J. Bradford DeLong's Blog, page 2084

Benito Mussolini Liveblogs World War II: February 23, 1941

Benito Mussolini:

Febraury 23, 1941: Blackshirts of Rome! I come among you to look you firmly in the eyes, feel your temperature and break the silence which is dear to-me, especially in wartime. Have you ever asked yourselves in an hour of meditation, which every one finds during the day, how long we have been at war? Not only eight months, as a superficial observer of events might believe; not from Sept. 1, 1939, when through guarantees to Poland, Britain unleashed the conflagration with a criminal and premeditated will; we have been at war six years, precisely from Feb. 1, 1935, when the first communiqué announcing the mobilization of Peloritana was issued.

The Ethiopian war was hardly finished when from the other shore of the Mediterranean there reached us appeals from General Franco, who had begun his national revolution. Could we Fascisti leave without answer that cry and remain indifferent in the face of the perpetuation of the bloody crimes of the so-called popular fronts? Could we refuse to give our aid to the movement of salvation that had found in Antonio Primo de Rivera its creator, ascetic and martyr? No. Thus our first squadron of airplanes left on July 27, 1936, and during the same day we had our first dead.

We have actually been at war since 1922-that is from the day when we lifted the flag of our revolution, which was then defended by a handful of men against the Masonic, democratic, capitalistic world. From that day world liberalism, democracy and plutocracy declared and waged war against us with press campaigns, spreading libelous reports, financial sabotage, attempts and plots even when we were intent upon the work of international reconstruction which is and will remain for centuries, as the undestroyable documentation of our creative will.

With the outbreak of hostilities on Sept. 1, 1939, we had just finished two wars which imposed relatively modest sacrifices in human life but had forced us to make an enormous logistic and financial effort.

On another occasion-not to tire you with too many figures-our intervention in the Falangist Revolution will be documented. This is why-and was publicly declared in December, 1939-when the reckoning of accounts had to be reached between two worlds which were inevitably antagonistic, we preferred to have it retarded as long as necessary for us to replace that which we consumed or ceded.

But developments in history, which sometimes are speeded up, cannot be halted any more than the fleeting moment of Faust could be halted. History takes one by the throat and forces a decision. This is not the first time this has occurred in the history of Italy! If we had been 100 per cent ready we would have entered the war in September, 1939, and not in June, 1940. During that brief period of time we faced and overcame exceptional difficulties.

The lightning-like and crushing victory of Germany in the West eliminated the eventuality of a long continental war. Since then the land war on the Continent has ended and it cannot flare back. The German victory was facilitated by Italian non-belligerency which immobilized heavy naval, air and-land forces of the Anglo-French bloc. Some people who today apparently think Italy's intervention was premature were probably the same who then deemed it too late.

In reality the moment was timely because if it is true that one enemy was in the course of liquidation there remained the other, the bigger one, the most powerful enemy number one against whom we are engaged and against whom we will continue the struggle to the last drop of blood.

Having definitely liquidated Britain's armies on the European Continent, the war could not but assume a naval, air and, for us, also a colonial character. It is the geographic and historic order of things that the most difficult and most faraway theatres of war are reserved for Italy. War beyond the sea and in the desert. Our fronts stretch for thousands of kilometers and are thousands of kilometers away. Some ignorant foreign commentators should take due account of this. However, during the first four months of the war we were able to inflict grave naval, air and land blows to the forces of the British Empire.

Since 1935 the attention of our general staff has been focused on Libya. All the work of the Governors who succeeded each other in Libya was aimed at strengthening economically and militarily that large region, transforming the former desert or desert zones into fecund land. Miracles! This word is able to sum up what has been done down there. With European tension becoming graver, and following the events of 1935 and 1936, Libya, reconquered by Fascism, was considered one of the most delicate points in our general strategic setup, since it could be attacked from two fronts....

It was during October and November that Great Britain gathered and lined up against us the mass of her imperial forces, recruited from three continents and armed by a fourth. She concentrated in Egypt fifteen divisions and a considerable mass of armored means and hurled them against our lines in Marmarica where on the first line were Libyan divisions, brave and faithful but unsuited to bear the attack of enemy machines. On Dec. g a battle was thus started, which was only five or ten days in advance of ours, and which brought the enemy to Bengazi.

