars.
The pain would come from interest on the debt, which is more immediate, and dependent on all those many things that influence interest rates.
5
Actually, the debt will be paid, but not in the conventional sense.
Also, it will not be paid by our children or grandchildren, but by us.
In order to fund the increase in the federal budget deficit caused by the tax cut, the Treasury will have to attract more dollars away from the foreign exchange markets. This will reduce the supply of dollars to the markets and, while the demand for dollars adjusts downwards, it will increase the price of the US dollar,strengthening it.
However, this will increase imports and reduce exports, increasing the trade deficit, tariffs notwithstanding.
We will pay for the debt by:
• Losing our jobs
• Lowering our wages
• Working two or more jobs to make ends meet.
1
Most Americans have bought into the fact that our national deficit is our biggest problem. Now, with the tax cuts, we're being asked by the same people to look the other way for the time being while these cuts trickle down and create some sort of boon to our economy - some sort of miracle that paying down our debt could never do. I think Americans are confused but in the end, most Americans will vote for the more conservative approach - paying down our debt by increasing taxes on the wealthy who will never notice a change in their lifestyle by doing so.
8
Let's see what has happened ALL 6 times we have paid down the federal debt 10% or more:
The federal government has balanced the budget, eliminated deficits for more than three years, and paid down the debt more than 10% in just six periods since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, and 1920-30. The debt was paid down 29%. 100%, 59%, 27%, 57%, and 38% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929.
Still think it's a good idea, spunkychk?
13
An important column, for which I am grateful however worrisome.
4
https://www.washingtonpost.com/business/economy/trump-prepared-to-hit-ch...
Trump prepared to hit China with $60 billion in annual tariffs
[ So it goes. ]
2
I think the Republican position can be understood in very simple terms, and it has nothing to do with what makes the economy work best for the country as a whole. Wealthy donors support Republicans. Republicans implement tax cuts for the very wealthy (their donors). Repeat ad nauseum. The tax cuts are the Republican platform, as well as the party modus operandi, plain and simple. No one should be fooled by the pennies Republicans toss to the middle class that they so righteously claim to be helping.
237
Republicans will continue doing this as long as the American people keep falling for it.
"Why has Trump hired people with such conflicting notions about international economic policy? The answer, presumably, is that he doesn’t understand the issues well enough to realize that the conflict exists."
I'm not sure it is as simple as that. Trump may be ignorant, but with years of reality TV experience and decades of being a tabloid celebrity, he knows how to work his audience. His audience is interested economic nostalgia: coal mines, steel plants, and more jobs with hard hats. These are images that Trump used to sell himself in 2016, and which he still sees as a key to securing support among his supporters. It's no surprise that zombie ideas dominate this administration. After all, supply side economics never went out of fashion with conservatives, and the neo-mercantilism plays nicely into a romantic image of a time when the whole world drove Fords and Chevies. How disconnected these ideas may be from reality is of little consequence to Trump. After all, whatever happens, Trump won't be footing the bill from the fall out.
14
Another reason Trump may be hiring people with conflicting notions is that it will force We The People to choose between the zombies. We fight, the press sells the news, and Trump gets whichever zombies win out.
When you apply the Ayn-Randian lens all this makes sense. In the Randian view, one should focus on self-interest and altruism is bad. In that sense, tax cuts for the rich are, for the rich, the magic they are purported to be. Do nothing, and viola, my income goes up. Same for supply-side: do nothing, and my costs go down. Once you apply the self-serving Randian lens, these bozos haven't been wrong, they've been right. They don't look at anyone not like them, because those people (us) don't matter.
12
Malpass, Kudlow, Navarro, Mnuchin, Ross and Lighthizer. These are the giants of financial thought now implementing economic and trade policy for our nation. I guess Ivan Boesky, Jim Kramer and Chainsaw Al Dunlap were not available. Ugh.
i say "implementing" because they are apparently carrying out the brilliant policies of Donald Trump, a businessman so successful that US banks have refused to lend to him for years due to his loan defaults and bankruptcies, and who is responsible for such failed ventures as Trump University, Trump Steaks, Trump Airlines, Trump Ice, Trump Vodka, Trump's failed Atlantic City casinos, Trump Magazine, Trump Mortgage, GoTrump.com (travel site), Tour de Trump (bike race), the Trump Network (nutritional supplement scheme) and at least 15-20 failed Trump real estate projects.
