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And the total risk they pose to the taxpayer far exceeds that of the big banks. Fannie and Freddie, in the final days of the year, are even said to be negotiating with the Treasury about greatly expanding the money available to them. Though the four are not in all the same businesses, they were caught in one of the same traps: They sold mortgage guarantees — in some cases to each other. Now when homeowners default, as they are doing in record numbers, these companies are covering the losses. Essentially, taxpayer money to these companies is being used partly...

The classic textbook example of the fallacy is a stadium full of seated people. When one person stands up, he gets a better view -- which he acquires at the expense of the people behind him. But if everyone stands up, then nobody's view is really improved. The fallacy is commonly committed when you conclude, after seeing that one person can live better at someone else's expense, that everyone can therefore live better at everyone else's expense. If a scheme relies on shifting costs to somebody else, then it will only work as long as someone exists to absorb the...

Illusions and bitternessDecember 16, 2009, 5:42 pm There’s enormous disappointment among progressives about the emerging health care bill — and rightly so. That said, even as it stands it would take a big step toward greater security for Americans and greater social justice; it would also save many lives over the decade ahead. That’s why progressive health policy wonks — the people who have campaigned for health reform for years — are almost all in favor of voting for the thing. The argument about the evil of the individual mandate is,as Jon Cohn says, all wrong. It was wrong during...

When I first began writing for The Times, I was naïve about many things. But my biggest misconception was this: I actually believed that influential people could be moved by evidence, that they would change their views if events completely refuted their beliefs. And to be fair, it does happen now and then. I’ve been highly critical of Alan Greenspan over the years (since long before it was fashionable), but give the former Fed chairman credit: he has admitted that he was wrong about the ability of financial markets to police themselves. But he’s a rare case. Just how rare...

... I don’t think many people grasp just how much job creation we need to climb out of the hole we’re in. You can’t just look at the eight million jobs that America has lost since the recession began, because the nation needs to keep adding jobs — more than 100,000 a month — to keep up with a growing population. And that means that we need really big job gains, month after month, if we want to see America return to anything that feels like full employment. How big? My back of the envelope calculation says that we need...

James Hansen is a great climate scientist. He was the first to warn about the climate crisis; I take what he says about coal, in particular, very seriously. Unfortunately, while I defer to him on all matters climate, today’s op-ed article suggests that he really hasn’t made any effort to understand the economics of emissions control. And that’s not a small matter, because he’s now engaged in a misguided crusade against cap and trade, which is — let’s face it — the only form of action against greenhouse gas emissions we have any chance of taking before catastrophe becomes inevitable.

I’ve never been fully committed to the notion that we’re going to have a “double dip” — that the economy will slide back into recession. But it has been clear for a while that it’s a serious possibility, for two reasons. First, a large part of the growth we’ve had has been driven by the stimulus — but the stimulus has already had its maximum impact on the growth of GDP, will hit its maximum impact on the level of GDP in the middle of next year, and then will begin to fade out. Second, the rise in manufacturing production...

And The Prize for the Worse Economist Goes To …Posted By Veronique de Rugy On December 2, 2009 @ 10:55 am In Economics, News, Politics | No Comments Well, it’s hard to choose these days. The resurgence of Keynesian economics shows how fragile and insecure economists are in general. They are, of course, important exceptions. But while I have a special dark place in my economist heart [1] for the New York Times‘ columnist Paul Krugamn, I think today the prize should to economist Mark Zandi, of Moody’s Economy.com.Zandi is constantly quoted in the media as the go-to-person on what...

Spoken like a man who probably hasn’t dug a ditch, wouldn’t dig a ditch, wouldn’t know a ditch if he hit one in the road. On This Week Sunday Nobel Prize winning economist Paul Krugman, one of the Sunday morning “wizards of smart” (thank you Rush Limbaugh) thinks he has a great idea to stimulate the economy: another WPA program. More infuriating than his cavalier attitude toward working Americans, or rather, out of work engineers, accountants, actuaries, manufacturers, etc, is his remarkable admission, right at the top that not only didn’t the first stimulus do the trick, but the second...

If you’re looking for a job right now, your prospects are terrible. There are six times as many Americans seeking work as there are job openings, and the average duration of unemployment — the time the average job-seeker has spent looking for work — is more than six months, the highest level since the 1930s. You might think, then, that doing something about the employment situation would be a top policy priority. But now that total financial collapse has been averted, all the urgency seems to have vanished from policy discussion, replaced by a strange passivity. There’s a pervasive sense...

