John Kelley

Econ 102-008

Dr. Shahnaz Abdullah

Krugman’s December 27, 2009 article: The Big Zero

Krugman names the first decade of the second millennium common era the Big Zero. There was practically zero job creation in the decade as unemployment data was slightly higher in ’09 as it was in ’99. Private sector unemployment actually dropped for the first time since being recorded. He notes there was zero economic gain for the average family. In ’07 the median income of households was lower than ’99 adjusted for inflation. Housing prices, adjusted for inflation, are where they were at the beginning of the decade, after a bubble in the middle of the decade, housing dipped to ’00 levels. Stocks balanced out for the decade, the Dow was only ~50 points higher on the decade.

Krugman then proceeds with a straw man argument. He presents facts that he does not want us to believe and then sets out to disprove them. The fact is how ever, corporate accounting was not letting investors see the same vision. The hiding of facts in corporate finance, along with a lack of discipline in how companies report and monitor their activities resulted in a terrible decade marred with companies such as WorldCom and Enron.

This is further structured with the evidences Krugman lays out: the dotcom era logged out, bankers inflated the housing to a bubble shortly thereafter, investors and analysts trusted the banks on their own ratings of financial strength. The poor ratings by the banks resulted in a quarter of American mortgages being underwater right now. Only 9 months after the initial stimulus went through in March ’09, we are back to a culture of giant bonuses.

Krugman then goes on to state that Republicans started this problem with tax cuts and deregulation. This should have been stated earlier in the passage as a foundation and then supported with claims. The Glass Steagall Act, however, was repealed in the Clinton years ’99 with a Republican majority in the Senate and a bipartisan effort in the House of Representatives. Republicans favoring the repeal were 205, with 16 noes; Democrats responded favorably with 138 ayes and 69 noes. (Final Vote Results For Roll Call 276) This was the landmark story for deregulation.

Krugman lays out the track for a Republican beating when he says that they are prescribing more tax cuts and deregulation to correct our current dilemma. I would have liked to have seen more linkage between the legislation of economics to the results. In his essay Krugman identifies the changes (null) to the economy across the decade acutely.

"FINAL VOTE RESULTS FOR ROLL CALL 276." house.gov. House of Representatives' Clerk's Office, 1 July 1999. Web. 28 Feb. 2011. <http://clerk.house.gov/evs/1999/roll276.xml>.