Paul Krugman: "The Mellon Doctrine" - Cut Wages to Increase Job Creation?

by Guest Fri Apr 01, 2011 11:01 am

“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” That, according to Herbert Hoover, was the advice he received from Andrew Mellon, the Treasury secretary, as America plunged into depression. But one thing is clear: Mellon-style liquidationism is now the official doctrine of the G.O.P.

In fact, across-the-board wage cuts would almost certainly reduce, not increase, employment. Why? Because while earnings would fall, debts would not, so a general fall in wages would worsen the debt problems that are, at this point, the principal obstacle to recovery. In short, Mellonism is as wrong now as it was fourscore years ago.

http://www.nytimes.com/2011/04/01/opinion/01krugman.html?partner=rssnyt&emc=rss

Paul Krugman: "The Mellon Doctrine" - Cut Wages to Increase Job Creation? Unempl11

by JoanB Fri Apr 01, 2011 12:17 pm

Things this made me think about:

You know that study that suggested that conservatives and liberals have different brains/personalities? I think they should do a similar study that looks at perception of cause and effect.
I wonder...is the confidence fairy is related to the underpants gnomes?
I love Paul Krugman. Even though I'm gay. Keynesian economics are very sexy.

by cps70 Fri Apr 01, 2011 1:21 pm

Well its obvious that the 2 plans that have become apparent over the past few years are not and will not work.1 side wants to throw money at the problem the other side wants to starve everyone so there has to be a happy medium everyone can agree on.

by JoanB Fri Apr 01, 2011 1:52 pm

But is it really obvious, cps? Take just Unemploment Compensation and the Food Stamp Program,, some government spending near and dear to our hearts here. Most economists will tell you that smart government spending (like the kind that goes to folks like us) does help the economy.

And think about all the spending that got us out of the Great Depression and along with the GI Bill (another great chunk of government spending), made the huge American middle class possible.

Sometimes the middle seems attractive, but isn't always the answer.

by cps70 Fri Apr 01, 2011 2:43 pm

I would be in complete agreement under normal circumstances but because of the enormous debt we have we do not have the luxury to throw endless dollars at the economy but on the other hand we also cannot cut programs that for some of us is the difference between life and death.That's why I said we need middle ground.

by JoanB Fri Apr 01, 2011 6:13 pm

cps70 wrote:I would be in complete agreement under normal circumstances but because of the enormous debt we have we do not have the luxury to throw endless dollars at the economy but on the other hand we also cannot cut programs that for some of us is the difference between life and death.That's why I said we need middle ground.

But I don't see how we're throwing endless dollars at the economy. I do see that the fat cats got to keep their Bush tax cuts. We sure couldn't afford that. The people who want to do all the cutting from the stuff that might benefit you and me will tell you that it is a spending problem, not a revenue problem, but that's just not true. The people at the top aren't paying their fair share. And corporations like General Electric paid no taxes at all last year. Zero.

Here's some of what the House GOP thinks we need to cut because "we can't afford it" (edited for brevity's sake):

• Flood Control and Coastal Emergencies -$30M
• Food Safety and Inspection Services -$53M
• WIC -$758M
• FDA -$220M
• Job Training Programs -$2B
• Community Health Centers -$1.3B
• Maternal and Child Health Block Grants -$210M
• Family Planning -$327M
• Poison Control Centers -$27M
• CDC -$755M
• NIH -$1B
• Substance Abuse and Mental Health Services -$96M
• LIHEAP Contingency fund -$400M

The problem I have with the middle in this case is that it assumes both sides are reasonable and acting in good faith. But I don't think that's the case here. It's like if you and I are looking at a patient who fell and hurt his ankle. Might be broken, might just be sprained. You say "let's just ice it and see." I say "No, no, no, let's amputate at the hip!" So the middle ground is to amputate at the knee.

Was that a ridiculous analogy? OK, so maybe they don't think that the government should help poor people, but I say if their ideolgy is so extreme that they think the even the Centers for Disease Control is non-essential spending, then they are not just ridiculous, they are insane.

by **Jobless_in_Ma** Fri Apr 01, 2011 6:30 pm

The problem I have with the middle in this case is that it assumes both sides are reasonable and acting in good faith. But I don't think that's the case here. It's like if you and I are looking at a patient who fell and hurt his ankle. Might be broken, might just be sprained. You say "let's just ice it and see." I say "No, no, no, let's amputate at the hip!" So the middle ground is to amputate at the knee.

Nice Analogy JoanB