March 27, 2009

Krugman: Taking on the adminstration's top economist

Posted: 08:05 AM ET

By NY Times' Paul Krugman

On Monday, Lawrence Summers, the head of the National Economic Council, responded to criticisms of the Obama administration’s plan to subsidize private purchases of toxic assets. “I don’t know of any economist,” he declared, “who doesn’t believe that better functioning capital markets in which assets can be traded are a good idea.”

Leave aside for a moment the question of whether a market in which buyers have to be bribed to participate can really be described as “better functioning.” Even so, Mr. Summers needs to get out more. Quite a few economists have reconsidered their favorable opinion of capital markets and asset trading in the light of the current crisis.

But it has become increasingly clear over the past few days that top officials in the Obama administration are still in the grip of the market mystique. They still believe in the magic of the financial marketplace and in the prowess of the wizards who perform that magic.

The market mystique didn’t always rule financial policy. America emerged from the Great Depression with a tightly regulated banking system, which made finance a staid, even boring business. Banks attracted depositors by providing convenient branch locations and maybe a free toaster or two; they used the money thus attracted to make loans, and that was that.

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Filed under: Paul Krugman

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Dave of Detroit   March 27th, 2009 8:58 am ET

Paul-Are you actually making a case for a tightly regulated financial system that goes against every Reagenomics and Republican belief? How did you ever become a reporter for a major paper during the Reagen Bush Era? Next thing you know, you'll start saying that unrestricted Free Trade has not been good for America-That Supreme Court Decisions that have completely undermined the moral fabric of America and the Protestant Work Ethic may not have been a good idea. Not to mention the Bush idea of unprovoked war as a way to spread the wonderful influence of our amoral society in a very moralistic Moslem world may not have been too bright either...You should hide your beliefs behind a hypocritical smile like all the other media before you get your unconditional release from the Republican Dominated Media-Rush will be out to get you-The modern day Boogeyman that refuses to hide under the bed, and the Gay Community that can't get back in the closet!

james harrison   March 27th, 2009 9:40 am ET

Dear President Obama,
Last night I heard your challenge for someone to present a better budget and plan to help this country & I James Harrison am prepared to help you create a better plan for the people that will excell over the current budget. There is no doubt that I have what we need in this country and it is up to you in whether you listen or not. Try me and you will hear something not of man but in the wisdom of God. For God has called me to help you. Visit Balanced Life Ministry website to see for yourself.
James Harrison

Jon   March 27th, 2009 10:54 am ET

I would like to see Jacque Fresco on you show asap. His ideals need serious debate as our world economy has never worked as it should, and its time to try something different.



John Panicker   March 27th, 2009 11:28 am ET

It seems common people cannot reach any one in power including the President – that is the main problem of America. Only people with connections can reach people in position. Connection is the key to all appointments- not talents, knowledge. We need some expertise from the people who served the Government in the past while we need more help from people who never worked in the Government to have a lot more to offer and insight at the problems.

I am happy that the President and his administration is trying to get more legislation to rein the financial institutions. The failure of financial institutions where not the lack of regulations, but total incompetency of the executives who held and hold positions in the regulatory agencies. In addition to almost all of them is some way closely connected and net worked to the financial services industry executives – either they were the past executives of those institutions or they keep close ties in order to get positions when they leave the government. How could these people then be impartial or serve the America.

There are enough regulations to mange the insurance companies. There are enough regulations to securely mange the banks. But where it failed? Why it failed?

Why did we allow so many mergers and acquisitions? None of the mergers of banks produced any benefit to consumers, it did not produce employment- rather it decrease employment, it did not bring efficiency, what it did is generously rewarded the executives with unbelievable amount of money which belonged to the shareholders and customers and in turn it lead to a total disaster – unparalleled in the history. Capitalism or socialism all needs some kind of regulations and enforcements without any exceptions. Why the government did allow the mutual insurance companies to become publicly traded company? A free market is nothing but a mess. What I see is when things are going well – capitalism – a few rich and powerful take the benefit, when economy goes bad – as it is now- applying the principal of socialism – and the society bear the burden – either way the average Americans are the victims.. Why not leave either everything to free market and take the brunt as it comes. Or let us have a moderated free market all the time.

