http://video.msnbc.msn.com/morning-joe/47351116
Nobel Prize winner and New York Times columnist Paul Krugman joins Morning Joe on why fixing “small, technical problems” could help fix the economy, why not having a job can be “totally destructive” to a person who wants to work, and why spending can help lead the country out of a depression.
“So let’s start with the title of the book. you had to make a decision to call what we’re in a depression . You say it’s not a great depression , but if you look at the numbers, it’s a depression .
“Yeah. so my way of putting it is a recession is when things are heading down. when things are done. and although, you know, we have some upticks, some months are better than others issue it’s terrible. there’s 13 million people out of work in this country. Four million who have been out of work for more than a year. this is an ongoing depression , just like the 1930s . not as bad as the ’30s, but that’s not a great slogan.
“Put that on the back of your car and see how that works for the campaign. but listen, even in good times, you say you can have four, five million people unemployed. but they are unemployed for a much shorter period of time, and that’s a big difference. they bounce from one job to another.
“It’s one thing to be out of a job for a few weeks, a few months, whatever. people have resources. we can get through that. our benefit system is basically designed for people not to be unemployed more than six months. And the whole society is basically built around the notion that if you want to find a job, you can find it. and in not too long. it may not be the best job, but that’s not the world we live in now. now we live in a world that you have four million people out of work for more than a year. Lots of guys my age, almost 60. lots of guys who cannot find anything –– can’t find fulltime employment in many cases. certainly can’t find anything that makes use of their skills. this is a disaster, and it’s cumulative. The damage grows with each month this goes on. this is not something to sit by and say, hey, you know, it’s difficult, it’s hard. let’s not –– you know, no easy answers. actually, there are easy answers but the main thing is we need answers.
“So your goal in this book to take the focus off of debt and turn the focus toward jobs. and one of the reasons why you cite a study called economics of happiness. And it struck me because my father was unemployed for a year and a half back in the early 1970s . And you describe how, yes, money is important to people, but money doesn’t necessarily determine satisfaction and happiness. But you say take a job away from somebody, and that shatters their being, and has economic repercussions.
“Yes. you can measure this stuff, which is, you know, I’m a numbers guy basically. so it turns out that money matters for sure, but not as much as people think. not having a job, when you want to work and you can’t find it, is totally destructive. I know people who are again sort of my age, who have in fact got enough savings they can manage, but they are not done with working. And not being able to find that job is killing them. in many cases I think quite literally killing them. This is enormous. the amount of damage we’re doing to our society, the amount of damage we’re doing to the people, you know, which is what a society is, is huge. And this is solvable. that’s the point. we actually know how to fix this. or we would know if we were willing to pay attention .
“We’ll get to the solutions in a minute. but make your pitch on why our government and governments across europe should be focusing more on creating jobs than lowering the debt.
“Well, there’s actually two things there. One is, you know, the crisis is now. the unemployment crisis is now. We can worry about debt later on. I mean, a lot of us are quoting St. Augustine these days. give me an economy that’s somewhere closer to full employment and i’ll become a deficit hawk , but not now. and the other thing is ––
“And you do by the way talk about long-term ramifications of big debt.
“Sure.
“And you do say this is something we need to be concerned about.
“Of course. and it’s not good. you know, I was actual very much opposed to the bush tax cuts and the unfunded wars because that was building debt at a time when debt was not helpful. but right now is not the time to worry. the other thing, it’s almost certain now given the evidence coming in that trying to cut the deficit right now doesn’t even work in purely fiscal terms. You cut spending, that depresses the economy. Revenue falls. So a lot of whatever you cut from the top gets lost on the bottom of the budget. and further more, it hurts the economy long run. those workers who are being cut off in the work force will never be employed again. Those young people who will never get started in those careers. those are the future taxpayers of america. So what you’re going to lose through both immediate revenue loss and through a weaker economy in the long run, means that even the budget is made worse by spending cuts now. this is not the time to do that.
“So you call for a decisive action. What action would that be? and what is a good time to deal with debt and deficit? it seems to me there never really is.
“No, there is. So just the second part of your question first. when the economy, when the private sector is strong enough that it’s actually very specific thing. When the private sector is strong enough that the federal reserve starts raising interest rates to head off possible inflation, that’s the point you can make a deal. Say you know what? how about you don’t raise interest rates and we’ll cut the budget instead. then you can do a deal without depressing the economy. so that’s a specific criteria, and that would probably happen if the unemployment rate drops into the 6 percent range. And the private sector will if we give it a chance heal. it’s paying down the debts that built up. so that can work. now what to do is actually pretty easy right now. We’re depressing this economy by having massive layoffs of government workers, cutbacks in spending at the state and local level, which are destructive and not, you know, the wrong thing to be doing. so now we don’t need any sort of grand plan. We just need to have an influx of money from the federal government , which can borrow at very low rates, to the state and local governments to rehire those workers, get the ordinary –– the school teachers, the policemen, the firemen, back to work. that in itself is almost certain enough to get us most of the way back to full employment .
