Greenspan: Delay on deficit measures could cause a double-dip recession

I added the only comment, because the person jives with the deficit commission and has ideas for competing forms of currency in the US to give our paper dollar some competition. mmmmmm.............

By Sara Jerome - 11/14/10 05:23 PM ET

Delaying on measures to tackle the deficit could thrust the country into a bond market crisis that would spur a double-dip recession, former Federal Reserve Chairman Alan Greenspan said on "Meet the Press" on Sunday.

"Look, I think something equivalent to what Erskine Bowles and Alan Simpson put out is going to be passed by the Congress," he said. "The only question is, is it before or after a bond market crisis?"

Greenspan said he is "hoping that we have enough sense to realize that we've got to resolve this issue before it gets forced upon us." His fear is that the long-term deficit could "spook" the bond market "to a point where long-term interest and mortgage rates move up very sharply."

"If that happens, that will cause the double dip," he said.

Even though there are some signals the economy is improving, Greenspan said, businesses are failing to make key investments because they are uncertain about the future. He said this is true to an extent that he has never seen before.

"The business sector is concerned is that business is highly uncertain about the future in a way which I've never seen it before and a way in which the data suggests has never, in fact, been so depressed," he said.

Businesses showing an unwillingness to invest in long-term assets, according to Greenspan.

"Unlike previous recoveries when, for example, we would be getting very significant pick ups in building, residential, nonresidential, in a sense, longer-term assets, we're not getting that today," he said. "It's a big hole in the economy."

He pointed out that constructing a building, for instance, is a 20 or 30-year investment. Businesses are unlikely to begin making longer-term investments until some of the question marks disappear, according to Greenspan.

"Unless and until we can begin to lift that pall of uncertainty, it is very difficult to see people reaching out into the longer term," he said.

Still, Greenspan said he doesn't see another crash around the corner, and said a double dip recession in unlikely.

"There's very little evidence of any deterioration that suggests we're about to have a double dip, as they call it. And in fact, if there's any evidence at all, we are actually picking up some," he said.

"We are in a position where we are moving forward largely because the rest of the world is moving forward," he said.

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Tea Party irks new members with tactic to promote its event

By Molly K. Hooper - 11/14/10 04:55 PM ET

A Tea Party tactic to pressure new lawmakers not to attend a privately sponsored orientation event in D.C. this weekend was unwarranted, according to frustrated incoming GOP House members.

Competing freshmen lawmaker orientation events over the weekend prompted the Tea Party leaders recently to encourage their followers to bombard newly elected GOP House members with the message that they must attend a Tea Party-sponsored event for local organizers instead of a separate orientation offered at the same time by the conservative Claremont Institute.

But incoming members say they never received an invitation to participate in the Tea Party Patriots event held in the Ronald Reagan building in Washington, D.C., on Sunday.

"Nobody received any type of (invitation), it was just 'this is what's happening, please don't go here,' but I'm a big boy and I can choose where I need to go and where I need to be," incoming Rep. Allen West (R-Fla.) said in an interview on Sunday afternoon before heading into a meeting at the Capitol Hill Club, a Republican unofficial headquarters in the shadow of the U.S. Capitol, with members of his freshmen class.

"I didn't know it was happening until I started getting inundated with emails and (messages) filling up my voicemail," West's colleague told The Hill.

One irate incoming member told The Hill that the Tea Party tactic to release personal contact information of the new class was "extremely counterproductive and, in all honesty, an incredible violation of privacy."

Tea Party Patriots coordinators sent out a message to followers late Saturday night with the subject line “FRESHMEN ORIENTATION CLARIFICATION” after it was apparent that they needed to repair the damage done as a result of poor scheduling.

“One of the main goals of the Tea Party Patriots is to help tea partiers across the country stay informed and communicate about issues which concern them. In doing so, we will occasionally ruffle feathers. And sometimes it requires that we step back and reevaluate our actions,” coordinators Jenny Beth Martin, Mark Meckler, Debbie Dooley, Sally Oljar, Diana Reimer and Dawn Wildman wrote.

Though they said they did not intend for Tea Partiers to “flood” new members' personal phones and emails with messages, they justified the decision as “this was our only way to communicate with them since they do not have an 'official' line of communication at the present time.”