We are not like the English. We boast that we are not like them. We haven't elevated lying into a government art nor into a narcotic for the people the way the London government has done. We call bread bread and wine wine, and when the enemy wins a battle it is useless and ridiculous to seek, as the English do in their incomparable hypocrisy, to deny or diminish it.

One entire army-the Tenth-was broken up almost completely with its men and cannon. The Fifth Air Squadron was literally sacrificed, almost entirely. Where possible we resisted strongly and furiously.

Since we recognize these facts it is useless for the enemy to exaggerate the figures of its booty. It is because we are certain regarding the grade of national maturity reached by the Italian people and regarding the future development of events that we continue to follow the cult of truth and repudiate all falsification.

The events during these months exasperate our will and must accentuate against the enemy that cold, conscious, implacable hate, hate in every home, which is indispensable for victory.

Great Britain's last support on the Continent was and is Greece, the only nation that did not want to renounce the British guarantee. It was necessary to face Greece, and on this point the accord of all responsible military leaders was absolute. I add that the operative plan, prepared by the superior command of the armed forces of Albania, was unanimously approved without reservations. Between the decision and the start of action there was a delay of only two days.

Let it be said once for all that the Italian soldiers in Albania combated superbly. Let it be said in particular that the Alpini wrote pages of blood and glory that would honor any army. When the sufferings of the march by the Julia division almost up to Metzovo are known all will appear legendary.

Neutrals of every continent who are spectators at the bloody clashes between the armed masses must have sufficient shame to keep quiet and not express libelous provocative opinions.

The Italian prisoners who fell into the hands of the Greeks are a few thousand, most of them wounded. The Greek successes do not go out of the tactical field and only megalomania has magnified them. The Greek losses are very high and shortly it will be Spring, and as befits such a season our season-beautiful things will grow. I say beautiful things will be seen in every one of the four cardinal points.

Not less heavy are the losses we inflicted on the English. To state as they do that their losses in the battle of sixty days in Cyrenaica are not above 2,000 dead and wounded means adding a grotesque note to the drama. It means attempting to exceed themselves as far as shameless lies are concerned, which should seem difficult for the English. They must add at least one zero to the figures of their communiqués.

From Nov. 7 to when English torpedo planes, which took off not from Greek bases but from an aircraft carrier, succeeded with their coup at Taranto, which we admitted, we met adversity in the war. We must recognize this. We had gray days.

This happens in all wars, in all times. Think of the Punic Wars when the Battle of Cannae threatened to crush Rome. But at Zama, Rome destroyed Carthage and wiped it out from geography and history forever. Our capacity to recuperate in moral and material fields is really formidable and constitutes one of the peculiar characteristics of our race.

Especially-in this war, which has the world as its theatre and pits continents directly or indirectly one against another. On land and sea and in the air it is the final battle that counts. That we shall have to fight hard is certain, that we shall have to fight long is also probable, but the final result will be an Axis victory.

Great Britain cannot win the war. I can prove this logically and in this case belief is corroborated by fact. This proof begins with the dogmatic premise that although anything may happen Italy will march with Germany, side by side, to the end.

Those who may be tempted to imagine something different forget that the alliance between Italy and Germany is not only between two States or two armies or two diplomacies but between two peoples and two revolutions and is destined to give its imprint upon the century.

The collaboration offered by the Fuehrer and that which the German air and armored units are giving in the Mediterranean are proof that all fronts are common and that our efforts are common. The Germans know that Italy today has on her shoulders the weight of 1,000,000 British and Greek soldiers, of from 1,500 to 2,000 planes, of as many tanks, of thousands of cannon, of at least 500,000 tons of military shipping.

Cooperation between the two armed forces occurs on the plan of comradely, loyal, spontaneous solidarity. Let it be said for foreigners who are always ready to libel that the comportment of German soldiers in Sicily and Libya is under all respects perfect and worthy of a strong army and a strong people brought up under severe discipline.

Follow me now please:

First, in war potentiality Germany not only did not decrease after seventeen months of war, but increased in gigantic proportions. From the standpoint of human losses, they have been at a minimum if compared with the masses in action. Losses of materials were more than compensated for by immense booty and were absolutely insignificant.

