Can't stop, won't stop: Paul Krugman's never-ending call for more spending
Is there any point at which deficit spending becomes a problem?
If a liberal is someone who often fails to take his own side in an argument, New York Times columnist Paul Krugman is the rare liberal who finds it impossible to take seriously anyone's argument but his own.
Ideologically speaking, Krugman's world is divided into three categories of people: diabolical conservatives who wouldn't hesitate to destroy the country or wreck the world economy in order to enrich a handful of billionaires; feckless centrists who idiotically place the long-term fiscal health of the country ahead of its far more urgent needs in the present; and sober Keynesian liberals like himself, who understand that what the U.S. and the world need above all else is deficit spending to stimulate growth, create jobs, raise wages, combat rising inequality, and avoid the deflationary trap that has ensnared the Japanese economy for the past two decades and threatens to sink the European Union at this very moment.
In the months and years following the financial meltdown of 2008, this cluster of convictions made Krugman one of the most relentless and convincing advocates for a larger stimulus than the one Barack Obama got through Congress in the opening days of his presidency — and an equally savage critic of those centrists and conservatives, at home and abroad, who have advocated austerity budgets rather than deficit spending.
There's just one problem.
For years Krugman justified massive spending with no concern for its long-term fiscal impact as an emergency measure demanded by high unemployment, anemic growth, and other after-effects of a “once-in-three-generations financial crisis.” We needed to do whatever it took to get the economy moving again, he argued; the fiscal mess could be cleaned up later, once we regained our economic footing. Until then, it would be “craven and irresponsible,” a sign of “intellectual laziness and a lack of moral courage,” to place concern for long-term problems like the budget deficit and national debt ahead of spending our way out of an economic sinkhole that was hurting tens of millions of Americans.
But what about now?
The unemployment rate is firmly below 6 percent. Growth is humming along at a decent clip. Based on the logic of Krugman's arguments — which have always conceded that the deficit and debt, and our ability to fund entitlements, are genuine problems, just ones that couldn't be addressed during the current crisis — one might conclude that now is the time to back off on the deficit spending, to try to bring the budget into balance, in part to assure that we'll be well placed to spend liberally when the next recession hits.
But to judge from Krugman's most recent column, nothing has changed, even with the economy taking off and debt hovering at levels not seen since the end of World War II. Conservatives are still sops for the ultrarich, and centrists are still foolishly focused on long-term fiscal concerns instead of the far more pressing problems of the present, which naturally demand yet more deficit spending.
Which brings me to my questions for Krugman: If deficit spending is required when we're deep in a painful recession, and it's also required when the economy is growing and creating jobs, when is deficit spending not required? When can it stop? What are the specific economic targets we need to meet before we can begin to readjust our budgeting, making it more sustainable in the long term?
The questions take in far more than Paul Krugman's column. Both parties, for different reasons, have strong incentives to favor deficit spending. The GOP likes to cut taxes, but it also favors high military spending and likes to wage long, expensive wars. And despite its antigovernment rhetoric, the party is terrified of cutting entitlements (Social Security and Medicare) that benefit its aging voters. The Democrats, meanwhile, are much less conflicted than Republicans about favoring higher levels of government spending, and they're far more willing (in theory at least) to raise taxes to pay for it. But Democrats are also keenly aware that raising taxes is unpopular and forever threatens to spark an anti-government backlash that will only help their political adversaries.
On top of these political motives for deficit spending, there is its stimulative effect. Keynesian economics tells us that such spending can soften the blows of a recession by stimulating aggregate demand. Ignoring the negative feedback effects of attempting to stimulate demand when we're not in a recession, Democratic and Republican presidents alike now go beyond Keynes, treating deficit spending as something normal, something expected. Like someone who begins taking amphetamines to get through an especially busy period of work but then finds himself needing to pop the pills just to get through an ordinary day, we've grown addicted to the added juice that deficit spending injects into the economy.
Krugman might not be the nation's drug dealer, but he's the false friend who keeps telling policymakers that it's perfectly acceptable to keep right on taking the speed, that it would be an act of supreme irresponsibility to stop, and that there's no need to worry about an overdose.
None of which is meant to deny that the American economy has significant structural problems. Wages are stagnant. Labor force participation rates are distressingly low. Widening inequality remains a major concern.
But does any of it constitute a crisis that justifies permitting sizable budget deficits, and a resulting annual increase in the national debt, in perpetuity? And even if it does, are we capable of recognizing the end of the crisis, and acting accordingly, when it finally arrives? Or have Americans simply come to expect a standard of living that can only be sustained by spending more than we're willing to pay for? And does anyone seriously believe that we won't eventually have to pay significant downside costs as a result?
Those aren't just questions for Paul Krugman. They're questions for us all.