The New Republic

Subsidizing wealthy people's insurance improves the risk pool and makes it more affordable. Also, to the contention that this legislation deterred investment. I'm curious of what Posner makes of data showing business investment is doing relatively well. http://krugman.blogs.nytimes.com/2011/06/21/the-foo-theory-of-investment/ http://macroblog.typepad.com/macroblog/2011/07/is-consumer-spending-the-problem.html

- darklayers

August 23, 2011 at 12:28am

Posner acknowledges that the immediate problem is lack of consumer demand and acknowledges as well that the only effective answer to that problem would be stimulus spending, but dismisses that solution saying only that stimulus would come "too late." More stimulus spending may be a poltical impossibility--it has likely been rendered such by the Obama administration's stumbling passivity and refusal to advocate for this needed action--but Posner's rejection of stimulus spending doesn't seem be based on any political calculations but instead on some unnamed intrinsic property of stimulus spending that means that even if the president and Congress were fully on board with the need to spend, spend, spend, such spending would come too late to do any good. Why? Posner doesn't explain. Posner's essay has the virtue of acknowledging that we're in deep shit and that none of his suggestions are likely to help us out of the muck, but like his colleauges in this symposium he seems to find it easier to talk about tinkering with the long term fiscal plan than to talk about what to do about the deep hole we're in right now.

- AaronW

August 23, 2011 at 12:48am

Look, so we're in deep s***. Why on earth can't we begin by reversing the Bush Administration's ghastly mistakes? Unless of course they intended to crash the economy - but that's another story. Allow the tax cuts to expire. They haven't created jobs, they've hurt the economy and caused the deficit to skyrocket. Same with the avaricious hunt for borrowers who couldn't afford predatory housing loans, what on earth is so terrible about renting, if over the long run it's actually not as expensive as "owning", which really means, having a mortgage that might be worth more than the property? And paying interest for decades? Work, right now, to help stop the bleeding in the housing market and stabilize it if possible. I don't know why the Obama administration hasn't led better in that area. But, better late than never maybe? And end the wars. We are spending absolute fortunes doing what? There is no money to create a better life for people, animals and environment because we are busy bombing people with no end in sight. We can't figure out something better to do? Also, let's think about the whole consumer economy idea, and about automation, and about profitability vs what makes people and the planet healthy and productive and hopefully, even happy. We've stripped work of its meaning, increasing corporate profits and "productivity" have come at too high a price if they've taken work away from people, and we no longer seem to value and reward excellent work, craftsmanship, art. How much plastic throwaway stuff are we supposed to buy anyway?

- Sophia

August 23, 2011 at 1:33am

SHORT TERM PROBLEMS ARE EASIER TO FIX THAN LONG TERM PROBLEMS. In fact, that's why they become long-term. Take the environment. This is the biggest long-term problem we have, because if seas rise and temperatures warm a few degrees C, many places become uninhabitable and our way of life comes to a halt. Carter tried to lead the way to efficiency and reducing our dependence on foreign oil but this was almost completely reversed by Reagan. Or health care. It took us a century to get a piece of paper that universalizes health care to nearly all Americans (at least in theory) from the halls of Congress to the president's desk. And the additional problem of our health care spending bubble goes unfixed for now, since that's a result of the complexity of our system. And on top of that, we have among the worst obesity rates in the world, a factor that vastly increases the rates of completely preventable and expensive chronic diseases. Education? We only articulated national guidelines within the last 15 years and are now working on a common national curriculum (though there are a couple of holdouts). Our tertiary education system still is the best because of a long lead-time advantage in funding but seems to be choking from lack of affordability. Perhaps one of the best indicators of whether a secondary school student will go to college (or even do well on standardized tests) is the median income of the school district, which suggests that de facto socioeconomic segregation rules our basic avenue for social advancement and equality. Those are the kind of problems that are long-term and difficult to solve, both from a research/theoretical point of view and from a political/practical point of view. The problem that Richard Posner says is nigh insoluble has historical precedent. In fact, it has recent historical precedent in Japan. But let's forget that for a second. Take a look at the unemployment rate from 1932 to 1936. Tell me that didn't go down from 23.2% to 16.9%, or a decrease of 6.3%. Then assure me that the New Deal didn't work again. I thought so. We have to reduce unemployment and increase demand so as to get the economy humming. That will help us slow the increase in our debt. But somehow the public investments we have been avoiding for decades should be done in the future when interest rates are higher and there aren't gobs of unemployed people desperate for a job? Go back to school and take macroeconomics. Preferably not at the University of Chicago. Then let me know whether it makes sense to assume that since a second stimulus (that is exclusively weighted towards infrastructure, job creation, and things with high Keynesian multipliers--not tax cuts) won't solve our problems through 2055, we should just throw up our hands and pretend that nothing can be done about our short-term economic problem, which is somehow more difficult to fix than the long-term ones that have bedevilled us for decades, even though this short-term problem is only about 3 years old (10 if you include the Bush bubble).

- chaitless

August 23, 2011 at 2:13am

Isn't the ACA, the health care reform law that Posener seems to dislike as a complex distraction, in fact one of the principal efforts to get a grip on health care expenditure over time?