“And you talk about John Maynard Keynes’ magneto.
“That’s right. he said we have magneto trouble. old-fashioned term for an electrical system. It’s like having a $30,000 car that isn’t running and you say there must be something total wrong with the car. it might just be a dead battery . Spend $100 and this thing will be going again. no one will believe that, but that’s the kind of crisis we have. these are very small problems that could be fixed very fast.
“Paul, the media to a large extent and the politicians are obsessed with the unemployment number. The White House will say, oh, it ticked down to 8.1 percent. That’s progress. mitt romney looks at different metrics. what do you look at as the take away number? what’s important to paul krugman inside those numbers?
“I’m mostly looking not at unemployment but employment. unemployment, if someone giving up looking, then they are not in the number and a lot of people have dropped out because the job prospects are so bad. I look at the fraction of adults that are employed, and because demography moves a bit, I like to look at the employment population ratio for prime age, 25 to 54. Gosh, I’m not prime age anymore. but you look at people in that range, and that’s not because those are the people who matter but that’s a pretty stable number. So that number plunged in the recession. it was flat for a long time. it ticked up a bit in the last six months. now it’s flat again. that number tells you we are still very deep in the hole.
“So when the president and the white house says we have added jobs every month for x number of months, do you look at that as something to take —
“It’s better than losing them. but remember we have a growing population. you have to add a certain number of jobs, something like 100,000 a month, just to tread water, just to stay in the same place. so that’s not good enough. It’s better than hemorrhaging 500,000 or 600,000 a month. But not what we need. and the basic story, just step back, take off your glasses. the story is that we had a terrifying plunge in the first six months of obama’s presidency, which was a continuation of a plunge that began before. and since then we’ve been basically in a sour plateau, right? and things are bad, they are not getting worse but they are not getting noticeably better.
“Do you tweet?
“No. i have a bot that tweets when i put up a blog first.
“That’s a good thing.
“But i don’t have 140 character thoughts.
“Good for you.
“That’s gent. Good for a lot of reasons actually. Go ahead.
“One of the things that’s concerned me over not only the past couple of years but for quite some time is what you describe in the book as the liquidity trap . It seems like every time we have a problem, the fed drops rates, and it seems like those rates have been dropped down to 0 for some time to kick start the economy. But we have gotten to the point now where as you say in this book, 0 is not enough. it’s not low enough.
“That’s at the heart of this. we have had this kind of –– we were able to be pretty lazy about the business of stabilizing the economy because we could leave it up to the fed because the fed could also cut rates.
“You have a crisis in ’99. lower interest rates . You have 2001. September 11. You kick start the economy by lowering the interest rates . but we get to a point now you can’t go below 0.
“That’s right. it’s much harder to make stuff happen. It can’t be just a narrow technocratic thing. ben bernanke —
“Who you compare let us say to chauncey gardener.
“He happened to make a speech in which it turned out to be almost verbatim the words of ––
“By the way, that’s a reference to being there. if you haven’t seen the movie, you need to see the movie.
“As long as the shocks aren’t too big, that system works. but what we got was the mother of all shocks. an enormous housing bubble and buildup of consumer debt. And then when the bubble burst, you’re left with a private sector that is just not ready to spend for a while, even as you have a zero interest rate , which is why we need the other stuff. Normally you just take two aspirin when the economy is having a hard time , but now we need the prescription antibiotics, which is what i call for in the book.
“How do you spend money wisely? i am a small government conservative. certainly over the arc of time, i’m concerned about long-term debt, medicaid, medicare, defense, et cetera, et cetera . But i always said, I wasn’t so concerned about the size of the stimulus package as I was the scatter shot sort of reductionism idea that any dollar spent is a dollar that helps the economy. that’s just not true. so where do you put that money?
“First of all, in times like this, it really is true. not that i advocate spending to just anything. but what got us out of the great depression ? It was spending on war. that was destructive spending. We had to do it. but that shows that even spending that doesn’t do anything for the productive side of the economy can help you get out of a depression. But, you know, this is much easier now. Three years ago, the question was, what are the projects? What do we spend on? we have had three years of savage cutbacks at the state and local level. just hire back those hundreds of thousands of school teachers. hire back the police officers. Fix the potholes that have been accumulating certainly in the roads around me because we have been deferring maintenance.
“You’re talking about spending $600 billion, sending it back to state and local governments .
“We have made some progress, in spite of everything i have said. we are not in free fall anymore. i think we can get –– not i think. my math says we can get a long ways back to prosperity just by doing that.
“You say europe is in trouble right now because of the framework. You say it’s an awkward combination of unity and disunity. you have germany really running things there, and I would guess that you’re not a big fan of angela merkel ‘s austerity plans.
“I understand there’s a new verb in german, which means to muddle through without a workable strategy. Look, europe went for a single currency . the truth is, if you want to have a single currency, you really want to have a single government. nevada and ireland both had housing bubbles and busts. But nevada medicare, social security are paid for by the federal government. In ireland they are paid for by the irish taxpayer so you have a debt crisis. the europeans –– and their answer has been just austerity. More austerity. The only answer. The debtor countries are sinners and they should pay for their sins.