All these can be solved and rectified. We do need an agency to examine the performance, the compliance to existing law and audit all the other agencies. And members of this agency must be clean.

Mr. President, why people like me cannot get an audience with you? You are available only to people who have connections?

Michael C. McHugh   March 27th, 2009 11:40 am ET

We have had 30 years of free market capitalism. Call it the Second Gilded Age, the Age of Neoliberalism, or the Age of Reagan, Gingrich and Greenspan: it ended very badly as these things always do. For some people, ideology hasn't yet caught up with reality on the ground, and they are still talking the language of the free market. I don't care if they keep talking it forever, as long as they follow very different policies in reality.

John Panicker   March 27th, 2009 12:00 pm ET

There is nothing such as ‘Free market’ Capitalism without certain regulations will certainly fail. Regulations in the books are not enough- but those regulations need to be strictly enforced with patriotism and loyalty. What we are seeing now is a failed capitalism, a failed regulatory system, incompetency , greed. When this capitalism failed the so called beneficiaries of the capitalism – since they are in power- rushed with Bailout – a socialistic tool. Why they did not leave the situation to the ‘free market? Why when the free market brought us to this disaster, those whoa re responsible are not brought to justice?
I am for ‘free market’ and for capitalism but with proper regulations.

John Rosing   March 27th, 2009 4:10 pm ET

The bogus GOP claim that “OBAMA spending is unprecedented” belies the facts.

It is out of historical context and a disingenuous political statement. Since 1981 there have been one Democratic and three Republican administrations while our nation has both prospered and later fallen apart.

During that time our National Debt increased from $0.96 to $10.70 Trillion, while the ratio of DEBT to GDP increased from 31% to 75%; our grand children’s legacy. $8.19 Trillion of that was the result of Republican administrations of Ronald Reagan, G.H.W. Bush and G.W. Bush, while only $1.54 Trillion was attributed to Bill Clinton’s Democratic administrations.

Ronald Reagan TRIPLED the debt from $0.96 to $2.74 Trillion, and George W. Bush DOUBLED IT AGAIN from $5.77 to $10.70 Trillion. These historical facts show that the Republican policies of “DON’T TAX AND SPEND” are consistently fiscally IRRESPONSIBLE. By contrast the Democratic “TAX AND SPEND” policies promote our nation’s welfare.

Furthermore the Media is editorially delinquent in their duties to repeat the GOP claims of Democratic “unprecedented spending” while ignoring the historical facts. (My information was taken from the Federal Reserve Bank of St. Louis, updated as of 3/23/2009.)

Irene, TX   March 27th, 2009 5:44 pm ET

Billions, trillions... Billions change hands on a daily basis on a scale of a country like US. It's just that these number have never been shot at us at such speed round the clock. People are being zombied with the numbers which they compare to their unemployment checks or a modest annual income. Naturally, people are in a state of shock where one can scare and manipulate them all one wants. How very convenient... Get real, people, tighten your belts and let's keep living and working. We shall overcome. Let's let our President do his job, the job that takes a bit more time than a roof replacement above a single family home.

Sen. McConnell told the reporters on Friday that GOP has an opportunity to be on offense... What did we come to! What kind of language are top politicians using in reference to their countrymen and president? Hello, Senator! Are you sane?

Dodie from Irvine, CA   March 27th, 2009 6:07 pm ET

My hope is that through this mess, we will come out the other end with a tightly regulated financial system that appears to go against every Republican belief starting with Reagan-economics.

My biggest concern is that we will end up in a terrible inflation along with losing the American dollar as the world's stable currency.

Robert   March 27th, 2009 6:11 pm ET

First of all i'am tired of hearing of Reagenomics it was that policy that led to large unemployment,huge deficits,and pollution,
until clinton came in and fixed everything, Go Obama.

Mari, Utah   March 27th, 2009 8:55 pm ET

All I have to say to Paul Krugman is, contact the Obama Administration, and please do share your brilliant ideas with them.

