Both Paul Krugman (Nobel Prize Laureate in Economics in 2008) and Bob Herbert are 100% correct. The heartless, braindead Republican Party is a national menace and disgrace and really don't care if the country goes belly up or not so long as the rich and arrogant continue to thrive at our collective expense. President Obama, the Democratic Party, and the rest of us will have to fight these rightwing demagogic bullies tooth and nail for the entire duration of the President's stay in the White House, and if we don't--mark my words--this country will be destroyed...
On the Edge
By PAUL KRUGMAN
New York Times
A not-so-funny thing happened on the way to economic recovery. Over the last two weeks, what should have been a deadly serious debate about how to save an economy in desperate straits turned, instead, into hackneyed political theater, with Republicans spouting all the old clichés about wasteful government spending and the wonders of tax cuts.
It’s as if the dismal economic failure of the last eight years never happened — yet Democrats have, incredibly, been on the defensive. Even if a major stimulus bill does pass the Senate, there’s a real risk that important parts of the original plan, especially aid to state and local governments, will have been emasculated.
Somehow, Washington has lost any sense of what’s at stake — of the reality that we may well be falling into an economic abyss, and that if we do, it will be very hard to get out again.
It’s hard to exaggerate how much economic trouble we’re in. The crisis began with housing, but the implosion of the Bush-era housing bubble has set economic dominoes falling not just in the United States, but around the world.
Consumers, their wealth decimated and their optimism shattered by collapsing home prices and a sliding stock market, have cut back their spending and sharply increased their saving — a good thing in the long run, but a huge blow to the economy right now. Developers of commercial real estate, watching rents fall and financing costs soar, are slashing their investment plans. Businesses are canceling plans to expand capacity, since they aren’t selling enough to use the capacity they have. And exports, which were one of the U.S. economy’s few areas of strength over the past couple of years, are now plunging as the financial crisis hits our trading partners.
Meanwhile, our main line of defense against recessions — the Federal Reserve’s usual ability to support the economy by cutting interest rates — has already been overrun. The Fed has cut the rates it controls basically to zero, yet the economy is still in free fall.
It’s no wonder, then, that most economic forecasts warn that in the absence of government action we’re headed for a deep, prolonged slump. Some private analysts predict double-digit unemployment. The Congressional Budget Office is slightly more sanguine, but its director, nonetheless, recently warned that “absent a change in fiscal policy ... the shortfall in the nation’s output relative to potential levels will be the largest — in duration and depth — since the Depression of the 1930s.”
Worst of all is the possibility that the economy will, as it did in the ’30s, end up stuck in a prolonged deflationary trap.
We’re already closer to outright deflation than at any point since the Great Depression. In particular, the private sector is experiencing widespread wage cuts for the first time since the 1930s, and there will be much more of that if the economy continues to weaken.
As the great American economist Irving Fisher pointed out almost 80 years ago, deflation, once started, tends to feed on itself. As dollar incomes fall in the face of a depressed economy, the burden of debt becomes harder to bear, while the expectation of further price declines discourages investment spending. These effects of deflation depress the economy further, which leads to more deflation, and so on.
And deflationary traps can go on for a long time. Japan experienced a “lost decade” of deflation and stagnation in the 1990s — and the only thing that let Japan escape from its trap was a global boom that boosted the nation’s exports. Who will rescue America from a similar trap now that the whole world is slumping at the same time?
Would the Obama economic plan, if enacted, ensure that America won’t have its own lost decade? Not necessarily: a number of economists, myself included, think the plan falls short and should be substantially bigger. But the Obama plan would certainly improve our odds. And that’s why the efforts of Republicans to make the plan smaller and less effective — to turn it into little more than another round of Bush-style tax cuts — are so destructive.
So what should Mr. Obama do? Count me among those who think that the president made a big mistake in his initial approach, that his attempts to transcend partisanship ended up empowering politicians who take their marching orders from Rush Limbaugh. What matters now, however, is what he does next.