Rep. Franks: Obama needs to 'wake up' on world threats

By Bridget Johnson - 11/14/10 05:53 PM ET

A Republican on the Armed Services Committee said that the Obama administration "seems to be asleep at the wheel" in its policies toward terrorism and nuclear proliferation by rogue states.
"I think that this president has subverted critical national security policy to his need to look 'reasonable' in other less friendly parts of the world," Rep. Trent Franks (R-Ariz.) told The Hill.
"This administration does not seem to understand the intent of jihadist ideology," Franks said, adding that it "could be fatal to a great many people and to world stability itself if Mr. Obama does not wake up."
Franks introduced the Protect the Homeland from North Korean and Iranian Ballistic Missiles Act last year, which never was given a hearing, and the Peace Through Strength Act of 2009 that detailed sanctions against Iran. That bill sits in committee.
Five years ago, Franks called from the House floor for Iran to be referred to the U.N. Security Council.
"My fear is that this administration has surreptitiously embraced a policy of allowing Iran to gain nuclear weapons, and I cannot begin to express the naivete and dangerous insanity of this policy," he said.
Franks lamented that many Democrats with whom he'd worked on stronger national security policies were defeated in midterm elections. "The Gene Taylors of the world, the Jim Marshalls of the world, these are good Americans even if they have the disadvantage of being registered as Democrats," he quipped.
Marshall (D-Ga.) was a co-sponsor on the Protect the Homeland from North Korean and Iranian Ballistic Missiles Act.
The Security Council released a report last week that found North Korea to be in violation of sanctions by deceptively exporting weapons and missiles and being active in the nuclear activities of Iran, Syria and Myanmar.
"North Korea and the leaders in Tehran laugh at this president because of his offensible belief that he can dissuade them with kind words," Franks said.
Franks charged that if the European missile defense shield hadn't been frozen by Obama shortly after he took office, it would have been completed by late next year. "What he has done in the face of that is to dismantle probably the most important short-term element of persuasion," he said.
Obama scrapped the missile interceptors plan for Poland and the Czech Republic, which had soured relations with Russia, in favor of a "stronger, swifter and smarter" missile defense plan that would focus on short- and mid-range missiles from Iran instead of intercontinental nuclear missiles.
"Iran is working relentlessly to develop nuclear weapons," Franks said. "It's almost impossible to express the gravity of that concern for all of the human family."

The Great IOR Mystery

— By Kevin Drum

| Sat Nov. 13, 2010 10:32 PM PST

I'd like to second this comment from Matt Yglesias:

If the country’s political press could redirect 10 percent of the attention currently being paid to the House Democratic leadership race and the GOP pre-campaign for 2012 to one thing I would suggest the Federal Reserve’s interest on reserves program.
....In late 2008, the Fed for the first time ever said that if banks wanted to hold extra reserves they would get interest payments in exchange for doing so. Then they raised the interest rate. And then they raised it again. Via Scott Sumner, Louis Woodhill makes a very strong argument that this has been a massively underrated factor in producing the recession. The IOR payments led to a steep decline in the velocity of money, which in turn led to a collapse in Aggregate Demand.

Now, I think Woodhill's argument is overstated in two ways. First, the Fed didn't just raise the IOR rate and then raise it again. The IOR rate is based on the fed funds rate, and the Fed raised the IOR rate at the same time that it was reducing the fed funds rate, producing a sort of choppy up and down trajectory for a couple of months in 2008. Overall, though, between October and December of 2008 the nominal IOR rate dropped from 0.75% to 0.25%.
Second, I have my doubts that this was responsible for the great collapse of 2008. Woodhill bases his argument on coincidental drops in stock market prices, but this is fairly weak tea. The stock market was both very volatile and generally falling during this entire period, and the drops following the IOR increases were made up pretty quickly. It's not impossible that the fluctuation in the IOR rate was driving some of the stock market changes, but the evidence is thin. [See update below.]
That said, however, the general argument here seems unassailable: regardless of whether bouncing IOR rates affected the stock market badly in 2008, the fact that the IOR rate today is greater than zero seems very, very strange. As Woodhill says:

The Fed knows that IOR is contractionary. Chairman Bernanke has testified that raising the IOR interest rate is one option for fighting inflation. Two Fed staff economists issued a report in July 2009 ("Why Are Banks Holding So Many Excess Reserves?") that describes how paying IOR at the Fed Funds target rate would stop the "money multiplier" process dead in its tracks.
....In the absence of IOR, there is an incentive for anyone who receives a dollar to immediately pass it on by doing another transaction. There is also an incentive for banks to lend out their excess reserves....The payment of IOR at an "above market" interest rate (which has been the case for the past two years) short-circuits the processes described above. IOR creates a "roach motel" for money — the dollars go in and they don't come out.

