Krugman knocks back Tres Sec job he was never offered

Fancy that, there really are people in high places who think Krugman would have made a fine Secretary of the Treasury, not just columnists at The Grauniad. But as he puts it, why should he take a lower less influential job than the one he has already, a pontificating guru with no responsibility and where everything he says comes out right because he tells you so. In his words quoted via The Weekly Standard:

‘Yes, I’ve heard about the notion that I should be nominated as Treasury Secretary. I’m flattered, but it really is a bad idea, writes Krugman.

The first reason Krugman lists is, he admits, that he’s ‘indeed the World’s Worst Administrator — and that does matter.’

The second reason: ‘Oh, and there’s not a chance that I would be confirmed.’

But the foremost reason, according to the guy who was never offered the job in the first place, ‘is that it would mean taking me out of a quasi-official job that I believe I’m good at and putting me into one I’d be bad at.’

And, by his own admission, Krugman’s better at playing the ‘outside’ game than the inside one. He writes, ‘The New York Times isn’t just some newspaper somewhere, it’s the nation’s paper of record. As a result, being an op-ed columnist at the Times is a pretty big deal — one I’m immensely grateful to have been granted — and those who hold the position, if they know how to use it effectively, have a lot more influence on national debate than, say, most senators. Does anyone doubt that the White House pays attention to what I write?’

Working for Obama, rather than the Times, would be a step down. ‘By my reckoning, then, an administration job, no matter how senior, would actually reduce my influence, leaving me unable to say publicly what I really think and all too probably finding myself unable to make headway in internal debates,’ writes Krugman.

Krugman, a metonym for all that’s wrong with economics today, remains at his post. There really could not have been a better way to discredit Keynesian economics although, having observed the world for the past four years, there is nothing at all that could cause Y=C+I+G to disappear from our texts. Why people want to balance budgets in such uncertain times as ours if this little equation is valid is beyond me. But we see (a) that additional deficit financed public spending wrecks an economy and (b) that things get better as budgets are brought into line. How this equation helps to explain the way the world actually behaves no one really knows (they just show it by moving lines on a graph), but we will keep teaching it from now until the crack of doom.

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48 Responses to Krugman knocks back Tres Sec job he was never offered

  1. Token

    In summary, he prefers to be unaccountable.

  2. .

    He doesn’t want to risk being the man who through a natural experiment, disproves his own silly theories and wrecks the economic credibility of the left globally for 50 years.

    He’ll pass the buck to Obama.

  3. Gab

    Krugman knocks back Tres Sec job he was never offered

    Love that title.

  4. Jock

    Steve

    Would love the Cats thoughts on the story doing the rounds of US Treasury minting a $1 Trillion coin. I realise it is only an accounting fudge to get around the debt ceiling, but if it worked it gives Obama a blank cheque.

  5. Alice

    I dont think we can see this at all
    But we see (a) that additional deficit financed public spending wrecks an economy and..etc

    I think nwe can see that excessive private sector debt combined with wasteful war spending (and failure by the feds to cramp the bubble) wrecks an economy (especially the debt of households loaded up to the hilt borrowing to pay for a roof over their heads at bubble prices in the US.)

    That will wreck the economy by reducing tax income and therby creating excessive government debt on its own. The deficits around the world are a product of failure to manage the business cycle by economists who in their bubble deluded mentality – thought they had tamed it.

    I dont agree with this comment ie that it was the government deficit that wrecked the economy. The government deficit doesnt explain away the gross levels of private sector debt in households in an unsustainable bubble at all. It was that that wreckled many economies, not just the US.

  6. Alice

    Also using a three sector model is unrealistic Steve Kates in a globalised world with open economies.
    The correct expression is Y=C+I+G+X-M.
    The M was very large in the US as they lost jobs and imported lots of goods they used to produce on US soil.
    The M explains a lot of what is wong with US only Ben Bernanke would like to teach econ without mentioning that one.

  7. Alice

    What works for household budgets does not work for government budgets and this is a naive view

    You also say ” we see that economies get better when the government budget improves”.

    Post hoc error with causation all wrong.

    We see that government budgets get better as the economy improves (as more people get jobs back and the taxes start flowing in again).
    Thats what we see.