Now, who said the following? "My prediction is that politicians will eventually be tempted to resolve the [fiscal] crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt. And as that temptation becomes obvious, interest rates will soar." Seems pretty reasonable to me. The surprising thing is that this was none other than Paul Krugman, the high priest of Keynesianism, writing back in March 2003. A year and a half later he was comparing the U.S. deficit with Argentina's (at a time when it was 4.5 percent of GDP). Has...

Best Buy, Krugman and the Carry Trade Submitted by Bruce Krasting on 11/29/2009 22:35 -0500 /snip On ABC’s "This Week" show there were some interesting thoughts from Paul Krugman. He remarked: “The cost of the deficit is only 1.2% real rate of interest at the Federal level.” This is economic speak. What Mr. Krugman was saying is that the Government can borrow long term at 3.2% and inflation is 2% so the real cost of debt is only 1.2%. In response, George Will made the point: "In ten years the interest cost of servicing the debt will go to $700...

I hereby forfeit my claim to a right-wing- conspiracy-decoder ring by offering two cheers for the Democrats. I congratulate them on their victory last Saturday night in the Senate, and while I can't quite wish them success on the course they are following, I'm beginning to make peace with the possibility that they'll win. For years, conservatives and liberals have flirted with the idea of disposing of the fool's errand of bipartisanship. Seeking compromise with partisans across the aisle is a recipe for getting nothing important done. For liberals, New York Times columnist Paul Krugman has been a leader of...

Paul Krugman Criticizes Reaganomics Here's how to defend it Lies, Damn Lies, and Statistics Krugman proves that a crafty, educated man can make statistics say whatever he wants them to. It's all about how you aggregate or disaggregate them and how wide or narrow an angle your snapshot captures.He showcases the blazing hot growth of the 50's and 60's that was the inevitable result of post-WW II rebuilding, and then criticizes Reagan because his growth didn't measure up to this impossible-to-maintain pace. So why does Fama (Eugene Fama, who trumpets the irrefutable success of Reaganomics) believe that something wonderful happened...

International travel by world leaders is mainly about making symbolic gestures. Nobody expects President Obama to come back from China with major new agreements, on economic policy or anything else. But let’s hope that when the cameras aren’t rolling Mr. Obama and his hosts engage in some frank talk about currency policy. For the problem of international trade imbalances is about to get substantially worse. And there’s a potentially ugly confrontation looming unless China mends its ways. Some background: Most of the world’s major currencies “float” against one another. That is, their relative values move up or down depending on...

"HE SEEMS TO SPEND 10 MINUTES writing his columns," observes Columbia Business School Professor Charles Calomiris, "and he makes up his facts as he goes along." The object of the professor's low opinion is [NYT] columnist Paul Krugman. Three years ago, I published a book called Econospinning, with several chapters devoted to Krugman's gaffes. I guess that prompted the Nobel committee to give him the prize, thereby magnifying his enormous influence. So perhaps a brief update on Krugmania is in order. No, his coverage isn't always misleading or misinformed. But let's say an expert in science were to tell me...

As I said in my previous post, that’s well into President Palin’s second term.

taylor s. nh October 26th, 2009 8:46 am I find this editorial incredible. The only people happy with the Massachusetts plan are the poor and the rich. All levels of the middle class are hurt by this plan. You know, I have voted Democrat all of my adult life; but I'm starting to believe what some conservatives say about the mission of the Democrat Party being to completely destroy the middle class. The bankers, industrialists, and corporate ceos all finnacially support the Democrat party, today, along with the great un-educated unwashed masses. Who is going to stand up for the...

The biggest question about the new Schumer-Carper health-care plan on Capitol Hill is the one nobody's asking. Why stop there? In case you missed it, Sens. Chuck Schumer, D-New York, and Tom Carper, D.-Delaware, are considering a proposal that may, at long last, break the logjam over health-care reform. They would create a public health insurer, the so-called "public option," but allow individual states to opt out if they wanted. In other words: the blue states can have public health insurance, and the red states can go without. You may wonder why it took so long to get here. If...

One lesson from the Great Depression is that you should never underestimate the destructive power of bad ideas. And some of the bad ideas that helped cause the Depression have, alas, proved all too durable: in modified form, they continue to influence economic debate today. What ideas am I talking about? The economic historian Peter Temin has argued that a key cause of the Depression was what he calls the “gold-standard mentality.” By this he means not just belief in the sacred importance of maintaining the gold value of one’s currency, but a set of associated attitudes: obsessive fear of...