IF you are not willing to be part of the solution, then just be quiet.

That goes for all the GOPers, offer solutions..... work together with Obama for the good of our Nation...... or STOP the criticism.


Jan   March 27th, 2009 9:10 pm ET

Mari, I totally agree. Instead of all the criticism, why don't they work together with Pres Obama for the good of our Nation.

I just don't get it.....they don't really care, aren't listening to the american people who want our elected officials working to fix things instead of arguing and putting up road blocks all the time.

AMEN TO "GOT ANY NEW IDEAS GOP?" Please do share

Rich   March 27th, 2009 9:33 pm ET

We "need" another depression. We have become spoiled!! No federal government buying "toxic assets".......If you can't pay your mortgage......time to move back in with the "in-laws" like we used to do in the "OLD DAYS"........Let the Chinese buy all the McMansions!!!

We got ourselves into this mess......We are the ones who are going to have to get ourselves out!!

JIM CARROLL INTERNET FREE PRESS   March 27th, 2009 10:29 pm ET

A Fair, Simple, Graduated Tax System for Individuals and Businesses
For mixturism to work most efficiently, several revisions in the current practices of how the country does business must be made…among these, creating a fair tax system for both individuals and businesses. There are several possible ways. The following is one example of how a fair, simple, graduated tax system would work.

For individuals we would use a tax rate of one-quarter of one percent per $1,000 of income with a maximum tax of 25%.

Taxable Income x % Rate = Taxes to be Paid
There would be only five standard deductions for the individual taxpayer.
1. $5,000 for each individual taxpayer filing separately or jointly.
2. $2,000 for each individual IRA
3. $1,500 for medical savings accounts for each individual taxpayer
4. $1,500 for educational savings accounts for each child or for each adult retraining.
5. All interest paid on a mortgage.
See sample individual tax return on page 57.

The same tax rate applies to all businesses after specified deductions.
All businesses, regardless of how they are structured—sole proprietorship, partnership, corporation, etc.—would be able to deduct any expenses which are part of the cost of what they produce or sell in the tax year.
If a business purchases a piece of equipment or a piece of property for $1 or $1,000,000, it would be fully deductible in the tax year paid.
If a piece of equipment or property is purchased on the installment plan, all installment payments including interest and handling charges plus any down payment would be fully deductible in the tax year paid.
If a piece of equipment or property is leased or rented, the full lease or rent payment would be deductible in the tax year paid.
If a business purchases a piece of equipment or builds a building and then sells the equipment or building, any down payment, installment payments or other expenses would be fully deductible; and then the balance would be entered as gross income.
The interest and service charges paid on loans would be fully deductible in the tax year paid.
To avoid double taxation, any profits paid out in the form of bonuses, dividends, etc. would be deductible since the individual receiving the money would pay the individual tax. The profits left in any kind of business—sole proprietorship, partnership, corporation, etc.—after all expenses are paid would be taxed at the same rate as an individual.
Business deductions would include all operational expenses paid out in the tax year—including 100% on equipment, property and dividends.
See sample business tax return on page 58.

Any additional revenue needed to balance the budget after all legitimate spending cuts are made would be obtained by creating new money or a surtax on individuals and businesses that make over $250,000 per year.
This simple tax system could also be made variable to leave more money in the pockets of consumers when the economy needed to be fueled. The tax rate of .25% per thousand dollars of taxable income or the maximum tax of 25% could not be exceeded. The tax would be indexed by the IRS so less money could be taken out of the wage earners paycheck if the Federal Reserve board deemed that more money should be available to exchange all the goods and services that people can produce. Again, any loss of revenue would be offset by the Treasury Department creating new money or a surtax levied on individuals and businesses making over $250,000 per year.

You can help produce an instant mindset change in the year 2001 that will bring a lasting era of peace and prosperity by ordering the book MIXTURISM to find and promote the ideas that will rule the 21st century and beyond.

