On the most recent Krugman-Obama semantic disagreement I'll take Obama's side by a nose

[Kurt_and_Hunter]

Krugman's January 11th "Ideas for Obama" column is on the money as far as it goes, but there's a semantic disagreement mentioned in the column where I think Krugman and Obama are both wrong for different reasons.

"And bear in mind that even a project that delivers its main punch in, say, 2011 can provide significant economic support in earlier years. If Mr. Obama drops the “jump-start” metaphor, if he accepts the reality that we need a multi-year program rather than a short burst of activity, he can create a lot more jobs through government investment, even in the near term."

http://www.nytimes.com/2009/01/12/opinion/12krugman.html?_r=1&hp

A "jump-start" is needed over and above any sensible long-range economic planning. The psychology of this thing is deeper than the numbers reveal and psychology is not precisely predictable. Mass psychology is the ultimate dynamic system, full of force multiplying feed-back loops that allow the possibility of catastrophic change. It is psychology that offers the greatest instance of "the danger of doing to little is greater than the danger of doing too much." The housing slide cannot be arrested by government intervention in foreclosures unless one imagines that housing has a natural bottom. That is not proven and the worst should be assumed. The pre-requisite for improvement in any sector, including housing, is to break out of a deflationary consumer psychology.

So Krugman underestimates, IMO, the need for an immediate short-term game-changing measure that will make all further steps more effective.

Obama uses the "jump start" metaphor that Krugman disfavors but seems to mis-comprehend the amps necessary to jump-start the global economy. His jump-start wouldn't do much of anything. $20 a week less in Federal withholding will no break a psychological spiral of caution and despair and business tax breaks are almost mocking. No business in trouble is paying any taxes this year so the benefit goes, by definition, only to the "haves". And long-term infrastructure projects will do little to change psychology today. Americans in 2009 are much savvier and more cynical—fireside chats will not turn the trick.

I still think that federal refinancing of a trillion dollars of consumer debt at 8% is the right first step. Mass psychology changer that would lower the panic level overnight, puts many more new spendable dollars into the average household's budget than any proposed tax break, clears all risky consumer debt from lenders' balance sheets and provides a profound incentive for new lending and is probably roughly break-even for the government so it need not foreclose other options down the road.

[BeyondGeography]

1. As a political dunce, Krugman makes a great economist

[gravity]

2. Krugman needs to do more than write a NY Times column

Because these semantics arguments aren't getting anywhere.

Krugman needs to explain in detail why his plan is better compared than Obama's, rather than just give some big generalizations.

[Kurt_and_Hunter]

4. Krugman writes academic papers full of greek letters and squiggles

They are long, incomprehensible to non-economists and not the sort of thing that gets printed on an op-ed page.

It is an error to look at a blog or op-ed and criticize it for being short of speciffics... of course it is. It's a thousand word column.

That doesn't mean it's the entirety of someone's thinking.

Nor should we presume that the only avenue from economic academia and Obama's economic team is op-ed columns.

[Kurt_and_Hunter]

5. PS: Einstein's famous letter to FDR about the A-bomb didn't say a thing about how to build a bomb

It said, such a bomb is possible and you need to be aware of the fact.

And if you want to look over the math, give me a call.

[gravity]

8. But the government has to work out the details in a stimulus plan

We know that something has to be done, but the problem is figuring out the details of it. This is not as simple as allocating money to some scientists.

[Kurt_and_Hunter]

9. The administration of the Manhattan Project was incredibly complex

The refining end of the project used some crazy figure like 10% of all electricity produced in the US.

But everything flowed from the big-picture question of whether a bomb was possible.

If someone provides macro advice that, for example, infrastructure spending is better for the situation than payroll tax cuts, or visa versa, the macro argument doesn't require an exact percentage of payroll tax relief or a specific list of infrastructure projects.

No matter what, the big questions have to come before the administrative questions.

[gravity]

7. And I hope he presents something like that to Obama

I don't know how involved he is with Obama's plan but I hope he is doing more than writing a column.

[RaleighNCDUer]

3. Krugman objects to the term 'jump start'?

I wonder when the last time was he had to get his car jumped.

The jump gets it running, but you gotta keep it running, drive around for a while, to make sure you get charged up or the 'jump start' doesn't accomplish anything.

I think that jump start is the perfect analogy. Obama plans to jump start the economy, then carefully drive around for a while to make sure the effort is not wasted. It's a process, not an action.

[mrreowwr_kittty]

6. I think so too

If people think that they have to wait until 2011 to see anything significant, they will be demoralized. OTOH, if they see something happening now, they will have reason to be optimistic.

[Kurt_and_Hunter]

10. ...

[Hippo_Tron]

11. As I said on the other thread, Obama is a politician and Krugman is an economist

It doesn't matter if Krugman's economic plan is better because it will never become law. The reality of the legislative process is that Obama not only has to consider what is the best policy but what are the politics of passing that policy. Krugman doesn't have to consider such things when he writes a column in the New York Times.

Krugman is not and should not be a cheerleader for Obama. And likewise, Obama should not take Krugman's advice in many situations.