Paul Krugman slams discredited "deficit scolds" for pushing a phony debt crisis

The award-winning economist says the budget hysteria of Obama's first term looks sillier than ever

Published July 21, 2014 1:48PM (EDT)

Paul Krugman                                                                                                                                                                   (AP/Lai Seng Sin)
Paul Krugman (AP/Lai Seng Sin)

In his latest column for the New York Times, best-selling author and influential liberal pundit Paul Krugman tries to singlehandedly revive the idea of elite accountability by reminding everyone that the debt hysteria that characterized much of President Obama's first term has been utterly discredited by subsequent events.

"I’m not sure whether most readers realize just how thoroughly the great fiscal panic has fizzled — and the deficit scolds are, of course, still scolding," Krugman writes. "[T]here has been a dramatic slowdown in the growth of health care costs," Krugman goes on to note, "which used to play a big role in frightening budget scenarios."

Nevertheless, Krugman agrees that rising debt — even if it's been exaggerated — is not ideal. The solution, he claims, is not to eviscerate Social Security and Medicare, as the deficit scolds usually urge, but to make relatively modest changes to fiscal policy.

"The budget office estimates that stabilizing the ratio of debt to G.D.P. at its current level would require spending cuts and/or tax hikes of 1.2 percent of G.D.P. if we started now, or 1.5 percent of G.D.P. if we waited until 2020," Krugman explains. "Politically, that would be hard given total Republican opposition to anything a Democratic president might propose, but in economic terms it would be no big deal, and wouldn’t require any fundamental change in our major social programs."

If the supposed crisis is so manageable then how do we explain the obsession with cuts that characterized much of 2010 and 2011? Attempting to answer that question, Krugman inches to the very precipice of alleging and class-interest conspiracy on the part of the wealthy:

So we don’t have a debt crisis, and never did. Why did everyone important seem to think otherwise?

To be fair, there has been some real good news about the long-run fiscal prospect, mainly from health care. But it’s hard to escape the sense that debt panic was promoted because it served a political purpose — that many people were pushing the notion of a debt crisis as a way to attack Social Security and Medicare. And they did immense damage along the way, diverting the nation’s attention from its real problems — crippling unemployment, deteriorating infrastructure and more — for years on end.

By Elias Isquith

Elias Isquith is a former Salon staff writer.

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Austerity Deficit Deficit Scolds Paul Krugman The New York Times