When historians look back at 2008-10, what will puzzle them most, I believe, is the strange triumph of failed ideas. Free-market fundamentalists have been wrong about everything — yet they now dominate the political scene more thoroughly than ever.Go read the whole article.
How did that happen? How, after runaway banks brought the economy to its knees, did we end up with Ron Paul, who says “I don’t think we need regulators,” about to take over a key House panel overseeing the Fed? How, after the experiences of the Clinton and Bush administrations — the first raised taxes and presided over spectacular job growth; the second cut taxes and presided over anemic growth even before the crisis — did we end up with bipartisan agreement on even more tax cuts?
From my earliest childhood in the 1950s the Great Depression was this horrible event that had caused my maternal grandparent to lose everything and have to leave Little Rock, Arkansas and go back to a small farm and struggle to feed his family. For my paternal grandparent it meant that he lost his various busniesses, and after collecting a lot of IOUs, he one day took them out in his field and burned all the IOUs because he knew he would never collect on them. The depression destroyed all of his wealth, forced him to take in renters and to take on a job with a road construction crew to feed his family. It was a horrible event. But I knew that such a horrible thing could never happen again because we had smarter leaders and the science of economics had made great strides.
But what Paul Krugman points out is that we really haven't made any progress. It is almost a fluke that 2008 didn't start the Great Depression II. Luckily enough leaders knew enough to flood the economy with dollars to keep the bank panic from completely sinking the economy. Instead of having the GDP shrink by 30% it only shrank by 3%. But despite the initial rush to save the economy, Obama in Feb 2009 only asked for a modest stimulus, a too small stimulus, and watched for the next two years as the economy gasped and wheezed while claiming he thought the recovery was "doing fine!". Only with the loss of the 2010 mid-term elections did Obama "notice" that there was near 10% unemployment and an economy projected to grow too slowly to get unemployment down by much over the coming decade.
Now Obama has done a "tax cut" (re-instating the Bush cuts as a second "stimulus" plan) and has expressed confidence that this will do the trick. But most economists outside the White House circle would tell him this $900 billion "stimulus" is mostly money thrown to the wind. The $700 billion given to millionaires and billionaires will do nothing to revive the economy.
So... in my old age I'm watching while a Great Recession shapes up to run for a decade and ruin people's lives. I can't believe that politicians are that stupid. That the Republicans are so venal and corrupt that they would sell their own grandmother (i.e., block all legislation until they got the tax cut for their real constituency of billionaires and millionaires). Incredible.
Here's more from the op-ed about how the economists (especially right wingers) have got it dead wrong:
It’s also worth pointing out that everything the right said about why Obamanomics would fail was wrong. For two years we’ve been warned that government borrowing would send interest rates sky-high; in fact, rates have fluctuated with optimism or pessimism about recovery, but stayed consistently low by historical standards. For two years we’ve been warned that inflation, even hyperinflation, was just around the corner; instead, disinflation has continued, with core inflation — which excludes volatile food and energy prices — now at a half-century low.And Krugman is pointing an accusatory finger at Obama "the compromiser" as an enabler of these "zombie" ideas, the bad, right wing, failed ideas:
The free-market fundamentalists have been as wrong about events abroad as they have about events in America — and suffered equally few consequences. “Ireland,” declared George Osborne in 2006, “stands as a shining example of the art of the possible in long-term economic policymaking.” Whoops. But Mr. Osborne is now Britain’s top economic official.
And in his new position, he’s setting out to emulate the austerity policies Ireland implemented after its bubble burst. After all, conservatives on both sides of the Atlantic spent much of the past year hailing Irish austerity as a resounding success. “The Irish approach worked in 1987-89 — and it’s working now,” declared Alan Reynolds of the Cato Institute last June. Whoops, again.
But such failures don’t seem to matter. To borrow the title of a recent book by the Australian economist John Quiggin on doctrines that the crisis should have killed but didn’t, we’re still — perhaps more than ever — ruled by “zombie economics.” Why?
President Obama, by contrast, has consistently tried to reach across the aisle by lending cover to right-wing myths. He has praised Reagan for restoring American dynamism (when was the last time you heard a Republican praising F.D.R.?), adopted G.O.P. rhetoric about the need for the government to tighten its belt even in the face of recession, offered symbolic freezes on spending and federal wages.I never believed I would live to see what I'm seeing, but tragically I am seeing it, and I'm living through it. Yet another great tragedy caused by political idiocy.
None of this stopped the right from denouncing him as a socialist. But it helped empower bad ideas, in ways that can do quite immediate harm. Right now Mr. Obama is hailing the tax-cut deal as a boost to the economy — but Republicans are already talking about spending cuts that would offset any positive effects from the deal. And how effectively can he oppose these demands, when he himself has embraced the rhetoric of belt-tightening?
In my youth I watched the US tear itself apart over the bad policy of the Vietnam war that was justified by the ridiculous "domino theory" when in fact audio tapes and memoirs from that era prove that it was Lyndon Johnson haunted by the idea of being "the first President to lose a war" that was the real reason for continuing the fruitless war. For this he sacrified 58,000 lives, 300,000 injured (and millions of Vietnamese). Then Nixon stepped up with a lie and won the 1968 election saying he had a "secret plan to bring peace". His "plan" was to Vietnamize the war and hope that the South Vietnamese with more weapons and more corrupting money would suddenly find the spine to save themselves from the Communists. We all know how "real" that plan was!
I watched Nixon leave in disgrace for corrupting government with his Watergate burglary and his various abuses of power. I thought that cesspit would destroy the Republican party for a generation, but within 4 years after a short Carter presidency, the electorate put the Republican Reagan into power. Yet another politician who lied. He lied that cutting taxes would make the economy grow. He lied that he didn't know that with his left hand he was illegally selling missiles to Iran and with his right hand using these funds to illegally fund the Contras in Nicaragua.
Similarly, I watched the swaggering, ignorant Bush II take power (through a crooked US Supreme Court decision) and watched him destroy the country by bogging it down in two unwinnable wars and then through is idiotic derelatory ideology allow the Wall Street banks to destroy the economy. I thought, that would destroy the Republican party for a generation. But two years later, they win the 2010 mid-term. They are back with the same crazy anti-government rhetoric and an even wilder plan to make the rich richer and fleece the poor. They really are going to dismantle all social programs.
How can a country be that stupid? I am simply amazed. In my youth I naively thought that countries, like people, grow up, grow wiser, learn more, learn their lessons, do better on the second, third and fourth try. Now I know this isn't true. It isn't true for some people and it certainly isn't true for most countries, and specifically it isn't true for the United States. Astounding!