Update 7/2/2010: Krugman is becoming even more nervous over the deficit vultures and their capacity to wreck the economy. Examine the flowchart above once again. If you don’t understand it, try reading any basic macroeconomics textbook.

Tags: Deficits, Austerity

Joe Firestone. posting on New Economic Perspectives, makes a highly persuasive argument against attempts to balance the budget under present conditions in his post An Open Letter to President Obama. He concludes with the following paragraphs:

Mr. President, this has been a long open letter, and I'll close it with some short statements. First, you will hurt, not help fiscal sustainability by pursuing austerity in Federal spending. Second, austerity in these times is not fiscally responsible. It is fiscally irresponsible. Third, real fiscal responsibility means spending what Government needs to spend to fulfill public purposes, and spending in such a way that spending can continue in the future, until public purposes are achieved. There are all kinds of public purposes going begging right now, and you're proposing that achieving those has to be subjected to austerity constraints because we are running out of money. Fourth, I can't imagine a more fiscally irresponsible course than the one you appear to be moving towards now. And that fiscally irresponsible course will, make no mistake about it, also hurt fiscal sustainability. While it won't destroy our solvency, it will destroy part of our productive capacity, and this will give us less room for government spending in the future to both heal our economic problems and avoid inflation while doing it.

So, please Mr. President, don't do austerity. Don't assume you know all about economics. Don't believe we have solvency problems when we have none. Don't believe we have to worry about inflation, when there is not the slightest chance of it anytime soon. Look at what you've done so far and evaluate it honestly. No excuses, please. It can't be right, because it has not worked. Don't be fiscally irresponsible and join the other global elites in following an ignorant and mistaken economic policy, likely to drive the world into a double-dip recession, or perhaps even a Great Depression 2.0. Instead, change course right now! Act like our President, an American President. Give us what we need, not what they need. Be loyal to us, not to them. And end this recession before it ruins any more American lives.

Admittedly, some of the letter may be a little difficult for the lay reader, but it is not abstruse or deliberately obfuscating. Anyone who retains some of what s/he learned in Econ 101 should not find it difficult. Chalk up its difficulties to the economic instruction all high schools graduates and most college graduates lack. But read the letter.

It is becoming all too clear that President Obama is in over his head in the field of economics. Receiving instruction from Bernake, Geithner and Summers will not put him any closer to economic reality, and especially its impact upon the average citizen. As I wrote over a year ago, real progress will come only when he fires this plutocratic threesome who genuinely believe that anything good for the financial sector (read “Goldman Sachs”) is good for America.

Tags: employment, elites, Deficits, Deflation

It appears that the deficit vultures are in the ascendency. As their position is backed neither by economic theory or the raw numbers, one must conclude that they have an alternate, but unspoken, agenda. I have no idea what it could be.

Paul Krugman is similarly nonplussed. His version of a typical dialogue between himself and a German deficit vulture is all too representative of what passes for most political argument that goes on today:

German hawk: “We must cut deficits immediately, because we have to deal with the fiscal burden of an aging population.”

Ugly American: “But that doesn’t make sense. Even if you manage to save 80 billion euros — which you won’t, because the budget cuts will hurt your economy and reduce revenues — the interest payments on that much debt would be less than a tenth of a percent of your G.D.P. So the austerity you’re pursuing will threaten economic recovery while doing next to nothing to improve your long-run budget position.”

German hawk: “I won’t try to argue the arithmetic. You have to take into account the market reaction.”

Ugly American: “But how do you know how the market will react? And anyway, why should the market be moved by policies that have almost no impact on the long-run fiscal position?”

German hawk: “You just don’t understand our situation.”

So on it goes. I blame most of this idiocy on total ignorance of economic history. If anyone has a better explanation, please enlighten us in the comments.

Tags: Krugman, Recession, Deficits

The Israeli attack in international waters upon a defenseless flotilla bringing humanitarian supplies to Gaza is no isolated event, but merely one more step towards what looks like a Zionist version of the Final Solution. They pushed the Palestinians off their land, imprisoned them in Gaza—which can be accurately described as one of the world’s largest concentration camps—and it is now tightening the noose around its hapless inhabitants.

We in the U.S. have long been the enablers of this vast atrocity and will have much to answer for when the inevitable time of accounting comes.

Earlier, Turkey — the unofficial sponsor of the convoy — had proposed a statement that would have condemned Israel for violating international law and demanded a United Nations investigation, the prosecution of those responsible for the raid and compensation for the victims. It also called for the end of the blockade.

But the Obama administration refused to endorse a statement that singled out Israel, and it proposed a broader condemnation of the violence that would include the assault by passengers of the Israeli commandos as they landed on the deck of the ship.

Already, the usual game of “Blame the Victim” is in full swing.

But this is not the time to equivocate or to blame the victim. The Israeli attack was an act of piracy, in violation of the law of the oceans, and a serious international crime. Resisting piracy is not the same as causing death and mayhem by the pirates. In fact, resisting piracy is usually regarded as a laudable, if unwise, action. Israeli/U.S. “logic” is reminiscent of WWI atrocities against civilians by the German army under the doctrine that resistance by an occupied people to its occupiers is a heinous crime and a justification for indiscriminate mass murder.

I am ashamed of the Obama administration for its duplicitous behavior. And we wonder why so much of the world hates us. There’s your answer. If he had only done the decent thing he would have raised the reputation of the U.S. throughout the world, and especially thorughout the middle east.

It shouldn’t have come as a surprise, however. Obama’s silence as president-elect during the Israeli assault on Gaza should was a powerful clue to his later behavior.

Tags: Gaza, Netanyahu