Insightful analysis

Via the professor:

THE IMPLICATION IS that the very creation of the common currency area sowed the seeds for this crisis, not the behavior of the periphery countries.

Read the full piece here.

A dangerous mind

Tom Friedman is a fool - there are so many holes in this op-ed that you don't know where to start. Instead, read it, and then remember that almost every assumption he makes or "fact" he simply states is WRONG:

Gov. Chris Christie of New Jersey isn’t going to run. That’s too bad. He had a chance to rescue the Republican Party from its dash to the cliff and make President Obama a better leader, too.

Here’s why: When the G.O.P. presidential candidates were asked during their debate on Aug. 11 whether any of them would accept a budget deal that involved $10 in spending cuts for every $1 in tax increases — and they all said no — the Republican Party officially became a danger to itself and to the country.

The G.O.P. became a danger to the country because it announced, in effect, that it would not be a partner for the kind of Grand Bargain that many economists believe we need — something that provides more near-term investment in the economy that spurs job growth, combined with a credible long-term plan to increase tax revenues and trim entitlements so the country’s debt-to-G.D.P. ratio stays in a safe range. Such a Grand Bargain would simultaneously boost the economy and optimism by its economic logic and the mere fact of the two parties working together.

The G.O.P. became a danger to itself because, as Tyler Cowen, an economics professor at George Mason University, pointed out in this newspaper on Sunday: “Cutting $10 in spending for every $1 in tax increases would result in $9 in net tax reduction. That’s because lower spending today means lower taxes tomorrow, and limiting the future path of government spending does limit future taxes, as Milton Friedman, the late Nobel laureate and conservative icon, so clearly explained. Promising never to raise taxes, without reaching a deal on spending, really means a high and rising commitment to future taxes.”

The G.O.P.’s refusal to contemplate any tax increase, added Cowen, “has brought what seems to be an extreme Democratic response: President Obama’s latest budget plan is moving away from entitlement reform and embracing multiple tax increases on the wealthy. We may be left with no good fiscal options.”

Indeed, Obama’s decision to respond to G.O.P. extremism and the failure to conclude a Grand Bargain, by moving to the left rather than to the center, was a huge mistake. It means, as Cowen noted, that the country has no credible, long-term fiscal option before it now. Rather than shift back to his base with a weak fiscal plan, Obama should have taken his idea of a Grand Bargain to the country.

Many Americans understand that we are on the wrong track and, I believe, will support a big plan if it: 1) addresses our problem at the scale that is required; 2) shares the burden of cutbacks fairly — takes from defense programs and entitlements and asks the wealthy to pay more but everyone to pay something; 3) has a lofty goal to restore American greatness, not just get us through this crisis; 4) lays out an honest time horizon. This will take time.

In an essay last week in The Washington Post, the co-chairmen of the president’s fiscal commission, Alan Simpson and Erskine Bowles, made exactly this point about their plan to cut the debt by $3.9 trillion by 2020 — through raising tax revenues, cutting defense and increasing the age at which people would qualify for Social Security and Medicare. “When we presented our co-chairmen’s proposal to the rest of the fiscal commission in November,” they wrote, “Washington insiders were shocked that we so aggressively exceeded our mandate. They were sure that the proposal would need to be scaled back to get a majority vote. It turned out that the opposite was true. The more comprehensive we made it, the easier our job became. The tougher our proposal, the more people came aboard. Commission members were willing to take on their sacred cows and fight special interests — but only if they saw others doing the same and if what they were voting for solved the country’s problems. ...We would not have garnered that type of support had we not taken on defense, domestic programs, the solvency of Social Security, health care, and spending in the tax code all at once.”

By refusing to embrace Simpson-Bowles as the basis of a Grand Bargain, and instead offering a watered-down version, Obama has left a gap for a sane Republican or independent candidate. Why was Christie popular among G.O.P. moderates and independents? Because he seemed ready to tell hard truths that Obama has started to shrink from. Had Christie — a moderate on gun control, climate change and immigration who has also backed Simpson-Bowles — run and won significant support, he would have forced Obama back to the center.

Then, instead of a race between the Democratic left and the Republican right — in which the whole country would lose because the winner would not have had a mandate for the real change we need — we would have had a race between the Democratic center, independents and the Republican center. Then the whole country would win. Because whoever captured the presidency would have a mandate to actually implement some version of the Grand Bargain needed to get growth going again — and growth is the only sustainable cure for unemployment, the deficit and inequality.