Kernen & Krugman Redux

Not satisfied with mischaracterizing what Krugman said on Squawk Box, I see Joe Kernen is now calling Krugman a communist.  And Mr. Kernen further exhibits his ignorance by admitting he doesn't know who Dean Baker is.  (Anyone else unfamiliar with Dean Baker should immediately add his blog to their bookmark list.)

Good Advice

TPM reader JB has excellent advice for the Obama campaign. The whole post is worth reading.
Money quote:

(I)t is clear that the Romney campaign doesn’t believe it can win on the current facts, it needs a better case. And that is a sign of weakness. That should be an attack point for Democrats. Don’t complain about the lying, which looks whiny and weak, use it to show weakness.......when Democrats highlight every lie, over and over as a sign of weakness, then the MSM will have a story to pick up and run with. 

The Lemonade Stand

After President Obama's not very elegant defense of government as the provider of the infrastructure space in which private business can flourish, Fox and Friends brought on a couple of young girls to explain how they hadn't needed government help in setting up their lemonade stand.

It's a pity that one of the networks that have some regard for intellectual honesty didn't have the initiative to invite them on afterwards to ask:

1. How do their customers reach them?  (On the street and sidewalk provided by their city government, presumably.)

2. How did they learn to read directions for making the lemonade, learn to write their billboard, learn to calculate how much to charge, and how to give change? (From their teachers, again we would presume.)

Which was the point President Obama was making when he said:

"If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you've got a business – you didn't build that. Somebody else made that happen. The internet didn't get invented on its own. Government research created the internet so that all the companies could make money off the internet."

Timing of ACA

I see Michael Tomaskey includes in his criticism of Obama that ".. it was wrong to push health care in year one.."

In retrospect, maybe.  But look at it from Obama's point of view coming into office:  he had promised a spirit of co-operation, and the ACA was based on Republican ideas from the AEI and from Romney's Massachusetts reform that Romney had suggested as a model for the nation.  Obama went so far as supporting the removal the public option from his own party's proposal, to keep under 65 health care entirely in the private sector. The reasonable thing for him to expect was that Republicans would join him in passing a conservative health care plan, so I can see how he thought that reform would be signed, sealed, delivered fairly rapidly.

He hadn't anticipated the GOP determination to block ANY Democratic initiative.  Once it became clear that the Republicans wanted to make health care a political fight, Obama was pretty much trapped into entering the slugfest it became - shelving the plan for another day would have given the GOP a huge and undeserved political victory in his first year.

So, yeah, in retrospect ACA sucked up political capital and energy that should have been devoted to boosting the economy and getting people back to work.  If Obama had any inkling ahead of time of just how low the GOP would sink purely for political gain, perhaps he would have put off  health care reform.  But he came into office promising co-operation, and naively thought the other party would reciprocate.

Romney and Bain

If the Democrats were to ask me how to counter Mitt Romney's claim that his background in business gives him a better ability to manage the US economy, I'd suggest something along the following lines.

Bain's MO was to use its investors' money to buy a company, and then load the company up with debt to pay back the investors.  Then Bain set about cutting costs at the purchased company by, among other things, reducing the workforce - putting people out of work.  Some companies struggled through the debt load and survived, some did not.  The debt load was an unproductive use of credit: all it did was benefit Bain and its investors.

Compare that to a productive use of credit:  taking on debt to invest in growing the company - installing new equipment and hiring more people to expand the company's capabilities and output, and then using part of the additional profits to pay off the debt.

Romney intends to bring the first (Bain) model to the US economy if elected.  He is promising he will add to the US debt burden by cutting taxes on the wealthy - so paying off his "investors" - with no benefit to the US economy.  And he is also promising to "cut spending" - i.e. put people put of work.  [There are three ways the Federal government can cut spending:  lay off government employees; cut purchases of goods and services (meaning the suppliers of goods and services will lose business, and lay off workers); and cut transfer payments like food stamps and unemployment benefits (meaning less money being spent, businesses suffering, and workers being laid off]. So "cutting spending" translates into adding to the unemployed - at a time when we have over 20 million unemployed or underemployed.  And the newly unemployed would not be spending - further exacerbating the low demand that is the drag on the economy at the moment, and threatening to send us right back into recession.

Contrast that with the Obama suggestion:  cut (temporarily) taxes on lower income people who will actually go out and spend the little extra income in their pockets, hire back state and local employees who will have incomes to spend, so generating more demand so businesses can expand and hire more workers, and infrastructure products that will help keep the travel and communications needed in our future economy while putting people to work right now.

So, yes, both candidates suggest increasing our country's debt.  But Obama is suggesting a productive use of borrowed money to put people to work and invest in our future, while Romney is suggesting an unproductive use while at the same time diminishing our economic output.

You'd think that it would be a no-brainer for the Democrats to contrast the two approaches, and to show how Romney's "business" approach would be disastrous for our country.  But right now they're quibbling over when Romney left Bain - 1999 or 2002.   Urgghh!


Update 7/18


Well - the "quibble" does seem to be working for them.  Turns out the issue of when Romney left Bain is exposing Romney's propensity for falsehood.

Kernen's Inability to Comprehend

I see that Joe Kernen is claiming that Paul Krugman called him or his colleagues a zombie, and that he thinks Krugman calls anyone who disagrees with him a zombie.  He is calling for an apology.

What Krugman was referring to were zombie ideas, that is, ideas that have been proven wrong over and over, so you would think would be dead by now, yet they keep coming back.  Zombie is a metaphor here, one that Krugman uses often, for ideas that should have been long since discredited, yet keep getting spread by the Joe Kernans of the world.  And yes, Mr. Kernan was spouting zombie ideas on this program, so the characterization was certainly apt.

That Mr. Kernan could not understand the simple concept of what the expression "zombie idea" means is indicative of Mr. Kernan's general inability to comprehend economic concepts.  And if anyone should apologize, it is Mr. Kernan for his failure to allow his guest on the program time to explain his ideas:  almost every time Mr. Krugman began an explanation, he was interrupted by hectoring from Mr. Kernan.

Mr. Kernan followed up with these tweets:

Krugman blogs "Zombies on CNBC" after interview. Dismissed every fact he didn't like as "myth".


Said 50 percent of GDP was the acceptable level of US government spending. Best economy in his words a "Free Market Welfare State"

So when Mr. Krugman correctly points out that one of Mr. Kernan's ideas is a myth, Mr. Kernan's reply on his tweet is that his idea is a "fact." A perfect illustration of clinging to a zombie idea.

And Mr. Krugman did not, as Mr. Kernans tweet suggests, say that 50% of GDP was THE acceptable level of government spending: he said that he would be concerned if it were to get above 50%, but Mr. Kernan did not give him a chance to explain what he thought an appropriate percentage would in fact be. I imagine Mr. Krugman would have pointed out that the percentage of government spending would depend on the business cycle: a lower percentage when the economy was expanding well, a higher percentage during depressions to stimulate the economy back to growth. Again, a simple concept that seems beyond the capability of Mr. Kernan to grasp.

Update:  for a model of how an interview should be conducted, see here and here.

Krugman at the LSE

If policy makers had ever asked me for advice on the economy,
I would have told them: listen to Krugman.

Here's an opportunity for all of us to listen to what he has to say.  (Some interruptions at the beginning over projection problems, but gets rolling after that.)

And why listen to Krugman?  Well, this for a start.