Friday, February 8, 2013

The End is Nigh. Serious this time. We mean it. Not kidding. This is not a test. Believe us. Really. Please.


Another day another warning of gloom and doom from Obama, the Dems and the Amen Corner. This time Armageddon can be avoided by removing the sequester.

Krugman weighs in that cuts occurred in the Clinton administration yet nothing dire happened since the Fed lowered interest rates, offsetting the impact. But the Fed can't help this time because rates are already close to zero.  That would be an interesting story about the Fed if true, but it isn't true.

Here is a chart of the Fed Funds Rate from 1992 through 2000:

I'm looking for the big cut the Fed instituted, but I just don't see it.

Maybe I'm looking at the wrong interest rate. Maybe I should be looking at the US Treasury 3 month bill.

Unless he's talking about the very short-term drop in 1992 I still don't see it. But that's a pretty powerful cut, that it can spur the economy for the next eight years despite interest rate INCREASES and FALLING government spending from 1993 onwards.

So the Clinton cuts were NOT offset by falling interest rates. In fact, interest rates ROSE.

You, and others, love to point out how higher tax rates under Clinton did nothing to deter a robust economy. Your strong form of that argument is somehow higher taxes CAUSED a robust economy. The mechanism for that is never explained, but that doesn't seem to bother anyone. I think both forms of the argument are dubious claims, but let's take them as true. Look at the arc of government spending and outlays from 1962 through 2023, as presented by the Congressional Budget Office.

According to your logic, the sharp drop in government outlays should be just the thing to spur the economy, after all, worked for Clinton.

The whole argument is silly and full of contradictions. Why increasing government outlays worked for the Regan recovery, but falling outlays worked for Clinton, but nothing works for Obama is a mystery no one has explained.  The Obama and Krugman et al doomsday predictions are, in my mind, a temper tantrum, on a grand scale.


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