Once upon a time Nobel Prize winning economist Paul Krugman actually had some interesting thoughts about economics. That was before he became a political hack. Here is Krugman on the deficit in 2004:
PROFESSOR PAUL KRUGMAN, PRINCETON ECONOMIST: Well, basically we have a world-class budget deficit not just as in absolute terms of course – it’s the biggest budget deficit in the history of the world – but it’s a budget deficit that as a share of GDP is right up there.
So, if you take a look, the only thing that sustains the US right now is the fact that people say, “Well America’s a mature, advanced country and mature, advanced countries always, you know, get their financial house in order,” but there’s not a hint that that’s on the political horizon, so I think we’re looking for a collapse of confidence some time in the not-too-distant future.
Here is Krugman on the deficit this week:
And I do mean fantasies. Washington has spent the past three-plus years in terror of a debt crisis that keeps not happening, and, in fact, can’t happen to a country like the United States, which has its own currency and borrows in that currency. Yet the scaremongers can’t bring themselves to let go.
Consider, for example, Stanley Druckenmiller, the billionaire investor, who has lately made a splash with warnings about the burden of our entitlement programs. (Gee, why hasn’t anyone else thought of making that point?) He could talk about the problems we may face a decade or two down the road. But, no. He seems to feel that he must warn about the looming threat of a financial crisis worse than 2008.
Or consider the deficit-scold organization Fix the Debt, led by the omnipresent Alan Simpson and Erskine Bowles. It was, I suppose, predictable that Fix the Debt would respond to the latest budget deal with a press release trying to shift the focus to its favorite subject. But the organization wasn’t content with declaring that America’s long-run budget issues remain unresolved, which is true. It had to warn that “continuing to delay confronting our debt is letting a fire burn that could get out of control at any moment.”
As I’ve already suggested, there are two remarkable things about this kind of doomsaying. One is that the doomsayers haven’t rethought their premises despite being wrong again and again — perhaps because the news media continue to treat them with immense respect. The other is that as far as I can tell nobody, and I mean nobody, in the looming-apocalypse camp has tried to explain exactly how the predicted disaster would actually work.
The 2004 deficit that Krugman decried was 3.6% of gdp. The deficit for 2012 which Krugman assures us is no problem was 7.3% of gdp. What a mystery! What could explain this difference in reaction? Two words: Bush and Obama. Krugman did not invent, of course, this type of partisan hackery where an “expert” says contradictory things based upon his partisan allegiance, but it is amazing that in the age of the internet he thinks he can get away with it. Go here to read a column which marks Krugman’s pivot point on the deficit. It came out, wait for it, in December 2006, right after the Democrats won control of Congress.