...So what did we learn from this moment? For one thing, we learned that the modern conservative movement, which dominates the modern Republican Party, has the emotional maturity of a bratty 13-year-old... ...The key point is that ever since the Reagan years, the Republican Party has been dominated by radicals — ideologues and/or apparatchiks who, at a fundamental level, do not accept anyone else’s right to govern. Anyone surprised by the venomous, over-the-top opposition to Mr. Obama must have forgotten the Clinton years. Remember when Rush Limbaugh suggested that Hillary Clinton was a party to murder? When Newt Gingrich shut...

Investors are celebrating an incipient “recovery,” but the interventions that were responsible for it are sowing the seeds of a more violent contraction down the road. The problem, quite simply, is debt. We’ve accumulated record amounts, yet many economists tell us we need more. Leading the charge is Paul Krugman. He exhorts us to borrow our way back to prosperity, but he doesn’t acknowledge that his brand of Keynesian economics ignores the consequences of debt. If you look at a chart of America’s total debt burden, he’s leading us over a cliff. The problem begins with the flawed way Krugman...

Anyone who reads Paul Krugman, our latest "Nobel Prize-winning economist," knows that Krugman believes inflation is not a threat to the economy at all. He is a regular defender of large fiscal deficits and expansionary monetary policy, claiming that they are the road to salvation from our so-called deflationary spiral. (We'll ignore the fact that this "deflationary spiral" involves six straight months of price increases and regular complaints from Mr. Krugman himself about skyrocketing costs in health care.) In 2009, Krugman stated that "deficits saved the world." However, in 2003, when Alan Greenspan and the Bush administration were destroying this...

I got an email from a nice producer requesting I appear on CNN at 12:30pm EST to discuss Paul Krugman's latest op-ed, The Town Hall Mob. Unfortunately because of distance, it wasn't possible, but she'll keep me in mind for future rebuttals. But while we're on the topic, let's look at Krugman's latest take on the "town hall mob"... Some commentators have tried to play down the mob aspect of these scenes, likening the campaign against health reform to the campaign against Social Security privatization back in 2005. But there’s no comparison. I’ve gone through many news reports from 2005,...

Picture a recovering alcoholic falling off the wagon. First he says he can handle a few drinks... But eventually he turns mean... As a drunk is to alcohol, the Bush administration is to budget deficits. During the 2000 campaign George W. Bush often pledged to maintain fiscal responsibility... [H]is people said they could cut taxes, pay for new programs... and still pay off most of the federal government's debt... Now the budget director, Mitch Daniels, has admitted the obvious: The federal government faces the prospect of large deficits as far as the eye can see. And sure enough, the drunk...

So new budget projections show a cumulative deficit of $9 trillion over the next decade. According to many commentators, that's a terrifying number, requiring drastic action — in particular, of course, canceling efforts to boost the economy and calling off health care reform. The truth is more complicated and less frightening. Right now deficits are actually helping the economy. In fact, deficits here and in other major economies saved the world from a much deeper slump. The longer-term outlook is worrying, but it's not catastrophic. The only real reason for concern is political. The United States can deal with its...

Medical Care: We took a lot of heat for using Stephen Hawking as an example of someone who'd suffer under a socialized health system. But a closer look at the treatment he got in the U.K. shows it wasn't all roses.As our Aug. 1 editorial put it: "People such as scientist Stephen Hawking wouldn't have a chance in the U.K., where the National Health Service would say the life of this brilliant man, because of his physical handicaps, is essentially worthless." Now, Hawking is British and — though he suffers from amyotrophic lateral sclerosis (ALS), often referred to as "Lou...

"The debate over the public option has, as I said, been depressing in its inanity. Opponents of the option — not just Republicans, but Democrats like Senator Kent Conrad and Senator Ben Nelson — have offered no coherent arguments against it. Mr. Nelson has warned ominously that if the option were available, Americans would choose it over private insurance — which he treats as a self-evidently bad thing, rather than as what should happen if the government plan was, in fact, better than what private insurers offer." Evidently, for Krugman, his own argument circa 2007 that it might lead inexorably...

