Paul Krugman is very upset.
And it’s a betrayal of everything Obama’s supporters thought they were working for. Just like that, Obama has embraced and validated the Republican world-view — and more specifically, he has embraced the policy ideas of the man he defeated in 2008. A correspondent writes, “I feel like an idiot for supporting this guy.”
Well, yes. The issue here is Obama’s proposed spending freeze.
President Obama will call for a three-year freeze in spending on many domestic programs, and for increases no greater than inflation after that, an initiative intended to signal his seriousness about cutting the budget deficit, administration officials said Monday.
The WSJ is unimpressed.
Mr. Obama’s touted spending freeze for some domestic agencies is the politics of gesture. It would apply to only 17% of the budget, and these programs have already had a 22% increase in their annual appropriations in the past two years, and another 25% increase including stimulus.
To get some idea of the extent of the problem, see this chart from Greg Mankiw.
In that graph we can see the ‘Bush spendathon’ – he actually spent within the average over 1970 – 2009 but revenues declined in his first term before making a recovery in his second term. Obama has spent well beyond the average and plans to continue doing so. So even when (if?) US tax revenue recovers the US will still be running a huge deficit.
So whether or not Obama will succeed in cutting spending, at least he and his administration have recognised the problem. Last word to the WSJ.
The tragedy is that Mr. Obama’s fiscal conversion is coming a year too late, assuming it is now real. If the President and his party really are serious, they can do more than promise a spending freeze after 2012. They can stop spending more now: Drop the health-care bill, cancel the unspent stimulus spending from last year, kill the $150 billion new stimulus that has already passed the House, and bar all repaid bailout cash from being re-spent. Everything else is marketing.
Obama has embraced and validated the Republican world-view — and more specifically, he has embraced the policy ideas of the man he defeated in 2008.
In a way, Krugamn’s right. Obamantion has validated his predecessors view on spending going so far on projected analysis to making it worse by 4 times Bush’s deficit.
So I really don’t know why, Krugman’s upset unless he thinks a deficit of 13% of GDP is too little.
JC
27 Jan 10 at 5:08 pm
I applaud Obama. It is a step in the right direction. It might take ten years to get back a debt free Government, by eyeballing the graph.
(Krugman is pushing for a higher than projected deficit? – He’s jumped the shark).
Semi Regular Libertarian
27 Jan 10 at 5:12 pm
All the US has to do is turn its higher education sector into a scam to fleece the third world, just as Australia has done. That would be one way of getting all those Treasuries back from China.
Peter Patton
27 Jan 10 at 5:23 pm
“U.S. fiscal policy is on an unsustainable path to an extent that cannot be solved by minor tinkering,” said CBO Director Douglas Elmendorf.
C.L.
27 Jan 10 at 9:56 pm
it would be on an unsustainable path if they impose a spending freeze.
Monetary policy is still waylaid by the liquidity trap. If the CBO is correct in its projections then interest rates would stay as they are at the end of 2012.
We now know what most of us said previously the ARRA package was too small. Even the IMF is still worried.
I see People still have not understood the problem of 1937 in the US or of Japan in the 90s.
They want to repeat again in the US.
Butterfield, Bloomfield & Bishop
28 Jan 10 at 10:33 am
“I see people have not understood….”
Yea, homer like we need you to interpret history for us.
JC
28 Jan 10 at 11:35 am
No use teaching you. It would be wasted
Butterfield, Bloomfield & Bishop
28 Jan 10 at 12:08 pm
So Homer is now rubbishing the CBO. LOL.
C.L.
28 Jan 10 at 12:10 pm
Yes, Homer is now rubbishing the CBO. This of course coming from the person that suggests Nazi Germany was the only place has ever tried Keynes. Ever! lol.
Hey Homer:
What liquidity trap are you referring to as the US is not in a liquidity trap at the moment.
Banks top line revenues are falling as they can’t find borrowers, you fucking clown. This is what you would expect in a recession.
You really deserve a clip over the ear for being a moron every day.
JC
28 Jan 10 at 12:16 pm
How am I rubbishing the CBO?
Forrest interest rates should be -5% they aren’t.
That is a liquidity trap.