- ironyroad

August 23, 2011 at 2:58am

Frankly, this is ridiculous. Posner is a charlatan who has a small vocabulary of economic terms and then pretends to be an economist. The answer to deficits is higher taxation. When the Federal government spends, it issues money. To avoid inflation, it reabsorbs most of that through either taxation or borrowing. Either way, the same amount of money is withdrawn from circulation. It is not that case, as Posner claims, that taxation withdraws spending power but borrowing does not. It is government spending that commands a share of resources, not government financing of its spending. This means that we can eliminate deficits by taxing sufficiently. The only reason we do not is political, that our supply-side wackos, beginning with Reagan and, to no surprise, cheered on by such as University of Chicago reactionaries like Posner, have made taxation taboo, although it is essential for a healthy society. We see this at work in Posner's claim that everyone, regardless of income, should pay some income tax. This is an entirely political claim reflecting Posner's reactionary ideas of political and economic justice. It has nothing whatever to do with economics, one way or the other, with this exception: If you are going to levy taxes with the least adverse impact on consumption spending, then you levy them on those with surpluses they do not spend, the very people whose national income surplus is the opposite side of the government deficit. That means, the wealthiest, those with the highest incomes, not "everyone," regardless of income. We need very much more progressive taxation in this country in order to sustain demand as it is the skewness of income distribution -- the very object and result of supply-side insanity -- that has rendered demand fragile and unsustainable. Undoing the depredations of Bush requires not just letting his tax cuts expire, but moving further in the other direction, lowering middle class taxes and increasing them sharply at the highest level. The answer to the Great Recession is sharply higher government spending, until all productive resources in this country are fully employed. There are successful economies with much higher percentages of government spending than ours. We may have to head there, or not. Perhaps once we have returned to full employment, private demand will recover sufficiently that we do not need to sustain the level of government spending and don't want to. Or perhaps we will have decided that we prefer more public goods to private. Using what Ronnie Reagan Ultra-Galactic Ouiji Board does Posner conclude that government spending is too late? Given that we are headed to a chronic high rate of unemployment and declining per capita GDP, too late for what? To sharply increased government spending and a much more progressive Federal tax system, add one more element, higher inflation. Don't soak up all the dollars printed for government spending. Leave more out there to increase inflation to closer to 5%. The inflation will deflate the value of outstanding debt, both government and consumer and facilitate recovery. Consider it a means of recouping some of the Bush high-end tax cuts that we should never have permitted in the first place. The thing that is so objectionable about Posner, today and every day, is that his writings are politics, his right-wing politics, masquerading as economics. _____________________ Darklayers, "Subsidizing wealthy people's insurance improves the risk pool and makes it more affordable." This is crazy. I cannot begin to count the ways. As for the Krugman piece that you linked, the chart shows clearly the relationship between unemployment and investment. Since investment, being smaller as GDP share than consumption, cannot directly account for higher employment, the investment must be correlated with higher consumption in the ratio of nearly 2:1 consumption to investment. This is a nice back of the envelope demonstration that consumption demand drives investment. The way out is increased demand. The way to increased demand is for the only actor that can autonomously generate demand, the Federal government, to do so. SPEND MONEY! Since investment now is above the curve on the chart, it makes complete nonsense of the claim that Fear of Obama, Uncertainty, Whatever, is depressing investment, the point that Krugman makes. The short response is that everything the right claims about the economy is a self-serving (as in serving the rich) lie. Everything.

- roidubouloi

August 23, 2011 at 6:40am

First smart article in a while. Why not talk about the responsible parties for this Depression? The neocon zionist war machine that has lied to us and caused the wars in Iraq and elsewhere in the ME, costing us thousands of lives and over $2trillion. The crooks on Wall Street, the very same funders of the neocon zionists and the ilk of AIPAC. They have taken the entire country for a ride and with the help of Greenspan and Shlomo Bernanke, have orchestrated the biggest ponzi scheme in the history. If we want to get out of this depression, first thing we need to do is to punish those that are responsible and send the bills to the financiers of those that are responsible.

- MSA70

August 23, 2011 at 7:26am

To his loophole list Posner should have put in first place the tax deductibility of employer-provided health care plans. Some weeks ago the New York Times featured an article listing "tax expenditures", as they are called, and deductible health care premiums topped the list by a wide margin, well ahead of no. 2, the home mortgage interest deduction (try getting THAT one cancelled, and watch the real estate industry scramble its lobbying forces). I hereby apologize to John McCain, who first mentioned this item in the 2008 presidential campaign. He was right, it now seems, to propose that it be cancelled.

- mjhollerich@stthomas.edu

August 23, 2011 at 7:31am

Roi is right on with respect to much of Posner's analysis (like the hoary uncertainty argument).. However, Posner's overall analysis is correct-- Bush and the Repubs created what is now really a Depression-- but BHO and the Blue-Dog Dems have made an inadequate and inept attempt to solve it. All give up hgope of doing anything about it. I agree the hope is small, but the only hope is for Progressive policies and Keynesian economics--- and the only near term hope for vthat is that bthe economic crisis be more ob, and Blue-Dog Dems.vious. ... Hope that comes sooner (for Xmas), than later (for Easter). By Xmas, there is stiill time for Progressives to really challenge Repubs, BHO, and Blue-Dog-type Dems.

