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Friday, September 10, 2010

Paul Krugman wants you to embrace the mediocrity of Japan

Krugman writes his op-ed today proclaiming the gray, stagnant economy of Japan during the "Lost Decade" wasn't all that bad. Praising the lack of growth, the financial woes, deflated prices and constant unemployment; its his feeling if Republicans gain back power things will be far worse.
The Bank of Japan cut interest rates and took other steps to pump up spending, but it was always behind the curve and persistent deflation took hold. The government propped up employment with public works programs, but its efforts were never focused enough to start a self-sustaining recovery. Banks were kept afloat, but were slow to face up to bad debts and resume lending. The result of inadequate policy was an economy that remains depressed to this day.

Yet the picture is grayish rather than pitch black. Japan’s economy may be depressed, but it’s not in a depression. The employment picture has been troubled, with a growing number of “freeters” living from temporary job to temporary job. But thanks to those government job-creation plans, the country isn’t suffering mass unemployment. Debt has risen, but despite constant warnings of imminent crisis — and even downgrades from rating agencies back in 2002 — the government is still able to borrow, long term, at an interest rate of only 1.1 percent.

In short, Japan’s performance has been disappointing but not disastrous. And given the policy agenda of America’s right, that’s a performance we may wish we’d managed to match.

Sadly, there is no basis in fact for most of what Krugman uses to make Republicans look like a bad choice. The growth during the '80's under Reagan and 90's under Bush, when tax cuts where provided to the job creators and incentive was given to business to hire and fuel growth in the economy, speak for themselves. While Krugman emphatically defends the choices made by this Administration as choices that have kept us from falling into the abyss, there is no proof this is the case. Allowing big companies to fail and people to lose homes they cannot afford is painful however, there is much evidence that points to this being a much quicker and less painful road to recovery than the malaise and seemly unending economic depression we are working in now.

One of the biggest fallacies in Kruman's argument is if Republicans are successful in gaining power this November and they rip out Obamacare (as they should) it would surely result in "reducing economic security even as it increases long-term deficits." Regrettably, Mr. Krugman appears unaware the government's own reports are showing the cost of health care is going to rise. Personal spending will increase from an average of $8,389 per person now to $13,652 per person by 2019-this is $265 more per person than it would have been with out the new law. In addition, governmental spending will rise to 20% of the total economy by 2019. Even the White Houses' own health reform director Nancy-Ann DeParle said that by 2019 overall health care spending per insured person would average $14,720, which she states is a $1,400 savings over what it would be with out the law. The problem is, costs are still rising. No matter how you slice it or who you listen to, your spending on healthcare is going up, high and the healthcare bill was supposed to stop costs from rising. The sad fact is if the idea of true competition was allowed to flourish and grow healthcare costs would go down and service levels and satisfaction would go up. How can I say that that with no trepidation? Look at cosmetic surgery and lasik. Those are but two areas where doctors have had to compete for clients based on price and care. Prices have fallen faster, quality and technology have improved dramatically. Case closed.

Paul Krugman is wrong. Stagnation and deflation-"the gray times"-are not better. With decisive action, definitive policies and drastic cuts in entitlement spending we can have a growing, flourishing economy once again. If business is allowed to manage itself and people are allowed to grow or fail of their own animus and if laws are passed that actually encourage economic growth there might be hope for us yet. Hope for sunshine, not the gray days of nothing.