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Published:February 23rd, 2012 10:06 EST
Expanding Upon Paul Krugman's "Pain without Gain" Article Focusing on Local Government Solutions

Expanding Upon Paul Krugman's "Pain without Gain" Article Focusing on Local Government Solutions

By Harvey Carroll, Jr.

  

This is to expand upon Paul Krugman`s "Pain without Gain" article in the New York Times on 19, February  2012.

 

He started by noting that the European Commissioned confirmed that the economies were shrinking and not growing. I don`t know who he had been listening to, but everyone that I have read or heard has been saying this for a very long time. So, nothing new there, and it did not take a noted Economist to realize this.

 

He claims that America`s GDP has surpassed pre-crises peak, but Europe`s has not and some are facing Great Depression-level pain citing Greece, Ireland and Spain. Obviously, and I and others include Portugal so we could have a great acronym PIGS. He notes that many such as Briton`s downturn has gone on longer than it did during the Great Depression. This new thoughts; however, there has been the discussions of how technology advances also deepen recessions.  So, not a revelation to hear.

 

Then he goes on to say that the Political and Monetary Policies that Europe has undertaken is in actuality undermining their economies growth and development by being wedded to economic doctrines responsible for this disaster. I think yes, and no on this, but you will see my thoughts as we go along.

 

Krugman as do I, believe that things should not have been this bad. I want go off on a tangent, Yet, I will remind folks of my Political Mentor that tried to educate Americans on keeping their debt low and not running a huge Trade Imbalance.

 

Krugman feels that Greece would have been in trouble no matter what and I have to agree. That is why I think it crazy that the IMF Managing Director Ms. Christian Legarde provided two bailouts for Greece since she took over. The first that she supported failed, and then soon after she wished the investors to take losses/a reduction in yields and then provided a second bail out...

 

I do not support Austerity Economics any more than Krugman; however, you don`t give a group of squanders more money. They will just continue to squander it. So, austerity controls must be put in place, just like getting a home mortgage or business loan from a commercial bank. You have to prove that you have a sound business plan to get the money and you have to secure those funds. Yet, with it is in the hundreds of Billions it appears that sound economic and finance principle do not apply to the IMF, nor in the mind of noted Economist Paul Krugman who cites Herbert Hoover`s doctrine of spending cuts and how that adds to unemployment (yes in Big Government and waste) . He goes on to try and make a case that the direct negative cuts on employment should offset changes in Confidence`, salvage spending cuts that will surge consumer and business spending and avoid capital exodus and rising interest rates.

 

However, Krugman make a case that three generations of economic analysis and lessons of history prove otherwise and discredit the Hoover economic model saying confidence declined, no private sector surges.

 

This is Krugman`s opinion and I am not sold, for I want more for my Debt Increase and Stimulus Investments, as do the Bond Markets. Be it the PIGS of Europe having trouble borrowing without a plan of action business plan. Rates obviously climb with risk, and the PIGS have risk. In many cases the PIGS are near Swine Flu and no one wants to be exposed to them. This is reasonable; however, there is hope and I will show you soon the vaccine for the EU-PIGS and America`s Economy as well in a moment.

 

The United States and Japan may not have jumped on the so called austerity train; however, they have had issues. I will just talk about the Untied States as noted by Krugman still has a lot cost of capital/borrowing costs that has defied the Hoover model theories. In many ways, that was because there was a Plan of Action to focus on buying down assets from Banks and focus on Stimulus projects that create growth; however, the United States has debt/defect problems and has taken a hit on their AAA rating. President Obama did slam shut the Social Security Lock-Box and McConnell and Bonners fingers and reduce the Defense Budget by about 300 billion that would give more cash-flow security to Bond Holders. So in a way, America may not have jumped on the austerity train, but they did take the austerity bus under President Obama`s wiser economic stewardship.

 

The best and really only point that Krugman makes in the paper that really makes sense is that more funds should go to help our state and local level Governments. Krugman cites all the fuss over shovel ready projects that President Obama cited to justify large-scale stimulus spending. Krugman feels that the federal government should provide aid to lower-level governments, allowing these governments to rehire the hundreds of thousands of schoolteachers, and restart building/maintenance projects they have canceled.