- drofnats1

August 23, 2011 at 7:39am

Yesterday's installments in this series, by economists, took a narrow, one subject view (e.g., social security reform), whereas Posner, the lawyer and jurist, gives us the entire tool kit, rejecting many with little or no discussion other than his opinion they won't work or are not politically feasible. I suppose that's the difference between the economist, who must convince his peers, and the jurist, who doesn't. Of course, it isn't surprising that Posner, he being of the Chicago school, would conclude that nothing can save us from doom since it is mostly his intellectual comrades (the freshwater types as PK calls them) who got us into this mess. But Posner's intellectual blinders should not hide his good ideas, starting with Medicare. Means testing does not have to end Medicare. Indeed, I'm convinced that America will not tolerate widespread poverty among the elderly, the motivation for the adoption of social security and Medicare in the first place. Indeed, I can make a persuasive case that means testing Medicare, by more equitably spreading the cost of health care, would actually increase the likelihood of the adoption of a much better health care system, the single-payer system. Posner's essay reveals a double irony: the first, while it's Obama (actually, his advisor) who is credited with the unhelpful expression of not letting a crisis go to waste, it is Posner and his intellectual comrades who are using this crisis to promote their longstanding battle to end social welfare programs; and the second, while Posner and his intellectual comrades have the upper hand today in the public policy debate as the result of the crisis of their making, it is unmasking the stark contrast between the two Americas, the vast majority who derive little benefit but bear most of the burdens and the very few who derive most of the benefits but bear little of the burden, making the eventual outcome far different from what Posner and his intellectual comrades hope for and expect.

- rayward

August 23, 2011 at 7:49am

Until we can get single-payer, like every other civilized country, I am all for means-testing Medicare. An upper income tax by another name. And until we can have truly progressive taxation in this country, I am for means-testing social security too. In fact, we should means test it, period, or take it back through progressive taxation. These will not, however, come close to solving the deficit and have zero to do with getting us out of the Great Recession. So far, every columnist that TNR has posted on the subject of what can be done about he current crisis has answered, "Nothing, let's talk about something else." Then we get a lot of half-baked and flat out backwards economics on the subjects that they prefer to talk about, the deficit, the excuse to do nothing, and long-term productivity, the other excuse to do nothing.

- roidubouloi

August 23, 2011 at 8:09am

Posner is simply wrong. We are in a depression because tens of millions of high-paying jobs have left forever. The people who had those jobs can't practice medicine or write software code. They can only take low-paying service jobs. Remember -- by definition, half of Americans have below-average intelligence. This is a tectonic change. We compensated initially by sending the spouse out to work, then by running ourselves into debt. We have run out of things to do. Either we share the wealth or we settle into being a nation with a small elite class served by a vast army of low-paid service workers.

- Mikelawyr22

August 23, 2011 at 8:20am

"Either we share the wealth or we settle into being a nation with a small elite class served by a vast army of low-paid service workers." You've just described Republican nirvana!

- DAVIDDREIER@EARTHLINK.NET-old

August 23, 2011 at 9:22am

Cross posted from another column: This series of articles displays the complete tone deafness in TNR's guest columnists. TNR's symposium, of which this article is derived, looks like it was sponsored by some right-wing or perhaps a libertarian publication. If this is what passes for the DC-centric progressive/liberal viewpoint then all criticism of the DC elite "progressives", including the president, are fully justified. Either that or TNR is part and parcel of the ruling right-wing oligarchy or completely tone deaf and has zero credibility as a progressive publication.

- tmmats

August 23, 2011 at 9:28am

I was sort of with this guy Posner until he recommended the Paul Ryan plan for "saving" Medicare. No one who supports that idea should be a contributor to TNR. And note that in Posner's suggestions for putting Social Security on a sound footing, he makes no mention of the most obvious solution: eliminating the cap on the amount of income subject to the Social Security tax and applying the tax to all forms of income. If that were done, the overall Social Security tax rate could be reduced. It would be a huge tax cut for the middle class. But, hey, who gives a damn about them?

- DAVIDDREIER@EARTHLINK.NET-old

August 23, 2011 at 9:32am

"So far, every columnist that TNR has posted on the subject of what can be done about he current crisis has answered, "Nothing, let's talk about something else." Then we get a lot of half-baked and flat out backwards economics on the subjects that they prefer to talk about, the deficit, the excuse to do nothing, and long-term productivity, the other excuse to do nothing." Roiduboi nails it here. The problem here is the economy sucks. So far, all the people posting are dodging that topic to propose solutions to other stuff--the deficit, mostly, which would be largely eliminated in the medium term if we fixed the economy and let the Bush tax cuts go to their long-delayed grave. (Yes, there would still be a long-term issue, but that can be tackled, y'know, over the long term.) I am aware of only two proposals out there to fix the economy. Number one is a big dose of Keynesian stimulus, which is the proposal of most economists. Number two is tax cuts, spending cuts, and deregulation, which is the proposal of the Republican Party (and most economists who don't work for a Republican think tank believe it will be disastrous). If anybody has a credible number three, or a clever new way to achieve number one, or at least a reliable way to stave off number two, I'd love to hear it. But I'm getting tired of articles that talk past the problem.

- Dausuul

August 23, 2011 at 10:05am

P.S. When I say "all the people posting," I mean the folks writing these articles. By contrast, most of the people posting comments have their eye on the ball. Perhaps TNR should outsource this series to its own comment section.

- Dausuul

August 23, 2011 at 10:09am

More than 50% don't pay taxes? How can this be? Well, under the Bush Tax Cuts, a married couple can make $86,703 of capital gains and dividends and be at a zero tax. Of course, a wage earner family will be taxed at close to 18%, but they probably did not vote for Bush and, therefore, must be punished.

- Nusholtz

August 23, 2011 at 11:00am

Roi expertly destroys and tnmats is completely right - this piece is mostly right wing nonsense, "uncertainty and shared sacrifice", my a**. Since when? I understand that TNR gives voice to all sides of a debate, but that's not what this is. Posner is a great - if predictable - legal mind, but a not an economist. Who needs more ideology? We can go to the Washington Post or some other rag for right wing dogma. Why offer it here? IF TNR can't muster up the guts to stop pretending that right wing dogma is a viable economic argument, then who will? If the last twenty years aren't a perfect example of what utter bull it all is, then what the heck will it take already?

