Legal Commentary

Joke Line Returns

By Big Tent Democrat

Before JournoList kept Joe Klein relatively informed, he had a penchant for writing stupidities about issues he had not the first clue about. Apparently the demise of the JournoList has Klein going back to his old ways. In a generally clueless post about Social Security, this specific bit of ignorance caught my eye:

There is a strong progressive argument for fixing social security now. Actually, there are two. First, as we saw when Bill Clinton chose to address the federal deficit in 1993, markets respond to fiscal responsibility. In that case, interest rates declined and the economy boomed (despite higher taxes, I must repeat again and again); now, a move toward federal fiscal responsibility might encourage the U.S. business community to start investing the $1.8 trillion in cash it is hoarding and thereby create some jobs.

(Emphasis supplied.) Setting aside the fact that Social Security is not a fiscal problem, Klein simply has no understanding of our current economic problem - which is deficient aggregate demand. Paul Krugman has explained this point a million times already:

Under the kind of conditions we’re now facing, the main determinant of business investment is the state of the economy, as evidenced by the plunge in investment shown in the figure. This, in turn, means that anything that improves the state of the economy, including fiscal stimulus, leads to more investment, and hence raises the economy’s future potential.

That is, under current conditions deficit spending doesn’t lead to crowding out — it leads to crowding in. In fact, you could argue that the worst thing we can do for future generations is NOT to run sufficiently large deficits right now.

Things won’t always work this way. Eventually we’ll emerge from the liquidity trap, and the normal rules of economic prudence will reassert themselves. But we are not there, or anywhere close to there, right now.

Apparently someone told Klein at a cocktail party that cutting Social Security would spur business investment and he repeated it in that post. As Krugman has demonstrated, this is simply uninformed, indeed, idiotic reasoning. It demonstrates yet again that Joe Klein simply does not know what he is writing about. Bring back the JournoList!

Speaking for me only

Full post as published by TalkLeft on August 26, 2010 (boomark / email).