Let's see all the great ideas coming out of this team: Punitive tariffs, immigration elimination (except for Norwegians) in the face of extremely low unemployment, the gold standard, ultra low taxes with high deficits, rolling back safety rules so we can do more off-shore oil drilling (except near Rick Scott's Florida), reopening coal mines and de-emphasizing alternative energy, and blowing up trade treaties like NAFTA and TPP.
The saddest thing about this post is that, except for the Boesky/Kramer/Dunlap joke, it is all entirely true.
105
Don't forget Trump Model Management.
Good point, but I don't view that as a business for Trump. I assumed it was his personal pre-internet version of Tinder.
1
The problem with zombie economics is that in the end we all get eaten alive. With a giant tax giveaway to the wealthy corporations and individuals in the hope that the zombie of "trickle down" will not kill us off as it almost did in 2008, the evisceration of the Dodd-Frank regulations on the big banks, and the imposition of tariffs on aluminum and steel with more to come, the zombies are out in force and they may kill the economy before they kill one another.
9
Being wrong in service to billionaires is not new. These wrong people aren't simply stupid. They're stupid for a reason. Dumb for the cause. Lying for $.
Billionaires who throw cash to elect an idiot like Trump, reality tv git who can play to the dumbest of the base, are not actually stupid. They're sneaky smart.
Mercer. Adelson. Koch. Childs. Putin and his posse of Ruskie oligarchs. Donnie is their idiot savant. And the real idiots love him.
I still have a foot of snow. My dog loves PK.
26
My understanding now is that on economics the president and assorted advisers are competing in offering up self-defeating policy ideas. The present attitudes towards China on economics strike me decidedly harmful for us, but the administration attitudes seem to be continually strengthening.
We need to work with China, not treat China as an adversary, but I have no idea how to get that point over...
So I worry.
7
Dr. Krugman,
What would happen if we expanded free trade to include intellectual efforts? We'd have shorten the duration of patents and copyrights, or even abandon them entirely, and broaden the entry paths to careers such as medicine. I'm from Detroit and frequently commute between there and my current home in North Carolina. I have lived through the death of the Rust Belt.
My life has unfolded in academic circles so I have had decades of free-trade arguments ringing in my ears. I long ago concluded that most of the professional class has trumpeted free trade for everyone but themselves. I suppose it's only human to do so, but it would be nice to find a certain measure of decency and care for others among our credentialed professionals. Trump has been the revenge for that lack of decency.
7
"Trump has been the revenge for that lack of decency."
Revenge on whom? It's not likely the "professional class" (whatever that is) that will pay the biggest price for the economic fallout for Trump's bunk ideas. Where will West Virginia be in 25 years if it continues to peg its fortunes to coal? Is Trump really doing Detroit auto workers a favor by a steel tariff? If Trump institutes an auto tariff, will that replace all the export markets Ford and Chevy lost to Toyota and Mitsubishi?
3
You focus on coal. I focus on what nonprofessional families have to pay for a trip to the doctor or for a prescription. These have nothing to do with Trump's bunk ideas. They have everything to do with why, today, Trump is in a position of power.
Do you think it is difficult to define the professional class? Given the trajectory of you comment, I believe you would have trouble defining it.
I read J. Kenneth Galbraith's Money: Whence It Came, Where It Went when it was published in 1975. I was ignorant of economics and thought that reading the book for understanding and instruction would help me to understand something that I didn't know a thing about. It didn't work. But I remembered one thing.
Professor Galbraith made the point that money is fluid; it is never, ever static. If I remember correctly, he wrote that a capitalist society benefits when the tension between capital and labor and goods and services is healthy. One nurtures the other; when one sector is weak, the others work in tandem, like a well-oiled machine. The problem was that monetary policies then were determined by bipartisanship. No such thing exists today on Capitol Hill.
I remembered, with sudden sharpness, Professor Galbraith's book after Ronald Reagan assumed office. The trickle-down bait-and-switch worked so well because gullible Americans wanted to believe that lower taxes on the wealthy would result, magically, in stardust for them. They never linked the fraudulent scheme with a lessening in earning power because, under Reagan, unions were the hard right's enemy--even more so than affirmative action programs. They could wait; handcuff the working class and feed their resentment of minorities, all the while being fleeced by "trickle-down."
