Krugman on Fiscal Scare Tactics

February 5, 2010

Fiscal Scare Tactics

By PAUL KRUGMAN


These days it’s hard to pick up a newspaper or turn on a news program without encountering stern warnings about the federal budget deficit. The deficit threatens economic recovery, we’re told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren’t stated as opinions, as views held by some analysts but disputed by others. Instead, they’re reported as if they were facts, plain and simple.

Yet they aren’t facts. Many economists take a much calmer view of budget deficits than anything you’ll see on TV. Nor do investors seem unduly concerned: U.S. government bonds continue to find ready buyers, even at historically low interest rates. The long-run budget outlook is problematic, but short-term deficits aren’t — and even the long-term outlook is much less frightening than the public is being led to believe.

So why the sudden ubiquity of deficit scare stories? It isn’t being driven by any actual news. It has been obvious for at least a year that the U.S. government would face an extended period of large deficits, and projections of those deficits haven’t changed much since last summer. Yet the drumbeat of dire fiscal warnings has grown vastly louder.

To me — and I’m not alone in this — the sudden outbreak of deficit hysteria brings back memories of the groupthink that took hold during the run-up to the Iraq war. Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt. Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn’t been any new information to justify this sudden urgency. Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized.

And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction.

http://www.nytimes.com/2010/02/05/opinion/05krugman.html?src=twt&twt=NytimesKrugman&pagewanted=print


(My bold)

:kick:

There is precious little interest in the advice of people who said what would happen last year and have been proved right.

They are egg-head academics who don't understand politics, don't you know.

Except even their political predictions were sound!

Krugman (feh... doesn't understand politics) has had a better model of the politics of the crisis from the get go. Not because he's a political genius but because he is in a position to state what is grindingly obvious.

As mster PK noted, if we passed a too-small stimulus it would fail and that would be taken by the national culture as evidence that stimulus is conceptually debunked.

The people who "understand politics" have fucked up the political situation beyond belief, and the embrace of the deficit thing is just one more brain-dead conventional-wisdom reactive "golden oldies" political stunt from people who are presumed to be political geniuses because they currently hold office.

Clueless Krugman couldn't grasp the complexities of the politics of healthcare. So when the "grown-ups" in their "big-boy pants" took over it breezed through to passage and became beloved by the American people that sure refuted his ivory tower bullshit!