From Ezra Klein, at the Washington Post:
Bill Gross: Deficit reduction can — and should — wait
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Bill Gross is the manager director of PIMCO, which makes him one of the most important bond traders in the world, if not the most important. And so his exit from the Treasury market a few months ago, plus his intense and very public concern over the deficit, has attracted a lot of concern. “Keep that in mind when you hear people arguing about austerity,” wrote Megan McArdle. “People like Bill Gross are the ones we ultimately need to convince, because they’re the ones whose defection will precipitate a crisis. And he’s not buying either supply-side claims that tax hikes will cause disaster, or the super-Keynesian argument that we can’t cut spending because the economy will contract so fast that we’ll actually end up with a bigger deficit.”
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Or so we thought. But in an unusual mid-month note to his investors, Gross hammered the “anti-Keynesians” in both parties who believe “that fiscal conservatism equates to job growth.” The truth, he says, is just the opposite. “Fiscal balance alone will not likely produce 20 million jobs over the next decade. The move towards it, in fact, if implemented too quickly, could stultify economic growth.” […] __
So what should we do? “Government must temporarily assume a bigger, not a smaller, role in this economy, if only because other countries are dominating job creation with kick-start policies that eventually dominate global markets.” But what about the deficit? “Deficits are important, but their immediate reduction can wait for a stronger economy and lower unemployment. Jobs are today’s and tomorrow’s immediate problem.”…
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Gross’s credentials as a deficit hawk are unimpeachable, but he’s arguing here that, to be a deficit hawk over the long term, you need to be jobs-focused now, as no economy with 9 percent unemployment is going to achieve the growth necessary to get its deficit under control. And he’s right. The question is whether his call for the government to refocus on jobs and brush aside fantasies that deficit reduction is also job creation will get as much attention as his concerns about debt and deficits.
So: Next time the glibertarian co-worker or facebook friend-of-a-friend starts yammering about The Deficit, tell them that the Very Serious PIMCO Superstar wants the government to hire more people. The math demands it!
Also, in DougJ’s absence, it falls to me to point out that Megan McArdle stands fair to inherit Bill “Always Wrong” Kristol’s mantle for infailable inaccuracy, if only she can stop dithering about Himalayan pink salt and find some focus.
azlib
Mr. Gross has finally figured out the Republican Party is simply insane. It would of course have helped if Obama had maintained clear and unambiguous messaging on jobs.
Belafon (formerly anonevent)
They’ll just declare him a DHINO (deficit hawk in name only) and continue to ignore him.
Thoughtcrime
Add the Wall Street Journal to the list:
http://online.wsj.com/article/SB10001424052702303635604576392023187860688.html
harlana
There’s your sound byte, Dems. Nice, neat, simple. Are you “courageous” enough to use it?
And while you’re doing that, I hope, would you point out the fact that republicans voted over and over to raise the debt ceiling during the Bush administration? Pretty please?
gbear
This isn’t going to make a bit of difference to house and senate republicans. LALALAICan’tHearYOOOOO.
Villago Delenda Est
Here’s the problem.
Our Ferengi MBA Galtian overlords are totally focused on the next fiscal quarter. There is no time beyond a FU. None.
Alex S.
The overlords are speaking up, finally. Maybe they’ve realized that this stagnant economy isn’t good for anyone, except for the electoral prospects of the Grand not-quite-as-old-as-the-Democrats Party. They will get louder the closer we get to the debt ceiling.
jl
@3 Thoughtcrime – June 21, 2011
I was going to post a link that that WSJ column, but you beat me to it. Thanks.
the WSJ column is a guest column by Aland Blinder, an economist at Princeton University, who is belongs to the Brad DeLong Paul Krugman nexus of Keynesian. I doubt the WSJ editorial page or a majority of other (Edit: WSJ) columnists would agree with Blinder’s column, at least overtly and in way that contradicts whatever insanity the GOP forces cook up on a given day.
Below is a link to op eds and columns at Blinder’s homepage.
Alan Blinder, op eds:
http://www.princeton.edu/~blinder/editorials.htm
jetan
This explains why McMegan is back on one of her ridiculous baking posts today.
