Calpundit Interviews Paul Krugman

by Tom on September 16, 2003

I suppose lots of people will have seen it anyway, but for those who didn’t it’s worth pointing out that Kevin Drum has an excellent but thoroughly terrifying interview with Paul Krugman.

An appropriately spine-chilling taster:

Train wreck is a way overused metaphor, but we’re headed for some kind of collision, and there are three things that can happen. Just by the arithmetic, you can either have big tax increases, roll back the whole Bush program plus some; or you can sharply cut Medicare and Social Security, because that’s where the money is; or the U.S. just tootles along until we actually have a financial crisis where the marginal buyer of U.S. treasury bills, which is actually the Reserve Bank of China, says, we don’t trust these guys anymore — and we turn into Argentina. All three of those are clearly impossible, and yet one of them has to happen, so, your choice. Which one?

I’m almost certainly spending too much time reading lefty American blogs, but I now have far more emotional investment in the result of the US Presidential Election in 2004 than I have in that of the next electoral flurry in the UK.



epist 09.16.03 at 10:34 pm

Perhaps that’s because the UK doesn’t have to worry about re-electing a madman with a vision of the US as some vast right-libertarian kleptocracy.

But that’s just a guess. . .


Tom 09.16.03 at 11:20 pm

Indeed not. We have to worry about re-electing a different madman who… etc etc.

However, our madman seems to be easily led astray by yours. Hence my concern.


Sean 09.17.03 at 1:12 am

Dont’ lose any sleep over a Krugman prediction. The US has been running budget and trade deficits for decades and remains the best place make money (even for the Chinese). The real question is why all the gloomy predictions of ‘economists’ like Krugman never come to pass! The real answer is – because they have no idea how the real world really works.


Demosthenes 09.17.03 at 1:27 am

And pray tell, Sean, how does the “real world” actually work?

Is it anything like your argument, which reminds me of the old story about the guy who fell off a cliff and halfway down said “so far, so good”?

Just curious, because Krugman seems to make a remarkably good case that things are different this time, taking into account precisely those things (budget and trade deficits) that you’re convinced are unimportant.


Andrew 09.17.03 at 4:10 am

I think you are dead on, Sean. As Krugman’s radicalization has proceeded apace, he has lost all sense of what he once appeared to have mastered relative to international economics. As one old Nobelist in economics put it at a recent conference, “Paul has turned into a talentless hack.” Amen, with some sadness.


Patrick Nielsen Hayden 09.17.03 at 5:00 am

Goodness, that was convincing.


Charles Stewart 09.17.03 at 9:32 am

andrew: Which `old Nobelist’ said this, and where?


Barry 09.17.03 at 12:21 pm

I second the question. Who said this?

And fear of exposure isn’t valid, since the guy supposedly has a Nobel prize.


ayjay 09.17.03 at 2:14 pm

ALL interviews with Paul Krugman are terrifying. (As are all attempts to read his columns.)


Dugger 09.17.03 at 3:34 pm

Krugman has been cited as one of the most, if not the most, partisan columnist in America – an Ann Coulter of the left w/o the humor. Jump off a cliff on his words at your own risk.


Kevin Brennan 09.17.03 at 3:59 pm

Wouldn’t Ann Coulter without the humor just be Ann Coulter?


Walt Pohl 09.17.03 at 4:55 pm

The campaign to “discredit” Krugman is pathetic. What, do you think just because we’re liberals we don’t know anything about economics? Krugman’s economic arguments are utterly conventional, well within the parameters of the field. And to compare him with Coulter (whose interpretation of history is, shall we say, novel)! Ah, the sight of someone’s reach to discredit far exceeding their grasp…

My question, is it centrally organized? Do you actually get paid to try to run Krugman’s reputation down? Or do you do it for the sheer love of vituperation?


PG 09.17.03 at 5:01 pm

Could one of Krugman’s detractors explain how it is infinitely possible for the U.S. government to rely on the other nations of the world to pay its bills?

Oh, Coulter is very funny to the kind of people who snicker at the disabled.

Actually, I’ve noticed a trend in conservative commentary to stop taking things very seriously. Krugman is seen as shrill because he has serious concerns about the state of the union.

But because the last thing these conservatives (think Coulter, Goldberg, et al) took seriously was Clinton’s sex life, they come off as these fun folks. So what if the U.S. is going to end up with unsustainable debt? Their boy is in the White House and their books are selling well.


nolo 09.17.03 at 5:22 pm

Actually, Ann’s a misunderstood comic genius.


zizka 09.17.03 at 5:47 pm

Krugman is followed wherever he goes by a swarm of bashers; only Hitlery can evoke such shrieking rage. Kevin Drum is approaching 350 comments on his interview, about half of them from stubborn, semiliterate idiots. You guys are lucky here.


Dugger 09.17.03 at 7:10 pm

The good doc himself has said he has been “radicalized” since the last election (probably when he finally realized the Supreme Court, not California’s 9th Circuit, would be resolving the Gore election-stealing issue). We are, of course, centrally organized, but the Conspiracy to Vituperate against Krugman did not trick him into saying that. Don’t believe me. Lying in Ponds rates Coulter, Scheer and Krugman as the three most partisan columnists. Krugman, though, via his NYT pulpit, has nearly twice as many (total) partisan columns as Coulter. And yet we are to believe Krugman is capable of being fair? And if he says George Bush is a DANGEROUS RIGHT WINGER with a SECRET AGENDA, instead of the mild mannered, slightly bumbling family man he is, we should take his radicalized word for it?