- WandreyCer

August 23, 2011 at 11:08am

Posner gets this part absolutely correct: "...The roots of this catastrophic situations lie primarily, I think, in the incompetent economic management of the Bush administration and the Federal Reserve. The persistence of the depression, however, is due in part at least to surprising failures of the Obama administration—poor leadership, poor management, the sponsorship of incomprehensibly complex health care and financial regulation laws that have created widespread uncertainty that has discouraged consumption and investment, and the inability to explain the nature of the economy’s problems to the general public. These failures caused the stimulus enacted in February 2009 to be botched in both in its design and its administration, resulting in the discrediting of deficit spending as a response to depression. ..." as does Sophia 08/23/2011 - 1:33am EDT especiallythe part about housing. No one listened to Sheila Bair about housing in 2007, 2008, 2009, 2010, until after she retired in 2011. BTW, in the space of four days, Bank of America changed their APR on cash advances on my Master Card from 10.99% to 18.99%. No explanation, and, since both mailers followed the Fed's announcement they would keep interest rates low/near zero for two years, I think BoA is crazy. Too bad, I was considering a cash advance to buy a refrigertor, vacuum cleaner, garage door and hire a handyman so I can rent (much easier to rent than sell), instead of using savings that are yielding 3.6%. The rental income would pay off the cash advance very quickly. we truly are screwed when BoA decides 18.99% represents an APR based on today's Prime Rate.

- K2K

August 23, 2011 at 11:35am

Once ggain. Those who understand Keynesian economics (the only kind that fit the available data) agree on the sources of the problem-- and the economic solutions. What you all refuse to consider is how to implement effective soulutions -- As opposed to maybe BHO can get a billion in unemployment insurance for 100 billion in tax cuts for thje wealthy. Answer: that ain't gonna happen until you elect those who understand and are will ing to advocate and mplement Keynesian policies. That ain't gonna happen until you replace some Repubs, Blue Dog dems and BHO. You all agree that ain't gonna happen unless something you dont want to even think about happens-- a yet-more-obvious economic crisis. And gfuess vwhat-- that's coming. BHO's debt-limit exytension guaranteed it. And, in all likelyhood, his defeat. With unemployment 9.5-12% or more a year hence, Michelle, Rick, or Sarah will look good compared to BHO .. no matter that their policies would make it worse. If BHO could beat those whackos, so could a Progressive challenger. Probably easier.

- drofnats1

August 23, 2011 at 12:02pm

Mikelawyr22 gets it right, except for the fact that nothing Posner has said is wrong. Posner is 100% right; he said it in his two books published around 2008, and he's still right. I would feel much more comfortable that America would weather this Depression without still more pain inflicted upon us by naifs, and evil courtiers, if he were President. Posner for President 2012!!! We are in an epochal change, the Digital Revolution. It is fully equivalent to the Industrial Revolution. Many jobs in buggy-whips are being lost right now. We'll all figure it out eventually. Those who got rich on the rackets of yesteryear (many fraudulent and technically illegal, particularly in finance, yet unpunished due to lack of enforcement) will seek to stow their wealth. That is where the unemployed will go. Hoarding in T bills has to be discouraged. That's why interest rates are set by the Fed at next to zero. As for the rest, there are no easy answers. We will all make our own answers and it will fall to future historians and writers to summarize for us what we all just did.

- BEANSPOUT

August 23, 2011 at 1:14pm

This is the beginning of an important discussion. We're fooling ourselves if we think we've only just had a recession and are in danger of a second one. It's worse than that, as Posner states. But there are other solutions as well. Cap and Trade could go a long way toward saving us from the brink we're on of a disaster far worse than an economic depression, and generate much-needed revenue. Eliminating the cap on social security payroll taxes for wealthy people would solve the Social Security deficit. Eliminating ALL the Bush tax cuts would have a profound positive impact on the economy. Though I have to say I disagree with some of Posner's proposals; the working poor should not have to pay income taxes on wages that keep them under the poverty level, for example. But my greatest hopes and worst fears are political: a 2012 mandate throwing out the Republican scoundrels is certainly our best hope. And my worst fear is of a Republican president after 2012 throwing all of us off the cliff and burning the house down.

- Erik_S

August 23, 2011 at 1:31pm

I don't think that Posner -- who famously embraced Keynesianism in the pages of this magazine, talks of "depression," and essentially cricizes Obama from the left (i.e., stimulus is good; he's wasn't good enough) -- can be characterized as a "right-wing" "University of Chicago whacko." He's not part of that crowd, intellectually anyway. He wasn't really part of that crowd even before his Keynesian heresy. But.... I agree that he doesn't explain why short-term stimulus now would come "too late." I understand why it's politically impossible, but I don't understand why it's not even theoretically possible, and Posner doesn't explain. I agree that he slips a non-economic judgment about fairness of taxation -- everyone should pay some federal income taxes -- into his argument without elaboration. I agree that his invocation of businesses' fear of the complexity of the health care reform act is unpersuasive, but that was wasn't the main point of his explanation for the continued depressed economy. He focused on the usual suspects that liberals focus on. I agree that his invocation of the Ryan plan is unfortunate, but I don't read him to endorse the the effect of Ryan's specific proposal -- denying care to those who can't afford it. Posner focuses on "entitlement reform," but in a way that amounts to, as roid points out, progressive taxation -- that is, tax the wealthy to pay for it, but withhold the benefit because they don't need it.