In other words, if the IOR rate is zero, banks might as well lend their money and hope to make a profit on it. It's better than nothing. Conversely, if they can earn a safe return on their reserves just by parking them at the Fed, that might seem like the better deal. And so credit tightens and businesses have a hard time getting loans.
Control over the IOR rate, which was given to the Fed in 2006, is an important monetary lever. So why would the Fed announce a quantitative easing program designed to stimulate a weak economy at the same time that it keeps the IOR level set at a mildly contractionary level? It doesn't make sense. Once the Fed has officially announced that it believes the economy is stuck ("Pace of recovery...continues to be slow...high unemployment, modest income growth, lower housing wealth, and tight credit....Employers remain reluctant to add to payrolls. Housing starts continue to be depressed"), why wouldn't it use the IOR lever in addition to the QE lever? Why have them pointing in opposite directions?
I suppose one reason this doesn't get very much attention is that there's nothing much to say about it. The Fed won't comment on it, members of Congress are mostly unaware it even exists, Glenn Beck hasn't devoted a show to it, and there's nothing to say in a news story other than "once again, the Fed has taken no action on the IOR rate." Your editor won't let you write that story very often.
Still, it's a pretty interesting question. Why is the IOR rate still stuck at 0.25% instead of zero? Is it because the Fed believes that lending is constrained by demand and the IOR rate isn't playing a role? Is it because they think providing a steady source of profit for the banking system is still Job 1? Is it because they consider IOR's effect on lending to be pretty trivial at 0.25% and not worth bothering with? Or what? It is indeed mysterious.
UPDATE: My intent in this post was to agree with Matt Yglesias's point about the IOR rate being too high without also implicitly buying into the Louis Woodhill argument that he links to. That's the only reason I spent any time on it at all. However, Niklas Blanchard thinks my skepticism was too mild:

IOR policy wasn’t the driver of the collapse in 2008, inadvertently tight monetary policy was. If you are hardcore about monetary disequilibrium, like I am, then that was the key to the entire recession (contra what was happening with financial intermediation). The IOR policy was just heaping gasoline on a fire, so to speak.

I mostly agree, and I should have been more pointed about this. The great collapse of 2008 was largely driven by economic fundamentals. Regulatory issues played a role in making the collapse worse than it had to be, but it would have happened regardless. Likewise, IOR fluctuations may have affected stock market prices in late 2008 — though even that's not indisputable — but the recession had been underway for nearly a year by that time, the financial system had come close to collapse a month earlier, and the IOR policy, at worst, might have made things slightly worse. The argument that it caused the collapse just doesn't hold water.

Interest on Reserves

MATT  YGLESIAS

If the country’s political press could redirect 10 percent of the attention currently being paid to the House Democratic leadership race and the GOP pre-campaign for 2012 to one thing I would suggest the Federal Reserve’s interest on reserves program. Insofar as people pay any attention to this issue, it comes via the suggestion that monetary stimulus can’t work because the Fed has already increased the money supply a lot and all that’s happened is that banks are holding more reserves at the Fed. I don’t think that’s quite right, but the core observation about soaring excess reserves is accurate. But then the analysis just stops.
But it should continue. In late 2008, the Fed for the first time ever said that if banks wanted to hold extra reserves they would get interest payments in exchange for doing so. Then they raised the interest rate. And then they raised it again. Via Scott Sumner, Louis Woodhill makes a very strong argument that this has been a massively underrated factor in producing the recession. The IOR payments led to a steep decline in the velocity of money, which in turn led to a collapse in Aggregate Demand.
Crucially, the Fed has never really explained why they’re doing this. The program was started at a chaotic time when lots of stuff was happening very quickly. At the time, the stated rationale was that the Fed’s counter-crash measures might work too well and prompt a need for a rapid change of course in an anti-inflationary direction. This could be achieved, they said, by hiking the IOR payments even higher. So the Fed believes that IOR payments are contractionary. But obviously nothing has happened in the two years since the IOR payments were started that supports the idea that we need more contraction. On the contrary, we need more expansion. This could be easily tested by cutting the right from 0.25 percent to 0.15 percent and gauging market expectation. But the Fed’s not doing it.