Violet
@Alex S.:
Ding! Ding! Ding! We’ve got a winner. I find it interesting that the Monied Class is starting to rumble a bit. Must mean they’re a bit nervous. They aren’t going to let the Teabaggers take away their wealth. At least not without a fight.
JPL
but, but, but, Fox news told me the government can’t create jobs… A friend said that FDR policies didn’t get us out of the depression, war did. When I pointed out that WWII was actually the biggest government stimulus ever, she hung up on me. lol
jl
Oops, edit time ran out. I wanted to add that I think Blinder is as good at explaining his logic and evidence as are DeLong and Krugman, so his columns are worth a read in order to glean well informed and well reasoned talking points.
Which, you can use in discussion of current economic affairs with various significant and insignificant others who have been misinformed, but can reached through evidence and some kind of sensible argument.
Davis X. Machina
Doesn’t matter. Gross is pissing into the wind. These people don’t have a different view of macroeconomics — they have no macroeconomics at all.
They have a theology.
(And no micro beyond double-entry book-keeping on a good day, and that required to maimtain a checkbook register on a bad one.)
Corner Stone
I’ve got a few problems with Mr. Gross en toto. But god damn, if that quote is accurate I want to have 1000 of his babies.
lamh34
OT, but it is kinda about Repub and bad accounting or money habits?
Well damn, I never thought Newt Gingrich was a real contender, but still WhoTF needs 2 LINES OF CREDIT AT TIFFANY’S????
I wouldn’t want Newt anywhere near my money if I was a repub!!!
Newt Gingrich had second line of credit at Tiffany’s
Janus Daniels
JPL – stating the obvious is a well known liberal trick.
AL – McMegan knows no limits. She gets pink salt wrong too.
trollhattan
This is good news for Herman Cain!
Are the banksters beginning to understand what and who they’ve unleashed on the nation in the form of Republican bagger Reagan corpseophiles?
Naaaaah.
Also, too, McMegan needs a job. Her first real job. Anywhere.
Thoughtcrime
This “deficits are OK for now” could also just be cover to justify keeping the tax cuts.
Karmakin
Well, there is a certain economics there. By keeping unemployment high, they force wages down which will result in making more jobs viable, creating jobs and lowering unemployment.
It’s pure supply side economics.
In any case, the debt was created to get TO this point. If the Democrats could snap their fingers and eliminate the entire debt, Republicans would immediately start building it back up. Lowering wages is the singular goal here.
JPL
Karmakin Lower wages won’t work over time because we are a consumer based economy. I had read that in an ideal world we would be an investment based economy but that has never, ever worked unless they want to do away with the middle class. Well..duh…I answered my own question..they don’t care about the middle class.
Karmakin
Oh I’m not saying that I agree with them of course. I’m strictly demand-based in every facet of the economy. (Mostly. There can be exceptions from time to time)
And yes, it’s about the ending of the middle class.
Matthew Reid Krell
Remember, without the minimum wage everyone would be employed! After all, it’s floors that prevent action, not ceilings.
Odie Hugh Manatee
@JPL:
The Repubs are going for a wider consumer base. They think that depressing wages to the point that everyone has a job will increase the consumer base and improve sales across the nation. The problem with this plan is that sales will increase, at the local dollar store and Goodwill. That and nobody will be able to afford much else.
Except the rich, and that’s just fine with them. The poorer everyone else is, the richer they look!
burnspbesq
The head of the Invisible Bond Market Vigilantes has spoken. Now we know why they are invisible.
Can’t wait to see what Krugman and DeLong have to say about this.
harlana
Bachmann is a soshulist!?1
RossInDetroit
Waiting to see if The Krug has a comment on this. Probably tomorrow, I’d bet.
JPL
Odie Hugh Manatee Well if I had Macy’s stock it would be time to sell. Most communities have malls and Macy’s or another store is the anchor. Without those anchor’s you are talking about a lot of empty space. You can’t exist with a wallmart on every corner. It won’t work.
EDIT..Neiman’s and Bloomie’s (federated owned) exist in the same mall. You get rid of the middle class buyers and they suffer also. Who wants to shop in a depressed area.
Binky
burnspbesq & RossInDetroit,
Bill Gross mentioned Krugman in the piece, essentially agreeing with him.