The unity of political and military command in the hands of the Fuehrer-he who once was simple soldier and volunteer Adolf Hitler-gives to the operations an enthusiastic, irresistible, revolutionary and therefore National Socialist rhythm that begins with the highest generals and goes to the humblest soldiers. Britain will realize that once again.

Second, German armaments are in quality and quantity infinitely superior to those available at the start of the war. Germany has not yet brought to the limit the employment of her human forces. For Italy it is just the same. We have at present under arms more than 2,000,000 men, but within the year we will, if necessary, reach, 4,000,000.

Third, while during the World War Germany was isolated from Europe and the world, today the Axis is master of the Continent and allied with Japan. The Scandinavian world (Finland, Sweden, Norway, Denmark) is directly or indirectly inside the German orbit. The Danubian and Balkan world cannot ignore and does not ignore the Axis, Hungary and Rumania have joined the Tripartite Pact. Occupied France, Belgium, Holland and Luxembourg are, like the Scandinavian and Danubian worlds, within the orbit of Germany. In the Mediterranean Italy is allied with a friendly Spain. There remains Russia, but her fundamental interests advise her also to follow in the future a good-neighbor policy with Germany. Europe therefore, with the exception of Portugal, Switzerland and, for a little while yet, Greece, is all outside the orbit of Britain and against Britain.

Fourth, with this situation things are diametrically opposed to conditions from 1914 to 1918. Then the blockade was a terrible weapon in the hands of Great Britain. Today this is a broken weapon because, from being a blockading nation, Britain became blockaded by the Axis air and naval forces and will increasingly be blockaded until catastrophe comes.

Fifth, the morale of the Axis people is infinitely superior to the morale of the British people. The Axis fights in certainty of victory, while the British fight because, as Lord Halifax said, they have no other choice. It is highly ridiculous to count on the eventual moral breakdown of the Italian people. This will never happen. To speak of a separate peace is idiotic.

Churchill has not the least idea of the spiritual forces of the Italian people or of what Fascism can do. We can understand Churchill's ordering the shelling of industrial plants at Genoa to disrupt work, but to shell the city in order to break down its morale is a childish illusion. It means that the British do not at all know the race temperament of the Ligurian people in general and the Genoese in particular. It means that they are ignorant of the civilian virtues and proud patriotism of the people who gave the fatherland Columbus, Garibaldi and Mazzini.

Sixth, Great Britain is alone. This isolation pushes her toward the United States, from which she urgently and desperately seeks aid. The industrial power of the United States certainly is great, but for aid to be useful supplies must safely reach England and also be of such quantity as not only to replace the destruction already inflicted and that which will come to the industrial plants of Britain, but also to bring about superiority over Germany. This is impossible because Germany now works with the men, machines and raw materials of the entire European Continent.

Seventh, when Great Britain falls, then the war will be ended, even if by any chance it should die out slowly in other countries of the British Empire. Unless-and it is possible-these countries, where already something is fermenting, do not Teach their independence once the metropolitan area is conquered. This would bring about a change not only in the European political map, but also in the world's map.

Eighth, in this gigantic struggle Italy has a first-class job. Our war power also improves daily in quality and quantity. Two of the three great ships damaged at Taranto are already in the way of complete repair. Technicians and workers toiled day and night, giving a convincing demonstration not only of their professional capacity but also of their patriotism. When the war is over, in the world's social revolution that will be followed by a more equitable distribution of the earth's riches, due account must be kept of the sacrifices and of the discipline maintained by the Italian workers. The Fascist revolution will make another decisive step to shorten social distances.

Ninth, that Fascist Italy dared measure herself against Great Britain is a matter of pride that will live through the centuries. It was an act of conscious daring. People become great by daring, risking and suffering, and not by placing themselves by the wayside in parasitic and vile expectancy. The protagonists of history can revindicate their rights, but simple spectators never can.

Tenth, to beat the Axis, Great Britain's armies would have to land on the Continent, invade Germany and Italy and defeat their armies, and this no Englishman, no matter how insane and delirious by the use and abuse of drugs and alcohol, can even dream of.

Let me say now that what is occurring in the United States is one of the most colossal mystifications in all history. Illusion and lying are the basis of American interventionism-illusion that the United States is still a democracy, when instead it is a political and financial oligarchy dominated by Jews, through a personal form of dictatorship. The lie is that the Axis powers, after they finish Great Britain, want to attack America.