  8. “Would love the Cats thoughts on the story doing the rounds of US Treasury minting a $1 Trillion coin. I realise it is only an accounting fudge to get around the debt ceiling, but if it worked it gives Obama a blank cheque.”

    Surprise, surprise, Krugman’s championing it.

    “”He will, after all, be faced with a choice between two alternatives: one that’s silly but benign, the other that’s equally silly but both vile and disastrous.”" Not raising the debt ceiling is the latter. I kid you not.

    “”By minting a $US1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling – while doing no economic harm at all,” the Nobel prize laureate writes.”

    I’m lost for words.

  9. dover_beach

    Working for Obama, rather than the Times,

    LOL.

  10. .

    The M explains a lot of what is wong with US only Ben Bernanke would like to teach econ without mentioning that one.

    The US is not strongly outwardly orientated. They didn’t export enough.

    The US would see around a 4% permanent increase in income if they dropped all trade barriers.

    Again Alice, you don’t know what you are talking about and demand the imposition of taxation to engender prosperity.

    Post hoc error with causation all wrong.

    Nonsense Alice. You cannot merely blurt out post hoc and then be entitled imagine there is some other fallacy of composition you never need justify.

    Increasing the US debt would not help America. Even if Keynes was right, his theory only works for closed economies experiencing a cyclical downturn and where monetary policy has ceased to be effective and the State is not indebted at record levels.

  11. “We see that government budgets get better as the economy improves (as more people get jobs back and the taxes start flowing in again).
    Thats what we see.”

    Captain Obvious Alice, that tells us nothing about how to fix a broken economy. It’s like saying that if I get a pay rise, I will have higher income. Did you pick that up at the Laurie Daley School of Economics?

    Throw in some income assistance if you like, but letting failed businesses fail and new ones to try and do better is far better than keeping the zombies upright and suppressing entrepreneurialism in the process.

  12. Toiling Mass

    “The New York Times isn’t just some newspaper somewhere, it’s the nation’s paper of record”

    I don’t think that’s right. I would grant him ‘the first draft of history’ if it is understood in the Winston Smith context where politics trumps actualities.

  13. brc

    “”By minting a $US1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling – while doing no economic harm at all,” the Nobel prize laureate writes.”

    F.me he is really off the reservation now.

    I wonder if krugman has a retirement fund. I wonder if he would mind if that fund printed another round of shares and then gave them away (dropped doma helicopter would be the best way). After all, no economic harm at all would be done, amirite?

  14. .

    I think nwe can see that excessive private sector debt

    Shorter Alice: home ownership is bad.

    Who sets the rates Alice? Governmental authorities.

    Having a balanced budget, low spending and low inflation focus (ala Rubin) allows you to have high levels of debt with little risk. Actual capital costs remain low and the cash rate remains relatively high.

    It is the only approach which is sustainable.

  15. as more people get jobs back and the taxes start flowing in again

    The other way around Alice…

    When people aren’t taxed as much, and don’t think taxes will increase, producers of real value* will produce more and relax less.

    What is Wayne buying with the 8 billion a month he’s borrowing?

    cf. Tasmanian GST…

    *something someone else actually wants to buy.

  16. Will

    Would love the Cats thoughts on the story doing the rounds of US Treasury minting a $1 Trillion coin. I realise it is only an accounting fudge to get around the debt ceiling, but if it worked it gives Obama a blank cheque.

    It was an ingenious suggestion.

    Governments can always print money. The problem is that they cannot create resources, so the result (in the extreme) is usually hyperinflation like pre-war Germany and current Zimbabwe.

    The USA is slightly different, as the $US is the worlds reserve currency, is used in international transactions. Printing $US can be used to purchase overseas assets and goods and services. I understand that the North Koreans are rather good at producing large quantities of fake US dollars. Spending them overseas probably supports the NK’s elite’s lifestyle.

    To a Keynesian, the USA printing greenbacks can “inflate” the world economy. This is one of the reasons that the USA can run a trade deficit almost indefinitely. It can cover it as capital transfers of $US. The problem is when the rest of the world loses confidence in the $US and refuses to accept it. This would have probably already happened if there was some other currency that could be substituted. As the US remains the largest and most dynamic economy in the world, this is not likely to happen for a long time.

