Mission Not Accomplished
By PAUL KRUGMAN
NY Times Op-Ed: October 2, 2009
Stocks are up. Ben Bernanke says that the recession is over. And I sense a
growing willingness among movers and shakers to declare "Mission
Accomplished" when it comes to fighting the slump. It's time, I keep
hearing, to shift our focus from economic stimulus to the budget deficit.
No, it isn't. And the complacency now setting in over the state of the
economy is both foolish and dangerous.
Yes, the Federal Reserve and the Obama administration have pulled us "back
from the brink" - the title of a new paper by Christina Romer, who leads the
Council of Economic Advisers. She argues convincingly that expansionary
policy saved us from a possible replay of the Great Depression.
But while not having another depression is a good thing, all indications are
that unless the government does much more than is currently planned to help
the economy recover, the job market - a market in which there are currently
six times as many people seeking work as there are jobs on offer - will
remain terrible for years to come.
Indeed, the administration's own economic projection - a projection that
takes into account the extra jobs the administration says its policies will
create - is that the unemployment rate, which was below 5 percent just two
years ago, will average 9.8 percent in 2010, 8.6 percent in 2011, and 7.7
percent in 2012.
This should not be considered an acceptable outlook. For one thing, it
implies an enormous amount of suffering over the next few years. Moreover,
unemployment that remains that high, that long, will cast long shadows over
America's future.
Anyone who thinks that we're doing enough to create jobs should read a new
report from John Irons of the Economic Policy Institute, which describes the
"scarring" that's likely to result from sustained high unemployment. Among
other things, Mr. Irons points out that sustained unemployment on the scale
now being predicted would lead to a huge rise in child poverty - and that
there's overwhelming evidence that children who grow up in poverty are
alarmingly likely to lead blighted lives.
These human costs should be our main concern, but the dollars and cents
implications are also dire. Projections by the Congressional Budget Office,
for example, imply that over the period from 2010 to 2013 - that is, not
counting the losses we've already suffered - the "output gap," the
difference between the amount the economy could have produced and the amount
it actually produces, will be more than $2 trillion. That's trillions of
dollars of productive potential going to waste.
Wait. It gets worse. A new report from the International Monetary Fund shows
that the kind of recession we've had, a recession caused by a financial
crisis, often leads to long-term damage to a country's growth prospects.
"The path of output tends to be depressed substantially and persistently
following banking crises."
The same report, however, suggests that this isn't inevitable: "We find that
a stronger short-term fiscal policy response" - by which they mean a
temporary increase in government spending - "is significantly associated
with smaller medium-term output losses."
So we should be doing much more than we are to promote economic recovery,
not just because it would reduce our current pain, but also because it would
improve our long-run prospects.
But can we afford to do more - to provide more aid to beleaguered state
governments and the unemployed, to spend more on infrastructure, to provide
tax credits to employers who create jobs? Yes, we can.
The conventional wisdom is that trying to help the economy now produces
short-term gain at the expense of long-term pain. But as I've just pointed
out, from the point of view of the nation as a whole that's not at all how
it works. The slump is doing long-term damage to our economy and society,
and mitigating that slump will lead to a better future.
What is true is that spending more on recovery and reconstruction would
worsen the government's own fiscal position. But even there, conventional
wisdom greatly overstates the case. The true fiscal costs of supporting the
economy are surprisingly small.
You see, spending money now means a stronger economy, both in the short run
and in the long run. And a stronger economy means more revenues, which
offset a large fraction of the upfront cost. Back-of-the-envelope
calculations suggest that the offset falls short of 100 percent, so that
fiscal stimulus isn't a complete free lunch. But it costs far less than
you'd
think from listening to what passes for informed discussion.
Look, I know more stimulus is a hard sell politically. But it's urgently
needed. The question shouldn't be whether we can afford to do more to
promote recovery. It should be whether we can afford not to. And the answer
is no.
***
From: The RAIN Newsletter (5-10-9)
http://www.haaretz.com/hasen/spages/1118892.html
Amira Hass: Mahmoud Abbas' chronic submissiveness
Haaretz Mon., October 05, 2009
In a single phone call to his man in Geneva, Mahmoud Abbas has demonstrated
his disregard for popular action, and his lack of faith in its accumulative
power and the place of mass movements in processes of change.
For nine months, thousands of people - Palestinians, their supporters abroad
and Israeli anti-occupation activists - toiled to ensure that the legacy of
Israel's military offensive against Gaza would not be consigned to the
garbage bin of occupying nations obsessed with their feelings of
superiority.
Thanks to the Goldstone report, even in Israel voices began to stammer about
the need for an independent inquiry into the assault. But shortly after
Abbas was visited by the American consul-general on Thursday, the leader of
the Palestine Liberation Organization got on the phone to instruct his
representative on the United Nations Human Rights Council to ask his
colleagues to postpone the vote on the adoption of the report's conclusions.
Heavy American pressure and the resumption of peace negotiations were the
reasons for Abbas' move, it was said. Palestinian spokespeople spun various
versions over the weekend in an attempt to make the move kosher, explaining
that it was not a cancelation but a six-month postponement that Abbas was
seeking.
Will the American and European representatives in Geneva support the
adoption of the report in six months' time? Will Israel heed international
law in the coming months, stop building in the settlements and announce
immediate negotiations on their dismantlement and the establishment of a
Palestinian state in the occupied territories? Is this what adoption of the
report would have endangered? Of course not.
A great deal of political folly and short-sightedness was bared by that
phone call, on the eve of Hamas's celebration of its victory in securing the
release of 20 female prisoners. Precisely on that day, Abbas put Gaza in the
headlines within the context of the PLO's defeatism and of spitting in the
face of the victims of the attack - that is how they felt in Gaza and
elsewhere.
Abbas confirmed in fact that Hamas is the real national leadership, and gave
ammunition to those who claim that its path - the path of armed struggle -
yields results that negotiations do not.
This was not an isolated gaffe, but a pattern that has endured since the PLO
leadership concocted, together with naive Norwegians and shrewd Israeli
lawyers, the Oslo Accords. Disregard for, and lack of interest in the
knowledge and experience accumulated in the inhabitants of the occupied
territories' prolonged popular struggle led to the first errors: the absence
of an explicit statement that the aim was the establishment of a state
within defined borders, not insisting on a construction freeze in the
settlements, forgetting about the prisoners, endorsing the Area C
arrangement, etc.
The chronic submissiveness is always explained by a desire to "make
progress." But for the PLO and Fatah, progress is the very continued
existence of the Palestinian Authority, which is now functioning more than
ever before as a subcontractor for the IDF, the Shin Bet security service
and the Civil Administration.
This is a leadership that has been convinced that armed struggle - certainly
in the face of Israeli military superiority - cannot bring independence. And
indeed, the disastrous repercussions of the Second Intifada are proof of
this position. This is a leadership that believes in negotiation as a
strategic path to obtaining a state and integration in the world that the
United States is shaping.
But in such a world there is personal gain that accrues from chronic
submissiveness - benefits enjoyed by the leaders and their immediate
circles. This personal gain shapes the tactics.
Is the choice really only between negotiations and armed-struggle theater,
the way the Palestinian leadership makes it out to be? No.
The true choice is between negotiations as part of a popular struggle
anchored in the language of the universal culture of equality and rights,
and negotiations between business partners with the junior partner
submissively expressing his gratitude to the senior partner for his
generosity.
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