The Uncertainty Meme

— By Kevin Drum

| Sun Nov. 14, 2010 9:21 AM PST

Why does the economy continue to suck? The LA Times is hosting a symposium on the topic today, and USC business professor Ayse Imrohoroglu says the answer is uncertainty:

Businesses don't know what will happen to interest rates. They have trouble calculating what new workers will cost in light of potential new healthcare mandates and costs. They don't know what will happen to tax rates, which could rise dramatically. They are uncertain about increasing financial regulation and the possibility of a carbon tax. And as if that isn't enough, the soaring deficits and national debt raise very real questions about the federal government's long-term ability to meet its debt obligations.

OK, let's take these one by one:

• Interest rates will remain very low for a very long time. The Fed has made this as clear as any central bank possibly could.
• PPACA has no impact on small businesses and only a minuscule impact on large businesses. Medium-sized businesses face a modest penalty if their workers use federal subsidies to enroll in private insurance programs via the exchange. In other words, the overall financial impact on the business community is pretty small. What's more, there's really no uncertainty here. The broad impact of PPACA's rules is already clear and they don't take effect until 2014 anyway. This is not having an impact on business investment decisions in 2010.
• There's no excuse for Congress leaving tax policy up in the air for as long as it has. But even with that said, the Bush tax cuts affected personal tax rates, not business rates. And despite demagoguing to the contrary, even if the Bush tax cuts expire completely the effect on small businesses would be close to zero.
• Financial reform was a fairly modest affair, and in any case its effect is almost entirely restricted to the financial sector. Its effect on the rest of the business community is slight.
• There is no possibility in the near future of a carbon tax.
• There is no question about the federal government's long-term ability to meet its debt obligations, and even if there were this would have next to no effect on short-term investment decisions by American businesses.

The uncertainty meme is just mind boggling. Businesses always have a certain amount of financial and regulatory uncertainty to deal with, and there's simply no evidence that this uncertainty is any greater now than it usually is. (It is, of course, entirely believable that business owners who spend too much time watching Fox or reading the Wall Street Journal editorial page might believe otherwise, but that's a whole different problem — and one that Imrohoroglu should spend his time debunking, not promoting.) The only significant real uncertainty that American businesses face right now is uncertainty about whether there's enough customer demand to justify hiring more workers and buying more equipment. PPACA and carbon taxes rank very far down the list.

Empowering Women

— By Kevin Drum

| Sun Nov. 14, 2010 9:51 AM PST

Dani Rodrik notes the surprising news that among the countries that have most improved their human development indicators since 1970, the stars are mostly Muslim countries, including several in North Africa:

What was their secret? Determined policies to expand educational opportunities and access to health along with a willingness to depart from the conventional wisdom of the day and experiment with their own remedies. Even though all three North African countries are Moslem, empowering of women seems to have played an important role as well:

There is now substantial evidence that the health and schooling of children can be raised by empowering women, and this is precisely what Tunisia did when it raised the minimum age for marriage, revoked the colonial ban on imports of contraceptives, instituted the first family planning programme in Africa, legalized abortion, made polygamy illegal, and gave women the right to divorce as well as the right to stand and vote for election.

This comes up repeatedly. As near as I can tell, the single most important thing that developing countries can do to ensure themselves a brighter future is to educate and empower women. I'm not sure there's even a close second.

Taking the Lame Out of the Duck

— By Kevin Drum

| Sun Nov. 14, 2010 1:38 PM PST

Lisa Mascaro writes in the LA Times that Democrats are lowering their sights for the lame duck session:

Gone is any hint that Democrats will try to ram through the rest of the ambitious legislative goals President Obama outlined two years ago when he took office with a Democratic majority in both chambers. No one, for example, is talking about a controversial bill to reduce global warming pollution with a cap-and-trade system.
Still, Democrats are intent on closing out the 111th Congress with a few final strokes that could provide a fitting coda to what historians have called one of the most productive sessions in a generation. Despite electoral losses that handed control of the House to Republicans and diminished Democrats' majority in the Senate, Democratic leaders are pressing an agenda that would extend middle-class tax cuts, fund the government and perhaps repeal the ban on openly gay men and women serving in the military.