Neither in Rome nor Berlin are such fantastic plans as this prepared. These projects could not be made by those who have an inclination for the madhouse. Though we certainly are totalitarian and will always be so, we have our feet on hard ground. Americans who will read what I say should be calm and not believe in the existence of a big bad wolf who wants to devour them.

In all cases it is more likely that the United States, before it is attacked by Axis soldiers, will be attacked by the not well known but very warlike inhabitants of the planet Mars, who will descend from the stratosphere in unimaginable flying fortresses.

Rome comrades! Through you I want to speak to the Italian people, to the authentic, real, great Italian people, who fight with the courage of lions on land, sea and air fronts; people who early in the morning are up to go to work in fields, factories and offices; people who do not permit themselves luxuries, not even innocent ones.

They absolutely must not be confused or contaminated by the minority or well-known poltroons, anti-social individuals and complainers, who grumble about rations and regret their suspended comforts, or by snakes, the remains of the Masonic lodges, whom we will crush without difficulties when and how we want.

The Italian people, the Fascist people deserve and will have victory. The hardships, suffering and sacrifices that are faced with exemplary courage and dignity by the Italian people will have their day of compensation when all the enemy forces are crushed on the battlefields by the heroism of our soldiers and a triple, immense cry will cross the mountains and oceans like lightning and light new hopes and give new certainties to spirit multitudes: Victory, Italy, peace with justice among peoples!

Mark Schmitt Is a Very Smart Man: His Forecast from Last Summer

Mark Schmitt, writing on July 27, 2010:

What Will a Republican Majority Do Next?: WIf, as predicted, the Republicans take control of the House, or both houses of Congress, this November, will they: 1) shut down the government? 2) propose massive budget cuts? 3) begin proceedings leading toward impeachment of President Barack Obama? 4) repeal the health-reform bill?... [T]he scholarly consensus seems to be "all of the above."

But a better question is, what will they do next, after those things don't work?

I've seen this movie before, having worked on the Hill when the Republicans took over in 1995. But they've seen it before, too, and will want to avoid making the same mistakes. (Though fewer of them have seen it than you might think -- only 55 current House Republicans were there in 1995, and 10 of them are retiring this year, meaning that if Republicans win a bare majority, 80 percent of their caucus will not have had that experience.)

Let's take their next moves in order:

First, Rep. John Boehner, who would become speaker of the House should Republicans gain the majority, has already proposed a partial shutdown of government in the form of a moratorium on enforcement of new regulations. But that's the easiest sort of gimmick for Democrats to counter, and they did so last week. Are you trying to block safety standards for cribs and bassinets, Mr. Would-Be Speaker? Boehner quickly modified the plan to grandfather in the babies, but we've probably seen the last of that scheme.

Shutting down the government usually isn't meant literally but refers to any sort of game of chicken over a legislative priority. In 1995, Congress refused to pass the usual increase in the debt limit or a continuing resolution to keep government going, in an effort to force President Bill Clinton to accept big spending cuts. It backfired. But even knowing that lesson, a new Republican majority has to find some way to show that it is the boss, so the temptation for some kind of showdown will be irresistible. But unless the fight is over something overwhelmingly popular, Republicans will wind up backing down, just as Newt Gingrich did.

The main alternative is the Andrews Air Force Base strategy -- named for the location of a 1990 meeting where Republican and Democratic leaders hammered out a budget agreement. But the words "Andrews Air Force Base" are to every Republican what the word "Munich" is to a neoconservative: Simply agreeing to meet represents appeasement, perhaps treason. "Never another Andrews" has been the one unbroken principle of congressional Republicans for the last two decades. And since much of any potential new Republican majority would be based on a conviction that the administration is illegitimate, it will hardly be a good climate in which to sit down and hash out budget numbers. So, showdown and shutdown it might be -- but there's little reason to think that will turn out well.

