Re: [Pen-l] Krugman: This is really, really bad

["Craig Freedman" <Craig.Freedman@xxxxxxxxxxxxx>]

Not really. The Ministry of Finance pushed fiscal consolidation for 1997
and afterwards fiscal policy was never expansive. Monetary policy until
the advent of a new head of the Bank of Japan in 2002 was very
stop/start. Expansionary policy would be followed by credit tightening,
ostensibly to prevent potential inflation. Only in the immediate
aftermath of the bubble collapsing was there anything like expansionary
policy. It wasn't a case of the policy elite's economists not having
political clout. 

Craig Freedman
>>> Jim Devine <jdevine03@xxxxxxxxx> 02/09/09 3:10 PM >>>
maybe this is what happened in Japan. The policy elite's economists
knew what to do when _their_ bubble economy popped, but they didn't
have the political clout to pull it off.

On Sun, Feb 8, 2009 at 6:22 AM, Louis Proyect <lnp3@xxxxxxxxx> wrote:
> Paul Krugman - New York Times Blog
> February 7, 2009, 5:36 pm
> What the centrists have wrought
>
> I'm still working on the numbers, but I've gotten a fair number of
requests
> for comment on the Senate version of the stimulus.
>
> The short answer: to appease the centrists, a plan that was already
too
> small and too focused on ineffective tax cuts has been made
significantly
> smaller, and even more focused on tax cuts.
>
> According to the CBO's estimates, we're facing an output shortfall of
almost
> 14% of GDP over the next two years, or around $2 trillion. Others,
such as
> Goldman Sachs, are even more pessimistic. So the original $800 billion
plan
> was too small, especially because a substantial share consisted of tax
cuts
> that probably would have added little to demand. The plan should have
been
> at least 50% larger.
>
> Now the centrists have shaved off $86 billion in spending â much of it
among
> the most effective and most needed parts of the plan. In particular,
aid to
> state governments, which are in desperate straits, is both fast â
because it
> prevents spending cuts rather than having to start up new projects â
and
> effective, because it would in fact be spent; plus state and local
> governments are cutting back on essentials, so the social value of
this
> spending would be high. But in the name of mighty centrism, $40
billion of
> that aid has been cut out.
>
> My first cut says that the changes to the Senate bill will ensure that
we
> have at least 600,000 fewer Americans employed over the next two
years.
>
> The real question now is whether Obama will be able to come back for
more
> once it's clear that the plan is way inadequate. My guess is no. This
is
> really, really bad.
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-- 
Jim Devine / "Disbelief in magic can force a poor soul into believing
in government and business."  -- Tom Robbins
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