Republicans have worked to increase the tension between the elements of finance and government and labor to the breaking point. We've reached it.
313
In the 1960s, as an economics student at the University of Minnesota, I heard a talk by Galbraith. He said that it is the job of government to put a human face on capitalism. I have always remembered this. Over the past 40 years, government has failed to do that job.
21
And the Reagan Democrats swarmed to this phony like flies to a rotting carcass, weakening the Democrat party, while supporting the guy who loved taking a wrecking ball to unions.
Every time I read about how the Democrats deserted white working class folks I want to tear out my hair in frustration. THEY deserted the Democrats, who then turned to the environment people and other like minded "elites" for their support. But the intelligent people and true fiscal conservatives were driven out by the fiscally disastrous Reagan Republicans so the timing was right.
5
Your analysis is of course right. But I don't think we've "reached it". People are not sufficiently outraged by Trump's policies of killing health care and lower taxes for the well-to-do.
There is a lot of outrage. But much of it on the left is aimed at Trump's severe personal failings or Mexicans or you-name-it. The right think the problem is immigration and the coastal elite's snobbery. I think of that and think, well, close. You're right it's someone who is wealthy and you're right someones in other countries are getting your jobs as the CEO's export, export, export jobs. But, still, you've missed and it's no accident that you missed. Thanks, Fox News!
1
Rumps knowledge of economics is shaped by his real estate dealings. It has been a series of getting people to invest in one of his deals, several of which have turned out to be a swindle. Others have been money losing overpriced underfunded ones.
The example I like to use is the Chicago hotel on which he owes so much he could not pay the mortgage. He tried to get out of it, by blaming the bank for the recession, which caused prices on the condos and apartment so be well below a profitable sale. The bank was calling for a default, but he got funding from Detusche Bank which got the money from the Bank of Cyprus, thanks to his Russian friends which he denies knowing.
He has had to have help with his golf courses and clubs, he gets the money from people who believe they will profit from them. That is his economics, he inherited a small fortune and has been able to leverage it using debt.
Now he has a couple more sycophants to tell him what he wants to hear, and a following that can barely balance their personal checkbook. Demographics have shown that More than half of Americans — 56 percent, to be exact — have less than $1,000 combined in their checking and savings accounts.
Now we have Kudlow considered the worst of all possible economic advisors, but maybe that is good, when enough people in Rumps world are impoverished, they might just change their view of him.
84
Thank you, Paul. My hope, and maybe our only hope, is that Kudlow and Malpass will spend all their time and energy trying to fit their rocks into Trump's holes. And maybe that process will take the next three years and in the end we all survive these neo-zombie threats.
I have less than $1,000 combined in my checking and savings accounts. Being low income does not make you stupid. Now does it make you a Trump voter.
Just finished Dani Rodrik's excellent "Economic Rules", in which the Harvard economist expounds on the value and pitfalls of using models in economics. Although written in 2014, and despite the fact that it isn't his primary intent, the book logically and methodically invalidates most of the right's sacred economic tenets. Suffice it to say, in economics as in every other aspect, we are in deep trouble. I increasingly doubt the nation will survive this.
48
Thank you Dr Krugman.
What is Canada to do? The USA owns most of our economy and is clearly a great enemy of our economic well being.
What should Canada do ?
Should we cut ties as soon a possible and try to expand trade with countries and blocs who share our social and ethical values?
Should we hang on as long as possible to our economy dependant on our US relations hoping the adults regain control?
Should we buy and control all our vital industries and turn them over to government run corporations? Here in Quebec we have a history of extremely well run government corporations that outperform their private sector competition.
Is there anything we Canadians can feel optimistic about so we don't have to make dramatic economic changes?
120
Sign a mutual defence treaty with China, and start trading in currencies other than the US dollar. Mexico might also follow suit. This would certainly get the attention of whatever remaining "responsible adults" there are in DC.
6
cjl,
It is not apparent that we share Chinese government ethics any more that we share the ethics of your executive, legislatures or your majority GOP lawyer court. We want fair trade and neither the USA nor China are a good match for a country committed to Canadian rules and ethics and protection of workers and worker rights..
5
If Canada were to join with California, Oregon and Washington on the west, New York, New Jersey and New England on the East, and a few states like Minnesota in the middle, we could be a vibrant, economically successful and socially progressive nation.
