Austerity Feud

Michael Kinsley has his latest volley out in his ongoing feud with Krugman over the correct fiscal response to our current economic problems. To recap, Kinsley wrote a piece the other day about the Krugman v “austerian” debate over the past several years–it’s a long rambling piece that gets a lot wrong–the essence of which is captured by the following:

Krugman also is on to something when he talks about paying a price for past sins. I don’t think suffering is good, but I do believe that we have to pay a price for past sins, and the longer we put it off, the higher the price will be. And future sufferers are not necessarily different people than the past and present sinners. That’s too easy. Sure let’s raise taxes on the rich. But that’s not going to solve the problem. The problem is the great, deluded middle class—subsidized by government and coddled by politicians.

In an attempt to discredit Krugman’s hypothesis about the motive of austerians–that they are driven by an urge to make economics a ‘morality play’ and believe that suffering in the wake of excess is good–Kinsley manages to make exactly that argument.

Krugman (and most of the other prominent liberal econ bloggers) responded forcefully (and correctly) to the original Kinsley piece over the last week–so now, Kinsley is out to defend himself. Really you should read the whole piece yourself to get the flavor for it; I’ve just pulled out the most choice quotes here–a bit out of order, but forgive me; I wanted to address a few different issues in increasing order of significance. First, in trying to decipher why his latest piece created such a firestorm of controversy among the blogosphere, Kinsley says:

First, it might be that I am not just wrong (in saying that the national debt remains a serious problem and we’d be well advised to worry about it) but just so spectacularly and obviously wrong that there is no point in further discussion. Or second, to bring up the national debt at all in such discussions has become politically incorrect.

Kinsley completely missed the main reason his piece became a point of ridicule–Kinsley missed or misrepresented most of the arguments in the entire debate, for starters, and then, in an attempt to disprove a point Krugman makes about the motives of deficit-scolds, Kinsley made the exact argument he was supposed to be refuting. Of course such obliviousness is going to generate significant blowback.

Kinsley goes on in an attempt to define the goalposts of the austerity v stimulus debate (‘all of them’ referring to policy advocates on the left and right):

All of them say we eventually will have to turn off the spigot. None of them wants to do it right away.

This is an absurd statement. You could maybe characterize this as the distance between Krugman and the Obama administration before the administration begins negotiating with the GOP. I’m pretty sure everyone on the right wants to cut spending immediately. The House GOP wants to do it so much that they threatened to not raise the debt ceiling in 2011 unless they received an immediate cut in spending equivalent to every dollar they raised the debt ceiling. How is that not wanting to cut spending right now?

Kinsley then launches into a bit of ad hominem against Krugman, trying to make the case that Krugman is having it both ways w/ regard to the austerity debate (playing the role as the lone voice calling for fiscal stimulus while also, apparently, taking credit for good economic news…see below):

One was an ad for his latest book, End This Depression Now! “How bad have things gotten?” the ad asks rhetorically.” How did we get stuck in what now can only be called a depression?” Right next door is Krugman’s gloat about the recent pretty-good economic news. “So where are the celebrations,” he asks, “now that the debt issue looks, if not solved, at least greatly mitigated?” Greatly mitigated? By what? Certainly not by anyone taking Paul Krugman’s advice.

Of course, Kinsley makes several significant errors in this very short series of sentences–the first and most significant is Kinsley’s conflation of Krugman’s definition of good economic news and what is (I’m guessing based on the argument) Kinsley’s definition. If you actually read Krugman’s post, he is highlighting the fact that deficit projections have fallen significantly over the next 10 years due to the unexpected permanence of the sequester and falling health care cost growth. Kinsley sees lower deficits and thinks good economic news. In contrast, Krugman was never worried about the short-term deficit; he knew that the deficit was primarily driven by the cyclical downturn; generate economic growth and the deficit falls while you also fix the real problem; unemployment. I find it difficult to believe Krugman would label anything “pretty-good economic news” if it doesn’t involve an improving labor market. In fact, Krugman’s post was more of an exasperated “I told you so.” Because, of course, the deficit is now (like he said all along) not an issue anymore whereas unemployment is still a huge problem (thanks to, as Kinsley points out, no one taking Krugman’s advice).

Last, Kinsley commits his biggest howler of them all (in describing potential motives to want to cut government spending):

Amidst these far-fetched possibilities, let me propose one more: maybe austerians really, sincerely want what’s best for America and the world, and really believe that theirs is the better path than Krugman’s.

I can really understand deficit scold organizations putting out research that argues that immediate fiscal consolidation is necessary. I can understand GOP lawmakers arguing that we need to cut Social Security in order to save Social Security. I really do–they have a professional incentive to do this; their livelihood depends on it. What I DO NOT understand is how an unbiased observer could look at the evidence of the last 4 years and still think that austerity is what’s best for America.

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One thought on “Austerity Feud

  1. Physician for Equity

    Stephen,

    My issues with government spending:

    1. Government spending is inefficient and wasteful. You could get the same productivity with half the amount of spending if incentives encouraged productivity. Think about the post office and the VA as specific examples. Until government is more efficient, the easiest think to ask for is across the board cuts.

    2. Government handouts in the form of unemployment insurance, disability insurance, and welfare, should be associated with able bodied persons doing good works. There are huge infrastructure projects that could be performed by able bodied person on government assistance.

    3. Raise taxes on the super rich. Tax unearned income above 200k per year at 90%. Get rid of off shore tax havens. Simplify the tax code. Decrease the tax on earned income.

    4. Show in transparent and concise form how the deficit will be reduced with increased tax revenues during good times and full employment. Basically, a rainy day fund should be created. This has never been consistently done well in good times by congress.

    Sent from my iPhone

    Reply

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