Why do Central Banks indulge in QE? Because they can’t cut interest rates much more.
I see you didn’t even finish High School
Butterfield, Bloomfield & Bishop
28 Jan 10 at 12:19 pm
Homer:
You’re changing the subject again.
You said the US is currently in a liquidity trap. It isn’t.
You are simply too dumb and stupid to be on this site.
Go away.
JC
28 Jan 10 at 12:24 pm
Forrest you do not even understand what a liquidity trap is.
the Us and other Major counties are in liquidity traps.
I have just shown why the US is.
As I said if you believe the CBO projections then interest rates in the will not change from now to at least 2012.
go away and get someone with a lot of patience to explain what a liquidity trap is and then wonder why US interest rates wouldn’t change until after 2012!
for a person who tells other people they are dumb and stupid you really do not understand simple concepts.
Butterfield, Bloomfield & Bishop
28 Jan 10 at 12:40 pm
Homer:
To repeat.
You’re changing the subject again.
You said the US is currently in a liquidity trap. It isn’t.
You are simply too dumb and stupid to be on this site.
Go away.
JC
28 Jan 10 at 12:49 pm
No,
I responded to your absurd claim it wasn’t in a liquidity trap and showed why it was.
You are too dumb and stupid to recognise that!
Indeed only a economic illiterate would have said I was rubbishing the CBO.
Two showed up!
Butterfield, Bloomfield & Bishop
28 Jan 10 at 12:53 pm
Homer:
To repeat.
You’re changing the subject again.
You said the US is currently in a liquidity trap. It isn’t.
You are simply too dumb and stupid to be on this site.
Go away.
JC
28 Jan 10 at 12:54 pm
IT is and I have shown why it is moreover you have shown you are simply too dumb and stupid to be on this site. Go away and try to learn something before you again show your complete ignorance in these matters
Butterfield, Bloomfield & Bishop
28 Jan 10 at 1:39 pm
Homer:
there’s nothing worse than a complete moron (you) telling your betters that they are morons. That in itself ought to get you on permanent moderation for continually infesting this site with idiocy.
I also “like” how you’ve suddenly become so aggressive when your normal posture is passive aggressive before hiding behind the garage in embarrassment.
Look , you moron, the RBA has an inflation target policy they apply like now. ……When core inflation is above target they will raise rates. They have to.
You still won’t answer the question, will you, you dishonest anti-intellectual tool.
Just go away.
JC
28 Jan 10 at 1:54 pm
JC
Don’t hold back. Tell us what you really think of Homer:)
Rococo Liberal
28 Jan 10 at 2:14 pm
Idiot when is core inflation above its target?
do you never get the eensy weeniest blush about how many times your words show you are ignorant about a topic.
Even a quote from the Governor doesn’t stop your idiocy.
you have no idea of what a liquidity trap is despite being shown how it exists in the US!
Butterfield, Bloomfield & Bishop
28 Jan 10 at 2:19 pm
Idiot when is core inflation above its target?
I would take a rough guess and say it’s above target when it’s above the target, Homer. Did I guess right? You moron. LOL.
do you never get the eensy weeniest blush about how many times your words show you are ignorant about a topic.
ah yes the old reversal trick.. Look fuck knuckle this site has to put up with idiocy from you every day when you infest the place with your stupid fucking drivel that most of the time no one can understand because of your shocking diction.
As I said and also posted their objective taken from their site which clearly explains the RBA is on an inflation target. Unless you can demonstrate they’re not, you simply come out looking like the moron you’ve always been.
Even a quote from the Governor doesn’t stop your idiocy.
He can say whatever he likes, however he’s bound by law to follow an inflation target.
you have no idea of what a liquidity trap is despite being shown how it exists in the US!
The US is not in a liquidity trap. It simply isn’t. It’s either that you’re lying or don’t understand economics. My hunch. It’s both, that you’re lying and have no idea.
Now get back to telling us great the German labor camps were, you nimrod.
JC
28 Jan 10 at 2:32 pm
Forest you are a goose of the highest order.
How in the hell do they cut inflation?
They do it by raising interest raters to cut demand for a period of time until there is some sort of output gap and inflation falls.
Compre!