Tom 09.17.03 at 7:14 pm

‘As one old Nobelist in economics put it at a recent conference, “Paul has turned into a talentless hack.” ‘

Uncle Miltie would be outnumbered by the ten Nobelists (Solow, Akerlof, McFadden, Modigliani, etc.) who signed the EPI’s petition, then.


Doug 09.17.03 at 7:49 pm

“Could one of Krugman?s detractors explain how it is infinitely possible for the U.S. government to rely on the other nations of the world to pay its bills?”

Not a Krugman detractor here, but an interested observer who’s heard similar arguments for the better part of a decade and a half. I don’t know if K is putting a time frame on his assertions, but some scale would certainly be helpful, otherwise one is likely to run into Keynes’ assertion about the long run.

Will the Js (or the rest of the world) stop buying Treasuries this month? In time for their fiscal year to end on March 31? Sometime before the next US election? By the end of the decade? When a certain criterion is met? When the Cubs win the Series?

Without this sort of guideline – or at least some sort of guideline – the assertion that US trade and fiscal deficits cannot continue indefinitely is useless.


Arnold Kling 09.17.03 at 10:41 pm

“Krugman is followed wherever he goes by a swarm of bashers”

Horse manure draws flies.

I don’t believe in bashing Krugman. On the contrary, I like to point out the things that he says which represent mainstream economics. When he says that the cost of Social Security and Medicare is likely to rise to a higher percentage of GDP than the government now collects in total taxes, that statement is grounded in mainstream economics.

Saying that the Administration has a plan to end free elections is a bit more speculative.

I believe it’s a mistake to think that you have to agree with Krugman 100% or disagree with Krugman 100%. The Krugman-bashers make that mistake. I hope that Krugman supporters don’t fall into the same trap.


Tom 09.17.03 at 11:05 pm

Arnold, where does Krugman imply that the Bush Administration wants to end free elections in the USA?

I don’t see it in Kevin’s interview, nor do I remember that claim turning up in his NYT columns.

I could easily be wrong, but do remind me if you can.


Sean 09.17.03 at 11:19 pm

For those who think the ‘trade deficit’ will be the undoing of the US I’d recommend reading Bastiat’s ‘Economic Sophisims’. It’s a classic…


Matt McIrvin 09.17.03 at 11:30 pm

The part about ending free elections in the quote from “The Great Unraveling” at the beginning of the interview. Krugman qualifies it with a “possibly”:

“The goal would seem to be something like this: a country that basically has no social safety net at home, which relies mainly on military force to enforce its will abroad, in which schools don’t teach evolution but do teach religion and possibly in which elections are only a formality….”


Tom 09.17.03 at 11:50 pm

‘…in which elections are only a formality’ – well, the damn things are still pictured as happening, right?

Sorry, that line is self-evidently entirely different from the one Arnold was looking for.


Henry 09.17.03 at 11:58 pm

My vague-ish memory is that Krugman has expanded on what he means by the ‘elections only a formality’ argument – his worry isn’t that elections would be abolished, but instead that Republicans are pushing for the same kind of hegemony in US politics as the LDP has in Japan. Which is something rather different from a ‘plan to end free elections.’


Walt Pohl 09.18.03 at 12:30 am

Arnold: I actually don’t agree with Krugman 100%. I have my own opinions on economic issues, which are considerably more sanguine than Krugman’s.


zizka 09.18.03 at 5:01 am

“Horse manure draws flies. I don’t believe in bashing Krugman”. OK.

Doug, so until Krugman is willing say the exact date when the bubble bursts, what he’s saying is senseless? — or if I’m wrong, please tell me what you were trying to say. (I’m sure Bastiat can enlighten me too.)

Feynman described some of you guys — Russian roulette optimists. “Look, we’ve been winning so far, despite what the naysayers say.”

Did you hear that Hitlery is going to run as Clark’s VP candidate, then have Clark killed so she can carry on Presidential lesbian affairs with Barbra Streisand, Madonna, and Christina Aguilera? That little bitch Britney will be so pissed.


Doug 09.18.03 at 12:17 pm

Well, K thinks the US is already in dangerous territory, that the Bush tax cuts should be rolled back immediately and some additional taxes levied on top of that. So in that sense, he gives a time frame in the interview: now.

The driver of the argument is that bond market sentiment can change very quickly and can overshoot, so for the sake of the larger economy, policy makers shouldn’t let the key indicators get anywhere near the levels that would trigger a change in market sentiment.

We’ve seen that at work in the US on inflation; many other countries have faced it on deficit-to-GDP ratios or debt-to-GDP ratios; the eurozone countries have tried to write these in stone with their stability pact.

So far, so good, and I like Howard Dean’s line, “We’ll return to Clinton levels of taxation in exchange for a Clinton economy.”

On the other hand, the emphasis in the debate here about foreigners no longer buying Treasuries is a weaker line of reasoning. This warning has been sent up so many times for so long that it’s just not effective. Second, investments have a strong relative component: for people to quit buying US bonds, there has to be a more attractive alternative. Same thing for equities and other investments: the return outside the US has to be greater before people will change their portfolios.


zizka 09.19.03 at 12:35 am

“On the other hand, the emphasis in the debate here about foreigners no longer buying Treasuries is a weaker line of reasoning. This warning has been sent up so many times for so long that it’s just not effective.”

Strikes me as a classically stupid example of the fallacy Feynmann was yalking about.

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