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An Answer to Prof. Krugman’s (Rhetorical) Question

Today, Professor Krugman in his NY Times blog, asked the question why do people who denied the existence of housing bubble and are now saying that fiscal stimulus doesn’t or can’t work command such attention?  I have an answer.

This is exactly what Prof. Krugman said:

The question is, why do such people command such attention? As I’ve pointed out before, the same people who denied the existence of a housing bubble also told investors that budget deficits would send interest rates soaring; in other words, anyone who believed these people in the past, and acted on that belief, has lost a lot of money.

Yes they have lost a lot money. They have lost trillions including money managers who manage retirement savings of millions of working families.  Why?

Prof. Krugman maintains a certain level of professional decorum and diplomacy which I do not share with the professor.  Those who denied the existence of a housing bubble and are now saying fiscal stimulus can’t and don’t work (despite real evidence to contrary) share an adherence to defunct neo-liberal economic theories .  Neo-liberalism and corresponding economic theories come in many forms the most popular are monetarism and “Trickle Down Economics” that Repuglican Party espouses. 

Some the more common points of neo-liberal economic theories include the following:

1) Government spending is bad.  But tax cuts for wealthy are great.  They advocate the elimination of government programs such as medicare, social security and education spending but of course most are fine with corporate subsidies and tax breaks and loopholes.  They talk about stuff like ‘crowding out’ where government spending leads to crowding out of private investment.  However, despite the nice sounding theories and the sound bites (based on flawed theory) that Repuglican Party recite, there is NO empirical evidence to support the point that government spending is bad or ineffective.

2) ‘Free markets’ are great and all powerful.  Don’t interfere with markets.  This flawed notion ignores that fact that markets are created by people and people participate in markets.  So markets will have flaws and at times, like humans, very irrational.  One only has to look at are current global financial crisis to figure that out.

3) De-regulation - reduce government regulation of everything that could diminish profits, including protecting the environment and safety on the job.  This flawed point totally ignores the total cost of NOT regulating an industry.  Most recent examples (and there are many) of de-regulations damaging effects include: Global financial crisis, mine accident in West Virginia that killed 29 miners, and oil spill in Gulf of Mexico that killed 11 rig workers and caused environmental (possibly long-term) and economic damage to the Gulf region.

4) Privatization - sell public assets or turn over government functions to private investors.  We see this now with Repuglican Party’s push to private Social Security.  Idea is that private sector can do thing cheaper and more efficient than government.  Guess what - not always the case.  Just take a look at the global financial crisis caused by the private sector - Wall Street.  And what about Halliburton’s and its subsidiaries’ performances in Iraq - that should be criminal. 

It boils down to this - this flawed neo-liberal economics that these imbeciles espouse favors top incomes, executives, big shareholders and the oligarchy.  That is why these imbeciles command attention.  Traditional (corporate owned) media doesn’t want people to know that the dominant economic consensus in Washington - a neo-liberal economic consensus - is flawed.  The money train would come to an end.  At least I would hope so. 

Good luck.