Crossroads

by Steven Hansen

Those that have followed my writing know that from time-to-time I take a swipe at Nobel Laureate Paul Krugman. Combining economics with partisan politics loses his message on most conservatives who view Professor Krugman as a liberal lapdog.

This is tragic as much of what Professor Krugman espouses are solutions most knowledgeable people could accept.  Although everyone has the right to express a political opinion, mixing politics and economics from a recognized expert in economics adulterates the economic message.Professor Krugman’s recent OpEd To the Limit is a completely partisan attack:

Bear in mind that G.O.P. leaders don’t actually care about the level of debt. Instead, they’re using the threat of a debt crisis to impose an ideological agenda. If you had any doubt about that, last week’s tantrum should have convinced you. Democrats engaged in debt negotiations argued that since we’re supposedly in dire fiscal straits, we should talk about limiting tax breaks for corporate jets and hedge-fund managers as well as slashing aid to the poor and unlucky. And Republicans, in response, walked out of the talks.

So what’s really going on is extortion pure and simple. As Mike Konczal of the Roosevelt Institute puts it, the G.O.P. has, in effect, come around with baseball bats and declared, “Nice economy you have here. A real shame if something happened to it.”

And the reason Republicans are doing this is because they must believe that it will work: Mr. Obama caved in over tax cuts, and they expect him to cave again. They believe that they have the upper hand, because the public will blame the president for the economic crisis they’re threatening to create. In fact, it’s hard to avoid the suspicion that G.O.P. leaders actually want the economy to perform badly.

If the tables were turned, the Democrats would be doing the same to the Republicans – Obama has wrongly voted against raising the debt ceiling in the past.  The political party in opposition always screws with the party in power.   This much of this debt argument is between two political parties who are both misrepresenting the situation.

The USA is at a debt crossroads.  The debt crisis did not start with the 2011 budget.  And trying to balance the budget in one year is stupid talk.  It is interesting that many Americans listen to the rhetoric, and associate personal and sovereign budgets.  The propaganda from AARP who believe this debt crisis is solvable without touching entitlements.   Others believe huge public works projects are the key to kick start GDP (thus getting more revenue for the government), while others believe cutting taxes will improve the economy (thus getting more revenue for the government.

The vast majority want the budget to balance without increasing taxes.

I do not believe a sovereign budget necessarily needs to balance, but the current debt buildup is destructive.  Just cutting spending here and there is NOT going to end the crisis.  New priorities must be established, and new approaches to government must be tried.

Professor Krugman’s underlying message, however, is correct – the debt ceiling increase MUST happen.  The debt was caused by both political parties taking their eye off the ball.   If they did not want the debt to go up, why did both political parties keep funding foreign confrontations and bailouts, and legislate expanding social programs.  There is more than enough blame to spread around.

Because my background is not academic – but was on the execution end of policy, I will never fully agree with Professor Krugman.  I am a pragmatist, not a theorist.   There are reasons good ideas don’t work.  But I will continue to read Professor Krugman’s work, and pick out the grains of wheat from the chaff.