NobodySpecial
Good thing Democrats haven’t decided that deficit reduction is incredibly important, then.
harlana
Rachel Maddow just diced the Huntsman campaign into little bits. Just watched the Hunstman ad for first time. o.O
lamh34
ughhh!!! my comment @15 is STILL in moderation!!!! Darnit, that’s what I get for posting something OT I guess…lol
Corner Stone
@NobodySpecial
Jay B.
Here’s Gross, as quoted in a much more detailed Talking Points Memo story:
Since the Democrats basically agree with the Republicans for the “solution” to our jobs problem, it’s too bad Gross has to go and make sense. It’s about goddamn time someone did, even if he’s a titan of capital. We need infrastructure investment. We need more stimulus and we need it now.
RossInDetroit
@ JB:
FTFY
Keith G
So the question is, can the Obama administration walk and chew gum at the same time? With all the other things going on this week, I hope that they can begin pushing a narrative on how Bartlet, Gross and other Conservative types are agreeing that the deficit must not be the priority until unemployment goes down. This should be metioned everytime an administration official and/or spokesperson finds a microphone (or a Bobo).
UncertaintyVicePrincipal
Jay B
If this thing snowballs and even Republicans start saying it, it could be really good since Democrats actually listen to them.
Andy Olsen
We should tackle the deficit when we have a strong economy equipped to do the job. When we don’t have chronic unemployment robbing Americans of livelihoods.
The deficit hysteria is so very contrary to America’s interests we need to state the simple fact that these failed policies are continuing to hurt our country.
The so-called “job creators” have received trillions in tax cuts, they were the first to benefit from the recovery, many were bailed out in the Wall St bailout and they have failed to deliver the jobs.
We need JOBS rallies now, all over the country.
Corner Stone
@Keith G
Interesting, isn’t it?
At some point one must conclude the outcomes we are seeing are coincidental with the policies President Obama desires.
JPL
Corner Stone haahahhahahahahahhahahahahahahahahhah ..u might be right or it just might be that MSM decides to put on Grover and ignore the President. Who knows.
cat48
Lolis
Yeah, the time for more stimulus was way before the 2010 elections, but Democrats in the House simply refused to consider anything. Instead, they procrastinated on the Bush tax cuts and led us to the shit sandwich of extending all of them. But, yes, Obama needs to publicly ask for stimulus, and not just the weak tax cut extensions they have been pushing for.
Martin
Gross has this wrong:
Most Democrats don’t believe that. The problem they’re facing is that service of the national debt costs more than the government raises in corporate taxes. It’s higher than the cost of all welfare programs including Medicaid. Even now it rivals unemployment payments. With an opposition so thoroughly steadfast against raising taxes, either we bring the deficit in line and quickly or we’re going to soon be spending more on debt service than on defense, and there will be no way to dig out of that hole no matter how bad or good the employment rate is. The government is being held hostage by insane people.
Gross is only saying this now because of the looming debt ceiling problem and the GOPs insistence that the solution to the potential national beheading is that we shoot the country in the heart first.
Ed Marshall
There are like four comments here about tax cuts. I don’t get this. No, tax cuts don’t pay for themselves. Yes, in a different economic regime it would be more fiscally responsible to have a different tax structure. There is no economic model that I know of that would make increasing taxes a better stimulus than borrowing (and the flight to quality has made the bond market incredibly cheap for the government now). It would be more stimulative to simply send checks to low-income people than to cut taxes, but in any possible macroeconomic model it is still more stimulative to borrow and send checks to low income people than to raise taxes to pay for it instead of borrow it in this climate.
If you are bitching about wanting to raise taxes you are making an austerity argument if you realize it or not.
Corner Stone
Yes JPL, you of course are correct. The MSM decides the policies President Obama backs or discards.
Corner Stone
@JPL
Soooo….you’re more than a little bit stupid then?
karen
@Corner Stone
Because the fall of the economy is all Obama’s fault. Bush left office with a zillion dollar surpluss and Obama just destroyed it all by himself, right?
Mnemosyne
Someone who’s trying to prevent the current Mrs. Gingrich from finding out that he’s got her replacement all lined up.
Come on, you know it’s true.
