Charlie Rose

REMant  01/12/2010 10:56 PM Report

He remains a rabid Keynesian, altho apparently not as rabid as Krugman. Thus for instance his completely incorrect analysis of 1937. The Depression remained a topic of discussion, and New Deal programs an object of derision, until at least 1940, as can easily be seen in the media of the time. It was the WWII command economy with its enforced saving, (and the aid we gave to regions devastated by the war), that took us out of the Depression. If this is what Krugman means - and I don't think it is, actually - then it would likely work again, but you need both the sacrifice and the savings. The problem is that the fiscal deficit at the moment, instead of helping cure the "GDP deficit," is helping to cause it, because it is doing nothing to improve either savings or frugality, and little to improve productivity, and costing us money in the process. The economic downturn was caused by private debt, which needs to be paid off. Extreme measures aside, we do not need more taxes, so much as to stop sending good money after bad. For instance, it has long been noted that the more we spend on education, the worse it gets, and yet everyone wants to spend more and more on it. The same of course with welfare. I would surmise this is also true of health care. And our overseas misadventures are surely another example. In health care, BTW, Orzag has been talking about taxing employer-sponsored health benefits, which would help a great deal to restrain overuse. The dollar will not remain the safest currency in the world, nor our debt attractive, if there is no economic productivity to back it up, at least it will not be for an ever-increasing portion of the world's population. At some point it either collapses because of that contraction, or because the rest of the world repudiates it and strikes out on its own.