- JakeH

August 23, 2011 at 2:06pm

The whole of it makes no sense to me. Wrong problem. Wrong solutions to the wrong problem. Misconceptions abounding. Confusion between political and economic claims. And no attempt to justify any of it.

- roidubouloi

August 23, 2011 at 2:22pm

"Everyone with an income should pay income tax equal to a modest percentage of his income." Even persons (families) whose income is under the poverty level? The Judge is repeating the same tired old tea party refrain. Low income persons are paying a greater portion of their income in highly regressive sale and payroll taxes than persons with higher incomes that pay income tax. It's the total tax rate that should be fair and progressive, not just the income tax.

- waroberts

August 23, 2011 at 2:51pm

Roid: Why do you say every civilized country has single payer? Japan doesn't, Germany doesn't, ditto for Switzerland, the Netherlands and others. They have universal coverage, but not single payer.

- ballston

August 23, 2011 at 4:14pm

I'm being too loose, ballston. As I have written in numerous comments on the subject, it doesn't actually matter who writes the check. What matters is that there is a monopsonistic buyer determining the cost in relation to clinical conditions although various aspects can be de-centralized. This exists in the Netherlands and wiki says this about Germany: "Since 1976 the government has convened an annual commission, composed of representatives of business, labor, physicians, hospitals, and insurance and pharmaceutical industries.[72] The commission takes into account government policies and makes recommendations to regional associations with respect to overall expenditure targets. In 1986 expenditure caps were implemented and were tied to the age of the local population as well as the overall wage increases. Although reimbursement of providers is on a fee-for-service basis the amount to be reimbursed for each service is determined retrospectively to ensure that spending targets are not exceeded." Of Japan it says this: The health care system in Japan provides healthcare services, including screening examinations, prenatal care and infectious disease control, with the patient accepting responsibility for 30% of these costs while the government pays the remaining 70%. Payment for personal medical services is offered through a universal health care insurance system that provides relative equality of access, with fees set by a government committee. Of Switzerland: Swiss are required to purchase basic health insurance, which covers a range of treatments detailed in the Federal Act. It is therefore the same throughout the country and avoids double standards in healthcare. Insurers are required to offer this basic insurance to everyone, regardless of age or medical condition. They are not allowed to make a profit off this basic insurance, but can on supplemental plans.[1] . . . The insured person has full freedom of choice among the recognised healthcare providers competent to treat their condition (in his region) on the understanding that the costs are covered by the insurance up to the level of the official tariff. There is freedom of choice when selecting an insurance company (provided it is an officially registered caisse-maladie or a private insurance company authorised by the Federal Act) to which one pays a premium, usually on a monthly basis. The list of officially-approved insurance companies can be obtained from the cantonal authority. _____________________ They all share the feature of a monopsonistic buyer, the government, regulating costs -- prices and compensated utilization -- directly although there are a variety of administrative structures and different aspects may be centralized or decentralized. I should be more careful about using the term single-payer, but the main point is that, in all these systems, the price and the compensated utilization are determined by government, not by the market and not by the healthcare providers.

- roidubouloi

August 23, 2011 at 4:57pm

Finally, a TNR contributor who is actually calling the Great Recession what it really is: another Great Depression.

- rewiredhogdog

August 23, 2011 at 5:07pm

Actually ballston, roid is correct. Single payer equates to monopoly buyer. And the government is the major stakeholder in each case you cite. You are really arguing a distinction without a real difference. Like not calling it calling taxes, but rather revenue enhancers.

- drofnats1

August 23, 2011 at 5:36pm

roid. Like JakeH, I think that Posner's overall statement of the problem is correct. Like Jake and you, I agree that Posner's economic solutions are a conceptual mess. Among other things, it's never too late for a stimulus (Example:Our entry into WWII eas indeed 12 years after 1929). But dont you agree that BHO's economic plan has been a conceptual and policy mess? Inadequate stimulus touted as just right, major emphasis for over a year on debt reduction in the middle of a recession/depression , weak job proposals, etc. You eager to wait another 9 years for an effective Keynesian stimulus?

- drofnats1

August 23, 2011 at 5:54pm

Whatever Posner's arguments may amount to (I happen to think his argument about our long-term problems with indebtedness is right on), I'm glad somebody is using the D-word. I do think we are in a bona-fide depression, with different features than the Great Depression which is strangling job growth. We'll be in the same situation or worse a year from now and indefinitely. Strangely enough, most people haven't got the message that paying off personal credit debt should be first priority, forgetting actual saving until that debt is paid off. It's going to take the better part of this decade to pull out of the economic slump we're in. In my book that's a depression with a capital 'D.'

- Tgossard

August 23, 2011 at 6:12pm

I meant forsaking not "forgetting."

- Tgossard

August 23, 2011 at 6:16pm

Agree with the above comments on taxing the poor. Seriously, I wonder if the well-to-do including professors, so forth, understand that poor people are REALLY POOR and that every penny counts? Plus as pointed out above, we're already regressively taxed. Fixing the tax situation would definitely be a step in the right direction. A starving artist or minimum wage worker, a cab driver, Walmart clerk shouldn't have to pay more income taxes than General Electric. I do agree though with means-testing benefit and safety net programs, perhaps all could receive benefits but the more wealthy could contribute a bit more and receive a bit less? Spiraling health care costs, regardless, would be better controlled without insurance company profits and overhead figured in. IE we should please go to universal payer asap. The health care issue is destroying worker initiative, bankrupting people, discouraging small businesses and depressing creativity.