8
The trumpistas have no understanding of economic principle. He tells them other countries are cheating by producing at lower costs than the U.S. can and stealing out jobs. Anyone who knows the history of the railroads here knows they were built with money from Western Europe, and that the profits went back there until some of the builders were able to get financing here. That was made possible by the government paying for the rails by the mile and generous land grants.
This current move to protectionism is to satisfy his followers who believe the foreigners will come here and open shop. Those followers are the same people who went to the low price leader a few years ago which put many of their local stores and manufacturers out of business, now they want the producers of the goods to return, but still expect them to sell at the low price. Good luck with that.
International trade depends on who id the most efficient at production and who returns the most on investment. A stronger dollar make it more expensive for the dollar using country, it means less dollars in circulation which can be deflation. Deflation is what happened in2008.
No matter anyone's wishes hopes and fears, you can not change the basic laws of economics. We saw the Soviet regime try it, we have seen a history of depressions caused by such actions. Bad money drives out good money, the law of supply and demand ifs fixed.
41
Hey, GOP. Really believe in trickle down ??? Move here, to Kansas. Get some first hand experience, in how to totally wreck a state, in a few short years. Embrace the suckage !!!!! Kansas, going back to the fifties, as quickly as possible. The 1850s. Seriously.
703
I have never lived in Kansas, but I know what you mean. I lived in a rural area that mostly elect conservative, Republican politicians. It is bizarre that many of these areas now blame "coastal elites" (whatever those are) for "leaving them behind." The local politicians consistently strip social services and public works in the name of low taxes, and favor more jails over more schools every time. It's neither an accident nor some kind of big city conspiracy these areas turn out the way they do.
256
Not just Kansas, also on display in Oklahoma and Louisiana.
Arkansas is working on it, four years or so before the tax cut obsession really begin to affect operations.
Louisiana is a self correcting problem, because the state will disappear when the "Blue" States quit sending federal dollars for Flood Protection.
19
We are doing the same thing here in Oklahoma. Going backwards. We have minority rule, also. 25% can control whether a tax increase happens or not and thanks to the Tea Party we will NEVER increase taxes. Minority Rule!!
14
It is always the darkest just before the dawn. In the long run, good ideas usually prevail.
9
One might hope that. But I wouldn't make a ten cent bet on it.
8
It's always darkest, when it's dark. And boy, is it dark.
Don't hold your breath. We're in for a long ride.
1
Stupidity is defined as doing the same thing over and over again and expecting different results. Add to this economic policy irrationality the fact that the Republicans nominated trump and more than a year later keep expecting him to act like a real resident. November cannot come soon enough.
52
There is nothing like failing upward. Donald Trump and his administration are the living embodiments of the Peter Principle. That or the Dunning Kruger effect.
32
Why not both?
4
"Why has Trump hired people with such conflicting notions about international economic policy?" Because they share the ability to ladle insincere praise, I'm guessing. If Trump thinks you think he's smart, than he thinks you are almost as smart.
But how stupid is this. Trump wants to punish the Chinese for polluting their air, water and soil while toiling at brutal factory jobs to produce us all the products we crave, many of them things that actually make us more productive.
And what do they get in return?.... American dollars. You'd think he'd be smart enough to realize that it's a lot easier to print some bills- mere paper symbols, than to produce something like a smart phone.
We've already proven after the crash of 07 that we can double our currency through quantitative easing without a meaningful depreciation of the dollar- the dollar is just too big to fail at this time- the rest of the world cannot afford it to.
When the housing bubble crashed on a mountain of bad debt, we made up most of our share without breaking a sweat while much of the rest of the world suffered the bulk of the consequences. And Americans are actually living in those homes.
Yessir, we Americans are sure suckers. Good thing that brainiac Trump has our backs!
95
If Kudlow and the other Zombie "economists" in the Trump adminstration get a hankering for brains, they better remember to pack a lunch. They sure aren't going to find any in this White House.
117
Made me smile
5
When you have a Nobel Prize in Economics, specifically related to your ideas on international trade and economic geography, you'd think someone in the White House might listen. Don't hold your breath, Paul . . . but the people are with you, and this time, we're voting—thank God.
418
There is no Nobel Prize in Economics.