I never believed for a second that Democrats could pass cap-and-trade, immigration reform, or card check during the lame duck session. It was a fantasy. If they couldn't do it during the regular session, what made anyone think they could do it during a lame duck?
Frankly, if they can pass a tax plan and repeal DADT, I'd consider that a pretty productive lame duck session. I'd even propose a deal that a few moderate Republicans might be open to: extend all the Bush tax cuts for three years in return for passage of the funding bills, including DADT repeal. If Democrats managed to do that, and possibly get Senate approval of New START too, it would go a long way toward showing that they haven't been entirely cowed by their "shellacking."

Murkowski on track to win
By: Shira Toeplitz
November 13, 2010 11:27 PM EST         

With the majority of write-in ballots opened and counted, Alaska Sen. Lisa Murkowski appeared Saturday to be on track to win reelection over Republican Joe Miller.

Murkowski has won 89.5 percent of the write-in ballots outright, plus another 8 percent that were challenged but counted for the senator anyway. The fate of those challenged ballots will be decided in the coming weeks pending court orders.

Election officials are scheduled to finish counting the final 15,000 write-in ballots Sunday – but that most likely won’t be the end of the road for either Miller or Murkowski.

From Monday through Wednesday, absentee and questioned ballots will be opened and counted.

Later this week, a federal court is scheduled to hear a lawsuit Miller filed arguing that Murkowski’s name should be spelled completely correctly on the write-in ballots. Election officials have said in the past that they would judge the write-in ballots based on voter intent.

Nonetheless, Murkowski’s team appeared confident they were headed to victory. One of Murkowski’s lawyers for the counting proceedings, veteran recount attorney Ben Ginsberg, told the Anchorage Daily News that he was flying back Saturday, saying, “This is in good hands, and the outcome looks pretty obvious.”

Miller has 87,517 votes, but that total will increase slightly after additional absentee and questionable ballots are counted early this week.

At the end of Saturday's count, Murkowski had won 74,449 write-in votes outright.

No, Really – Nobody Cares About the Deficit

---

November 14, 2010, 7:36 am

CBS

Via Steve Benen, a post-election poll shows essentially nobody, regardless of party affiliation, making the deficit a priority.

•  I have added comments and they from all over, the world, and basically they do not agree with Mr Krugman, they for the most part believe that the deficit  is one of the important factors with this past Mid-term election. 

1.

BT

London

November 14th, 2010

12:41 pm

It is extraordinary how the G20 nations are in the grip of deficit paranoia and the austerity fad, when all their economies desperately need further stimulus to sustain demand and prevent a lost decade of high unemployment and stagnant investment.

The idea that G20 nations have too much government debt and cannot borrow more is utter nonsense. G20 nations can borrow as much as they require and central banks can help by purchasing this debt whenever necessary to keep interest rates low.

Increasing public investment in this way does not 'crowd out' private investment when the private sector is in a deleveraging crisis and interest rates are rock bottom. Anyone suggesting that government borrowing and central bank quantitative easing will lead to high inflation in the current deleveraging environment is profoundly wrong.

The entire western world is strangling itself for no good reason.

2.

Red October

Chester County PA

November 14th, 2010

12:41 pm

I disagree with your conclusion. I very strongly care about the deficit, and know many others who feel it is our biggest long term problem. However, I do not feel it is the "problem to concentrate on first when Congress begins in January." It is flawed logic to conclude that therefore, I don't "care about the deficit."

3.

mickeyrad

Centerville Iowa

November 14th, 2010

12:41 pm

Exactly. This is where a short speech to educate the American public as to the importance of continuing yearly deficits now while setting up a framework to deal with the long-term debt should be delivered by Obama.

Instead, we get Obama parroting the Republicans on earmarks. It's almost as if Obama can't let a Republican say something without immediately agreeing to it.

I'm not sure where Obama's "negotiation skills" were learned. In the real world, you wait until you have a "trade" you can make before agreeing to some of the other person's positions. Obama is so obsessed with agreeing with Republicans that he adopts their positions with no movement on the Republicans' part.

This is why we end up with a "stimulus" that's mostly wasted tax cuts & aid to repressive state governments, a health care bill that imposes a mandate without establishing a public option, etc. It's bad politics and bad policy.

