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May 31, 2012 The Austerity Agenda By PAUL KRUGMAN LONDON The boom, not the slump, is the right time for austerity. So declared John Maynard Keynes 75 years ago, and he was right. Even if you have a long-run deficit problem and who doesnt? slashing spending while the economy is deeply depressed is a self-defeating strategy, because it just deepens the depression. So why is Britain doing exactly what it shouldnt? Unlike the governments of, say, Spain or California, the British government can borrow freely, at historically low interest rates. So why is that government sharply reducing investment and eliminating hundreds of thousands of public-sector jobs, rather than waiting until the economy is stronger? Over the past few days, Ive posed that question to a number of supporters of the government of Prime Minister David Cameron, sometimes in private, sometimes on TV. And all these conversations followed the same arc: They began with a bad metaphor and ended with the revelation of ulterior motives. The bad metaphor which youve surely heard many times equates the debt problems of a national economy with the debt problems of an individual family. A family that has run up too much debt, the story goes, must tighten its belt. So if Britain, as a whole, has run up too much debt which it has, although its mostly private rather than public debt shouldnt it do the same? Whats wrong with this comparison? The answer is that an economy is not like an indebted family. Our debt is mostly money we owe to each other; even more important, our income mostly comes from selling things to each other. Your spending is my income, and my spending is your income. So what happens if everyone simultaneously slashes spending in an attempt to pay down debt? The answer is that everyones income falls my income falls because youre spending less, and your income falls because Im spending less. And, as our incomes plunge, our debt problem gets worse, not better. This isnt a new insight. The great American economist Irving Fisher explained it all the way back in 1933, summarizing what he called debt deflation with the pithy slogan the more the debtors pay, the more they owe. Recent events, above all the austerity death spiral in Europe, have dramatically illustrated the truth of Fishers insight. And theres a clear moral to this story: When the private sector is frantically trying to pay down debt, the public sector should do the opposite, spending when the private sector cant or wont. By all means, lets balance our budget once the economy has recovered but not now. The boom, not the slump, is the right time for austerity. As I said, this isnt a new insight. So why have so many politicians insisted on pursuing austerity in slump? And why wont they change course even as experience confirms the lessons of theory and history? Well, thats where it gets interesting. For when you push austerians on the badness of their metaphor, they almost always retreat to assertions along the lines of: But its essential that we shrink the size of the state. Now, these assertions often go along with claims that the economic crisis itself demonstrates the need to shrink government. But thats manifestly not true. Look at the countries in Europe that have weathered the storm best, and near the top of the list youll find big-government nations like Sweden and Austria. And if you look, on the other hand, at the nations conservatives admired before the crisis, youll find George Osborne, Britains chancellor of the Exchequer and the architect of the countrys current economic policy, describing Ireland as a shining example of the art of the possible. Meanwhile, the Cato Institute was praising Icelands low taxes and hoping that other industrial nations will learn from Icelands success. So the austerity drive in Britain isnt really about debt and deficits at all; its about using deficit panic as an excuse to dismantle social programs. And this is, of course, exactly the same thing that has been happening in America. In fairness to Britains conservatives, they arent quite as crude as their American counterparts. They dont rail against the evils of deficits in one breath, then demand huge tax cuts for the wealthy in the next (although the Cameron government has, in fact, significantly cut the top tax rate). And, in general, they seem less determined than Americas right to aid the rich and punish the poor. Still, the direction of policy is the same and so is the fundamental insincerity of the calls for austerity. The big question here is whether the evident failure of austerity to produce an economic recovery will lead to a Plan B. Maybe. But my guess is that even if such a plan is announced, it wont amount to much. For economic recovery was never the point; the drive for austerity was about using the crisis, not solving it. And it still is. MAY 31, 2012, 9:00 PM The Wrong Résumé By <http://opinionator.blogs.nytimes.com/author/timothy-egan/> TIMOTHY EGAN <http://opinionator.blogs.nytimes.com/category/timothy-egan/> Timothy Egan on American politics and life, as seen from the West. Tags: <http://opinionator.blogs.nytimes.com/tag/business/> business, <http://opinionator.blogs.nytimes.com/tag/mitt-romney/> mitt romney, <http://opinionator.blogs.nytimes.com/tag/the-presidency/> the presidency Lost in the exhaust of mendacity left in Las Vegas this week, after Donald Trump brought his birther fantasies to town on behalf of Mitt Romney, was a curious statement by the man who has now cinched the Republican nomination for president. On Tuesday, the same day Trump proved yet again that money and truth, like money and taste, are seldom twined, Romney talked about amending the Constitution to require the president to have business experience. He spoke approvingly of a notion from a store owner who wanted to make anyone who does not have at least three years of business background ineligible to lead the country. He said, Id like to have a provision in the Constitution that in addition to the age of the president and the citizenship of the president and the birth place of the president being set by the Constitution, Id like it also to say that the president has to spend at least three years working in business before he could become president of the United States, said Romney, cheerfully summarizing this rewrite of the founders governing blueprint. Well, there goes Teddy Roosevelt, the writer, rancher and police commissioner, not to mention his distant cousin Franklin Roosevelt, the assistant naval secretary and politician, or Dwight Eisenhower, the career soldier. Ikes résumé, which includes defeating the worlds most concentrated form of evil in Nazi Germany, would not be not enough to qualify him for the presidency. Romney has made business experience the main reason to elect him. Without his business past or his projections of business future, there is no there there. But history shows that time in the money trade is more often than not a prelude to a disastrous presidency. The less experience in business, the better the president. In a scholarly ranking of great presidents, a 2009 survey conducted by C-Span,6 of the 10 best leaders lacked sufficient