There is the Swedish National Bank Prize in Memory of Alfred Nobel created in 1968. Nobel died in 1896.
1
That is a bit misleading.
“The Nobel Memorial Prize in Economic Sciences (officially Swedish: Sveriges riksbanks pris i ekonomisk vetenskap till Alfred Nobels minne, or the Swedish National Bank's Prize in Economic Sciences in Memory of Alfred Nobel), commonly referred to as the Nobel Prize in Economics,[2] is an award for outstanding contributions to the field of economics, and generally regarded as the most prestigious award for that field.”
4
The Republican “goal” is completely different from that of Paul Krugman.
Paul Krugman’s goal is to help the country and the American people.
The Republican goal is to enrich themselves and the 1% by “harvesting” the earnings of American people and essentially looting the country.
Republicans have been extremely successful in attaining their goals.
3
Trump appointed his cabinet with people straight from central casting. Each looked the part, which is how he described Rex Tillerson. Trump said Rex looked like how America's chief diplomat should. That's how Rex got the job.
Trump didn't so much appoint a cabinet as redecorate the Cabinet Room with potted plants. He chose actors who read their lines but understood he was the marquee star. Scene stealing was inadvisable. The lone exception to looking the part is AG Sessions, who looks like a librarian about to cry.
Those Trump fired didn't read the memo. They didn't understand that Cabinet members, like children, are seen and not heard. (Except to lavish Trump with praise.)
To get Trump's attention you need to fawn and flatter, like Peter Navarro, the new trade advisor, who said his job as an economist is to validate Trump's intuition(!). Just like Pompeo will be Trump's oxymoron of a diplomatic attack dog and Mnuchin who likes Trump's potty mouth tirades because they're "funny".
Trump's best and brightest know: You don't tug on Superman's cape. You don't spit into the wind. You don't pull the mask off that old lone ranger and it's survival of the lowest -- Cockroaches like sycophants will still be around when we're long gone.
121
If Trump's cabinet is to be describe as potted plants, they are only small potted plants. That's because where ever Trump lives or works, no kids or pets or furnishings or decor that can draw attention away from Trump are allowed. Large pictures of Trump are sometimes in the room, but that's it.
8
If Steve Mnuchin is so rich why is he fleecing the US Treasury?
3
You say: "The most important of these zombies is the “supply side” insistence that cutting taxes on the rich reliably produces economic miracles," This is actually a true statement if you are rich. Otherwise, this article is 100% on target.
22
'they have Trump’s ear, because the rocks in their heads fit the holes in his.' This is the kind of technical jargon I can understand!
485
That's a good one, and a first for me: never heard it before. And I thought I'd seen it all.
1
And the hole where their humanity used to be is now an echo chamber for Trump's bizarre and hateful tweets, statements, and actions.
6
Invincible Ignorance is their new motto
2
Given Trump's taste in furniture and furnishings, I'm surprised he has not added to his economic advisory team someone who wants to see a return to the gold standard. Then we would not only have a battle of the zombies, but we could have a battle of the glittering zombies!
57
A strong dollar is great if you want to buy stuff in other countries, which counts as US imports, but not so good if your job is to sell stuff made here in other countries, aka exports.
Maybe if you are a guy doing sketchy real estate deals around the world, a strong dollar goes further, but again that counts as imports. In fact, for a guy who pretends to care for American jobs and trade balances, Trump and his family do an awful lot of importing, from those stupidly long red ties to MAGA hats to fashion shoes and purses to workers for his resorts.
As for steel and aluminum tariffs, celebrating steel workers must have been surprised mid-toast to learn that Trump was planning all along to use them as bargaining chips for other unspecified non-steel things, like intellectual property protections. Sorry, steel workers, tariffs were a bad idea anyway.
We are learning Trump's negotiating style, first go "nuclear", then await a counter offer. My button is bigger than yours.
147
Larry Kudlow’s wish for a higher dollar will very likely come true, thanks to the tax cut and the twin deficits (google).
In order to fund the increase in the federal budget deficit caused by the tax cut, the Treasury will have to attract more dollars away from the foreign exchange markets. This will reduce the supply of dollars to the markets and, while the demand for dollars adjusts downwards, it will increase the price of the US dollar, strengthening it.
However, this will increase imports and reduce exports, increasing the trade deficit, tariffs notwithstanding.
1