- Sophia

August 23, 2011 at 7:16pm

drof, I don't know that I would say that Obama's policies have been a conceptual mess as much that they have been marked by excessive timidity. The right general direction for the most part, but so compromised as to be marginally effective at best. The stimulus was both too small and freighted with very inefficient tax cuts making the whole less than 1/3 or even 1/4 what it should have been. The re-regulation of finance was wholly inadequate, failing to address the greatest threat, off-balance sheet leverage. The finance bail-out did not hold shareholders, bondholders, and management to account, something I argued for vociferously at the time. In contrast, GM's shareholders were wiped out and the bondholders were hit hard. The ACA is a Rube Goldberg contraption. Spending cuts not once but twice (or is it three times) when what we need are spending increases. Renewing the Bush tax cuts. The debt ceiling debacle. In each case, the things Obama said he wanted to do were correct, but he didn't do them, and I don't think he fought for them. wkwami would say he got the best possible deal under the circumstances. Leaving that aside, the sum of it is very much too little. His greatest political failure, in my opinion, was giving affirmation, repeatedly, to the Republican narrative that the deficit is our greatest problem. That alone in my estimation severely limited what he could then achieve and has given the Republicans a club with which to beat him and us. Do I see an alternative to Obama? No. I don't, despite my enormous disappointment.

- roidubouloi

August 23, 2011 at 7:48pm

I agree with rewiredhog. I have been saying we are in the Second Great Depression for at least a year. I am not happy to be correct. Dauusul says, "Perhaps TNR should outsource this series to its own comment section." There is no doubt about it. The comment posters for TNR are the most intelligent, perceptive, and sensible people in the universe. Let's impeach the President, Congress, and the SCOTUS and appoint the TNR comment posters to run the country (if not the world, or perhaps the Solar System, or why think small, the galaxy)? The brilliance shining from my monitor at this moment is overwhelming, and I am going to shut down my computer before I am struck blind. Let me know when the coup has taken place, and what my position in the new regime will be. All hail...us!

- skahn

August 23, 2011 at 8:46pm

Good to see some original fresh content here. Judge Posner has provided a well thought out piece. Not as good in reporting or organization as some of Judis or Scrieber's work, but clear, direct and bloggy. Judge Posner is closer to the truth than most folks aknowledge right now. If we are not in Depression Economics, we are close. My argument is that there is something we can do, and should do, to get the economy rolling. I view the current problem in America as high wages & benefits. These are fueling a lot of the problems with Exports from China to Federal & State defeciets. High wages spread across the economy and lead to inefficiencies when these folks began to spend this money. My proposal is to start a reduction in the wages and benefits of Public Workers. By reducing direct wages by 10-15%, and reducing benefits by 20-25%, the government is freeing up money for other uses. It provides a cover to industry and acadamia to lower their employment costs. It would cut off a lot of discretionary spending, but most likely would effect the inefficient areas of the economy more than the necessary housing, utilities and base food markets. There is a risk of deflation, and politically it is not popular. But it could be the jolt the economy needs to get restarted. There is a lot of support for cutting wages of public workers, and union contracts are always coming up. Balancing white collar and represented pay cuts are possible and would restore a little sympathy for government workers. Something can be done.

- CRS9TNR

August 23, 2011 at 9:05pm

Yeah, well, something can be done, but cutting labor income isn't it. That is the neo-Classical claim, that unemployment is due to wages being too high and it is drop-dead wrong. First, a major drag on the economy is the overhang of consumer debt, mortgage and credit card. Reducing labor income goes backwards because it inflates the value of the debt rather than deflates it which is what we need. Second, the neo-Classical notion that labor is just like any other good -- drop the price and consumption goes up -- is wrong because it fails to account for the fact that these goods are also the spenders that drive most of the economy. Take money out of their pockets and demand, already weak, crashes. Sorry, CRS, but this is 19th century (and University of Chicago) economics and it is a total failure. We have evidence of this right now in our own economy. Profits are very high despite the slow economy. Since we are not in a boom, operating above normal capacity, the only other explanation is that the wage share of output is abnormally low. According to you, this should be sparking a resurgence, but nothing of the kind is happening. That's because you have it backwards. The extra money in the pockets of the investing class that is not about to invest it in the absence of demand only makes things worse. We can either pass out money to labor or have the government spend it to get the economy going. While we are at it, we should encourage inflation to deflate the debt and the cash hoard of corporations, encouraging them to spend it before it gets to be worth a lot less. Which is also why Judge Posner is much further from the truth than you might imagine. He is not wrong to say this is a depression, but he has not a clue what that implies for economic policy. Next.

- roidubouloi

August 23, 2011 at 9:51pm

Roid- Fwiw, I agree with every word of your last post. As much as it pains me to say it, I would seriously consider a primary challenge by someone who could persuade me that they could bring the narrative back to where it should be. Regarding Posner's contention that we are in a "depression" rather than a "recession," isn't that, at best, irrelevant to a serious analysis of how we should address our economic distress, and, at worst, irresponsible? If the notion that we are in another Depression were to gain currency, wouldn't that have a profoundly deleterious effect on any potential recovery? Dhurtado

- NR143296

August 23, 2011 at 9:55pm

That's right, CRS, the one thing the economy really needs now is even more people with suddenly less disposable income to create demand. Perhaps the reason it wouldn't be "politically popular" is that the stores and businesses and enterprises in which the affected public sector workers spend their money aren't stupid? Those salaries are the income of those stores and businesses and enterprises, and they know it.