Another dynamite find by Verum Serum, on an endless mission to expose liberal doublespeak about what the public option would mean in practice. First clip is from two years ago, the second clip — declaring the arguments against the public option to be “sheer nonsense” — from last weekend. My only quibble with VS is that they seem to think there’s some dissembling here by Krugman. But there’s no contradiction: He’d clearly love to see ObamaCare metastasize into socialized medicine, ergo any arguments against that happening are nonsense. Here he is in the Times just a few days ago:

Paul Krugman appears to be determined to try and rewrite the history of the Reagan years all on his own. He continues with this piece. Let’s talk for a moment about why the age of Reagan should be over. First of all, even before the current crisis Reaganomics had failed to deliver what it promised. Remember how lower taxes on high incomes and deregulation that unleashed the “magic of the marketplace” were supposed to lead to dramatically better outcomes for everyone? Well, it didn’t happen.

The debate over the “public option” in health care has been dismaying in many ways. Perhaps the most depressing aspect for progressives, however, has been the extent to which opponents of greater choice in health care have gained traction — in Congress, if not with the broader public — simply by repeating, over and over again, that the public option would be, horrors, a government program. Washington, it seems, is still ruled by Reaganism — by an ideology that says government intervention is always bad, and leaving the private sector to its own devices is always good. Call me naïve,...

Paul Krugman calls for more public spending By Eric Uhlfelder Published: August 23 2009 13:57 | Last updated: August 23 2009 13:57 When asked where the most promising investments for the short term are, Paul Krugman, the most recent recipient of the Nobel prize for economics, candidly exclaims “damned if I know”. But the Princeton economist is certain the US economy would be far worse off without the government’s massive $787bn (£476bn, €553bn) stimulus package. “I can’t come up with any analysis that suggests a superior outcome without this level of deficit spending, both in the short and long run,”...

As per usual, Paul Krugman posts to his blog a comment that puts him in the mode of deceptive hustler, or seriously confused He starts with this chart: He then moves on to tell us: Net federal saving is, roughly, the budget surplus (so it’s negative if there’s a deficit.) It turns out that there’s a strong correlation between budget deficits and interest rates — namely, when deficits are high, interest rates are low. On reflection, it’s obvious why: a weak economy both drives up deficits and drives down the demand for funds, while a strong economy does the reverse....

From the 9/16/2008 debate on healthcare at Rockefeller Plaza in NYC. Paul decides to show everyone how great socialized medicine is by asking the Canadians in the room about it... From the 9/16/2008 debate on healthcare at Rockefeller Plaza in NYC. Paul decides to show everyone how great socialized medicine is by asking the Canadians in the room about it...

All in all, I vote for Paul Krugman losing his Noble Peace prize in Economic Science because he clearly has no idea what he’s talking about. Things are not fixed Paul! Since they aren’t fixed you can’t say we avoided a second great depression! Perhaps you can explain to me what will happen when the Fed, the Treasury, US banks, or anyone else for that matter with trillions of dollars in bad positions has to unwind those trades? Will we just stimulate our way through that too? You know what, on second thought, perhaps Krugman is right, maybe we should...

The world economy needs a second stimulus if it is to avoid the fate of Japan in the 1990s when the country was stuck with years of sluggish growth, Nobel laureate and professor of economics Paul Krugman told CNBC Monday. "The good news is that it does not look like the 2nd great depression. For a few months it did," Krugman said. All indicators now point to the fact that the plunge has stopped, as jobs in the US are lost at a smaller pace and manufacturing and services seem to be stabilizing worldwide, he added. But the sources of...

...is you just don't know. I strongly suspect Paul Krugman is right: For the most part, the protesters appear to be genuinely angry. The question is, what are they angry about? There was a telling incident at a town hall held by Representative Gene Green, D-Tex. An activist turned to his fellow attendees and asked if they "oppose any form of socialized or government-run health care." Nearly all did. Then Representative Green asked how many of those present were on Medicare. Almost half raised their hands. Now, people who don't know that Medicare is a government program probably aren't reacting...

The Project 21 black leadership network, New York Times liberal columnist Paul Krugman Obama Must Condemn NY Times Race-Baiting Tactics, Black Group Says Washington D.C. — The Project 21 black leadership network is condemning New York Times liberal columnist Paul Krugman for scurrilously pinning racist motives on critics of President Obama’s health care proposals. The group is calling upon President Obama to condemn all efforts to derail legitimate public debate, specifically including this effort to stifle debate with race-baiting tactics. “Paul Krugman is the one with race on the brain,” Project 21 Chairman Mychal Massie charged. “Specifically, he is using...

New York Times columnist Paul Krugman is not pleased with some of his fellow racist mobs -- er, U.S. citizens -- as he demonstrated in his column on Friday, "The Town Hall Mob," on loud protests that have met some Democratic congressmen who support Obama's costly health care ideas.