“One of the things that surprise me if you talk even to labor leaders in great britain, they are not saying cameron is wrong because we want to spend 20 percent more. it seems to me that both sides of british politics and even french politics i think we’re going to find in the long run, they are still working in the same margins. they both feel they are restricted by the realities of long-term debt.
“But they’re wrong actually. certainly in britain they are wrong. The british are basically in the same situation we are. they can borrow cheaply. They have their own currency. you say, back in the ’30s did, we have debt levels like this? Yes, they did. they had higher ratios then than they do right now. Unfortunately labor has been pretty weak on opposing this stuff. the other countries on the euro have a problem. They don’t have their own currencies. They are borrowing in somebody else’s currency. It’s all somebody else’s currency. or maybe it’s germany’s currency, whatever. so there has to be –– either they have to leave the euro or there has to be a europewide solution better to do the europewide solution, better to have a little more inflation, better to have the germans not be doing austerity. They need to do the opposite. We’ll see if anybody is willing to do that.
“We have to go. but the atlantic wire suggests that you and david brooks take it outside. they accuse both of you of engaging in a passive aggressive war between them. Willie, there really is nothing earlier.
“Things were going so well.
“An editorial writer on editorial writer here. It’s sad.
“‘The New York Times’ is so much the dominant place for intelligent discussion in america that of course both sides of any issue is going to be two ‘new york times’ columnists. What else can you do?
“So there’s no passive aggressiveness. That’s a positive spin.
It’s explicit.
“It is explicit.
“No passivity there.
“Paul Krugman, what a fantastic conversation.
“Thank you.
“We appreciate it.
“Definitely don’t go on twitter. the book is ‘End This Depression Now.’ You can read an excerpt on our blog, mojo.msnbc.com.”
Paul Krugman continues to provide a “single” solution based on “one-factor economics”––create jobs and full employment with government stimulus. While this is necessary in the short run, simultaneously and long-term the thinking must shift to FULL PRODUCTION, with ALL American citizens participating in the private ownership of the growth economy.
While government can lead the way our of this Great Recession with infrastructure stimulus and investment in services such as education and safety, as a nation we need to focus on private sector growth bolstered with broadening the private, individual ownership of new wealth creation in the form of new productive capital formation investments, which as a benefit will result in full employment.
But true to conventional economist thinking the Paul Krugman’s continue to be stuck in one-factor economic thinking––JOBS and the Labor Worker as the ONLY means to earning a living. Without government coerced trickle-down through redistribution achieved by the rigging of labor prices, by taxation to support redistribution and job “creation,” or subsidization by inflation and by all kinds of welfare, open and concealed, not only would government jobs cease to exist but private sector jobs also would spiral in decline.
Private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s (the non-human factor) ever increasing role. Over the past century there has been an ever-accelerating shift to productive capital––which reflects tectonic shifts in the technologies of production.
Unfortunately, ever since the 1946 passage of the Full Employment Act, economists and politicians formulating national economic policy have beguiled us into believing that economic power is democratically distributed if we have full employment––thus the political focus on job creation and redistribution of wealth rather than on full production and broader capital ownership accumulation. This is manifested in the belief that labor work is the ONLY way to participate in production and earn income. Long ago that was once true because labor provided 95 percent of the input into the production of products and services. But today that is not true. Capital provides not less than 90 to 95 percent of the input. Full employment as the means to distribute income is not achievable. When capital workers (productive capital owners) replace labor workers (non-capital owners) as the principal suppliers of products and services, labor employment alone becomes inadequate. Thus, we are left with government policies that redistribute income in one form or another.
Binary economist Louis Kelso was quoted as saying, “Conventional wisdom says there is only one way to earn a living, and that’s to work. Conventional wisdom effectively treats capital (land, structures, machines, and the like) as though it were a kind of holy water that, sprinkled on or about labor, makes it more productive. Thus, if you have a thousand people working in a factory and you increase the design and power of the machinery so that one hundred men can now do what a thousand did before, conventional wisdom says, ‘Voila! The productivity of the labor has gone up 900 percent!’ I say ‘hogwash.’ All you’ve done is wipe out 90 percent of the jobs, and even the remaining ten percent are probably sitting around pushing buttons. What the economy needs is a way of legitimately getting capital ownership into the hands of the people who now don’t have it.”
The one sure way to close the “jobs gap” is to adopt the scenario where new economic growth is financed with mechanisms that extend pure insured capital credit to ALL citizens to acquire newly issued shares of stock in our major corporations and pay for their acquisition out of the future earnings generated by the new productive capital assets (non-human factor of production), and gain greater access to “real” job opportunities that a growth economy generates. And as this new economy takes form with the secondary benefit of creating “real” job opportunities, ALL citizens within a generation or so will have acquired a viable ownership stake in the future economy that will earn them income for the rest of their lives.
