See other Editorial Articles
Title: Cleaning Up the Economy By PAUL KRUGMAN
Source:
[None]
URL Source: http://www.nytimes.com/2012/09/07/o ... .html?_r=2partner=rss&emc=rss&
Published: Sep 7, 2012
Author: Cleaning Up the Economy By PAUL KRUGMAN
Post Date: 2012-09-07 12:23:44 by tom007
Keywords: None
Views: 78
Comments: 3
Cleaning Up the Economy By PAUL KRUGMAN Published: September 6, 2012 137 Comments Facebook Twitter Google+ E-mail Share Print Reprints Bill Clinton’s speech at the Democratic National Convention was a remarkable combination of pretty serious wonkishness — has there ever been a convention speech with that much policy detail? — and memorable zingers. Perhaps the best of those zingers was his sarcastic summary of the Republican case for denying President Obama re-election: “We left him a total mess. He hasn’t cleaned it up fast enough. So fire him and put us back in.” Fred R. Conrad/The New York Times Paul Krugman Go to Columnist Page » Blog: The Conscience of a Liberal Related Democrats Say U.S. Is Better Off Than Four Years Ago (September 4, 2012) Related in Opinion Editorial: The Better Economic Question (September 6, 2012) Times Topics: United States Elections | Economy Opinion Twitter Logo. Connect With Us on Twitter For Op-Ed, follow @nytopinion and to hear from the editorial page editor, Andrew Rosenthal, follow @andyrNYT. Readers’ Comments Readers shared their thoughts on this article. Read All Comments (137) » Great line. But is the mess really getting cleaned up? The answer, I would argue, is yes. The next four years are likely to be much better than the last four years — unless misguided policies create another mess. In saying this, I’m not making excuses for the past. Job growth has been much slower and unemployment much higher than it should have been, even given the mess Mr. Obama inherited. More on that later. But, first, let’s look at what has been accomplished. On Inauguration Day 2009, the U.S. economy faced three main problems. First, and most pressing, there was a crisis in the financial system, with many of the crucial channels of credit frozen; we were, in effect, suffering the 21st-century version of the bank runs that brought on the Great Depression. Second, the economy was taking a major hit from the collapse of a gigantic housing bubble. Third, consumer spending was being held down by high levels of household debt, much of which had been run up during the Bush-era bubble. The first of these problems was resolved quite quickly, thanks both to lots of emergency lending by the Federal Reserve and, yes, the much maligned bank bailouts. By late 2009, measures of financial stress were more or less back to normal. This return to financial normalcy did not, however, produce a robust recovery. Fast recoveries are almost always led by a housing boom — and given the excess home construction that took place during the bubble, that just wasn’t going to happen. Meanwhile, households were trying (or being forced by creditors) to pay down debt, which meant depressed demand. So the economy’s free fall ended, but recovery remained sluggish. Now, you may have noticed that in telling this story about a disappointing recovery I didn’t mention any of the things that Republicans talked about last week in Tampa, Fla. — the effects of high taxes and regulation, the lack of confidence supposedly created by Mr. Obama’s failure to lavish enough praise on “job creators” (what I call the “Ma, he’s looking at me funny!” theory of our economic problems). Why the omission? Because there’s not a shred of evidence for the G.O.P. theory of what ails our economy, while there’s a lot of hard evidence for the view that a lack of demand, largely because of excessive household debt, is the real problem. And here’s the good news: The forces that have been holding the economy back seem likely to fade away in the years ahead. Housing starts have been at extremely low levels for years, so the overhang of excess construction from the bubble years is long past — and it looks as if a housing recovery has already begun. Household debt is still high by historical standards, but the ratio of debt to G.D.P. is way down from its peak, setting the stage for stronger consumer demand looking forward. And what about business investment? It has actually been recovering rapidly since late 2009, and there’s every reason to expect it to keep rising as businesses see rising demand for their products. So, as I said, the odds are that barring major mistakes, the next four years will be much better than the past four years. Does this mean that U.S. economic policy