    So it looks like to could work, allowing the US’s $13T debt to expand further.

  17. Alice

    Dot

    pardon me but you say

    “Even if Keynes was right, his theory only works for closed economies experiencing a cyclical downturn and where monetary policy has ceased to be effective and the State is not indebted at record levels.

    Lets just focus on this bit Dot…if we happen to notice that the Monetary authorities in the US dont actually seem to be having much effect

    “and where monetary policy has ceased to be effective??”

    How good have the QEs worked Dot? I dont see the place on fire. Everyone knows when you increase the money it will go looking for the highest returns and that just happens to be outside the US right now and is more likely to be in Asia

    So WTF good is Monetary Policy doing for the US now Dot?

    If that isnt a case of monetary policy “not working” then I dont know what is. Plus when the sorporates are sitting on piles of cash already – making more money and giving them low interest rates isnt going to make them invest at home. They already have enough dough cheap. There just isnt any worthwhile projects in the US right now because its in a mess.

    So for all their big QEs who is getting the benefits – most likely Asia, not the US.
    Think Dot. US Monetary Policy isnt working for the US. Dont get all semantic with me either and split hairs and say a QE2 isnt a form of monetary polcy or I will chuck something at you.

  18. brc

    You cannot fix economic problems by changing numbers on a piece of paper. I note that the plan is to mint a coin rather than print a banknote. Presumably this is because minting coins with a ridiculous face value is somehow considered to be less fraudulent than printing banknotes with ridiculous face values. The existence of a $1 trillion banknote would draw the obvious parallells to Zimbabwe et al. But a coin, no!

    No doubt they would do some phony attempt to make the coin valuable, like making it out of platinum or some other pathetic attempt to cover up their John laws style fraud.

    Ther is no doubt the plan would work as gar as accounting numbers go. But once they had done it once, how long before we saw the second, third, fourth coin? How long before ford dealers are accepting trillion dollar notes for a new f150?

  19. .

    Alice

    Even if Keynes was right – you are forgetting the precondition of a Government WITHOUT a sovereign debt crisis.

    You are actually advising the Americans to borrow MORE?

    You’re a lunatic.

  20. Splatacrobat

    You are actually advising the Americans to borrow MORE?

    You’re a lunatic.

    In Alice’s wonderland more intercourse would be the solution to the decline in virginity rates amongst newlyweds.

  21. DaveF

    I’m familiar with Y=C+I+G etc, it’s High School stuff.

    My question is what happened to D? How did Y become demand?

    And the trillion dollar platinum coin was a thought bubble thing by some lefties to skirt the law. Apparently there is some paragraph that says the Treasury may mint coins at their sole discretion.

    Even in these devalued times it would cause an uproar. (I hope)

  22. Token

    I think nwe can see that excessive private sector debt combined with wasteful war spending…

    Where is Fanny Mae & Freddy Mac in your tale Alice?

  23. Alice

    Where did I say borow and spend more Dot?

    I didnt so dont put words in my mouth and claim my lunacy over your own thoughts.

    But I might ask how can you not be a lunatic if you cant recognise that their version of monetary policy right now is likely to be flying straight Oseas and doing some other countries good, not them?

    The fed has well and truly had its day and the government budget deficit is already large but I could think of a lot more productive spending than they are actually doing now without increasing the spending and possibly even reducing it.

    The first thing they should stop is the massive corporate welfare subsidies they hand out at taxpayers expense.

  24. Alice

    Token
    They are where they should be
    They recklessly loaned but they were in amongst the pack of financial institutions that recklessing loaned and they didnt have by far the largest shares of subprimes on their books. Go ask Lehman about those that were in their exploding boxes sent all round the world.
    Token the banks have been done to death. I was talking about Dots comments on monetary policy.

    Monetary policy is not working in the states and if they keep persisting with it they will end up in the same decade long hole Japan fell into.

  25. Will

    Y = income

    in this equation, Y is presumably national income

  26. DaveF

    Y = income

    Ahh…I had always thought it was Demand. Silly me.