- ironyroad

August 23, 2011 at 10:46pm

I understand the appeal of a primary challenge, Dhurtado, but I think it would just be a setback. When the party picks a candidate, it really is for two runs. With all the disappointments, changing horses in midstream is really for the extreme emergencies. I agree with you that the nomenclature is irrelevant to the solutions as they are the same in either case. But perhaps the recognition of something much more serious than a normal recession would serve to galvanize a sense of urgency that seems to be lacking. It could have a negative effect on confidence, I suppose, but given that we are in a sort of stable, low equilibrium, I doubt it. Now, however, we are out of the realm of economics and politics and into crowd psychology, about which I know not much.

- roidubouloi

August 23, 2011 at 11:06pm

Roi. Your comments are well considered. However, consider re-electing BHO. At best-- he wins re-election. His coattails are now nil. He will not bring in Progressives to the House or Senate. He is not capable of dealing with intractable opposition. If a yet-more severe economic crisis does not happen before his election, it will soon after. And he and the Repubs and Blue Dogs will do next to nothing so long as BHO is President. BHO advocates debt reduction measures in a recession.. while occasionally talking small strimulus. That is at best economically incoherent. I too like BHO. I supported him since 2008. He is bright and articulate. But he has the wrong personality and policies for the crisis of his times.

- drofnats1

August 23, 2011 at 11:44pm

I think you are probably right, roi, about a primary challenge. You will note that I set the bar fairly high for my willingness to consider it. I know not much about either economics or mass psychology, but I would think that the latter is part of the former. It surprises me that there is so little discussion these days of the role psychology plays in driving or suppressing consumption/demand. In fact, putting money in consumers' hands is only half the story of a Keynesian stimulus isn't it? Isn't the other half the consumer confidence that is created when the government injects money into the economy while announcing that it will stimulate the economy? Isn't that at least in part what drives consumers to spend the additional money rather than save it? Dhurtado

- NR143296

August 24, 2011 at 1:10am

I think that's very true (psychological factors impact the economy). It's almost as though the Republican carping on How Doomed We Are Because Of The Deficit And Of Course Things Like Medicare And Unions, so forth (high wages indeed!) has killed the recovery. Since they've gotten into power we've been treated to the appalling spectacle of the House passing the Ryan budget, the Tea Party, secessionists, anti-science freaks, Governors (who are popular in national polls yet) leading MASS PRAYER RALLIES to pray for rain...for heaven's sake - and of course playing chicken with the debt ceiling which has made the rest of world think we are nuts. Obviously this has affected the economy. In fact, I'd say in order to improve our national lot in life, at some point somebody has to confront this religious stuff. I never would have imagined that evangelicals would obtain any nationally significant numbers yet alone use their belief system to gain political power. But since they have, we should start rethinking the taxation of these churches. They are really making political speech and political policy while at the same time threatening to drive us back to the Middle Ages. Alas this would then apply to all churches, synagogues, temples, mosques but so what. Religion and other forms of magical thinking are not helping matters especially when it comes to the environment but also, in many cases, basic human rights. Much of what is said and done in the name of religion is not only bad for business it's bad for everybody. And in fact - religion IS a business. Beyond that, a core Constitutional principle is impacted when religious groups become political groups. We have no problem discussing "Islamism," the Right is horrified at the idea of Shari'a law; well, what are they doing, stripping women of our rights, the planet of any protection, seriously claiming that evolution is of the same educational value as "creationism"? This is threatening us on many levels, including economics - so the quickest solution would be to simply call it out and call it what it is: political power and money masquerading as private religious belief. Tax it. Win/win.

- Sophia

August 24, 2011 at 3:03am

Here's Krugman on the Swiss health model: http://www.nytimes.com/2009/08/17/opinion/17krugman. We can agree or disagree on whether single payer is the right term for this, but it's a viable model which according to Krugman "relies on private insurance companies, using a combination of regulation and subsidies to ensure that everyone is covered." He also says "the Massachusetts health reform more or less follows the Swiss model...." As for Obamacare, "basically, it's a plan to Swissify America, using regulation and subsidies to ensure universal coverage."

- ballston

August 24, 2011 at 9:06am

drof, I do consider Obama to have turned out to be the wrong person in the wrong place. Not the personality type we needed, although perhaps he would have been had we not hit an economic crisis. But then, he also might not have been elected. In any case, I am hugely disappointed. My problem with going in another direction is this: When Bush II stole his way into office, a friend of mine was despairing. I said she should not worry, the Republicans would over-reach and be thrown out. The only question, said I, was how much damage they would do before that happened. In my wildest imagination, I never dreamt of the extent of the damage that Bush II would do. I am, quite frankly, terrified of the damage another round of Republican governance would do to the country. We are wealthy and resilient, but not divinely blessed as some would have it. I am not sure how much we can take before there is a downward spiral from which we will not recover in a lifetime, which means perhaps not at all. I think we are moving faster and faster toward a society that consists of a handful of über-wealthy, a curtilage of an upper-middle class, and a vast number of struggling people, the former middle class, with few prospects. At the same time, our democracy is being, or is already, hollowed out by the power of money, a simulacrum of democracy. We are becoming a banana republic. I don't know that the answer is for things to get as bad as possible, by electing Republicans, before they get better. And I believe that the numbers show that Obama's chances are still the best by virtue of incumbency and his personal popularity. Even if he ends up being nothing more than the boy with his finger in the dike, the alternative could be much, much worse.

- roidubouloi

August 24, 2011 at 9:16am

Universal coverage is a different issue, ballston. If we cannot control costs, then universal coverage will only break the bank faster. My understanding of Obamacare is that that is exactly what it is designed to do, give everyone coverage and threaten to break the bank so quickly that the alternatives are either to eliminate healthcare for vast numbers of people or force us to adopt some type of direct government control of costs. The Swiss have that. I don't see that Massachusetts does because that is considered verboten in America. Mass my have a similar formal structure, but without the key element, it is not going to rein in costs.

