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Thursday, February 24, 2011

Stever Pearlstein wrote a very good column about the struggles of governor Scott Walker of Wisconsin with Wisconsin public sector unions, Wisconsin Democratic state senators, tens of thousands of demonstrators, Wisconsin public opinion, national public opinion and the facts.

Money quote

... Walker overreached, refusing to give up his union-busting even after the unions agreed to his benefit-cutting demands. Now that he has allowed the unions to reframe the issue from one of greedy public servants to one of political revenge, Walker has single-handedly succeeded in bringing more attention, unity and sympathy to the union movement than it has had since . . . well, since Ronald Reagan took on the control tower. A mischievous columnist might even take this opportunity to speculate whether this is the beginning of the revival of labor's fortunes.

Ezra Klein complained that he revealed the secret to how to succeed at writing columns without really trying.

I have a different problem. Running low on article outlines but having some space to fill Pearlstein wrote the following nonsense

a country that for years had been living beyond its means. Now, even three years after reality came crashing down, we have only just begun to figure out how to bring about the reduction in living standards that will be necessary to create a sustainable balance. Will the pain come in the form of prolonged high unemployment? Or wage and salary cuts? Or reduction in the value of homes and financial assets? Or loss of ownership of American companies? Or price inflation? Or higher taxes? Or reductions in government services and benefits?

The right answer, of course, is "all of the above." The hole we dug for ourselves was so deep and so wide that we'll need all of them to get us out of it. The central political, economic and social challenge of the next decade will be to decide how we are going to apportion the adjustment among these various channels, and among the various classes and sectors and regions of the country, without tanking the economy or breaking the bonds that hold our society and our democracy together.

So we have been living beyond our means so we just have to roll up our sleaves, consume less and work less ?!? The assertion made with no doubt that we have to accept "prolonged unemployment" in order to "get out of" "The hole we dug for ourselves" is nonsensical neo-Austrian mumbo jumbo. It makes no logical sense. It never has made any logical sense. The effect of WWII on the US economy should have proven once and for all that it is nonsense. The only logic here is magical -- we have sinned, so someone must suffer, and unemployed workers who are scapegoats for the nation.

And why must we accept price inflation ? It sure seems that one of the effects of the hole we dug ourselves is dangerously low inflation. I am a modern macroeconomist. The first great triumph of modern macro was the discovery that the Phillips curve was all a statistical illusion. However it wasn't.

Pearlstein seems to consider the budget deficit part of living above our means so he says we must accept (among other things) reduced government services and benefits. Notably he did not write that we must accept increased taxes. Ohhhh noooo that would be sharing the sacrifice too widely.

Among those who work for major Newspapers, Pearlstein clearly understands economics more than almost anyone else (Krugman is obviously an ecception) but he casually tosses off nonsense as if it were all not only logically consistent but also true, known and obvious.

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