The item was too delicious to resist: New York Times columnist Paul Krugman, he of the don’t-worry, be-happy approach to the federal deficit, had been forced to declare personal bankruptcy.The piece would be stronger, of course, if it didn't open with Marcus caricaturing Krugman's views, or even if it were clear that Marcus knew what she was doing. It would have taken even the more credulous of her peers mere seconds, minutes at most, to determine the source of the Krugman satire, or that Krugman had not declared bankruptcy. So what's Marcus's excuse for not knowing the views of an economist who has been anything but a wallflower on these issues?
Except it wasn’t true. The tidbit was satire, from a Web site called the Daily Currant. The Currant’s “tell” was obvious to anyone who took introductory economics: Krugman, it said, had attempted, like a good Keynesian, to “spend his way out of debt,” after “racking up $84,000 in a single month . . . in pursuit of rare Portuguese wines and 19th-century English cloth” — a wink-wink reference to the classic examples of comparative advantage in international trade.
Here's Krugman on debt:
Now, the fact that federal debt isn’t at all like a mortgage on America’s future doesn’t mean that the debt is harmless. Taxes must be levied to pay the interest, and you don’t have to be a right-wing ideologue to concede that taxes impose some cost on the economy, if nothing else by causing a diversion of resources away from productive activities into tax avoidance and evasion. But these costs are a lot less dramatic than the analogy with an overindebted family might suggest....And more recently:
So yes, debt matters. But right now, other things matter more. We need more, not less, government spending to get us out of our unemployment trap. And the wrongheaded, ill-informed obsession with debt is standing in the way.
Bear in mind that the budget doesn’t have to be balanced to put us on a fiscally sustainable path; all we need is a deficit small enough that debt grows more slowly than the economy. To take the classic example, America never did pay off the debt from World War II — in fact, our debt doubled in the 30 years that followed the war. But debt as a percentage of G.D.P. fell by three-quarters over the same period....In simple terms, Krugman is explaining that deficits matter, but that if they're at a sustainable level they're not a threat to the economy, and that the time to worry about balancing the budget is when the economy is booming in part so that you can avoid self-destructive austerity measures and afford sufficient stimulus spending when the economy is faltering. It doesn't seem that hard to understand... unless, as it seems, you're a Beltway pundit or a Republican partisan.
So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.
There are, of course, longer-term fiscal issues: rising health costs and an aging population will put the budget under growing pressure over the course of the 2020s. But I have yet to see any coherent explanation of why these longer-run concerns should determine budget policy right now. And as I said, given the needs of the economy, the deficit is currently too small.
Do you remember who actually took the position that "deficits don't matter"? A guy whose administration used the Clinton surplus as an excuse to slash taxes for the rich, ran up huge deficits during a period of economic recovery, and crashed the economy on its way out of town. Did Marcus ever so much as whisper a word of criticism? If so, I missed it.
But, oh, something seems familiar about Marcus's quip. "Don't-worry, be-happy." Oh, right, the time Marcus humiliated herself by trying to take on Krugman in public. (Do I give her and her peers too much credit by assuming she's been introduced to at least one take-down of that piece? Mark Thoma: "Ruth Marcus Tries to Show Her Beltway Badge of Seriousness"; Brad Delong piles on. Krugman commented primarily to point out that Marcus didn't understand the statement that she had used as the centerpiece of her attack.)
I really think it's time for Marcus to do the tiny bit of work that she recognizes would have saved her colleagues from embarrassment, and take the few seconds to read what Paul Krugman is actually saying about the economy and deficits, even if it's more fun to believe the satire.