How much of the US exports are the toxic investments or other financial creations like the ones that have brought us down? How much of our exports are credit default swaps? What percentage of our exports are weapons? Just as manufactured products represent only 12% of our GDP; what percentage of our exports involve added value of labor?

Unless you produce something, have you created any value? If we use it, shouldn't we build it?

another article on economics without any discussion of the planet...where the hell will Product come from in the future? again, we don't really need the things we're offered to buy, and can't afford the resources to make them in the first place...the model fails...how can this thinking continue to be given credibility?

Just imagine a stimulus package that put people to work building windmills from Dakota to Texas and along the east and west coasts with accompanying transmission lines. Imagine what we could accomplish with nearly limitless low cost energy for heating, autos, and lots more (and especially for good tunes).Imagine rail improvements with short-run semi truck hubs. Imagine more public transit and at higher speeds. Why not have an all out war-like effort, a new moon-shot, what the hell are we waiting for?

Krugman is much too optimistic.

Wage deflation is underway because aggregate demand is crashing and there is no way around it. Our economy needs to be entirely restructured to meet our new paradigm. That new paradigm is that we spent too much over the last 30 years amassing 350% of GDP or $50 trillion in aggregate U.S. debt and that debt bubble has been popped by this banking crisis.

The new paradigm is a lower standard of living for all which is why the well off will have to be asked for much more in the way of taxes. The taxes must be used to build a platform under the public including Medicare for All, longer unemployment benefits and much higher wage cutoffs for food stamps, housing and day care. It may even go so far as a shortened work week from here on out. A public utility banking model will address funding new and extended programs as well as set the stage for a sustainable economy.

Krugman hints at what he must know, that our economic model is broken and that without radical changes we fall deeper and deeper into negative growth.

With the drastic shift of wealth away from America’s workers toward the elite there will be no demand fueled economic recovery until there is an increase in real wages for the Middle Class and working poor.

Secondly simply throwing money at the problem (economic stimulus) isn’t going to be nearly as effective as it was in the past due to improvements in efficiency. (One worker with modern tools and equipment is far more productive than 5 or 10 or 20 workers would have been in the 1930’s.)

However there are areas of the economy that by nature are labor intensive that are also in dire need of additional resources. Foremost is care for the elderly, “for profit” nursing homes that cater mostly to low or no income patients are woefully understaffed. Many elderly that do not require nursing home care could use more assistance in their homes seeing that they receive decent meals, take their meds on time, get help around the house and a hundred other necessities that become too much too handle as one ages.

A second area that needs expansion is health care. The “for profit” health care system has priced millions of Americans out of receiving regular health care. Simply seeing to it that every person gets access to medical services would require a dramatic increase in health care providers.

A third area of the economy that isn’t getting the resources it needs is the environment. In a story that only the Chicago newspapers reported Indiana’s Governor, Mitch Daniels, recently did away with the enforcement division of the Indiana Department of Environmental Management. Yep, even if inspectors find evidence that a company is polluting there isn’t anybody to prosecute the case, cause, ya’know, that a polluter that gets a notification of a violation ALWAYS CLEANS UP THEIR ACT. Back to the subject… Many micro-environmental projects like erosion control, habit restoration, cleaning up abandoned cars, buildings, machinery, etc are ignored simply because there is no money allocated for the projects. Using economic stimulus funds for these projects would be money well spent.

Yes, America’s infrastructure is in need of being upgraded. But as mentioned above, due to increases in productivity, these upgrades will not have the widespread economic impact they would have had only a generation ago. Too many of the “usual suspects” like construction giant Bechtel, are slobbering all over themselves like pigs at the trough waiting to gobble up these funds, If you compared the percentage of money spent for labor verses capital equipment on this type of project today, verses a generation ago, you would find that a much smaller portion goes to labor.

The trouble is that there is nobody to lobby for an economic stimulus package of the type I describe. If, as I suspect, the lobbyists get to decide how the stimulus package is diveyed-up way too much will go to companies like Bechtel.

If that happens Krugman is way, way, way too optimistic in thinking there will be a turn-around after only one year.

First, "cautious consumers" is a silly word combo - how about "smart, mature consumers" who have learned, finally, that buying tons of useless crap and living beyond means is not, in fact, even in the same neighborhood as the road to happiness.

What PK is saying is this: there is no Plan B if "consumers" do indeed grow up and get smart, seeing as how 70% of the economy is presently supported by dumb, immature stuff-mongers.

Second, PK suggests a Plan A.5: "By selling more to other countries and spending more of our own income on U.S.-produced goods..." Except, er, sell what? What the f**k do we make in this country that other countries actually want (besides shitty movies and shittier TV shows)? And expecting Americans to buy more US goods - again, what goods exactly? Plus, even when countries export tainted food and toys, we keep buying from said countries, which suggests there's no reason to ever expect Americans to suddenly start "buying American," even if we did actually make anything.