Next, Republicans will want to make good on plans to cut spending. But the only serious plan they have, Rep. Paul Ryan's "Roadmap for America's Future" gets no stronger endorsement than "It's a pretty good list of options" from Boehner, and Ryan himself apparently told an audience at the Brookings Institution that Republican candidates were "talking to their pollsters, and their pollsters are saying, 'Stay away from this.'" That's not surprising, since the plan privatizes Social Security, turns Medicare into a voucher program, and raises taxes on the middle class. But it's the only actual plan they've had since the beginning of the Obama administration.

Then there's impeachment. In a majority heavy with politicians who will believe they were elected solely because of the illegitimacy of the occupant of the White House, there will be subpoenas and fake scandals (and real scandals, too; no administration, however devoted to "no drama" and high ethical standards, escapes without some screw-ups and lapses in vetting) -- and articles of impeachment are sure to follow. The cynical Clinton impeachment certainly established that it is now purely an instrument of politics. But the episode also established that you can't do it without some basis -- although the groundwork was laid early, it took three years before they caught Clinton actually doing something that shocked a lot of people.... As much as some on the right may have convinced themselves that Obama was only elected president because a listserv of little-known opinion writers and professors colluded to bury bad news about him, with support on the ground from ACORN and the New Black Panther Party, that won't make the cut.

And finally, there is repealing health care. It is easier said than done, for the simple reason that Republicans are split about whether to repeal all or part of it. Trying to keep the parts they say they like (coverage of pre-existing conditions) without the parts they don't (the individual mandate), would be very expensive and not welcomed by their allies in the insurance industry, which would prefer to do the opposite. So I suspect they would just start making noise about the 10th Amendment and how the states should reject the plan. Sure, they can grind health reform into dust by refusing to fund key aspects of implementation or blocking appointments, but it won't deliver the political satisfaction of dramatic repeal.

That will leave a majority without much to show for its victory once in office. Its next steps will be critical for the future path of American politics. What do the options look like?

So let's look at the movie from 1995. After the failed government shutdown, the Republicans turned to the basic legislative agenda that had been part of the Contract with America -- notably welfare reform. (It's often credited as a Clinton initiative, but his role was to sign it, after vetoing it once.) Welfare reform and anti-crime legislation were the big substantive initiatives of the Republican agenda, and they had the advantage of being popular and acting on things Clinton had promised to do but hadn't.

The current Republican Party lacks a similar basic, manageable agenda. It's all or nothing. And the GOP no longer seems to have the capacity to get policy plans developed into legislation that is written, negotiated, and signed into law. The GOP has made a political choice to cut off a lot of its policy capacity. That's why it has no budget plans other than Ryan's super-unpopular one. It's why it didn't come up with any meaningful alternative to health reform. It's not because Republicans are dumb -- although Boehner and his allies were no match for Nancy Pelosi in a battle of tactics and determination -- but because offering an alternative would mean negotiating, finding areas of agreement and disagreement. And that sounds suspiciously like, well, Andrews Air Force Base!

And so the GOP is left with only one move, the culture war that Arthur Brooks of the American Enterprise Institute calls for in a new book, ably critiqued by the libertarian Brink Lindsey here two weeks ago. What Newt Gingrich and his crew learned 16 years ago should have been more than just "Don't shut down the government." It's that the president still retains the power to set the agenda, and going to war with the White House rarely turns out well. If there is a new Republican majority, we'll have to see how long it takes them to relearn that lesson.

Friday March 4, 2011: The Value of Global History for Modern Political Economy

Topic:

There is a growing faction in the academy arguing that education for global citizenship requires that students learn some "global history." Certainly our Political Economy major here at Berkeley has placed a lot of its chips on this bet. But is this argument true? What is the value of "global history" for the student and analyst of modern political economy issues, anyway?

Panel:

Chair, J. Bradford DeLong, UCB Economics

Speaker, Alan Karras, UCB International and Area Studies

Speaker, Mark Healey, UCB History

Location: Blum Hall Plaza Level

Time: 2:10-2:40: Panelists. 2:40-3:10: Discussion. 3:10-4:00: Reception.

Winston Churchill Liveblogs World War II: February 23, 1941

Dean Baker: The Origins and Severity of the Public Pension Crisis

DB:

The Origins and Severity of the Public Pension Crisis | Reports: There has been considerable attention given in recent months to the shortfalls faced by state and local pension funds. Using the current methodology of assessing pension obligations, the shortfalls sum to nearly $1 trillion. Some analysts have argued that by using what they consider to be a more accurate methodology, the shortfalls could be more than three times this size. Based on these projections, many political figures have argued the need to drastically reduce the generosity of public sector pensions, and possibly to default on pension obligations already incurred.