- roidubouloi

August 24, 2011 at 9:20am

Keynes himself sort of threw up his hands at the mass psychology part, Dhurtado, just labeling it "animal spirits" and leaving it at that. A real Keynesian stimulus tries to minimizing savings by direct employment of resources rather than passing out money. This is indeed a good part of why the Obama stimulus was inadequate, not only too small, but loaded up with un-Keynesian tax cuts courtesy of the wacko right-wing. Then, of course, having done its best to render the stimulus far too small, the right complains that it failed. Actually, it succeeded in stopping a free-fall, but it was not enough to kick a robust recovery.

- roidubouloi

August 24, 2011 at 9:24am

Hmmm ... roid. I have not read Keynes' works, but it has always been my impression that Keynes regarded "animal spirits," i.e., psycholody, to be integral to his theories, and that it was not something that he simply brushed aside. Am I wrong? And while it is certainly preferable for a stimulus to involve the government itself as both a consumer and an investor, rather than direct payments to consumers, the operative principle is still that money reaches the hands of consumers (by means of their being employed), which in turn stimulates demand. Certainly psychology (confidence, if you will), plays a large role in determining the extent to which consumers save or spend the new income. Dhurtado

- NR143296

August 24, 2011 at 9:54am

Oh, he thought it was very important, he just didn't know what to say about it. So, he just gave it the label "animal spirits" and moved on to talk about other things. Yes, increasing employment increases both confidence and spending. If people see the economy rising, they are less afraid to spend the money they have. It is a virtuous cycle, the opposite of the one that leads to depression. This is why it is referred to as "stimulus." I think this is, however, poor language, as it assumes that the government spending has to disappear as soon as possible, that it is supposed to "stimulate" the economy and quick go away. But if we have idle resources, there is every good reason to put them to work building and doing things from which society benefits, for as long as unemployment remains above its full-employment level. As the gap between capacity and output shrinks and pressure for private spending grows, we can then reduce government spending if we want more private goods and fewer public goods. The whole supply side notion that there is some arbitrary line of too much in the way of public goods and too little in the way of private goods is crazy.

- roidubouloi

August 24, 2011 at 10:05am

Why can't somebody explain this, as simply and eloquently as Roi has done, on CNN? "The whole supply side notion that there is some arbitrary line of too much in the way of public goods and too little in the way of private goods is crazy." I honestly don't think people understand the economic arguments here. What they see is the finger-pointing, the shouting, progressives being labeled pinkos, community organizers, poor people characterized as "parasites," and nobody gets what the real argument is about and how it doesn't make sense when you spell it out.

- Sophia

August 24, 2011 at 12:36pm

roi, I agree with your assessment of our economic drift: rich-get-richer poor-get-poorer. Interestingly, Jesus said as much, and he was absolutely right, really a summary of millenia of Jewish experience. It's a truism economically as well as an analogy for the spiritual life. The problem is drift, not so much a malevolent plot but the way matters take their own course. It is why Marx's analysis was correct. He merely stated empirically what he found in economies and societies throughout history. It was as true of the Soviet Communist economy as it is of ours today. The problem is drift. The Tea-Party conservatives simply clear away all obstacles so the drift can proceed unhindered.

- Tgossard

August 24, 2011 at 12:54pm

The problem, Sophia, is that Keynesian economics is counter-intuitive to a lot of people. They hear slogans such as "the government has to learn to live within its means, just like you and I have to live within our means," or that the huge national debt is crushing us and is the cause of our economic woes, and it makes sense to them on a superficial level. I have had reasonably intelligent people look at me like I am crazy when I postulate that a household is different than a government, and that a household micro-economy is different than a macro-economy. The idea that government should operate under a large deficit and indeed increase its indebtedness during an economic recession strikes them as absurd. Certainly a family in economic distress, they reason, would not be well-advised to increase its indebtedness. So how do we explain to them that, no, government is different? Government can run large deficits as long it can borrow and pay its obligations as they come due, and, even then, a government cannot be foreclosed on. Government running a deficit means it is putting more money into the economy than it is taking out. Reducing debt/deficit means taking money out of the economy, the opposite of what is needed in an economic recession. Of course, as has been pointed out by others here, Obama has not even tried to make that case, but instead has allowed the conversation to shift to deficit reduction, actually agreeing with the Right that deficit reduction is an urgent matter -- the precise opposite of what we should be doing. Dhurtado

- NR143296

August 24, 2011 at 2:25pm

Obama not even making the case is what's troubling so many of us. Krugman's got to be feeling like Cassandra.

- Sophia

August 24, 2011 at 11:31pm

I know I am late to this party, but I just so the article: While I agree with Judge Posner's view that we are i a depression and not just a recession and I also agree that the Bush administration is largely at fault and that the Obama team handling of the economy thus far hasn't helped much, still I disagree with almost everything else he said. I don't see the health care being at fault and I strongly disagree with Paul Ryan's efforts at privatizing health care. I did agree with one more of his comments: Posner admits that he really has no answers. I agree with him there.

- arnon

September 3, 2011 at 12:17pm

NR143296, the government household analogy is false. Government is composed of multiple households and a household is not the same as say ten households. Ten households can pull resources and aid each other while a single household can only rely on itself. The reason so many conservatives like the analogy is because they can associate single households with individuals, and individuals have to be, according to them "self-reliant." The idea that ten household (in a hamlet) could pull resources together smacks of socialism.

- arnon

September 3, 2011 at 12:29pm