And like GW Bush, Obama is sure he has done everything right. In fact, he takes a "perverse pride" in that notion. We're in for a long cold lonely winter.

4.

DDavis4um

Pleasantville, NY

November 14th, 2010

12:41 pm

Yep, all a distraction that was shown by market research to be easy to link to Democrats whether it is true or not.

5.

WatchIt

Chile

November 14th, 2010

12:41 pm

Good point, and yet we are NOT going to do a Keynesian binge AGAIN. To do so, would actually be a really bad idea, because it would move our government balance sheet closer toward insolvency.

What needs to happen is simply this: wages need to FALL to the point where the labor market CLEARS. If people in the U.S. were not so persnickety about their particular salary and their particular job category, EVERYONE would be working RIGHT NOW.

Everyone, wake up and smell the global market for talent!

6.

Tim Buckley

New York

November 14th, 2010

12:41 pm

Yes, but how many people in the Economy/Jobs category would say that tackling the deficit/debt go hand-in-hand with improving the economy? Not that they're right, but as a measure how much people regard the debt as a problem, this "pick your top priority"-type question is not up to the task of answering the question of how people regard the deficit problem.

7.

dvdhldn

England

November 14th, 2010

12:41 pm

Or apparently Education - go figure.

8.

Smooth Sailing

New England

November 14th, 2010

12:41 pm

Obviously, the way you have put this, we should just put it out of our minds. Is it far fetched to think that this blog is another form of polling for the administration, and you are the question writer?

9.

Timezoned

New York City

November 14th, 2010

12:41 pm

Nobody except the national news and punditry population, along with all conservative politicians, which is to say most of them.

If you asked that group, a tiny number of people with a vastly outsized voice, they'd not only tell you that they think the deficit is the biggest problem by far, but they would tell you that so does the rest of the country. Despite the evidence in this poll that practically no one cares at all.

We live in a made up world. The politicians respond to the made up one, not the real one. Four percent of the people actually think the deficit is our big problem, yet the Republicans and FOX News start saying it's more like 90%, and soon you have even Barack Obama putting all of his focus on it.

We live in a complete fantasy world. Calling it a dream world is far too tame, it's a nightmare.

10.

elwu

Germany

November 14th, 2010

12:41 pm

So what? That doesn't mean that not making deficit a priority is the right thing. It just confirms that people do not want to undergo cuts which would affect their comparatively luxurious lifestyle, no matter what this irresponsibility costs their children and grandchildren; and the rest of the world.

11.

Jerome Capirossi

Paris

November 14th, 2010

12:41 pm

Good morning,

I attended few months ago to a conference of "Cercle des économistes" chaired by Jean-Hervé Lorenzi at Sciences Po.

I was astonished by the poor care given to the debt. After a discussion, I understood that the point of view was to fix growth first and after to contemplate the debt.

It seems it has not changed today if we have a look to seoul G20 results.

Jacques Attali in is last post at Slate.fr magazine is desperate since he is worry about the debt level and the risks it raise in front of us.

I am personally trying to decipher the game with such following questions :
* Could we still afford to play the game of inflation ?
* Who will start to loose control of inflation to fight debt ?
* Who imagine to tight fiscal pressure to face debt ?
* What about money control ? Are central banks always able to do it ?

I am personally convinced that the answer lies around a corner of one of these sentences, otherwise everybody were still struggling to solve the debt problem.

Best regards

Jerome Capirossi
http://bizstrategos.com

86.

Daniel A. Greenbum

New York, NY

November 14th, 2010

6:19 pm

It used to be Republicans stock and trade to attack Democrats for what in retrospect were small deficits. The cry was "borrow, spend and elect." Then came Arthur Laffer, Jack Kemp and Ronald Reagan. Suddenly you could cut taxes and generate more governmental revenues. Deficits no longer mattered. The result was the largest deficit in American history.

The Bush (41) and Clinton attacked the deficit and Clinton left the nation with a surplus. Then Bush (43) was elected and as Cheney said deficits did not matter. Tax cuts and wars and all other manner of spending left to monumental deficits.

Obama comes to office saddled with a terrible economy and a huge deficit. Once again the Republicans see the merits of fighting deficits. Unless they want to pay back the rich with tax cuts.

Deficits as an issue are a political fraud.