This paper shows:

Most of the pension shortfall using the current methodology is attributable to the plunge in the stock market in the years 2007-2009.

The argument that pension funds should only assume a risk-free rate of return in assessing pension fund adequacy ignores the distinction between governmental units, which need be little concerned over the timing of market fluctuations, and individual investors, who must be very sensitive to market timing.

The size of the projected state and local government shortfalls measured as a share of future gross state products appear manageable.

DeLong Smackdown Watch: Closed Cabal Edition

Johnny Baltimore writes:

Ryan Thomas McNeely Has a Weblog... - Grasping Reality with a Sharp Beak: I'm sure this young man is smart and personable.

But isn't this a perfect example of upper class privilege in action?

We have a 20%+ U6 rate and Brad is featuring a kid from an upper middle class town who went to an elite university, then worked for another product of elite parents and universities(Yglesias)then attended another elite university.

Alex is correct- Jesus wept.

It's hardly "upper class." I'm not getting him a job at Goldman Sachs.

The primary original purpose of this weblog was as my archive of interesting things and tickler file, and I do want to be sure to go back and look at what RTM has written in a few months.

Is there somebody else starting out--somebody smart, deserving, etc.--who did no intern for MY who I should be looking out for instead? Yes. Who are they? I do not know: if I knew I would link to them...

DeLong Smackdown Watch: Lexicographic Preferences

Nemi writes:

Robert Murphy Joins the "It's Immoral to Tax Americans to Destroy an Asteroid" Caucus - Grasping Reality with a Sharp Beak: From what I´m reading on this blog – you seem to be an excellent economist.

But, your blind spot towards your own profession is something that is repeating itself over and over again.

What about “We economists do not like lexicographic preference…”. Really? Wow!

Do you honestly believe that these kind of libertarian lunatics (who would answer like Volokh, at least in private) is LESS common among economists compared to the population at large (or any other group for that matter)? I´m not saying that most economists are libertarians – I think they are very few – but the ratio is certainly a lot bigger than among any other group of people.

I´m sure there exist studies on this - if anyone know of one that support or falsify my hypothesis, please share.

We economists commit many sins, but IMHO lexicographic preferences is one of the few that we do not commit. There are always tradeoffs, and we are always optimizing between alternatives along some margin...

David Leonhardt: German Cuts, American Stimulus, Private Hiring, and Government Layoffs

DL:

Private Hiring and Government Layoffs: [G]overnment employment and private sector employment have both fallen during the last two years. Over just the last year, private employment has risen — though more slowly than the population has been growing — while government employment has continued falling. These numbers make clear that a surge of government hiring can’t be the economy’s problem right now — because there has been no surge.... It’s hard to look at these numbers and believe that the laying off of more government workers will somehow cure the economy’s troubles.

And:

Germany’s Cuts vs. America’s Stimulus: Germany’s economic growth surged in the middle of last year, causing commentators both there and here to proclaim that American stimulus had failed and German austerity had worked.... Well, it turns out the German boom didn’t last long... he United States — where the stimulus program has been bigger and longer lasting — has recovered.... Yet many members of Congress continue to insist that budget cuts are the path to prosperity. The only question in Washington seems to be how deeply to cut federal spending this year.

If the economy were at a different point in the cycle — not emerging from a financial crisis — the coming fight over spending could actually be quite productive.... The immediate problem, however, is the fragility of the economy.... A big round of federal cuts will only make things worse. So if the opponents of deep federal cuts, starting with President Obama, are trying to decide how hard to fight, they may want to err on the side of toughness. Both logic and history make this case.

Let’s start with the logic. The austerity crowd argues that government cuts will lead to more activity by the private sector. How could that be? The main way would be if the government were using so many resources that it was driving up their price and making it harder for companies to use them. In the early 1990s, for instance, government borrowing was pushing up interest rates. When the deficit began to fall, interest rates did too. Projects that had not previously been profitable for companies suddenly began to make sense. The resulting economic boom brought in more tax revenue and further reduced the deficit. But this virtuous cycle can’t happen today. Interest rates are already very low. They’re low because the financial crisis and recession caused a huge drop in the private sector’s demand for loans. Even with all the government spending to fight the recession, overall demand for loans has remained historically low, the data shows.