business experience to be president by Romneys rumination. This list includes Ronald Reagan, the actor, union activist and corporate spokesman, and John F. Kennedy, the naval officer, writer and politician. There is one failed businessman on the list of great presidents, the haberdasher Harry S. Truman. By contrast, two 20th century businessmen George W. Bush, whose sweetheart deal with the Texas Rangers made him a multimillionaire, and Herbert Hoover, who came by his mining fortune honestly were ranked among the worst presidents ever by the same historians. Bush left the country in a sea of debt and an economic crisis rivaled only by the one that engulfed Hoover. Both George W. Bush and Romney are Harvard Business School graduates, further padding their business cred. Once they started governing, both men failed to improve the economic lives of those under them. At Bain Capital, Romney as C.E.O. practiced a very Darwinian form of capitalism for 14 years; he points to his time there as a model for how he would turn around the American economy. But its clear that enriching a handful of shareholders often has very little to do with job creation. The point of private equity, after all, is to make deals that turn investments into profits nothing more. In that realm, Romney has succeeded. Once he moved from running Bain to running the Bay State, Romney was a failure at job creation. His state ranked 47th. Job growth nationwide, even under the sluggish economy of George W. Bush, was five times higher than it was in the Massachusetts run by Romney from 2003 to 2007. This was reflected in his approval ratings 34 percent in the last full year of his term, making him one of the most unpopular governors in the country, ranked 48 out of 50. The biggest job creator of modern times, Bill Clinton, wouldnt know a spreadsheet from a cooked derivative. His business experience was nil, but he had governing smarts, and his instincts were usually right. Under Clintons watch, the United States added 23 million new jobs this after he raised job-killing taxes on the rich. Romney never mentions Clintons formula for prosperity, or that of Franklin Roosevelt, the other business-challenged president who took the American economy to new highs. Roosevelt had been through a traumatic life experience, the diagnosis of polio, that made him a man of resolve, with empathy for the average person. If you spent two years in bed trying to wiggle your toes, after that anything would seem easy, said Roosevelt. When he ran for president in 1932, his theme was the forgotten man. Romney has shown a strange tendency to fetishize wealth, from his belief that corporations are people to his boasting of how many Cadillacs his wife drives. His European role model would have to be Silvio Berlusconi, Italys richest man. A media tycoon, the Rupert Murdoch of his country, Berlusconi was laughably bad as a three-time prime minister. The verdict is still out on Barack Obama, the community organizer, lawyer and writer. Because he got hit with the Bush hangover, his overall job numbers show a net loss of about 850,000, from January 2009 to the present. But if you start a year into his presidency, Obama has added almost four million jobs. We arent electing a C.E.O. to occupy the White House. Were looking for good judgment, broad life experience, flashes of wisdom. Still, for those who insist on making business the bottom line in who they pick, the past is indeed predictive. May 30, 2012 Sleeping in the Cradle of Opera By ROCKY CASALE FLORENCE, Italy FOR Paolo Mazza, the Palazzo Bardi was supposed to be just another project at work. Mr. Mazza, now 59, was the chief executive of Amplifin S.p.A., an investment firm in Milan, in 2000, when his company acquired the property, a 15th-century palazzo said to have been designed by the great Renaissance architect Filippo Brunelleschi. The plan was to convert it into apartments to sell, and for the next several years Mr. Mazza supervised the architects charged with the delicate task of carving up the building. One space had the distinction of being a theater that was a meeting place for the Florentine Camerata, the group of 16th-century musicians and theorists credited with inventing opera. When I saw the architects plans to carve up the theater, which in its original form was as open and acoustically pristine as a theater ought to be, Mr. Mazza said, I had to intervene. In 2008, he halted work on La Camerata, as the 3,444-square-foot theater is now known, and bought it himself, for 2.5 million euros (about $3,875,000 at the time). He and his wife, Gabriella, now 56, then put four years of work and another $1.5 million into turning it into a home. It was a project that Mrs. Mazza, a former owner of a luxury retirement community, said involved dealing with a lot of red tape because of the theaters historic significance. We were constantly dovetailing the tiring tasks of wading through a legal swamp of restoration requirements while trying to leave our own interior-design stamp on the property, she said. Working in consultation with artists and historians from the Accademia di Belle Arti, the art academy in Florence, they submitted nearly two dozen architectural proposals and renderings to the Municipality of Florence and to the Italian Ministry of Cultural Heritage, before construction could begin. The space was lofty and open, as befitting a theater, and the Mazzas wanted to keep it that way. So they turned the one private room, a study near the entrance, into a bedroom and bathroom. To preserve the open spaces integrity, they inserted a giant free-standing structure, creating two guest rooms with bathrooms on the lower level (for their children, Francesco, 32, and Giulia, 25, who live in Milan) and a modern kitchen, dining and living area above. A marble staircase with a wrought-iron railing leads to the second level, where a glass-and-steel railing stretches the length of the mezzanine, overlooking the open space below. But first, there was a huge amount of restoration to be done. The frescos in what would become the master bedroom needed to be restored, and the wood-beamed ceilings and 12-foot-tall wooden shutters were covered in centuries of paint. So the Mazzas hired Dini Restauri, a restoration company, to strip the space down to its original state. Workers spent seven months picking away at the heavy layers of lead paint on the walls with chisels and hammers, finishing the job with a calcium oxide wash that accentuated the chiseled effect. And the paint on the woodwork was removed to reveal pastel flower stencils on the paneled ceilings. When the Mazzas bought the apartment, they also bought a street-level space in the building that was originally a 15th-century buchetta, the Renaissance equivalent of a fast-food drive-through that sold food staples. Their intention was to turn it into a two-car garage. But like many of their plans, that was vetoed. Authorities deemed the space too historically important to be used for parking. So the couple did what they learned to do during the renovation: they improvised. And now they run a restaurant in that space called La Buchetta.
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