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Home Publications Blogs Beat the Press Robert Samuelson Didn't Hear About the Recession

Robert Samuelson Didn't Hear About the Recession

Monday, 10 May 2010 04:58

That is the only thing that readers of his column on the "death spiral" of the welfare state can conclude. After all, he notes the size of the budget deficits facing various European countries, but discusses them entirely in the context of their wlefare states. He apparently does not know that these countries all face severe downturns as a result of the collapse of housing bubbles in the United States and elsewhere. During recessions budget deficits always expand as tax collections fall and spending on items like unemployment insurance and other benefits rise.

Contrary to what Samuelson claims in this column. Most European countries have been willing to pay the taxes needed to support their welfare states. And this has not prevented them from maintaining rates of productivity growth (the long-term determinant of living standards) comparable to the United States.

The economic crisis caused by the collapse of the housing bubble does make sustaining the welfare state more difficult, just as it makes every other aspect of economic life more difficult. This points to the need to have more competent people setting monetary policy (unfortunately, none of the incompetent central bankers have been fired), but it does not provide insights into the viability of the welfare state, which is most needed in times of economic hardship.

Comments (7)Add Comment
Typo: Wlefare?
written by Jay, May 10, 2010 8:30
What is wlefare? ;)
let them eat baguettes
written by frankenduf, May 10, 2010 8:58
he does mention the Greek riots- they too are calling for something's death spiral- not sure it involves the 'welfare state' tho...
The heart of the problem
written by skeptonomist, May 10, 2010 10:08
Dean's complaints about incompetent central bankers do not belong in an economic blog - they should be made in church, addressed to God. Who else is going to replace all the central bankers in the world?

The system of having major economic decisions made by central bankers has never worked well - supposed past successes of this system are mostly mythical. The US was most prosperous and stable economically when the role of the Fed was limited. Economists were apparently seduced by the promises of unproven monetary dogmas into supporting the activities of the Fed, and have ignored the events and data which conflict with these dogmas. Like the bankers, they have not faced the consequences of their mistakes.

Maybe God should go to the heart of the problem and replace the economists who reason dogmatically from monetary theory.
written by Queen of Sheba, May 10, 2010 11:30
Samuel's column, like most of his columns, is just another "sky is falling because of the deficit" rant to bring an end to, or to privatize, what scant safety net this country offers. The deficit hawks are in full throat now (although to be fair Samuelson has been on this tack for years), with very few voices speaking up on behalf of the voiceless - those ordinary folks who want MORE of a safety net provided by the government, not less.

Blaming Europe's economic problems on the "welfare state" is just another way of saying, "We can't afford Medicare, and Social Security is going to bankrupt this country." Such a mantra ignores what the average person wants and is willing to pay for and gives undue weight to what the top 5% of the wealth holders wants.
written by diesel, May 11, 2010 12:04
Samuelson said "It (the euro) was supposed to lubricate faster economic growth..." "More important it would promote political unity."

I was under the impression that a significant part of the reason for the euro (at least as stated by the German press at the time) was to put an end to destabilizing arbitrage and currency speculation by American investors.

Samuelson also said "Almost anything governments might do with their budgets threaten to make matters worse by slowing the economy or triggering a recession."

Gee golly, that doesn't give government much choice does it? I guess they had better just throw their arms up in the air and leave it to the "big boys" at Goldman because it sounds as if they're damned if they do and damned if they don't. It's a little confusing, do you think he means that governments should or shouldn't cut military budgets? or replace military spending with investment in solar and wind? Should or shouldn't have built the Grand Coulee dam? or established the TVA? or built and managed airports? or interstate highways? After all, "anything governments might do..." seems to have disastrous consequences, never positive,life-enhancing, economically-stimulating effects. This assertion seems at odds with the historic facts.

written by Rick Caird, May 11, 2010 11:36
Dean Baker always has a reason why the sovereign is increasing and never decreasing. But, we always have recessions and bubbles. After each one the fiscal problems of the welfare states is worse. In the case of Greece, it is inevitable that if Greece actually pays the debt, fully 6% of GDP will go to foreigners as interest. No country will stand for that. This is a direct result of the welfare state. Samuelson is right. Baker is wrong.

Ask Baker: Does he expect the Greek debt, as a % of GDP, to get smaller after economic recovery? If not (and he shouldn't), then the next economic problem will result in more debt and the problem worsens. This is an infinitely increasing series until the ultimate default. it is a pity Baker does not understand that. Ostriches don't survive.
"Lord, deliver me from sin" (debt)
written by AndrewDover, May 11, 2010 12:51
...but not just yet."

Samuelson did hear about the recession, and mentioned it in the article:
"Countries everywhere already have high budget deficits, aggravated by the recession."

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.