Similarly, there is no evidence that the government is gobbling up too many workers and keeping them from the private sector. When John Boehner, the speaker of the House, said last week that federal payrolls had grown by 200,000 people since Mr. Obama took office, he was simply wrong.... Without the government spending of the last two years — including tax cuts — the economy would be in vastly worse shape. Likewise, if the federal government begins laying off tens of thousands of workers now, the economy will clearly suffer.

That’s the historical lesson of postcrisis austerity movements. The history is a rich one, too, because people understandably react to a bubble’s excesses by calling for the reverse. When Franklin Roosevelt was running for president in 1932, he repeatedly called for a balanced budget. But no matter how morally satisfying austerity may be, it’s the wrong answer....

“It’s really quite striking how well the U.S. is performing relative to the U.K., which is tightening aggressively,” says Ian Shepherdson, a Britain-based economist for the research firm High Frequency Economics, “and relative to Germany, which is tightening more modestly.” Mr. Shepherdson adds that he generally opposes stimulus programs for a normal recession but that they are crucial after a crisis....

By all means, though, don’t follow the path of the Germans and the British just because it feels morally satisfying.

Simon Johnson: Geithners Gamble

SJ:

Geithner’s Gamble: Tim Geithner laid out his view of the nature of world economic growth and the role of the US financial sector. It is a deeply disturbing vision, one that amounts to a huge, uninformed gamble with the future of the American economy – and that suggests that Geithner remains the senior public official worldwide who is most in thrall to the self-serving ideology of big banks.

Geithner argues that the world will now experience a major “financial deepening,” owing to growing demand in emerging markets for financial products and services. He is thinking, of course, of “middle-income” countries like India, China, and Brazil. And he is right to emphasize that all have made terrific progress and now offer great opportunities for the rising middle class, which wants to accumulate savings, borrow more easily (for productive investment, home purchases, education, etc), and, more generally, smooth out consumption.

But then Geithner takes a leap. He wants US banks to take the lead in these countries’ financial development. His words are worth quoting at length:

I don’t have any enthusiasm for…trying to shrink the relative importance of the financial system in our economy as a test of reform, because we have to think about the fact that we operate in the broader world.... It’s the same thing for Microsoft or anything else. We want US firms to benefit from that…Now, financial firms are different because of the risk, but you can contain that through regulation.

There are three serious problems with this view. First, Geithner ignores everything that we know about the pattern of financial development.... It is very rare for financial systems to develop without major crises.... Second, Geithner assumes that risks at the largest US firms can be contained through regulation, when all our knowledge points directly to the contrary.... And third, Geithner completely overlooks what has brought significant parts of Europe to its economic knees. He should spend more time with the authorities in Iceland or Ireland or Switzerland, countries where “financial globalization” allowed banks to become big relative to the economy.... Geithner is a very smart and experienced public servant. His views concerning the future of finance will help shape what happens. And that is why we are headed for trouble.

Steven Pearlstein: Wisconsin's Union Showdown

Steve Pearlstein:

Steven Pearlstein - Making sense of Wisconsin's union showdown: Rather than playing Reagan to Wisconsin's truant teachers, 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.

Back when I was working at Inc. magazine in the mid-1980s, we loved nothing better when approaching a public-sector issue than to ask how the private sector would handle it. Faced with the situation in Wisconsin, we would have called up Tom Peters or Peter Drucker and posed the example of a new chief executive brought in by the shareholders (i.e., the voters) to rescue a company suffering from operating losses (budget deficit) and declining sales (jobs). Invariably, they would have recommended sitting down with employees, explaining the short-and long-term economic challenges and working with them to improve productivity and product quality in a way that benefits both shareholders and employees.

Now compare that with how Wisconsin's new chief executive handled the situation: Impose an across-the-board pay cut and tell employees neither they nor their representative will ever again have a say in how things will be run or get a pay raise in excess of inflation. A great way to start things off with the staff, don't you think? Remember that the next time you hear some Republican bellyaching at the Rotary lunch about why government should be run more like a business...