If you want more of Paul Krugman than the Times will publish, you can go to his very own site.

ELEPHANT SHIT (5/5/03)

Thanks to Bobby Pelgrift at the  unofficial site I've been led to  Demosthenes (GREAT blog name, by the way - does Orson Scott Card know? And where's Locke?), where I learn that my stalker-in-chief thinks that the liquidity trap is "elephant shit". The purpose of this note is to remind everyone that this is very serious shit indeed.

Just an aside: as Demosthenes notes, it is bizarre that someone who claims to have insight into economics has apparently never heard of a liquidity trap. It's even more bizarre that someone who spends a lot of time attacking yours truly doesn't know that this is one of my signature academic issues. Also, doesn't some version of Godwin's law apply here - the first person to mention bodily wastes loses the argument?

Anyway, let me explain why everyone concerned with economics should know about liquidity traps.
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  thanks to CalPundit

How do you push a string?

The Federal Reserve decided not to lower its benchmark interest rate Tuesday, but it said there is a risk of continued weakness - and with the economy bumping along like an old jalopy running on fumes, the chances of a cut have definitely increased. Such a cut would take rates to 1 per cent, a level not seen since the 1950s. And what does the Fed do if the economy still won’t budge? That’s when things start to get really interesting.
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  thanks to The new Paul Krugman website

BUSHONOMICS

What’s more, the President’s tax cuts may in the end destroy more jobs than they create. As tax revenues fall and the deficit increases, interest rates will rise, and the higher cost of borrowing will impede business investment and hiring. The reborn supply-side economists who devised the President’s plan would dispute this, except that many of them were fired or encouraged to quit in the Administration’s recent purge of its financial team. N. Gregory Mankiw, the Harvard professor who was recently nominated as chairman of the Council of Economic Advisers, is more realistic. In his popular textbook “Principles of Economics,” he explains that when a government runs a budget deficit it “pulls resources away from investment in new capital and, thereby, depresses the living standards of future generations.” Alan Greenspan, whom the President plans to reappoint for a fifth term as Federal Reserve chairman, said essentially the same thing last week. Kenneth Rogoff, the I.M.F.’s chief economist, went even further. He recently told journalists, “Suppose for a minute that we were talking about a developing country that had gaping current account deficits year after year . . . a budget ink spinning from black into red . . . open-ended security costs, and a real exchange rate that had been inflated by capital inflows. With all that, I think it’s fair to say we would be pretty concerned.” When I.M.F. types start talking about the United States as if it were a banana republic on a bad day, it’s probably time to change course.
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  thanks to Cursor

Trouble in Bush's America
by Bob Herbert

While our "What, me worry?" president is having a great time with his high approval ratings and his "Top Gun" fantasies, the economy remains in the tank. And the finances of state and local governments are sinking tragically into ever deeper and ever more unforgiving waters.

You want shock and awe? Come to New York City, where jobs are hard to find and the budget (as residents are suddenly realizing) is a backbreaking regimen of service cuts, tax increases and that perennial painkiller, wishful thinking.

The biggest wish, of course, is that the national economy will suddenly turn around and flood the city and state with desperately needed revenues. Meanwhile, the soup kitchens and food pantries are besieged.
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