Wednesday, March 20, 2013

Distraction by the Pound Klein


Every time I read the name Ezra Klein I remember Bob Dylan singing of Ezra Pound and T.S. Eliot.


At Mike Norman's, Tom Hickey offers Ezra Klein — Our deficits aren’t as bad as Washington thinks. Titles like that always interest me, but it's a kind of dual fascination. Because the deficits are bad. Or maybe I just watch too much TV.

An excerpt from Tom's excerpt:

Future deficits are a legitimate concern. But as either Yogi Berra or Niels Bohr said, predictions are very difficult, especially about the future. And future deficits are, annoyingly, situated entirely in the future.

I'm torn on this, too. Mini haha is not good argument. But prediction is troublesome, particularly when it contradicts evidence.

That bit of Klein reduces to this: Future deficits are a legitimate concern. But we don't know about the future. And that is true.

However, we do know something of the past.

And that brings me to Paul Krugman, who likes to say that we need bigger deficits now, and we can -- and we should [Krugman adds] -- deal with the Federal deficit later, when the economy is better. But for now [he says] we need bigger deficits.

That's frustrating as hell for me, because in the past, when the economy WAS better, we could not and did not draw down the Federal debt.

Oh, don't tell me about the Clinton years. I know all about the Clinton years, when the budget briefly came into balance. The budget came into balance because of a late '90s "macroeconomic miracle" of economic performance which, though they know it not, was due to the slow growth of private debt since 1986 and the fast growth of circulating money in the early 1990s. I know all about the Clinton years.

That balancing act didn't last, because they didn't know what made it happen in the first place. They couldn't duplicate the results. They tell us they can get growth by cutting the Federal debt and deficit. The fools have it backwards.

You have to reduce private debt first, to get the economy growing. Then the growth makes the Federal deficit fall. That's how it works. That's what gave us the miracle of the late 1990s. Heck, that's what gave us the "golden age" after World War Two. It will work again, if we ever get around to trying it.

In the meanwhile we have Krugman pretending we can balance the budget later. That's why he has no friends on the right. They know what I know about the past. I think Paul Krugman knows, too. I think he's bullshitting. He has an audience: People who do not oppose Federal spending like what he says, and want to buy his bullshit.

Ezra Klein bought it, apparently.


Klein's opening is funny:

This week marks the beginning of the U.S. budget season.... In honor of the season, Americans everywhere will wear traditional budget-season hats and eat the customary budget-season meals, which include, of course, a rich dessert that we assume will be offset by future weight loss.

The next chunk of Klein's article is just stupid. Summarizing "the left-leaning" Michael Linden, who begins with the prediction that "debt in 2037 will be at a truly scary 199 percent of gross domestic product", Klein watches as Linden talks the number down, from 199% to 169%, to 153%, to 112%, to 97%, and finally "to about 71 percent of GDP by 2037" Klein writes, quoting Linden.

Ezra Klein considers Linden's work "a welcome antidote to the deficit hysteria that permeates Washington." But Klein seems to miss the fact that prediction is prediction. It doesn't matter whether you're predicting numbers up or predicting numbers down, prediction is still prediction. I suppose if inflation-going-up is inflation and inflation-going-down is "disinflation", then prediction-going-down could be "disprediction". But it's still prediction, just the same.

After recapping all of that from Linden, Klein says he doesn't buy it. So, why did he present each piece of it in turn? Seven paragraphs Klein used. Plus a graph. To recap something he says he doesn't buy.

Smoke and mirrors, that's why he presents it.

Klein notes that CBO offers two projections. He rejects the high-debt scenario in favor of the "simple, mechanical projection of future deficits based on current law." Basically, he's saying Linden's work is irrelevant. (So again: Why present it?)

It's all a diversion. In his opening remarks, Klein says

Today’s deficits are, if anything, too small.

Like Krugman, Klein wants bigger deficits, for now. But he also says

Future deficits are a legitimate concern.

Like Krugman, he wants to deal with the deficits later.

The smoke and mirrors only serves to distract you from the real issue, which is that when later gets here, we won't be able to balance the budget then, either.

Don't be distracted. You can't balance the budget by cutting the spending. It doesn't work that way. You can only balance the budget by getting the economy to grow. And you can only get the economy to grow by reducing private debt. Take your hundred measures of oil, sit down quickly, and write fifty.

1 comment:

Luke Smith said...

Nice song.

I agree with Krugman, the budget deficit now is not a problem; but if the federal government is going to spend lots of borrowed money, it needs direction. Quite frankly, most effort and focus is welfare oriented (Social Security, Medicare, Medicaid).

Unfocused, visionless federal government spending is dangerous; by the way, today is the 10 year anniversary of the Iraq War.

And Ezra Pound was crazy.