New York Times columnist Paul Krugman accused Republicans on Friday of supporting policies that will "likely to deliver a Greek-style economic disaster here [to] America."
The Greek "formula for disaster" involved "the toxic combination of austerity with hard money," he argued, and "most of the Republican Party" wants to "impose that kind of toxic policy mix on America."
For example, "just about everyone in the GOP demands that we reduce government spending, especially aid to lower-income families," while at the same time they are "incessantly attack[ing] the Federal Reserve for its efforts to boost the economy, delivering solemn lectures on the evils of 'debasing' the dollar."
Some of them even "hanker for a return to the gold standard, which would effectively put us into a euro-like straitjacket." Which means that instead of worrying that the United States might happen to "turn into Greece, you should really focus your concern on America's right," who are actively pursuing policies to ensure that it will.
To understand the real lessons of Greece, you need to be aware of two crucial points.
The first is that the “We’re Greece!” crowd has a truly remarkable track record when it comes to economic forecasting: They’ve been wrong about everything, year after year, but refuse to learn from their mistakes. The people now saying that Greece offers an object lesson in the dangers of government debt, and that America is headed down the same road, are the same people who predicted soaring interest rates and runaway inflation in 2010; then, when it didn’t happen, they predicted soaring rates and runaway inflation in 2011; then, well, you get the picture.
The second is that the story you’ve heard about Greece -- that it borrowed too much, and its excessive debt led to the current crisis -- is seriously incomplete. Greece did indeed run up too much debt (with a lot of help from irresponsible lenders). But its debt, while high, wasn’t that high by historical standards. What turned Greek debt troubles into catastrophe was Greece’s inability, thanks to the euro, to do what countries with large debts usually do: impose fiscal austerity, yes, but offset it with easy money.