has done a good job? Not at all. Bill Clinton said of the problems Mr. Obama confronted on taking office, “No one could have fully repaired all the damage that he found in just four years.” If, by that, he meant the overhang of debt, that’s very much the case. But we should have had strong policies to mitigate the pain while households worked down their debt, as well as policies to help reduce the debt — above all, relief for underwater homeowners. The policies we actually got were far from adequate. Debt relief, in particular, has been a bust — and you can argue that this was, in large part, because the Obama administration never took it seriously. But, that said, Mr. Obama did push through policies — the auto bailout and the Recovery Act — that made the slump a lot less awful than it might have been. And despite Mitt Romney’s attempt to rewrite history on the bailout, the fact is that Republicans bitterly opposed both measures, as well as everything else the president has proposed. So Bill Clinton basically had it right: For all the pain America has suffered on his watch, Mr. Obama can fairly claim to have helped the country get through a very bad patch, from which it is starting to emerge. A version of this op-ed appeared in print on September 7, 2012, on page A31 of the New York edition with the headline: Cleaning Up The Economy. Facebook Twitter Google+ E-mail Share
Post Comment Private Reply Ignore Thread
Top • Page Up • Full Thread • Page Down • Bottom/Latest
#1. To: tom007 (#0)
Effing Asshat needs to barf up that blue pill, it is making him mentally ill.
Bill Clinton has a lot of nerve to utter his bullshit. That bent-membered bastard started the whole housing crisis when he and his administration forced lending institutions to make loans to unqualified home buyers: "To hear today's Democrats, you'd think all this started in the last couple years. But the crisis began much earlier. The Carter-era Community Reinvestment Act forced banks to lend to uncreditworthy borrowers, mostly in minority areas. Age-old standards of banking prudence got thrown out the window. In their place came harsh new regulations requiring banks not only to lend to uncreditworthy borrowers, but to do so on the basis of race. These well-intended rules were supercharged in the early 1990s by President Clinton. Despite warnings from GOP members of Congress in 1992, Clinton pushed extensive changes to the rules requiring lenders to make questionable loans. Lenders who refused would find themselves castigated publicly as racists. As noted this week in an IBD editorial, no fewer than four federal bank regulators scrutinized financial firms' books to make sure they were in compliance. Failure to comply meant your bank might not be allowed to expand lending, add new branches or merge with other companies. Banks were given a so-called "CRA rating" that graded how diverse their lending portfolio was. It was economic hardball. "We have to use every means at our disposal to end discrimination and to end it as quickly as possible," Clinton's comptroller of the currency, Eugene Ludwig, told the Senate Banking Committee in 1993. And they meant it. In the name of diversity, banks began making huge numbers of loans that they previously would not have. They opened branches in poor areas to lift their CRA ratings. Meanwhile, Congress gave Fannie and Freddie the go-ahead to finance it all by buying loans from banks, then repackaging and securitizing them for resale on the open market. That's how the contagion began. With those changes, the subprime market took off. From a mere $35 billion in loans in 1994, it soared to $1 trillion by 2008. I hope Bubba caught the clap from that jewish whore, Monica Lewinsky. So Bill Clinton basically had it right: For all the pain America has suffered on his watch, Mr. Obama can fairly claim to have helped the country get through a very bad patch, from which it is starting to emerge.
#2. To: All (#0)
“We left him a total mess. He hasn’t cleaned it up fast enough. So fire him and put us back in.”
-Alex Kurtagic
#3. To: tom007, All (#0)
whatreallyhappened.com's THOUGHT FOR THE DAY! Recession: Your neighbor loses his job. Depression: You lose YOUR job. Revolution: The Government loses THEIR job!" -- Michael Rivero Job growth has been much slower and unemployment much higher than it should have been, [sic] More on that later. But, first, let’s look at
-------
"They're on our left, they're on our right, they're in front of us, they're behind us...they can't get away this time." -- Col. Puller, USMC
Top • Page Up • Full Thread • Page Down • Bottom/Latest