At 93, he provides razor-sharp insights into the current crisis in this interview in Japan’s Asahi Shinbum (via Mark Thoma).
I think it is definitely the worst crisis since the 1929-1939 Great Depression, both in America and globally, and I think it was an unnecessary breakdown as there was no need for America to have a meltdown.
When George W. Bush became president in 2001, he inherited a country with quite sound (fundamentals) from President Bill Clinton with an overbalanced budget. … George Bush will go down in the history books as the worst president that America has had in more than 200 years. And, that couldn’t have happened if the voters had not moved to the right …
One is the Iraq war, which is a disaster. It’s as bad as the Vietnam War and the Vietnam War entangled four or five presidents and there was no victory. … But the other reason is because people on Main Street in America are hurting. The reason they’re hurting goes back to 1995 when Alan Greenspan, as the chairman of the Federal Reserve Board, made no efforts to curb the stock market bubble.
So the American electorate is very unhappy. Free trade and globalization add to world productivity. It also adds to the potential standard of living of many people, but unequally … The whole history of capitalism has had up-bubbles in real estate and down-bubbles after something different. This time the new fiendish Frankenstein monsters of financial engineering blinded the eyes and the minds of everybody. The CEOs and the chief financial officers are the most surprised people. Nobody learned any lesson from Long-Term Capital Management. And what happens with this “new financial engineering” is an incredible “super over-leveraging” and you don’t even know you’re doing it. You know, it’s as if you’ve been blindfolded. And nobody learned any lesson from that. … And this all could happen only because Bush, with his “compassionate capitalism” appointed incompetent people …
This is a new crisis because if you look at its bottom it says, “Made in America” (laughter). It’s not Thailand. It’s not Mexico. It’s not Argentina. It’s America. And, of course, it spread from there. Could you believe that the whole country of Iceland is bankrupt? Icelanders were the happiest people two years ago. They’re the unhappiest people today. …
Rome was not built in one day, and Franklin Roosevelt did not get full employment. It took about seven years. Now I don’t say it’ll take seven years this time, but it won’t be done with a balanced budget and it won’t be done with “inflation targeting” …
Spending in the direction of the poor part of the population (is important) because those are the people who are most likely to re-spend. If you primarily spend in the direction of your millionaires, that won’t make any difference.
February 3rd, 2009 at 10:39 am
It’s interesting that over the summer, Alistair Darling (UK Chancellor of the Exchequer) got ridiculed for suggesting that the recession was the worst since the 29-33 Great Depression.
This guy says it and no-one blinks. You have to love the right-wing bias of the UK media.
February 3rd, 2009 at 1:21 pm
That guy is senile. Iraq is AS BAD AS Vietnam? By what metric?
Come on, you can think that Iraq was a total blunder and not stoop to saying that it is as bad as Vietnam. That’s just slander.
He also has absolutely no idea what supply side economics really is. His brain is infected with Keynsianism. It’s a disease.
It’s not about giving tax cuts to millionaires so they can spend it. It’s about cultivating the incentives to work, get educated, and take risks. And it is an admission that the people who work, get educated, and take risks deserve the money that they earn.
Once again, I link my analysis of the household income statistics. Household income is determined by how many people are working in the household, how many hours they worked, and the education level they’ve achieved.
February 3rd, 2009 at 1:57 pm
“When George W. Bush became president in 2001, he inherited a country with quite sound (fundamentals) from President Bill Clinton with an overbalanced budget.”
Richard, completely discounting the late-90’s tech bubble that broke not from Bush policies but from the weight of it’s own fraud does not count for “razor-sharp” insight to me. The tech wreck took out three or four trillion dollars in market capitalization. And taxes collected from the rediculous wages and profits of the tech sector doomed us to deficits when that bubble broke and tax revenue fell precipitously.
Sound fundamentals my Pets.com stock!
And let’s not so soon forget that whole 9-11 thingy Bush threw together (you know, the controlled implosion of the World Trade Center at the cost of nearly bankrupting the insurance industry) to get us into endless wars. That may have been a miscalculation on his part, though I’m still holding out that one day they’ll find it was really al Quaeda or somesuch group that was behind it. Anyway, that little incident has to factor into the economic downturn in some fashion, coming on the heels of the tech wreck as it did.
And as far as the Iraq war being as bad as the Vietnam war – Mr. Samuelson, how many years did it take for the citizens of a united Vietnam to go to the polls to vote in a democratic election… twice? Yeah, I’ll still be waiting for that when I’m 93.
I’m sorry to sound so contemptable, but there’s alot said in this quote that tenders contempt. I think creative people need to move away from lionizing people who seem capable only of seeing what they want to see. Life is bigger than that.
February 3rd, 2009 at 2:41 pm
I’m no fan of Bush, but what the heck is this: “that whole 9-11 thingy Bush threw together (you know, the controlled implosion of the World Trade Center at the cost of nearly bankrupting the insurance industry) to get us into endless wars”.
Yikes.
Buzzcut and Nashvilian, remind me how many Nobel Prizes you have? Right.
Samuelson is correct. This economic crisis is the final apotheosis of the right-wing policies and governance of the past 30 years. We’ve had 4 business-oriented Presidents since 1980, all more or less pursuing the same failed and now-discredited policies. Bush was only the most recent, and the policies pursued under him – including Iraq – have simply brought the crisis to its ultimate realization. These policies have failed. Samuelson then is also correct when he adds that “Spending in the direction of the poor part of the population (is important) because those are the people who are most likely to re-spend. If you primarily spend in the direction of your millionaires, that won’t make any difference.” Taxcuts don’t work. Bailing out banks and corporations won’t either. Unless, as Martin suggests, you don’t care about “stimulating” the economy, but instead care about maintaining current distributions of wealth and power.
