Krugman on Today

Wookster

Did anyone hear him? I was a bit disappointed actually.

Evan Davis asks him 'So if government spending was expanded by 2% what would the increase in GDP be?'

Answer: Cough Cough, Well the UK is harder to gauge than the US

So What would you spend increased government spending on?

Answer: Well the NHS is exactly the same as infrastructure.

You're very derisory of your critics aren't you?

Answer: Well I hold contemptible people in contempt.

It seems to me that his singularly failed to make the case for his arguments but fair credit, he did mention that the PIIGS suffered because they could not manage monetary policy.

Joe_Bloggs

I heard him too.
Me thinks he is all about selling his book rather than bothering to do any current research into the UK /Euro economy.
J_B.

Masomnia

So he's basically asking him what the Keynesian multiplier actually is. I don't think anyone knows with any specificity, if specificity is the word I'm looking for, and it does worry me that people are basing policies on it.

Generali

To be fair he puts a likely figure of 2.6% rise in National Income (kinda GDP) on a 2% increase in Government spending. Then says between 2-3%.

He answers the underlying question which is, 'Do you think a 2% of GDP rise in Government debt will lead to a greater or less than 2% rise in GDP?'. He believes the former, I have my doubts but he's winning 1-0 over me in terms of Nobel Prizes so perhaps I should cede to him.

I certainly respect anyone who gets to use the phrase 'mendacious idiot' on Radio!

He fails to answer the same question that so many who stand against austerity in Europe falter upon: If you're going to carry on spending, where will the money come from?

chewmylegoff

if your GDP is £100, your tax take is £40, and your public spending is £48, then what happens if you increase public spending to £50, and GDP increases to £103?

Here's a clue, tax take goes to £41.2 and the deficit is now £8.8 (8.5% of £103) instead of £8 (8% of £100), and you haven't accounted for debt interest yet.

If you increase public spending you have to increase taxes to pay for it, which in turn reduces the GDP growth created by public spending. If you don't do that your deficit gets bigger and the cost of finance spirals which has the same effect.

In other words it's all just a load of old bollox and there is no magic bullet.

Generali

chewmylegoff wrote: »

if your GDP is £100, your tax take is £40, and your public spending is £48, then what happens if you increase public spending to £50, and GDP increases to £103?

Here's a clue, tax take goes to £41.2 and the deficit is now £8.8 (8.5% of £103) instead of £8 (8% of £100), and you haven't accounted for debt interest yet.

If you increase public spending you have to increase taxes to pay for it, which in turn reduces the GDP growth created by public spending. If you don't do that your deficit gets bigger and the cost of finance spirals which has the same effect.

In other words it's all just a load of old bollox and there is no magic bullet.

Good maths old thing. I guess that's the problem with the current position: we can't borrow enough to push the economy back on course.

Wookster

Generali wrote: »

To be fair he puts a likely figure of 2.6% rise in National Income (kinda GDP) on a 2% increase in Government spending. Then says between 2-3%.

He answers the underlying question which is, 'Do you think a 2% of GDP rise in Government debt will lead to a greater or less than 2% rise in GDP?'. He believes the former, I have my doubts but he's winning 1-0 over me in terms of Nobel Prizes so perhaps I should cede to him.

I certainly respect anyone who gets to use the phrase 'mendacious idiot' on Radio!

He fails to answer the same question that so many who stand against austerity in Europe falter upon: If you're going to carry on spending, where will the money come from?

Evan Davis literally had to spoon feed him. It was almost as though he didn't believe his argument - does he really think you can go on national radio not being able to string together a basic argument for your theory?

FWIW most socialists can't answer the basic question as to where this supposed money tree can be found...

Wookster

Well just seen him on Newsnight and he was totally pwned by Jon Molton & the conservative spokesman.

He sat there slightly aghast.