It’s time for Mr. Obama to go on the offensive. Above all, he must not shy away from pointing out that those who stand in the way of his plan, in the name of a discredited economic philosophy, are putting the nation’s future at risk. The American economy is on the edge of catastrophe, and much of the Republican Party is trying to push it over that edge.
Copyright 2009 The New York Times Company
Playing With Fire
By BOB HERBERT
New York Times
February 6, 2009
It was good to see the president, ordinarily so cool, so accommodating, exhibiting some real fire the other night. It seems to have done some good.
With the economy in deep, deep trouble, and Americans suffering by the tens of millions, the Republicans spent much of the week doing their same-old, bad-faith Neanderthal two-step: trying their best to derail the economic stimulus package working its difficult way through Congress.
“This bill is stinking up the place,” said Lindsey Graham, a Republican senator from South Carolina who not only opposed the legislation but wanted to make sure that no one would mistake him for a class act.
One of the goals of the package, of course, is to begin cleaning up the holy mess that resulted from the long, dark night of G.O.P. control in Washington. President Obama went out of his way to get a substantial number of Republicans to make a genuine effort to move the economic revitalization process along, but was rebuffed, and in some cases contemptuously.
On Thursday night, he struck back, attacking Republican intransigence and its failed policies of the past. On Friday morning, with the government reporting that nearly 600,000 more jobs had been lost in January, the president went public again, stressing how irresponsible it would be to do nothing in the face of the growing crisis.
Neither the job losses nor the president’s prodding was enough to prompt much of a response from the Republicans. But by Friday evening, it appeared that a small number of G.O.P. senators, enough to assure Senate passage of a revised (and watered-down) stimulus package by a very slim margin, had come aboard.
But only a small number. Even as the report of an agreement was being circulated, Senator Bob Corker, a Tennessee Republican, was bad-mouthing the package on CNN. “This bill is a disaster,” he said.
It’s been clear for years that the G.O.P. is a party without a heart. But its pointless obstructionism, its overall lack of any serious response to what is a clear national economic emergency, seems to indicate it’s also a party without a brain.
Republicans in Washington have behaved like a milling crowd standing in the way of firefighters trying to respond to a devastating blaze. The best that can be said for the party is that a few senators seem to have been able part the crowd enough to let the rescuers begin to inch forward.
President Obama addressed Republican inflexibility on Thursday night when he said at a gathering in Williamsburg, Va., “Don’t come to the table with the same tired arguments and worn ideas that helped to create this crisis.” He added that without swift action on the stimulus bill, “an economy that is already in crisis will be faced with catastrophe.”
The report of January’s enormous job losses came roughly a dozen hours later. It was the latest in a long and hideous pattern of employment woes, much of it resulting from the G.O.P.’s obsession with destructive supply-side economic voodoo.
On the front page of The Times on Friday was an article that said the number of women on the nation’s payrolls is poised to pass that of men for the first time in American history. This is not because women have been doing so well, but because men have been doing so poorly.
As I was reading the article, I thought of all the guys who used to listen to Rush Limbaugh while driving to or from work but are now tuning in from their living rooms because the benefits of the G.O.P.’s right-wing, tax-cutting ideology never trickled down to them and they are now jobless.
“Since the start of the recession,” as Heidi Shierholz, an economist with the Economic Policy Institute, points out, “the U.S. economy has shed more jobs than the total population of Chicago.”
The Republicans still don’t get it. Most act as if they don’t understand that in this radical economic downturn the demand for goods and services has fallen off a cliff, and that government spending is needed — and needed quickly — to replace a large portion of that lost demand.
The goal is twofold: to alleviate some of the enormous suffering (something that is easily understood if you have a heart), and to revive the battered economy (equally easy to understand by anyone with a brain).
Senator John McCain echoed many of his Republican colleagues on Friday when he indignantly asserted, “This is not a stimulus bill; it is a spending bill.”
It was an objection that had been addressed by an incredulous President Obama on Thursday night. “What do you think a stimulus is?” the president asked, his voice rising. Spending, he said — to laughter from his audience — “is the whole point.”