I am not a budget expert, but I saw Paul Krugman interviewed on the PBS Newshour program last evening and had a few questions.
Here’s an excerpt from that interview:
PAUL KRUGMAN:
I guess I don’t know how you can be honest about what is actually going on in this country without sounding partisan. That’s the old line, right? The facts have a well‐known liberal bias, because, right now, we’re in a world where deficits are a good thing and a little bit more inflation would also be a good thing.
PAUL SOLMAN:
A proposal that’s put him at odds with the man who hired him at Princeton, Fed Chairman Ben Bernanke.
Tom Ashbrook asked him about it.
TOM ASHBROOK:
Ben Bernanke calls your proposal very reckless.
PAUL KRUGMAN:
Odd, because he made the same proposal himself 12 years ago for Japan.
(LAUGHTER)
PAUL KRUGMAN:
Those of us who have been calling for a bit more inflation are calling for 4 percent inflation, which is what we had back during the reign of Ronald Reagan in his second term. It didn’t seem that terrible to me at the time.
PAUL SOLMAN:
But we could be taking a big risk, right? You have no way of knowing whether or not the interest rate we’re going to have to offer to borrowers might change overnight, as it has often recently.
PAUL KRUGMAN:
Well, I am reasonably sure that isn’t going to happen until or unless the U.S. economy is really on the path to recovery. And that’s the point also when — by the way, when I will support the austerity. Once we no longer need that support to keep the economy afloat, that’s when you do want to start raising taxes and cutting spending, but not now.
A few questions for Mr. Krugman:
- I don’t know whether you agree with the proposition that we’re about $100 trillion in debt, but if we were, could we really afford to postpone (again) deep spending cuts? Wouldn’t the time for cuts be … yesterday?
- You say that you would support spending cuts when the overall economy gathers more strength, but isn’t the record clear that the pols have neglected to reduce spending during previous periods of economic growth?
- What evidence leads you to believe the pols will act differently if economic growth were robust? Wouldn’t they seek to avoid the political pain of cuts and be seduced (again) by those who say the United States can “grow our way out of the debt problem”?