Here's Standard and Poor's Press Release.
I'm not a big fan of Megan McArdle but apparently she heard about it beforehand, U.S. Faces Possible Ratings Downgrade From S&P. "For a couple of days, I've been hearing rumors that one reason that US stocks were plummeting was S&P's delay in issuing its ratings; supposedly, the delay was because S&P was going to downgrade us, and they wanted to wait until after Friday's market close."
Krugman's take, "On one hand, there is a case to be made that the madness of the right has made America a fundamentally unsound nation. And yes, it is the madness of the right: if not for the extremism of anti-tax Republicans, we would have no trouble reaching an agreement that would ensure long-run solvency.
On the other hand, it’s hard to think of anyone less qualified to pass judgment on America than the rating agencies. The people who rated subprime-backed securities are now declaring that they are the judges of fiscal policy? Really?
Just to make it perfect, it turns out that S&P got the math wrong by $2 trillion, and after much discussion conceded the point — then went ahead with the downgrade."
11 comments:
That's the kind of vitriol that's not helping. Krugman doesn't like/agree with the right so he calls it "madness." Even if you think someone is mad, calling them that doesn't lead to cooperation.
As far as political vitriol goes, it seems pretty minor. I could give plenty worse examples from the right. He even makes an attempt at explaining why. His blog posts also are quickly written and are more a running commentary. He uses them to get out ideas for his I think twice weekly columns which are a bit tamer.
Still, can you argue on the merits? Cause I basically think he's dead on.
Here's a Krugman post from the other day on the madness http://krugman.blogs.nytimes.com/2011/08/06/prattle-and-prejudice/
Oh and also regarding stimulus, it's not like a permanent addition to the deficit like a permanent tax cut or a new unpaid for entitlement like Medicare Part D. It's a one time payment (that might last a couple of years) to get the economy moving again. Some call that an investment.
Yes, his vitriol is minor. It is, though, an example of name calling rather than ideas.
My simple argument on merits is, if you don't accept Keynes, then this spending is wrong, so charging people more taxes on a wrong policy is also wrong.
Dems accept Keynes (in general). Reps don't (in general). The arguments simply flow from that.
That said, if you accept Keynes, spending now makes sense and dealing with the debt later makes sense.
Also, in regard to "Prattle and Prejudice", I find it convenient that Keynes is very supportive of the general Democratic principle of giving more services to the needy. It would be natural to agree with an idea which gives national economic support to the overall goodness of spending more on services.
I'm not sure I'm comfortable in letting someone merely "not accept Keynes". I need to hear arguments why it's wrong and some better model. I think "trickle down" (which was the GOP position for a while) is now completely debunked. And I haven't seen a compelling GOP economic argument other than "taxes should be lowered, all the time" which doesn't seem at all credible as an economic policy, merely as a vote getting policy.
I'd seriously love to hear a cogent tea party explanation for economic crisis and what we should be doing to get out of it (including how that plan will change things, underwear gnomes don't count).
Keynes doesn't make sense to me. I don't see the economy react directly enough to see that the effect is consistent. What I see is a few examples where spending increased and the economy got better. And a few examples where spending increased and it did not, with the argument that it doesn't count because the spending wasn't high enough. I'm clearly not an economist, so I'm not expert enough for conclusions.
On the plus side, WWII looks Keynesian. I'll grant that. Given the depression time graphs I've seen, it could also just be the natural timing of recovery.
On the negative side, Carter sucked (any disagreements anywhere?). Reagan tried trickle down. Things got much better. Sounds non-Keynesian to me.
Now, I see a bad economy, which started while we were spending at WWII levels on two war fronts. Still recession. That seems counter to the pattern.
Then we spend a whole bunch more, a little effect, but not enough to prove the effect.
A google search didn't get me any hard examples except for the generally accepted WWII. Do you have more data?
So, for the Depression, Hoover tried austerity, it failed. FDR tried spending and things got better. In 1937, fearful of debt, they went back to austerity and things got worse. WWII comes along. That counts as 4 for me. :)
Look to other nations. Britain has been trying austerity, failure. As I understand it Germany has been spending, success. Japan didn't spend or address their banking problem, lost decade. Unfortunately lots of situations are different and it's hard to make direct comparisons in some situations.
I think if we put sweaters on as Carter asked us to we'd be much better off now, but clearly stagflation sucked.
As far as Reagan, I'm with Lloyd Bentsen, let me spend $2 trillion we don't have and I'll give you the illusion of prosperity. Sounds a little Keynesian to me actually. I regularly see stats showing that Reagan's terms were only average gains with serious inequity (the rich did well, the moderate not) and of course those non-wartime debts. Here are two latest from Krugman, google for more.
http://krugman.blogs.nytimes.com/2011/06/22/reagan-and-revenues/
http://krugman.blogs.nytimes.com/2011/07/30/more-about-the-reagan-non-miracle/
I don't think you can use the Bush years as an anti-Keynesian example. The bad economy started with the crisis in 2008 though the causes happened earlier. And we haven't been spending near WWII levels yet. http://nationalpriorities.org/resources/federal-budget-101/charts/general/federal-outlays-and-revenues-1930-2015-perc-gdp/
The big factor that broke things was deregulation. From the 40s to the 80s we had small cycles. With deregulation we started having big crises because some investors got greedy and no one noticed until too late. The S&L crises was the first and we learned no lessons. This current crises might have started because of a housing bubble, but what made it a crises was huge leverage in the derivatives market and a huge interconnectedness that no one understood (CDSs issued to everyone by AIG).
I did a search and found this. http://www.huppi.com/kangaroo/Keynesianism.htmNot really lots of examples, but lots of examples of the alternative theories failing.
Thanks for the links. I'll keep researching. I'm losing hope for clarity. This seems more like religion to me.
Krugman has links on the right of his blog that collect about 20 postings describing his point of view.
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