In a blog posting yesterday, New York Times columnist Paul Krugman raises questions about a recent Rasmussen Reports poll of Massachusetts voters. The poll shows that Bay State voters are less than enthusiastic about the state’s experiment in health care reform. Krugman states that “last year polling seemed to show very strong support for the Massachusetts plan.” He then asks, "So has support plunged since then? Or is the wording of the Rasmussen poll calculated to give a negative result?" Krugman must have an interesting definition of “very strong support.” The poll he cited found that just 14% want to...

Americans are angry at Wall Street, and rightly so. First the financial industry plunged us into economic crisis, then it was bailed out at taxpayer expense. And now, with the economy still deeply depressed, the industry is paying itself gigantic bonuses. If you aren’t outraged, you haven’t been paying attention. But crashing the economy and fleecing the taxpayer aren’t Wall Street’s only sins. Even before the crisis and the bailouts, many financial-industry high-fliers made fortunes through activities that were worthless if not destructive from a social point of view. And they’re still at it. Consider two recent news stories. One...

At a recent town hall meeting, a man stood up and told Representative Bob Inglis to “keep your government hands off my Medicare.” The congressman, a Republican from South Carolina, tried to explain that Medicare is already a government program — but the voter, Mr. Inglis said, “wasn’t having any of it.” It’s a funny story — but it illustrates the extent to which health reform must climb a wall of misinformation. It’s not just that many Americans don’t understand what President Obama is proposing; many people don’t understand the way American health care works right now. They don’t understand,...

Paul Krugman is an eminent economist, but he here reveals a woefully inadequate understanding of Austrian business-cycle theory. The rudiments of the theory are easy; one might have thought that even a Keynesian could grasp them. According to Mises and Hayek, an expansion in bank credit pushes the money rate of interest below the "natural" rate. People prefer goods in the present to the same goods in the future, a matter obvious to anyone except for a few philosophers. The rate at which people favor the present, in the Austrian view, chiefly determines the rate of interest.

Paul Krugman, New York Times columnist, Nobel Prize winner, and Obamaphile extraordinaire, has been pushing HARD for Obamacare, which he sees as a big step towards instituting his preferred Canada-style single payer system. At a symposium on the issue, Krugman conducts an informal poll here of Canadians on their satisfaction, with instant and decisive results.

Not the outcome he expected.

Right now the fate of health care reform seems to rest in the hands of relatively conservative Democrats — mainly members of the Blue Dog Coalition, created in 1995. And you might be tempted to say that President Obama needs to give those Democrats what they want. But he can’t — because the Blue Dogs aren’t making sense. To grasp the problem, you need to understand the outline of the proposed reform (all of the Democratic plans on the table agree on the essentials.) Reform, if it happens, will rest on four main pillars: regulation, mandates, subsidies and competition. By...

I found Obama’s health care presentation so impressive — so much command of the issues — that it had me worried. Seriously, it’s really good to see how much he gets it. Update: So Howard Fineman was unimpressed. And Fineman knows presidential greatness when he sees it: He’s the Texas Ranger of the world, and wants everyone to know it. He’s the guy with the silver badge, issuing warnings to the cattle rustlers.

Will the destructive center kill health care reform? It looks all too possible. What’s especially galling is the hypocrisy of their claimed reason for delaying progress — concern about the fiscal burden. After all, in the past most of them have shown no concern at all for the nation’s long-term fiscal outlook.

The American economy remains in dire straits, with one worker in six unemployed or underemployed. Yet Goldman Sachs just reported record quarterly profits — and it’s preparing to hand out huge bonuses, comparable to what it was paying before the crisis. What does this contrast tell us? First, it tells us that Goldman is very good at what it does. Unfortunately, what it does is bad for America. Second, it shows that Wall Street’s bad habits — above all, the system of compensation that helped cause the financial crisis — have not gone away. Third, it shows that by rescuing...

O.K., Thursday’s jobs report settles it. We’re going to need a bigger stimulus. But does the president know that? Let’s do the math. Since the recession began, the U.S. economy has lost 6 ½ million jobs — and as that grim employment report confirmed, it’s continuing to lose jobs at a rapid pace. Once you take into account the 100,000-plus new jobs that we need each month just to keep up with a growing population, we’re about 8 ½ million jobs in the hole. And the deeper the hole gets, the harder it will be to dig ourselves out. The...