Interest rates would be -%% if the Authorities could cut them to where they should be. They are not there.
This is a liquidity trap. Monetary policy ain’t working and according to CBO projections are not working well into 2012.
Oh yeah typical of Forrest of when he gets shown up.
he tries a smear of labour camps when he knows I talked about the RAD.
You are beneath contempt
Butterfield, Bloomfield & Bishop
28 Jan 10 at 2:37 pm
Forest you are a goose of the highest order.
Homer, you are.
How in the hell do they cut inflation?
By following an inflation target and raising interest rates when core inflation is above the target. I thought you would know that Homer.
They do it by raising interest raters to cut demand for a period of time until there is some sort of output gap and inflation falls.
I don’t quite see that in their objectives statement homer. I don’t quite see where they say they are required to raises interest raters (sic) until there is “some sort of output gap and inflation falls”. Can you show us where it says that?
Thought so, so fuck off.
Compre!
Is that the word that applies to you whenever you come on here defending Nazi economics, labor camps and telling us that Skanky ho was an Asian warlord’s mistress?
Interest rates would be -%% if the Authorities could cut them to where they should be. They are not there.
This is a liquidity trap. Monetary policy ain’t working and according to CBO projections are not working well into 2012.
Not so. The US is not in a liquidity trap. But as usual you’re too cowardly to back away from a stupid comment you’ve made and fess up with an apology
he tries a smear of labour camps when he knows I talked about the RAD.
Is there any rake you haven’t stepped, Homer?
You are beneath contempt
Which is light years from the contempt I hold you in, you intellectual coward and incoherent moron.
JC
28 Jan 10 at 2:49 pm
This like watching a tennis match between a Wimbledon champion and Kevin Rudd
Rococo Liberal
28 Jan 10 at 2:54 pm
Forrest have you ever read Glen Stevens testimony to the Senate Committee.
Oh gee there is demand and supply all around ( that is what an output gap is old son when demand is lower than supply.
oops wrong AGAIN.
Stupid , Germany got out of the Depression and achieved full employment by 1936.
I have not brought up labour camps as they do not come into being really until 1938.
The Rad is very different.
Oh yeah how many people found out that Skanky Ho was not a mistress. you haven’t found one from way back then when ?I said it .
funny about that, well no it isn’t typical actually.
And you still have no idea of what a liquidity trap is. again in black and white you exhibit ignorance of the highest order.
you are consistent on that
I really do not care what you think and you will go to any lengths to attack someone.
It would be nice if once only ONCE you could actually write about a subject any subject and not show your usual ignorance
Butterfield, Bloomfield & Bishop
28 Jan 10 at 2:58 pm
Forrest have you ever read Glen Stevens testimony to the Senate Committee.
Unless he’s saying that they have moved away from targeting a preset core inflation rate there’s really no point in reading it other than assuaging your peculiar habits of reading the most boring literature known to mankind. I would also add to that that so far they have behaved exactly as one would expect the RBA to behave when the core rate rises above the target zone and that is to raise interest rates. Seeing they have done that and are also likely to do that in the near future I would hazard to guess that they are still acting within the legal constraints, which is the preset inflation target.
Oh gee there is demand and supply all around ( that is what an output gap is old son when demand is lower than supply.
Homer discussions about the output gap and measurement of such went down with the sinking ship in the 70’s. You still seem to be stuck in a time warp. The RBA’s primary marker for inflation is the core CPI.
oops wrong AGAIN.
Don’t thinks so, Homer.
Stupid , Germany got out of the Depression and achieved full employment by 1936.
I have not brought up labour camps as they do not come into being really until 1938.
The Rad is very different.
Oh yeah how many people found out that Skanky Ho was not a mistress. you haven’t found one from way back then when ?I said it .
Yes you sure did say IT homer. You’ve said lots of very stupid things here. However please don’t turn this into another one of your Nazi economics homilies as we’re offended enough by that already. I promise you that I will not be going anywhere near Asia or elsewhere on the look out for Skanky Ho. I’ll let you do that.
Lastly the US is not in a liquidity trap. It isn’t and the suggestion is totally preposterous. …..as preposterous as you understanding economics.
JC
28 Jan 10 at 3:15 pm