- Paul Krugman: Secret Deficit Lovers
- Links for 10-10-14
- 'The Light Bulb Cartel and Planned Obsolescence'
- 'Do We Need a Crisis to Reduce the Deficit?'
Posted: 10 Oct 2014 12:24 AM PDT
Why isn't America celebrating the large fall in the deficit?:
Secret Deficit Lovers, by Paul Krugman, Commentary, NY Times: What if they balanced the budget and nobody knew or cared?
O.K., the federal budget hasn't actually been balanced. But the Congressional Budget Office has tallied up the totals for fiscal 2014..., and reports that the deficit plunge of the past several years continues. ...
So where are the ticker-tape parades? For that matter, where are the front-page news reports? After all, talk about the evils of deficits and the grave fiscal danger facing America dominated Washington for years. Shouldn't we be making a big deal of the fact that the alleged crisis is over?
Well, we aren't, and once you understand why, you also understand what fiscal hysteria was really about.
First, ordinary Americans aren't celebrating the deficit's decline because they don't know about it. That's not mere speculation...
Why doesn't the public know better? Probably because of the way much of the news media report this and other issues, with bad news played up and good news downplayed if it's reported at all.
This has been glaringly obvious in the case of health reform, where every problem ... has been the subject of headlines, while in right-wing media — and to some extent in mainstream news sources — favorable developments go unremarked. As a result, many people — even, in my experience, liberals — have the impression that the rollout of Obamacare has been a disaster, and have no idea that enrollment is above expectations, costs are lower than expected, and the number of Americans without insurance has dropped sharply. Surely something similar has happened on the budget deficit. ...
Deficit scolds actually love big budget deficits, and hate it when those deficits get smaller. Why? Because fears of a fiscal crisis — fears that they feed assiduously — are their best hope of getting what they really want: big cuts in social programs. ...
But isn't the falling deficit just a short-term blip, with the long-run outlook as dire as ever? Actually, no..., there has ... been a dramatic slowdown in the growth of health spending — and if that continues, the long-run fiscal outlook is much better than anyone thought possible not long ago. ...
So let's say goodbye to fiscal hysteria. I know that the deficit scolds are having a hard time letting go; they're still trying to bring back the days when Bowles and Simpson bestrode the Beltway like colossi. But those days aren't coming back, and we should be glad.
Posted: 10 Oct 2014 12:06 AM PDT
Posted: 09 Oct 2014 07:25 AM PDT
Busy day today -- a couple of quick ones for now. This is Tim Taylor:
The Light Bulb Cartel and Planned Obsolescence: The old 1951 movie "The Man in the White Suit," starring Alec Guinness, is both an entertaining adventure/comedy and a meditation on technology and planned obsolescence. The Alec Guinness character invents a wonderful new fabric that will never get dirty and never wear out. He sees a future where ordinary people will save money on clothes and cleaning expenses. People marvel at the invention at first, but soon everyone is against him: the textile and clothing companies fear his cloth will put them out of business, the workers in those companies fear losing their jobs, and those who do the washing fear losing work, too. Near the end of the movie, one character notes wryly that markets won't function if the products work too well. He says: "What do you think happened to all the other things? The razor blade that doesn't get blunt? The car that runs on water with a pinch of something else?"
It's harder to come up with clear-cut real-world example of where companies sought to reduce the quality of a product in order to boost sales. After all, in real-world markets there should usually be a mixture of lower-quality, lower-price products and higher-quality, higher-price products, and what people want to buy will have a substantial effect on what gets produced. But in the October 2014 issue of IEEE Spectrum, Markus Krajewski tells the story of "The Great Lightbulb Conspiracy: The Phoebus cartel engineered a shorter-lived lightbulb and gave birth to planned obsolescence." ...
Posted: 09 Oct 2014 07:24 AM PDT
Do we need a crisis to reduce the deficit?: The macroeconomic case for not cutting the deficit straight after a major recession is as watertight as these things get, at least outside of the Eurozone. (It is also true for the Eurozone, but just a bit more complicated, so its easier to just focus on the US and UK in this post.) If you want to bring the government deficit and debt down, you do so when interest rates are free to counter the impact on aggregate demand. As the problems of high government debt are long term there is no urgency for debt reduction, so the problem can wait. The costs of fiscal consolidation in a liquidity trap are large and immediate, as we have experienced to our cost.
Sometimes austerity proponents will admit this basic macroeconomic truth, but say that it ignores the politics. Politics means that it is very difficult for governments to reduce debt during booms, they say. Although it would be nice to wait for interest rates to rise before cutting the deficit, it will not happen if we do, so we have to cut now. Like all good myths, this is based on a half truth: in the 30 years before the recession, debt tended to rise as a share of GDP in most OECD countries. And it always sounds wise to say you cannot trust politicians.
However both the UK and US show that this is not some kind of iron law of politics. ...
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