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Compromising Our Way Into Debt

Compromise. It’s what we all say we want out of our leaders in Washington.

But what is the current compromise on the Bush Tax Cuts? Well, not to resolve the issue, certainly. Better to simply kick the can down the road two more years – continuing to borrow money for rich people’s tax cuts, in other words – while at the same time extending unemployment benefits yet again.

How much worse could a compromise possibly be? Not only is it “Not 100% of What [Barack Obama] Want[s] or What the Republicans Want,” its really not anything that either side wants at all. For Democrats, its kicking themselves in the ass in two years time – when another election coincides with another vote on raising taxes – in exchange for a few extra months of unemployment insurance that is a practical vote of no confidence in their ability to lead. For Republicans, its a capitulation on unemployment insurance in exchange for a continued higher national debt.

On the other hand, there is no scenario under which taxes increase that doesn’t make Democrats look bad as the majority party. Paul Krugman‘s idea of letting everything expire and then letting the Republicans try to talk their way out of it ignores the fact that this is precisely what they’re good at.

The dysfunction in Washington seems to have no bounds whatsoever.

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A Bad Plan

Paul Krugman checks in with a well-constructed, common sense explanation for why the recently-leaked Geithner plan is a crappy one. Basically, the plan only works if there isn’t any underlying problem beyond a market panic, which I think any reasonable person paying a modest amount of attention has to realize is simply not the case.

I’ve always admired Barack Obama for his ability to surround himself with good people who are competent at what they do. His financial team makes plain the down-side of this: without good people, he’s stuck in the mud on the most pressing issue of our day.

Finally for this post, let me also counterbalance these negative thoughts with ones perhaps more calm: the man’s been at work for not quite 60 days. There’s time for him to get things right and maybe if enough smart people tell him what a mistake this plan is – Krugman, Baker, I’m looking in your direction – he can reverse course. The media’s insistence on drumming up fears for the sake of ratings notwithstanding, we’ve managed to bumble along for five months without a permanent solution. I’m sure a little bit more time is not going to break us.

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Krugman on AIG and Obama

Clearly, Paul Krugman is in no mood to be charitable to the Obama Administration or Tim Geithner. Not that there’s very much reason to be charitable to an administration that’s floundering badly right now.

There’s gotta be some people who know what the hell they’re doing with money who aren’t still sucking the balls of the Captains of Industry, right? Someone else who can steer the Treasury in a way that benefits someone other than the banks?

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Paul Krugman on Why Spending Can Outlast the Recession

As always, an interesting and enlightening post from Paul Krugman on why the stimulus spending can outlast the official recession without worrying about whether it’ll do more harm than good. In short, and lamentably: because the employment problems of the large mass of Americans are doubtless going to stick with us long after the bean counters declare the recession over. He puts it at about 2011.

By the way, while I realize that his Nobel prize was about actual theoretical economics, I think he deserves an extra reward for being that smart and still being able to explain it to the rest of us.

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Words Are Not Deeds

Paul Krugman picks up on something that The Daily Show also echoed: that the words Barack Obama spoke in his inauguration speech were similar to those of George Bush. Krugman also goes slightly farther to include Bill Clinton in that mix.

Yes it is true. All three men have said things which look similar when you put them on paper. But words are not deeds, as every critic of Obama’s throughout the campaign has noted. Does anyone out there ever recall a moment when George Bush actually sounded like he meant anything he said? With the possible exception of the days immediately following 9/11, I don’t think I can come up with any.

That’s because at the very same time he spoke about responsibility, he was doing things in direct contradiction to his words. Its because when he says we don’t torture, it’s at the same time as we know we are torturing. It’s because he gave tax cuts to the rich while claiming it was about the Middle Class. And in the case of things like the Clean Air Act, the Patriot Act and many others, the previous Republican administration and Congress actually went out of it’s way to very specifically mislead the public in order to advance it’s agenda. Therefore, the words of George Bush are at no time in his administration worth considering as either fact or a genuine reflection of his intent.

Barack Obama, by contrast, owes his presidency in a very real sense to the personal responsibility of his supporters. It was the sense of duty that pushed people to knock on doors or make phone calls or create art or write songs that pushed him over the top. His grassroots campaigning has always been about inspiring people to action. . . and it worked. There is absolutely no reason to think that his call to action now won’t be followed up by very specific measures just like it was in the campaign.

That’s the difference.

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Credit Markets Still All Gummed Up

As the media continues to watch the Dow like a bunch of penguins at a ping-pong tournament, Calculated Risk and other smart economic minds you may have heard of keep their eyes on the real action in the LIBOR and TED spreads. Along with a few other choice indicators.

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The Sunnier Side of Paul Krugman

Mind you, I can’t find fault with anything he’s saying, here.  And that’s the part I find most amazing of all.

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The Monetary Side

OK, it took me three reads to get to where I thought I understood this article from Paul Krugman, but it’s worth understanding the montetary policy side of the current financial crisis.  Typically, when the economy gets into trouble, The Fed simply produces more money, which increases inflation and helps bouy unstable markets.

That’s what they usually do.  However, in this case the T-bill market is in bad enough shape that it’s not capable of helping out in any way.  Krugman does a really wonky job of explaining it.  It’s worth the multiple reads, honest.