85.

fredfelix4

WI

November 14th, 2010

6:19 pm

Paul, your conclusion is not supported by the data presented. Using your reasoning nobody cares about education, the wars, or taxes either. All we know is most people say jobs and the economy are top priority. What their second priority is and how close to first it may be is not known.
From this survey we should conclude that jobs come first. After all, the more people working and making a good wage, the higher government tax revenues are and the lower entitlement payments such as unemployment become. Overall, people are smarter than politicians and economists. They know private sector jobs are more important than temporary government stimulus and budget cuts. They know that taxing the richest at higher rates won't produce as much tax revenue as taxing labor, if labor could find work. This country has to produce product here in order to create jobs here. When our government starts cutting the high tax burden on labor and starts taxing imports and consumption we will know they finally get it.
The tax on wages is roughly 40%; 15% income tax, 16% FICA and medicare, a few percent each for unemployment and workers' comp., about 6% for state income taxes, some local city or county taxes. When you add the cost of health insurance to the 40% tax burden the total cost on wages is in the range of 50% to 60%. It doesn't matter whether the employee or employer pays. This is the true cost of employing someone in the United States. America can compete against low foreign wages if the burdens on wages are reduced.

84.

c kaufman

Hoboken, NJ

November 14th, 2010

6:18 pm

Since the Republican Party today is a top down only corporation it doesn’t matter what the public thinks. They see American people caring for deficits, because party politicians and pundits are on a media blitz disseminating this message and all the cable channels instantly mimic what they hear from these “experts” as fact. There’s so little independent reason and analysis in today’s American media. It’s scary. It’s the party that tells Americans what to think today, and then they point to all the media coverage they got and claim it must be true. Of course the inevitable minority who just happens to believe all this political idea advertising, will be lauded as the “real” public (Joe the plumber style). Some of this “real public” is told it’s their duty as loyalist to fill Paul Krugman’s blog and column with, “Palin, Gingrich, and Rove are correct and you’re all wrong, you liberal…”.

The Democrats seem to be having their own problems focusing inward too much, always watching and measuring this same groupthink. Brushing off any criticism as some wild lefty fringe opposition and annoyance. Like a Republican pundit would. This poll says something about how little the public counts in government today.

83.

Frunobulax

Chicago

November 14th, 2010

6:18 pm

Run your own numbers through the template provided on the interactive feature in today's NYT. One assumption of the exercise is that there should be a several year period to allow for economic recovery, until 2015. From the perspective of the next generation (i.e., 20 yrs. out) almost the entire deficit problem relates to constraining medical costs, SS pensions, and related entitlements. The discretionary spending component is de minimus.

A side point: I was surprised how many people didn't understand the relationship between income and longevity. Look at actuarial tables on life expectancy going back 100 years. My parents' generation (born mid-1920s) had life expectancies actually below what the SS act set for retirement age payouts a mere decade later. In a sense, then, these numbers were gamed from the beginning but, of course, have barely changed even though life expectancies have increased to points well beyond 70 yrs.Life expectancies for African Americans in the 1920s were, by today's standards, worse than in 3rd world countries, under 50 yrs.

82.

John Aronson

Hampshire County, MA

November 14th, 2010

6:17 pm

You cannot be serious! You, or some dolt on your staff, found an exit poll that can be described as showing that on November 2, 2010, about 50% of those polled said that their vote was influenced by “the economy and jobs” but only about 10% said that it was influenced by “budget, deficit/debt.” So you, or some idiot on your staff, decided to assert that the voters at large have no real concerns about the level of the national debt. While you, yourself, may have no concerns about the nation’s collective debt you are very much mistaken if you think that the voters at large are similarly unconcerned

You, or your staff, really do have to think a bit more before you offer your collective brain farts to the world. I think that any fool can see that taken together, the public views the three inter-related problems of the economy, health care and debt as their over-riding concern.

Applying an expert’s technical understanding of the term “debt” to a lay person’s use of the term in a flash poll is intellectually dishonest; if, as you would have us believe, you are offering an expert’s opinion on these matters.

81.

Jason

San Jose, CA

November 14th, 2010

6:17 pm

I agree with other readers that Krugman has drawn a faulty conclusion from this data. When contextualized as "the first problem to deal with," even other issues that we know that many Americans feel strongly about (the war in Afghanistan or even "Taxes") appear as "non-issues" for average voters. I don't disagree with Krugman that the deficit issue may not actually be as important for voters as the mediah as spun it recently, but I don't think this poll provides compelling evidence of it.