Wyatt   March 28th, 2009 8:46 am ET

Why are we in Afghanistan again ? 11 of the 19 hijackers were from Saudia Arabia. Al Qaeda ? You mean the CIA funded and NSA Brzezinski trained to fight the Russians. Rex Tomb, Chief of Investigative Publicity for the FBI (2006) – " The reason why 9/11 is not mentioned on Usama Bin Laden’s Most Wanted page is because the FBI has no hard evidence connecting Bin Laden to 9/11.” 1999- Taliban almost eliminates opium growing completely in Afghanistan, 2007- Opium growing is the largest its ever been according to UN. So why are we in Afghanistan again ? Think people, you know it doesnt add up !

Lauro Silva-Brazil   March 28th, 2009 8:56 am ET

What we´re watching across the world is that all governments are sugar-coating the pill when the bitter pill had to be swallowed instead. The drastic consequences of it have to be faced making all necessary efforts to minimize its effects and not forgeting it is a hard way to be followed but not too hard enough to make it impossible. When you get a very serious upset stomach the best to be done is to bring it up to solve the problem. The deceptive reality is that all technocrats, aides,CEOs, managers,bankers and the like, making up the Administration, Federal Reserve,Central Banks, Wall Street, AIGs,Automakers are all alike doing the best for themselves or taking outraging and illegal advantages perfectly syntonized to the moments they are living and into a continuous shift work around, not to mention their persistent negligence. They don´t concern about the common people at all but about themselves. We have noticed as well all governments have been naive, maybe a supposed camouflaged naiveté, when they believe the private investors will help the government or that the bankers pledge cooperation with the government etc etc. The same naiveté we have three or four times noticed at the time Mr. Obama had to choose his assistants. The most basic precautions just put aside,threatening to crumble the government away. Everything you do without the necessary conditions to, you´ll have to face the bad results from them. All these unbelievable bailouts will be getting back with disastrous consequences, the first one an uncontrollable inflation. We have been hearing of plans in countries of constructing one million popular houses for people afforded to pay 7 or 9 dollars installments a month. No doubt it will be a wide open door for corruption, petty politics,grafts, embezzlements and that the ordinary people will get the dirty end of the stick again in the future.

Lauro Silva-Brazil   March 28th, 2009 9:28 am ET

All governments across the world are sugar-coating the pill with unbelievable bailouts that will get back in the future with disastrous consequences for the common people. Everything you do without conditions to, you´ll have to face the bad results from them. It has been proving that all technocrats, aides, CEOs, managers, bankers and the like are all alike in any country only concerning about themselves and many times with outrageous behaviors. We realize as well a naiveté,or a supposed camouflaged naiveté, believing the private investors to help the government or bankers pledging cooperation with the government. It was devastating for the government when at the beginning it faced difficulties three or four times to choose its assistants being naive and not taking the most basic precautions. We´re watching that the crisis has been a wide open door for corruption,petty politics,grafts,embellzements and that the common people will keep yet getting the dirty end of the stick.

Jay Curry   March 28th, 2009 10:23 am ET

What is a Comedian/writwe/actor/producer dioing on an ëxpert " panel sharing his ignorance about Afghanistan, Pakistan, and

Jay Curry   March 28th, 2009 10:23 am ET

What is a Comedian/writwe/actor/producer dioing on an ëxpert " panel sharing his ignorance about Afghanistan, Pakistan, and

Brandon Klinedinst   March 28th, 2009 12:07 pm ET

This depression will help people realize the numerous faulties associated with our economic systems of the world today. It's clear that it's time for change, and Obama isn't able to bring that change.

I personally like the ideas that have been presented by Jacque Fresco.

Dave of Detroit   March 28th, 2009 7:44 pm ET

I am going to take a break from CNN and Politics for awhile-Barney Franks is starting to look and sound like Elmer Fudd, Chris Dodd is Yosemite Sam, Nancy Pelosi reminds me of Cruella, and Harry Reid is Mr. Magoo-all the Republicans are the Seven Dwarfs and Rush Limbaugh is going to huff and puff until he blows the entire Capital Buiding down-Obama should look in the mirror as he is starting to sound like Bush in committing U.S. Troops to a war in Afghanistan after saying he wouldn't make any unilateral decisions without United Nations Sanction and help and as far as any changes in Washington-I thought Obama meant positive changes-withdrawing our overworked troops and giving them a much deserved rest, protecting our and Mexico's Borders, but all I see is a continuation of the farce of spreading our so-called influence throughout the world and rebuilding every country but our own-Am I wrong? Am I delusional?