Buzzcut, your regressions look ridiculous. Let us know why there are only 7 observations. Are there only 7 people in the US? Only 7 states? 7 cities? 7 zipcodes?
February 3rd, 2009 at 2:49 pm
Because the incomes are broken down into ranges. 0 to $15k, $15k to $30k, etc. There are 7 income ranges. I used the median in the range to do the regression.
The excel file I used is here. Feel free to run your own regression if you think I’m wrong. I explained in a previous post exactly what I did.
February 3rd, 2009 at 2:53 pm
Just because you’ve got a Nobel prize doesn’t mean that you aren’t a senile idiot. Nor does it mean that your opinion has more weight in areas outside of the subject of said Nobel.
February 3rd, 2009 at 3:11 pm
I looked at the excel file. This makes no sense. This is just a summary table giving the number of households in certain income ranges. So, in fact, your dependent variable is just number of households, not income. So, essentially, the regression is meaningless. As education goes up, the number of households goes up? Huh? What you should do instead is get the data, summarized to all of the counties (or zipcodes, or MSAs, or some other geography) and measured on income, education, number of earners, as well as the many other variables that explain income – which you left out of your analysis. Then, do an regression of income on the independent variables at the county level (or the MSA level, or the state level). You can easily get this data using the Factfinder tool on the Census website. Indeed, maybe later today I’ll try it out and post the results. Your regression is wrong because your dependent is nonsensical, and because you’re not using raw data, instead you’re just cherry-picking numbers off of a summary table and sticking them into a regression. Go to Factfinder, use the raw data at different units of analysis (county, zip, MSA, whatever), control for the whole range of important independent variables, and then we can talk. Otherwise, I’ll just assume you’re making crap up.
February 3rd, 2009 at 3:44 pm
You’re making things too complicated.
Look, we know a lot of things from this data.
1) total number of households.
2) households in each income range.
3) demographic data about the households (number of income earners, educational attainment, hours worked).
4) You know how many households at each level of demographic data fall into each income range.
You just need to process the data:
1)Divide number of households for each demographic level by total number of households in that income level.
2) Multiply it by the demographic level. For example, the number of households with 1 income earner gets multiplied by 1.
3) Take the average for the income level.
Using this procedure, for example, I found that the under $15k income range (with a median income of $7500) worked an average of 350 hours, had an avergae of .39 income earners, and an average of 12 years of education. This is what got regressed.
February 3rd, 2009 at 4:14 pm
“I’m no fan of Bush, but what the heck is this: ‘that whole 9-11 thingy Bush threw together (you know, the controlled implosion of the World Trade Center at the cost of nearly bankrupting the insurance industry) to get us into endless wars’.”
It’s sarcasm.
February 3rd, 2009 at 4:25 pm
“Buzzcut and Nashvilian, remind me how many Nobel Prizes you have? Right.
Samuelson is correct. This economic crisis is the final apotheosis of the right-wing policies and governance of the past 30 years. We’ve had 4 business-oriented Presidents since 1980, all more or less pursuing the same failed and now-discredited policies.”
Why do you hold that because a guy is a Nobel Prize winner he can’t be a partisan hack or an an FDR deciple? Why does, in your estimation, a Nobel Prize give it’s recipient free reign to rewrite very recent history to leave out the tech bubble and the 9-11 attacks for consideration as a significant turning point in the economy?
“Bush was only the most recent, and the policies pursued under him – including Iraq – have simply brought the crisis to its ultimate realization.”
Remind me, in what years were you ever POTUS? Right.
February 3rd, 2009 at 7:13 pm
The problem in Buzzcuts analysis is the top category ends at $100k. Therefore, the hedge fund manager with a trophy husband (or wife) and the nurse married to a fireman fall in the same top income category. Up to incomes of $250,000 years of education, # employed, full or part-time employment (or retired) are strongly correlated; although I should point out that correlation does not prove causation.
February 3rd, 2009 at 9:43 pm
“Franklin Roosevelt did not get full employment. It took about seven years.”
Huh? Is Samuleson suggesting that FDR returned employment to its pre-recession levels (”full employment”) in seven years?
Yikes.
And this is also the second post that seems to suggest that the American electorate has shifted left, which I find hilarious.
Methinks people read into election results far too much. Electoral voting follows a pretty understandable ebb-and-flow, with agency accounting for deviations.
People that believe the US is *really* democratic because of the last election are as silly as those who believed Americans were neocons 4-8 years ago.
But I suppose its harmless, and incidentally serves as an excellent signal that the individual is data-mining for arguments and explanations of reality that fit their political predispositions.
February 4th, 2009 at 12:32 pm
This is all a very interesting and lively debate – but I am not finding the source material, the interview with Samuelson, all that interesting – whether he is right or wrong.
The one vital trope “the new fiendish Frankenstein monsters of financial engineering” isn’t very good.
cliche. move along – nothing to see here – we ALL know why there was a crisis – go read something about how to get out of the crisis – for realz.
Here’s something – The Smart Growth Manifesto:
http://blogs.harvardbusiness.org/haque/2009/01/davos_discussing_a_depression.html
February 4th, 2009 at 2:04 pm
The problem in Buzzcuts analysis is the top category ends at $100k. Therefore, the hedge fund manager with a trophy husband (or wife) and the nurse married to a fireman fall in the same top income category. Up to incomes of $250,000 years of education, # employed, full or part-time employment (or retired) are strongly correlated; although I should point out that correlation does not prove causation.
Fred, I totally agree. But consider that less than 2% of households are much above $150k. Does it really make that much difference in the analysis to lump them all together?
My focus in the analysis was the bottom… septile? Those households under $15k. What do they need to do to not be poor? Answers: work more, get a HIGH SCHOOL education, get married, get a roomate, whatever. More hours, more education, more income earners.