  27. Alice

    Dave F
    the assumption is that at equilibrim demand = supply (econ basics). In macro the demand is aggregate hence AD and the Y is GDP (or output or supply). Hence if at equailibrium Y = AD = C+I+G+X-M. Thats how Y becomes = to AD.
    If in disequlibrium in that case the Y wont = AD.

  28. Alice

    Another basic Dave F
    In macro aggregate spending = aggregate income = aggregate ouput -
    So Y substitutes for all three (and at equilibrium they are all equal).
    The ABS calculates GDP three different ways also corresponding to this macro tenet
    GDP(I) – aggregate income
    GDP(E) – aggregate expenditure
    GDP(P) – aggregate production

    All the GDPs hence are called Y seeing as they all add to the same amount give or take a statistical discrepancy.
    Thats why in macroland income also equals spending also equals output (or GDP)
    I know its hard to get head around one symbol being both income and spending and GDP.

  29. That the Treasury Secretary probably gets paid a lot less than a famous newspaper columnist (including writing new books, lecture tour fees) is of course completely irrelevant to his considerations.

  30. DaveF

    Ta for the info guys, very thorough.

    I understand Krugman receives $100k for speeches on a regular basis. Hard to walk away from that sort of dough.

  31. JC

    That the Treasury Secretary probably gets paid a lot less than a famous newspaper columnist (including writing new books, lecture tour fees) is of course completely irrelevant to his considerations.

    That’s true, Jacques until they resign and go on board or speech circuit… as you suggested.

    Rubin was paid 30 million a year to go on Citigroup board. Not a bad payoff.

  32. You assume Krugman thinks that far ahead, JC. The last time he did serious long-term thinking was his paper on interstellar trade.

  33. JC

    Jacques…

    If Krugs just left the macro and monetary side alone, he is actually a first class economics. He just doesn’t understand that stuff. He should also try and become less henpecked by his dominating wife.

  34. GP

    The coin idea might work. Provided it were well finished, easily portable, and contained about 600,000,000 ounces of gold.

  35. .

    But I might ask how can you not be a lunatic if you cant recognise that their version of monetary policy right now is likely to be flying straight Oseas and doing some other countries good, not them?

    I never said it was nor do I approve of what they are doing, or plan to do.

    Nor will spending more help.

  36. “I understand Krugman receives $100k for speeches on a regular basis.”

    Wouldn’t a clown be cheaper? I mean, a regular one?

  37. Elizabeth (Lizzie) B.

    where everything he says comes out right because he tells you so

    A lovely way to live of course. Swannie thinks so.

    GP – one gold coin gives entry to Wonderland. What’s to complain about?

    Ask Alice.

  38. ugh

    “Token
    They are where they should be They recklessly loaned…”

    You mean Freddie and Fannie were required *by law* to make loans to minorities who in the past were refused credit on the basis they couldn’t pay it back @Alice.

    Unless you’re trying to assert that following the law is reckless…

  39. Unless you’re trying to assert that following the law is reckless…

    There. Fixed.

  40. Toiling Mass

    I understand Krugman receives $100k for speeches on a regular basis.

    We may need to modify the formula to Y=C+I+G+K*

    *K=Krugman

  41. Tel

    The coin idea might work. Provided it were well finished, easily portable, and contained about 600,000,000 ounces of gold.

    So, Clive Palmer is building an ocean liner out of gold… hmmm, not a bad idea. Make sure none of the guests trim a bit off around the edges.

  42. Splatacrobat

    Minting a Trillion dollar coin to get out of paying the piper is not a new concept. Mark Twain wrote a book detailing such a concept.

    The Million pound note. Gregory Peck 1954

  43. Alice

    Ugh

    go check your stats – of all the lenders Fannie and freddie had the lowesy amount of subrpimes meaning every other private bank in town was being more reckless than them (on purpose because Lehman was boxing them, the ratings agencies were triple A rating crap, and then lehman was flogging them all round the world).

    Dont come this bullshit “it was Freddie and Fannies fault” with me.

  44. Alice

    Well Dot on the useless QEs we agree. On the uselessness of the fed we also seem to agree. On the usefulness of Government spending we may even agree if the waste and corporate bloody subsidies are cut.

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