There was a pop song from the early 1920' called "I'm Forever Blowing Bubbles":

I'm forever blowing bubbles,
Pretty bubbles in the air,
They fly so high, nearly reach the sky,
Then like my dreams they fade and die.

That's the United States now, blowing bubbles, hustling, hustling, hustling, always trying to get something for nothing, then having those bubbles explode (not burst) in our faces. This song should be made the new National Anthem.

My oldest son, the smartest person I personally know, said 20 years ago that our future lies in technology. He was right. A high wage country (with it's concurrent high prices) cannot compete with countries who pay pennies on the dollar to it's workers. Unfortunately we've been dismantling access to institutions of higher learning. In introducing his science team, Obama pointed out the need to focus on science and technology and has made repeated references to the need to convert to a green economy. I think he gets it. We need to restructure our economy away from a consumer economy. Just imagine TV commercials filled with "Think Green" instead of "Buy Junk".

I don't know Paul Krugman personally, but have listened to him for many years and trust his opinions. I only recently learned he is a Noble Laureate and hope the Obama team is paying attention to his opinion. Certainly I was appalled that Obama chose for his economic team the very people who got us into this mess, while personally enormously profiting from it (the team, not Obama). There ought to be a law. I am choosing to trust Obama for now, because he is extremely smart and ran a well organized, highly successful campaign. I'm waiting to see if he can do the same as President. He didn't always make the choices I would have made, but his turned out to be right.

When the people fear their government there is tyranny,
when the government fears the people there is liberty.
~ Thomas Jefferson

Paul Krugman did not mention anything about raising wages and having a progressive taxation to put some money in the hands of the people and lower taxes
on the average Joe and reduce the staggering gap between the super-rich and
the average citizen.
Continuing basing the economy on consumer spending is a call to a repeat bubble.
People have stuff especially clothes which are enough for several life times.
We need a shift in thinking and not tinkering with the old way of thinking.
For a starter how about nationalizing the Federal Reserve and the rest of the
banks and having a single national bank owned by the people.

We would all be better off if the executive-pay bubble would burst. Executives are way over valued and manual labor and menial labor are way undervalued.

This is really very simple. Until funds start going to the workers who actually produce things instead of investment bubbles, it's a downward spiral.

Productivity figures have been up over the past decade, so where are the corresponding salary increases for the working class? If we keep putting our gains into bubbles instead of people, then this is what we get.

To paraphrase the 1992 Clinton campaign slogan: "It's the Wages, Stupid!"

"The point is that it may take a lot longer than many people think before the U.S. economy is ready to live without bubbles."

Before the U.S. economy is ready to live without bubbles......or before the President and Congress demand that the Federal Reserve stop creating bubbles?

Here's a little quote from Federal Reserve Chairman, Ben Bernanke:

"Our mission, as set forth by the Congress is a critical one: to preserve price stability, to foster maximum sustainable growth in output and employment, and to promote a stable and efficient financial system that serves all Americans well and fairly."

As reality would have it, the Federal Reserve Bank has miserably failed it's alleged mission on an ongoing basis for the past 30 years. This private entity should be dismantled immediatley and replaced with a system that serves "ALL AMERICANS well and FAIRLY".

jonabark

Krugman is ok at dispelling certain lies. Not so good at imagining the details of substantive change.

So far he continues to ignore:
1)the problems of the bailout( including the elaborated critiques of other economists, who don't exist in this supposedly communication age of collegial exchange)
2) the earth as a biological reality. This does not appear to exist in Krugman's world and because of this neither do peak oil, climate crisis, devastation of ocean species and rainforests, unsustainable fossil fuel dependent agricultural monocultures, toxic releases of poisons
3) living wages for all workers
4)the enormous waste of military spending the ultimate make work, then make hell program
5) the corrupting power of corporate interests on Democrats as well as Republicans.

As far as I can see, he consistently ignores these things and panders to the same dream that Obama holds up. Your kids will go to COLLEGE, and through the magic of education become rich and infinitely upwardly mobile. Sure, we might have some rough days, less dining out for those of us without high pay jobs but the hardy middle class will fight their way back to the land of happy motoring. Never mind those wars, the chemical spills, the little nuclear accidents, or all those whose mobility is into the meat packing plants, the burger stands, secretary desks, the jobs selling shit that doesn't work or make you happy. Keep the dream alive, the golden dream of bigger houses, bigger TVs, bigger cars, bigger stereos, more booze, .... wait no no littler cars, littler stereos, littler computers with bigger harddrives. What a wonderful life. Every time you hear a boom box rattling the neighborhood or a stewardess telling you about the safety features of this airplane an angel gets his or her wings.