Times Letters: Good and Bad

Since the demand for postings is overwhelming, I apologize I haven’t posted anything recently. I’m starting a new feature, running (maybe) every week or two; the best and the worst of the New York Times letters to the editor (maybe with comments, maybe not).

The best this week so far, on Monday, February 13:

"The withdrawal of Senator Judd Gregg from consideration for the post of commerce secretary, coming on the heels of the Republican Party’s overwhelming and disciplined rejection of the stimulus package, should serve as a wake-up call for President Obama’s strategy of bipartisanship. It should now be clear that, for all its facile appeal, bipartisanship is a mistake for at least three reasons.

First, it assumes a willing partner, and the Republicans have made it clear that their goal is to rapidly derail this presidency rather than help build a new spirit of bipartisanship.

Second, it assumes that the solutions to the nation’s ills lie somewhere in the middle of the political spectrum — between the two parties — whereas the reality is that our most pressing problems, from providing universal health care and sensible economic regulation, to environmental protection and labor law reform, all require more radical solutions, not weak compromises.

Third, bipartisanship of this kind undermines democracy because it thwarts the will of the people. Republican ideas and political practices were decisively rejected at the polls last November; they should not reappear through the back door.

I voted for Barack Obama and his policy agenda. I thought we won.

Let’s see it enacted." Chris Howell

Oberlin, Ohio, Feb. 13, 2009
*****
The worst, on Wednesday, February 18:
Re: "To Spend or to Save? Trick Question: by David Leonhardt (Economic Scece column, Feb 11):

"The "paradox of thrift" is an idea that needs to be put out of its misery once and for all. It’s been losing support among economists for many years, and for good reasons.
It’s never an act of patriotism for individuals or families to buy stuff they cannot afford. Whether it’s rainy or sunny outside, saving a portion of one’s income for future use is always a wise idea. There is nothing paradoxical about these concepts.

At the heart of the alleged "paradox of thrift" is the belief that private citizens behaving unwisely (thriftlessly) can at times produce good societal results. That belief is false. The idea that overindebted, chronically undersaving American consumers would somehow be serving their country in its time of need by maxing out yet more of their credit cards is surely an idea whose time has passed.

Yes, individuals can incur "good debt" — in general, current expenditures aimed at future gains, like the cost of education, or of winterizing a home. And yes, at the societal level, mainstream economic theory suggests that in times of economic downturn, government can legitimately engage in deficit spending to moderate the downturn (just as surpluses are called for in economic boom times). But again, there is no paradox here.

David Blankenhorn
New York, Feb. 11, 2009

The writer is president of the Institute for American Values and the author of a book about thrift.
*****
God help us. He totally misses the point. The "paradox of thrift," first espoused by Keynes, does not deal with the wisdom of personal saving or the morality of saving. It simply argues that attempting to save during a recession may lead to cutbacks in production, and therefore income losses, and this will result in less saving than if the attempt not been made.

Prior to this, economists assumed that the savings would automatically be invested and the only change would be the proportions between consumption and investment. Keynes shows how this is a misunderstanding of the economic process.

Blankenhorn goes on about "good debt" and individuals being wise and unwise, etc. This has nothing to do with the "paradox of thrift." He obviously doesn’t even see why it is a paradox. It is a paradox because the attempt to save leads to less saving.

And, indeed, if individuals in great numbers said to themselves–oh, oh, we’re in trouble, I better save more–and then did save more, the result would be more unemployment and many of those trying to save would be among the unemployed and therefore would not be saving at all (or certainly saving less).

All of this implies, as Keynes pointed out, we need government macro-policies to get us out of the problem. This is what is happening, with the stimulus. Whether it is big enough remains to be seen.