Krugman on Tim Geithner’s new book and why he’s so full of shit:
But fiscal austerity wasn’t the only reason recovery has been so disappointing. Many analysts believe that the burden of high household debt, a legacy of the housing bubble, has been a big drag on the economy. And there was, arguably, a lot the Obama administration could have done to reduce debt burdens without Congressional approval. But it didn’t; it didn’t even spend funds specifically allocated for that purpose. Why? According to many accounts, the biggest roadblock was Mr. Geithner’s consistentopposition to mortgage debt relief — he was, if you like, all for bailing out banks but against bailing out families.
“Stress Test” asserts that no conceivable amount of mortgage debt relief could have done much to boost the economy. But the leading experts on this subject are the economists Atif Mian and Amir Sufi, whose just-published book “House of Debt” argues very much the contrary. On their blog, Mr. Mian and Mr. Sufi point out that Mr. Geithner’s arithmetic on the issue seems weirdly wrong — order of magnitude wrong — giving much less weight to the role of debt in holding back spending than the consensus of economic research. And that doesn’t even take into account the further benefits that would have flowed from a sharp reduction in foreclosures.
In the end, the story of economic policy since 2008 has been that of a remarkable double standard. Bad loans always involve mistakes on both sides — if borrowers were irresponsible, so were the people who lent them money. But when crisis came, bankers were held harmless for their errors while families paid full price.
And refusing to help families in debt, it turns out, wasn’t just unfair; it was bad economics. Wall Street is back, but America isn’t, and the double standard is the main reason.
Our national debt is about $17.5 trillion dollars. Our yearly maintenance (interest paid) on that debt is in the neighborhood of $350 billion dollars. Part of that debt is owned by foreign countries. Most of it is owned by Americans. Very wealthy Americans. 1% Americans. Now why would any wealthy 1%er want to give up a slice of that government guaranteed $350 billion dollars? Surely no one in the oligarchy wants to retire our national debt. Or even see it shrink all that much. The game is rigged from top to bottom.