First, on a question about spending cuts, Kagen touted the cuts to Defense that Secretary Gates recently announced. The only problem is that Gates was merely proposing that the Pentagon shift its spending to where it makes the most sense, not that they actually spend less. Here's what I wrote about these cuts back in August:
Defense Secretary Robert Gates has undertaken an effort to reform the Pentagon's budget. Praise came swiftly, but has been somewhat tempered the last few days. NPR had a story about how taxpayers won't see any benefit, at least not anytime soon, from Gates' plan. This was due to the fact that the cuts will come from programs that the Pentagon thinks are no longer necessary, but the savings will be redirected into programs that the Pentagon thinks are necessary.Spending money wisely is an excellent idea, but it is not the same as a cut in spending.
Next, during a question on job creation, Kagen said, "costs are going up. We've got mild inflation." I'm sure this would come as news to liberal economist and Nobel Laureate Paul Krugman.
The Consumer Price Index for the 12 months ended in September was only 1.1%. The Bureau of Labor Statistics reports, "[o]ver the last 12 months, the index for all items less food and energy rose 0.8 percent, the lowest 12-month increase since March 1961."
And from the New York Times:
In framing his cautious arguments for additional Fed action, Mr. Bernanke said inflation (about half of the implicit target of “about 2 percent or a bit below”) was “too low”So if Kagen can't recognize the fact that we aren't experiencing inflation currently, will he be able to recognize the real thing? Being able to do so could be critical since the Fed is about to embark on a program of money creation explicitly designed to increase the inflation rate.
9 comments:
Well.
You're missing the Big Picture: Kagen is a PROPHET!!
And inflation will be a problem, probably sooner than later.
There has been massive inflation.
Making the classic mistake: seeing only what is seen, and ignoring what is unseen.
In the bust phase of the fed-created business cycle, prices decrease from their artificial highs. This always happens MORE in the capital goods sectors of course, but what are we ignoring?
Why didn't prices FALL, as is the normal state of affairs? Prices RISING during the bust phase at any rate means they are obviously not falling.
That explanation is tantamount to Biden saying the economy is 'getting better' because we 'only'
lost X00,000 jobs.
Steve Kagen is confused on everything that involves basic economics, as is non-economist Krugman.
Kagen's problem is he will talk about waste in the defense budget, but then vote yes on something like the alternate engine for F-35at a cost of 2.9 billion, including 465 million in FY2010 that no one including the Pentagon and the President want.
In order to be an effective Congressmen you have to have the courage to tell your fellow congressmen and lobbyist NO.
Technically we do have very mild inflation so Kagen's words are accurate. If he had said deflation you would have said (correctly) that he was wrong. We are far short of ideal.
D said;
"Steve Kagen is confused on everything that involves basic economics, as is non-economist Krugman."
It is far more likley that you are the one confused, can you claim to be a macro-economist?
Perhaps you should recognise that there is a world of difference between basic economics and macro economics. They are not the same subject.
I'm with Dean.
"Perhaps you should recognise that there is a world of difference between basic economics and macro economics. They are not the same subject"
Disagree entirely. "Macro" is based entirely on the interactions of individuals. Are we still believing in the fiction of 'functions' and 'equations' in the dealing of the (literally) countless subjective valuations of individuals?
Necessarily, 'Macro' deals with the basic laws and principles of 'micro' - luckily, the fallaciously separated parts were integrated over 80 years ago so we can disregard long-since debunked superstitions.
"Technically we do have very mild inflation so Kagen's words are accurate."
If we use the faulty, again long-ago debunked definition of 'inflation' being an increase in the prices of arbitrarily chosen and measured consumer goods. And of course, along the way ignore the basic building blocks of economic law.
"We are far short of ideal."
"Ideal" inflation? This just goes to show how far removed from reality this discussion is. The "Ideal" amount of inflation (in other words robbery and misallocation) is ZERO.
Bring on the obligatory political propaganda disguised as 'economics.'
Good morning D, thanks for the reply.
Gee, maybe an analogy. Do you consider meteorology and climatology to be the same?
Are a carpenter and a homebuilder (developer) the same?
" "Macro" is based entirely on the interactions of individuals. Are we still believing in... 'functions' and 'equations' in the dealing of the (literally) countless subjective valuations of individuals? "
Why yes.
Back to meteorology, air is made up of countless particles, yet the weather is forcast using math functions. Do you deny the utility of math?
Why do you possibly think that zero inflation is ideal? Could you cite a society and time with zero inflation that was fuctioning well?
Money itself is not sacrosanct.
Money is just a lubricant for commerce.
In the world in which we actually live in, zero inflation is not ideal. The equations which you seem to take issue with indicate that zero inflation has an adverse effect on employment and is not ideal or sustainable.
Maybe in your world zero inflation is ideal. But again, don't live in the world you paint for us on a weekly basis D.
Krugman has a comment on his blog that addresses the type of comment by D.
http://krugman.blogs.nytimes.com/
>>>I’m getting some fairly hysterical reactions to today’s column, many of them along the lines of “You’re an idiot — I know what it’s like out there in the real world of business” etc..
The thing is, no amount of experience meeting a payroll helps you understand issues that are critically affected by the way things add up at a macro level. Businesses are open systems; the world economy is a closed system, with feedback effects that are crucial but play no role in ordinary business experience. In particular, an individual businessman, no matter how brilliant, never has to worry about the fact that total income equals total spending, so that if some people spend less, either someone else must spend more, or aggregate income must fall.
This is why we have a field called macroeconomics. Unfortunately, the hard-won insights of macroeconomics are being rejected right now in favor of visceral feelings. And we’ll all pay the price.<<<
Post a Comment