April 1, 2011
Paul Krugman: Another Day Older and Deeper in Debt
Before the financial crisis, before the meltdown of the real estate market, before the collapse in employment, Paul Krugman was the nation's foremost economist urging Congress to forget about balancing the budget. Whether it's good times or it's bad times, it's never the right time to get the nation's fiscal affairs in order according to Krugman. For Krugman, balancing the budget is something that happens in the future, after we've made America into a utopia. Thing is, the future never comes.
In his March 24 column, "The Austerity Delusion," Krugman writes:
Why not slash deficits immediately? Because tax increases and cuts in government spending would depress economies further, worsening unemployment. And cutting spending in a deeply depressed economy is largely self-defeating even in purely fiscal terms.
Krugman suffers from the Keynesian delusion that he and his ilk can actually manage the economy. But where are Krugman's jobs gonna come from? Does he have some plan for repatriating the manufacturing jobs lost over the last 50 years? Does he favor cutting the corporate tax rate, which in April will become the world's highest?
And isn't Krugman jumping the gun a bit? Let's give these Euro-austerity programs a little time to work before passing judgment. After all, we've waited more than three years for the Democrats' deficits from hell to create jobs and Krugman expects us to keep on waiting. One thing Krugman might consider is this: Perhaps Europe's austerity programs aren't austere enough.
What Krugman doesn't understand is that one can't always have it all; occasionally, one must choose. One may have to choose between a sound currency and Big Government, or between a vibrant economy and ObamaCare. But Krugman seems to think government can decree that America can have everything simultaneously, even when they cancel each other out.
It's one thing for government to incur debt during war, and in natural disasters such as Japan is facing. But to run deficits year after year, as America has done with few breaks since 1930, is reckless beyond reckoning. Neither the entire federal workforce nor even Paul Krugman himself is smart enough to control the unraveling of such a debt.
Since the president's debt commission released its report, it has become quite apparent that Democrats aren't serious about balancing the budget. And not only that, Democrats want to use the showdown on raising the debt ceiling for political advantage, as Andrew Stiles reported on Tuesday.
Given the Democrats' gamesmanship, Republicans must not yield on their spending cuts. If the Democrat Senate refuses to agree to the cuts, then the Republican House should refuse to agree to raise the debt ceiling and let the government make do with current revenue. The feds would have to get by on an estimated $2.173 trillion (Table 1.1), but America would have a de facto balanced budget.
But even if the Senate accedes to the House's $61 billion in spending cuts, what's really needed is Senator Rand Paul's $500 billion in cuts. Such cuts would still leave a deficit for fiscal 2011 of about one trillion bucks, which might (I say might) be a large enough deficit to placate Paul Krugman.
When balancing the budget (video), consider Hillel's question: "If not now, when?"
Jon N. Hall is a programmer/analyst from Kansas City.