80.

Robert Waldmann

Rome Italy

November 14th, 2010

6:17 pm

How very odd. It seems that comments are not allowed on the pro-death panals post. Knock me over with a wrecking ball. I will try to behave myself but can't help mentioning here that I don't support a VAT and that an increase in the higher brackets of the income tax (notice the absense of the number $250,000) would balance the budget and is actually popular. It won't happen any time soon, but long before a VAT.

Now about that poll. I don't think it can save us from ourselves. The problem is that most people in the USA haven't yet figured out Keynes's argument. To me it is very old, low brow economics which was long out of fashion, but it is clear from other polls that a majority reacts now just as they did in the thirties.

People want to do something to help the economy and reduce unemployment. They think that a good way to do that is to eliminate earmarks and cut foreign aid therefore reducing Federal Spending by 20 % If the public accepted the simple, recently proven for the nth time fact that increased public spending implies increased nominal aggregate demand, then we would be fine. And pigs would fly.

79.

Dave

Wisconsin

November 14th, 2010

6:17 pm

Here we go again:
http://www.cnbc.com/id/40181956

I wish someone that knows more than I would explain where, if the bond markets decide to revolt, that the capital would flow and put some numbers on it. Isn't it a very convenient argument to say that the so-called markets are going to retaliate without providing any proof to back it up? Tell us, somebody please, who will retaliate and where is this great new investment opportunity that will redirect their money from the bond market? Numbers, please.

We need a new rumor: 'High US unemployment could spark civil unrest'

It could happen any day now. I've heard that people living close to Alan Greenspan are the most likely to spark a revolt, and that the entire area would go up in smoke. It could happen at any minute...

78.

mcgloinm

bowling green, ky

November 14th, 2010

6:17 pm

The GOP has to do this now. This is perfect for the GOP to say "we're sorry, but because of the economy we must cut everything we don't like".

77.

Captain Ronnel

L. A., CA

November 14th, 2010

6:16 pm

Sean, who wrote comment #25, has repeatedly on this blog shown himself to be a conservative propagandist, and his latest is a prime example: Promoting as fact the mere assertion without providing any documentation that progressives and Dr. Krugman are to blame for peoples' financial woes, despite the actual fact that what documentation does demonstrate is that conservative policies are to blame. This comment constitutes the epitome of disinformation, which Republicans have used to great success in their drive to render government unable to function in behalf of the common good.

76.

Elwood Anderson

Las Vegas NV

November 14th, 2010

6:16 pm

The masses don't look beyond their own noses. That's why they are in debt up to their nose, are deceived by commercialism, and fall for schemes the wealthy foist on them to drive them deeper in debt. Anyone who has looked at what happened in the last decade, when we went from a surplus to a huge deficit, knows that it can't be sustained. And, you want to put your head in the sand and let the economy be governed by a poll of the dupes that fell for it all. You must admit that the only reason you play down the deficit is that you fear deflation and know the havoc it can cause. At some point we will have to address the deficit, or it will be the end of us.

75.

KenLayIsAlive dot org

Brooklyn

November 14th, 2010

6:16 pm

The wealthy care Dr. K! And it today's USA, that counts for...well, everything.

74.

Ron Legro

Milwaukee, WI

November 14th, 2010

6:16 pm

I agree that the poll tells us what the public expects of its national leaders in the next two years. I don't tend to agree that means other issues aren't of concern to the citizenry, only that this society more and more seems to have a narrow, self-centered focus -- the tell-tale of a very anxious electorate. This focus in turn translates in polls to overemphasis on particular issues. Right up there next to jobs and the economy, I remain very concerned about protecting the environment and improving our schools. These are always top issues for me, but education only shows up marginally in this poll, and environment shows up not at How different this poll might have looked the week after the BP oil spill. It's emblematic of short-attention-span politics in a short-attention-span society.

The other thing I suspect is that, for many citizens, an improved economy automatically would resolve their deficit concerns, so that their angst about the latter, however misapprehended, will go away the moment the economy seems secure. How else to explain the Bush era? Times are good, so deficits don't matter! The exact opposite of how the electorate ought to be thinking.

Meet the Press Sunday November 14, 2010