Paul Krugman On The Deficit: Then And Now

27 Dec, 2006 by John Hawkins

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Since the New York Times editorial columnists have gone behind a subscription wall, the number of links to and discussion of their columns has dropped down to a very minimal level. Combine that with the holiday season and it’s not a big surprise that I missed Paul Krugman, last Friday, explaining why it’s OK for us to run a deficit now that the Democrats are in power:

“[Robert] Rubin was one of the ablest Treasury secretaries in American history. But it’s now clear that while Rubinomics made sense in terms of pure economics, it failed to take account of the ugly realities of contemporary American politics.

“And the lesson of the last six years is that the Democrats shouldn’t spend political capital trying to bring the deficit down. They should refrain from actions that make the deficit worse. But given a choice between cutting the deficit and spending more on good things like health care reform, they should choose the spending…”

In other words, when the Democrats were out of power, they complained about the deficit. Now that they’re in power, it’s, “Screw the deficit, let’s tax and spend!”

Now, is this really a big surprise given that the Democrats customarily pretend to be moderates while planning to immediately veer way off to the left once they get in office? No, but the brazenness of Krugman’s on a dime turn on the issue is noteworthy — and oh boy, is this a 180 degree shift for Krugman.

After about 5 minutes of Googling, I was able to pull up all of these previous quotes from Krugman:

“The trouble with railing against the deficit is that it’s hard to get people completely enraged. They ought to be, because this is world class irresponsibility, and one day it’s going to take its toll.” — Paul Krugman on Nov 10, 2005

“…Mr. Bush has at last conceded that the deficit is indeed a major problem.” — Paul Krugman, Nov 11, 2005

“We already have a large budget deficit, the result of President Bush’s insistence on cutting taxes while waging a war. And it will get worse: a rise in spending on entitlements – mainly because of Medicare, but with a smaller contribution from Medicaid and, in a minor supporting role, Social Security – looks set to sharply increase the deficit after 2010.

Add borrowing for privatization to the mix, and the budget deficit might well exceed 8 percent of G.D.P. at some time during the next decade. That’s a deficit that would make Carlos Menem’s Argentina look like a model of responsibility. It would be sure to cause a collapse of investor confidence, sending the dollar through the floor, interest rates through the roof and the economy into a tailspin.” — Paul Krugman, Jan 11, 2005

“If you were going to take a look at just the budget, we have a huge, immediate problem on the deficit about which Bush intends to do nothing, really.” — Paul Krugman, Dec 21, 2004

The deficit is a “huge, immediate problem” that people should be “completely enraged” about and it could send the “economy into a tailspin” if something isn’t done. But, now that the Democrats are in power and have an opportunity to do something about this issue that they’ve talked about incessantly, they “shouldn’t spend political capital trying to bring the deficit down.”

How sadly typical for a liberal.