Steve Soto (The Left Coaster) Interview with Paul Krugman (Part II)

As you are looking forward, and hopefully Kerry is elected, what do you think would be the very first thing in the economic arena he should deal with? Where would you have him start and do you think it would take him one or two terms to deal with the mess that has been left?

First of all, unless it’s really a tidal wave election, he is going to have limited ability to pass legislation, at least in the first two years. So there are going to be severe constraints. In fact, if it is a close victory for Kerry, the beginning is going to be a very unpleasant period. It’s going to be very nasty unless it is really a landslide election and he can carry along with him the control of the congress -- and maybe we want to talk about that in a bit.

What I would say is as a technical manner, the economic problems are not actually that hard to solve. We actually have a pretty good idea of how you can go about a serious jobs program, to do a lot of New Deal type stuff, for which there is actually a great need for, including homeland security measures, and basically switch : raise taxes on the rich who are least likely to spend the money and provide increased spending on necessary projects and temporary tax rebates to people with lower incomes who are in fact, likely to spend it. So that’s actually not hard.

As for the longer term budget problem, it is serious, but well within the capacity of the US to handle. The US does have the lowest taxes – the federal taxes share of GDP are at their lowest level since 1959, they’re way low compared to other advanced countries, so there really isn’t a problem technically raising enough revenue to deal with the problem. The trouble is it’s a political minefield and it is going to be difficult to get people to accept the kinds of policy changes that are needed. And it probably does take two terms, it definitely takes two terms if we have a divided government.

more...

http://www.theleftcoaster.com/archives/002474.html#more

Also for those of you that missed Part I of the interview, see the following thread:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x67044