 

I agree; however, I see that as a PIG IN A POKE. You don`t see what you are getting, nor is it real investments that are needed to create vast increases in America`s GDP via growth and development. I will address this in the last paragraph and include spreadsheets and ideas that will far expand upon lower-level Government funding via Comprehensive Planning such as this one I pittled with in my hometown of Irvine, Kentucky.

 

I am not a noted economist; however, I have affected the economic fate of nations in my political and military advisements; which is a story for another day. I have a BBA in Real Estate and Finance, Masters work in Business, Diplomacy and International Commerce. Developed a few million dollars worth of land and dealt with Real Estate Sales in Kentucky and Florida where prices were really skyrocketing. I clearly understand and have participated in both private land development and community growth and development projects and have the Professional Public Administrators educational/experience background that exceeds that of Paul Krugman looking at this issues from an economist perspective.

 

I wrote papers prior to warning of the economic crash. I got a few emails, and a form letter from time to time from Senators, and President Bush nothing happened until they saw the reality in 2008. That is when the Bush Wartime Economy along with bad trade deals such as Newt`s NAFTA, combined with China and other bad trade deals is now about a one trillion dollar a year trade imbalance. America should never have gotten into such financial difficulties and I see Kentucky Senator Mitch McConnell as partially responsible as well as Bush. I would like to see McConnell pack and leave Washington as I am sure many in the PIGS of the EU would love to see their mismanages leave Government.

 

In my attempts to try and help America climb out of, and bail its way out of the economic crises. I wrote lengthy papers, and Microsoft Excel Spreadsheets such as this one . I my thoughts with the White House, FDIC, and the House Senate Financial Services Committees in attempts to be proactive and preventing a major downturn in the Real Estate market; my ideas may have resulted TARP.

 

The plan was for the Federal Government to quickly inject cash into the Real Estate Market that would prevent it from total collapse. The Federal money could be borrowed very cheaply in comparison to banks, and this margin would ease losses by banks as real estate values dropped; yet, provide an asset for the Social Security trust fund and others. However, the Bush leadership and many in Congress blamed the American people and the Banking System for their failures, as opposed to accepting responsibility for their own squandering of taxpayer funds on wars of choice, and bad trade policies. Washington`s actions affected the monetary system, and then they blamed Americans which added to the drop in confidence and a vast drop in Real Estate Values.. So, not only is this a rebuttal to Krugman`s concepts, but I also have to call BS on Washington and all the so called economist that echo this Idiocracy of running up huge debt. Yet, I give Krugman credit for focusing on the local aspects of making the economy grow.

 

The local economy investments can help with the problems, but let us realize that we have huge problems and vast GDP increases to meet. During the Bush Administration, welfare nearly tripled and went from 17 million when President Bush took office in 2000 and at an end of the Bush Presidency was on a rapid climb that is halted today by President Obama at nearly 45 million. I see a direct partial correlation between the tripling of the Defense Budget with the tripling of the Welfare roles.

 

Defense austerity of cutting nearly 1/3rd of its budget will allow a shift of nearly 300 billion or (about a 1 BILLION DOLLARS EACH DAY) that could be shifted back into American Infrastructure projects, which in turn will expand growth and development within the United States and begin a vast creation of jobs.

 

In conclusion, I support shifting Federal Funds to the State and Local Level; however, I feel that it should be matched via local payroll tax or other forms of in-kind contributions, as well as SBA and other leveraged funds to maximize Federal Funds. This allows communities like my own hometown of Irvine, Kentucky to see a bit of hope and begin to consider taking a look at long term Comprehensive Plans. My hometown and others can begin to dream like Disney`s Imagineers and ask What Ifs, and once they determine feasible and financeable projects they can begin new and innovative ways to tap into the State and Federal Infrastructure funds made available in the Obama Budget. Comprehensive Planning and Infrastructure Funds/Bank can provide help in each and every part of their community grow with citizen participation. Such planning in each community, city and state will maximize and leverage Federal funds to create vast new growth and development from the local and state levels of Government.

 

Thank you,

 

Harvey Carroll, Jr.

 

Photo Credit: WikiMedia Commons