Marjorie   March 29th, 2009 5:52 am ET

You talk about cleaning up the earth but yet you send all the JUNK up in space...could this be 1/2 of the problem

Barbara Kenzik   March 29th, 2009 11:54 am ET

Now that the dust has 'settled' on this debacle that is consuming our country, it is time to look more clearly at the devastation it has caused. A hurricane or tornado is a natural disaster. This one was man made and in my opinion, borders on treason.

The realtors, mortgage companies, banks, brokerages and insurance companies were blinded by the dollar signs they saw and quite simply destroyed this country. They took the hopes and dreams of people who wanted to be homeowners and this is how they paid them back. I do not know anyone anywhere who has said this crisis has not affected them in some way. As the saying goes, 'when my neighbor is our of work it is a recession. When I am out of work it is a depression'. This crisis has affected every man, woman and child in this country. And it could have been avoided.

Wall Street and the stock market should be abolished completely. I know I want nothing to do with these people – ever.

If you want to gamble, I know just the place – Las Vegas. And you will have more fun!

Joe   May 11th, 2009 9:03 am ET

Please get Jacque Fresco on your show. His ideas demand some serious discussion.

Fibreman   May 11th, 2009 3:27 pm ET

The truth is, the interest-based capitalist economic systems introduced by the western world are doomed to fail – they have been designed that way.

Before decisions are taken to fix the current crisis by generating even MORE debt, every man and women in every western country should educate themselves as to what is really happening with our taxes, the history of interest rates, the truth behind banking collapses past and present. In whose pockets is this money really going?

We live in a world of plentiful resources, yet half the population lives in poverty. How can we, as intelligent organisms, justify this?

In order to survive with our freedom as human beings intact, we need to open our minds to more radical ideals than the ones we have been sold since our childhoods.


No person on this planet should be without the bare essentials. Every single person on this planet can and should have access to food, clean drinking water, free shelter, a supply of energy and a full, flexible education. Many of us spend 40+ years of our lives working in sedentary, mundane and monotonous lines of employment. The technology is already there for many of these jobs to be performed by computers. While there may always need to be jobs in some areas, we may eventually only be required to work for as many as 10 years in the most crucial roles before retiring to learn more about ourselves, the world (and universe) that surrounds us, and to affect change by performing voluntary roles in our communities. In this sense, the sharing of our skills becomes the greatest economic factor – the more we learn, together, the stronger we become.

Cars have been able to drive themselves safely on our roads for the last 20 years yet we have yet to see the worlds first consumer-level driverless car. The technology is already there for cars to run on water – yes, clean and simple H20 – yet there has yet to be a consumer level water-powered car, thanks to the billions of dollars being made by oil companies raping our planet of a natural, but increasingly scarce supply of energy. Enough electricity to supply the entire planet can be derived from geothermal sources using technology available today – a plentiful supply of power that will constantly renew itself throughout the lifetime of our little blue/green blob circling the Sun.

This is not all pie in the sky, this is acheivable, and it can be done NOW. All it needs is the world's population to know about it, to support it, and to reject the drip feeding of meaningless green paper into our pockets, wallets, and purses from our governments, financial sectors, and corporations.

PLEASE HELP GET JACQUE FRESCO ON LARRY KING. More must learn not to simply accept that 'that's the way the world is' but to help acheive what the world could be.

Nick   May 11th, 2009 4:01 pm ET

I would like to see Jacque Fresco on the show for a second time. He represents an alternative future for the World which needs to be discussed!

Dustin   June 6th, 2009 1:33 am ET

I second (or third or fourth, etc.) the notion to bring Jacque Fresco back on. If every man thought the way Jacque Fresco did, the world would be everything we dream it to be in an utopian society.

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