Paul Krugman wants Americans to stop worrying and learn how to love the bomb – the fiscal bomb that is.
Just as Dr. Strangelove in the eponymous film classic assures the president that America can survive thermonuclear war, Krugman professes blithe disregard for the impact of massive government borrowing on U.S. fiscal stability.
The public and a good many economists may beg to differ, but what do they know? Voter concern about deficits has grown salient over the past year, as Washington has spent trillions to prop up the economy. Last March, a slight majority approved of President Obama’s handling of the federal budget deficit; in January, a CNN/Opinion Research poll found that 62 percent disapprove.
Krugman dismisses such concerns as “hysteria” and puts them down to a combination of economic ignorance and Republican propaganda.
On one point, the intensely partisan Krugman is dead right: GOP credibility on fiscal discipline is shot to pieces. The Bush Republicans squandered the budget surplus President Clinton bequeathed them on tax cuts and profligate spending. In 2003, they rammed through Congress a trillion-dollar prescription drug benefit for Medicare recipients but somehow forgot to pay for it. Quite a contrast to President Obama, who took pains to insist that Congress fully offset the costs of his health reform plan – with Republicans all the while hooting inanely about “socialism” from the peanut gallery.
But on the fundamental question – whether progressives should ignore America’s huge and growing fiscal imbalances – Krugman is flat wrong. GOP hypocrisy aside, plenty of progressive economists are sounding the fiscal alarm.
Jeff Garten, for example, believes America’s ballooning national debt will lead to “the slow but inexorable decline of the U.S. dollar,” undermining a key source of U.S. prosperity and influence in the world.
In a compelling Time essay, Jeffrey Sachs argues that the mounting public debt is symptomatic of a breakdown in political responsibility in Washington that stymies the nation’s progress. Republicans won’t abandon their anti-tax fetish, Democrats won’t rein in spending, especially on fast-growing entitlements, and the result is paralysis. “Until both political parties make a serious effort to improve the performance of government while shrinking its swelling deficits, Americans will watch both their quality of life and their country’s standing in the world erode,” he maintains.
Liberals, says Sachs, are wrong to cite deficit spending during the New Deal as proof that Americans shouldn’t worry about government borrowing today. During the height of the Depression, he notes, the federal government was running deficits of around about 5 percent of GDP as opposed to 10 percent today. Back then, he notes, we financed our debts domestically. Today about half of our national debt is held by foreign creditors, especially China and Japan.
Now, Sachs is neither an economic ignoramus nor a Republican stooge. He believes, as Krugman does, that public investment is an imperative to create jobs, rebuild U.S. infrastructure, and restore shared prosperity. But unlike Krugman, he recognizes that Washington’s unwillingness to defuse the public debt bomb is relentlessly squeezing out fiscal space for such investment.
President Obama gets it too. He is trying to strike a balance between massive, short-term spending (although not massive enough for Krugman) to stimulate the economy, and the need to restore fiscal discipline over the long haul by freezing domestic spending and creating a bipartisan commission to tackle entitlement reform.
That’s not easy, and he deserves more help than he is getting from liberals like Krugman who pose a false choice between progressive reform and fiscal responsibility.
Tags: Budget, Deficits and debt, Democratic Party, Economy, Jeffrey Garten, Jeffrey Sachs, Paul Krugman, Republican Party, spending, Taxes
Too bad Obama didn’t strike the balance a year ago. He promised us targetted Clintonomics in the primary. He gave us a Keynesian hog fest and squandered tons of political capital by dismissing fiscally responsible voters.
I pointed this out a year ago, over and over. And no one noticed. I begged for mass demonstrations on healthcare in the major cities. Instead, the base sat on their lazy butts while big insurance and Wall Street bought congress and the Presidency. And our the talking heads chatted up every piece of trivia they could think of.
Why has it taken you guys so long to wake up. Don’t you spend eight hour days thinking about this stuff?
Dumb as they are, at least the Tea Partiers are doing something. But where are the liberal mass meetings in every major city in the country? Nowhere, that’s where.
This was supposed to be our year. And we had a duty to make sure that the first African American President succeeded brilliantly. But it has shown liberals for what they are: lazy, self satisfied, hypocrits. Now I’m so disgusted with the party, I can hardly see straight.
Predatory Lending is a major contributor to the economic turmoil we are currently experiencing.
Here is an example of what I am talking about:
Scott Veerkamp / Predatory Lending (Franklin Township School Board Member.)
Please review this information from U.S. Senator Jeff Merkley regarding deceptive lending practices:
“Steering payments were made to brokers who enticed unsuspecting homeowners into deceptive and expensive mortgages. These secret bonus payments, often called Yield Spread Premiums, turned home mortgages into a SCAM.”
The Center for Responsible Lending says YSP “steals equity from struggling families.”
1. Scott collected nearly $10,000 on two separate mortgages using YSP and junk fees. 2. This is an average of $5,000 per loan. 3. The median value of the properties was $135,000. 4. Clearly, this type of lending represents a major ripoff for consumers.
http://merkley.senate.gov/newsroom/press/release/?id=A09C6A80-537A-4EB1-83C5-31925F046B6F
Wilberforce, I’m sorry, but do you know what you are talking about? Rahm, Geithner, and Summers are liberals? It’s funny you mention Clintonomics as something Obama hasn’t followed when Obama’s main economic advisors played an instrumental role in crafting Clintonomics. While Clinton was certainly better than Bush some of his economic policies helped get us into our current economic mess. Most notably, the Financial Services Modernization Act.