Corner Stone
@karen
Yes karen. In 2011. The deficit is the most pressing thing our elected officials should be addressing.
Tim, Interrupted
What about when Barry starts yammering about it? What then?
Ed Marshall
@49
affect a defiant stance and post silly shit on BJ.
El Cid
The problem with you people is that you just don’t understand what the deficit and the debt means to America.
Yes, sure, they hate not having jobs or stressing that they’ll lose theirs and how close they are to losing their home or their rented housing.
And, yes, a lot of them have to work a lot harder on budgeting so that they can get enough decent quality food each month for their kids to eat at least a bit less fast-foody.
But that’s not what keeps them awake at night.
That’s not what bites at their souls, or feels like icy fingers wrapping around their throats.
It’s the deficit. And the debt.
Americans can’t worry about abstract things like their food or rent or their only job which is cutting back anyway. You liberals always think you can convince them to somehow rise above their daily life and think as though they all want to drift around the School of Athens debating such idealized Platonic concepts as “car payments.”
Here in the real world, Americans have to wake up every day and look at the deficit staring them in the mirror.
When they’re trying to have just a couple of minutes with their children before they go off to school, or to the remaining months of day care which soon they won’t afford, do their children talk about how their teeth hurt or where Uncle Jake is living now?
No. They’re kids. They’re going to be talking about the debt, like any other normal kid who has to face up to real issues.
You people have to learn to live in the now, to deal with people on their own level, to understand that average Americans don’t want to hear somebody make these promises about ‘jobs’; they want to hear that practical connection with someone who can talk to them straight up about the deficit. And how it’s killing everybody. And how if we don’t get it under control, we’re going to suffer really bad.
After all, a family can lose their house, and have to live day by day finding a friend or relative to live with ‘just a little while until we get back on our feet’, or know that one serious medical issue will bankrupt their family for the next umpteen generations, and adapt to someone’s pain and depression at losing the job or career that gave them a sense of contributing to their own destiny, whether it was a loved or hated job or not.
But to rob a man or woman of the knowledge that ‘I have to balance my budget every month, the government ought to as well!’ is only a hope, only a dream, why, that’s taking from them the one thing they had to hold on to: that public spending would see reductions in various programs such that the federal budget would be seen as more or less balanced.
Without that, what is life?
moops
Lets make this crystal clear. The only real goal here for Gross is to talk the lunatics out of blowing up the economy over the debt ceiling. If that insanity wasn’t staring us in the face he wouldn’t be making a peep about tax-cutting Republicans.
Anonne
I guess he doesn’t ascribe to the Feudalism Now! party politics of the Republican Party.
moops
The only real option to save the economy is unfortunately the one thing Democrats have been taunted with for decades. Tax and Spend. It is a name they cringe at, because they’ve been bullied with it for so long that they have internalized the shame of that title.
sneezy
Don’t hold your breath.
PreservedKillick
The monied class is not liking the games politicians in Washington are playing with the economy right now, no, not one bit. They haven’t managed to fully cash out their winnings on this economic cycle yet. Washington needs to back off until they do.
That said, I suspect they are out of luck. The current crop of republicans wants one thing, power, and they will trample anything in order to get it, most assuredly including the economy.
alwhite
I don’t want to go all Goodwin on the thread but there is a similarity here to 1930s Germany. The Nazi party became the front for wealthy industrialists who saw it as a bulwark against the communists, who were gaining strength because of the insane economy. Those industrialist thought they could use the the thugs & loonies to gain control and then simply control them when they took over.
In the end the thugs & loonies did take over and were not controllable. While many of the industrialist did quite well for themselves it did not end well for them.
I think the masters of the universe have over played their hand and created a monster they really can’t control. We saw this in the last election where nutbag candidates beat MOtU backed ones and in the continued destruction of the economy by the Republicans. What remains to be seen is how it all ends. Badly I am sure but I hope not as badly as it ended for Germany.
daveNYC
Not exactly. There’s no reason why targeted tax increases combined with targeted spending increases couldn’t be a net stimulus. What a stimulus package wants to do is increase consumer spending, so if you increase taxes on those who don’t spend their money, and then give it to those that do, you end up with a net gain.