So, about that fiscal crisis — the one that would, any day now, turn us into Greece. Greece, I tell you: Never mind.By now we know, as Krugman has told us before, and as he uses these words to open this New York Times column, our situation is for lots of reasons totally unlike that of Greece.
After referring to the Chicken Little nature of the arguments we have been hearing, we then encounter the following blunt words at the end of the 2nd and beginning of the 3rd paragraphs:
Suddenly, the argument has changed: It’s not about the crisis next month; it’s about the long run, about not cheating our children. The deficit, we’re told, is really a moral issue.Please keep reading.
There’s just one problem: The new argument is as bad as the old one. Yes, we are cheating our children, but the deficit has nothing to do with it.
In part the tenor of the argument has changed because, as Krugman points out, both the President and the Speaker of the House have said we face no immediate debt crisis.
What happened? Basically, the numbers refuse to cooperate: Interest rates remain stubbornly low, deficits are declining and even 10-year budget projections basically show a stable fiscal outlook rather than exploding debt.So for those seeking their wet dream of slashing Social Security and Medicare, they needed another argument, hence the focus on the future and what debt supposedly is doing to our children, so Krugman takes apart that argument the way he previously took apart the notion that we are somehow going to turn into Greece.
Debt does not, according to Krugman, function the way we have being propagandized - it doesn't directly make us poorer and hence is not the "crippling burden" some argue we are imposing upon future generations. Could they be? Well, indirectly, were they crowding out private investment - but business do not need to borrow to finance the investments they have been making and they are sitting upon huge amounts of cash reserves because they are not selling enough to use current capacity. Thus we are not borrowing large amounts of additional money from overseas to finance our current economic activity. And our trade deficits are down, not up.
So in fact, Krugman argues, running current deficits would be one way to put the idle cash sitting in the hands of corporations to work, generating economic activity that oh by the way would increase demand beyond the capacity currently being utilized.
Krugman will grant that we are cheating our children:
By neglecting public investment and failing to provide jobs.He cites data about our failing infrastructure, and yet despite that and despite those unemployed in construction we have actually been cutting back on infrastructure expenditures.
He similarly criticizes our cutting back on education, leading to the laying off of teachers, the diminution of funds for people wishing to attend college who are in less affluent families, and a real problem for the future:
Last but not least, think of the waste of human potential caused by high unemployment among younger Americans — for example, among recent college graduates who can’t start their careers and will probably never make up the lost ground.That hot link takes you to a report from the Center on Budget an Policy Priorities titled "Recent Deep State Higher Education Cuts May Harm Students and the Economy for Years to Come" which I urge you to read. It is of course the restricting of access to higher education, the increased student debt incurred by those still attending, the lack of the educated work force necessary to keep up with a growing demand, and offers this warning specifically about the issue of student debt:
The increase in student debt in recent years also has important implications for the broader economy. While debt is a crucial tool for financing higher education, excessive debt can impose considerable costs on both students and society as a whole. Research finds that higher student debt levels are associated with lower rates of homeownership among young adults; can create stresses that reduce the probability of graduation, particularly for students from lower-income families; and reduce the likelihood that graduates with majors in science, technology, engineering, and mathematics will go on to graduate school.Krugman has been warning us about the need to make a greater commitment to stimulating our economy. On February 12, 2009, he offered Failure to Rise, in which he opined that what the Obama administration had achieved in its approach to stimulus effectively just kicked the can down the road, and offered these words:
Over all, the effect was to kick the can down the road. And that’s not good enough. So far the Obama administration’s response to the economic crisis is all too reminiscent of Japan in the 1990s: a fiscal expansion large enough to avert the worst, but not enough to kick-start recovery; support for the banking system, but a reluctance to force banks to face up to their losses. It’s early days yet, but we’re falling behind the curve.Those so caught my attention that I quoted both of those paragraphs in a post here I titled Krugman is worried - and so am I which led to a discussion thread of almost 800 comments.
And I don’t know about you, but I’ve got a sick feeling in the pit of my stomach — a feeling that America just isn’t rising to the greatest economic challenge in 70 years. The best may not lack all conviction, but they seem alarmingly willing to settle for half-measures. And the worst are, as ever, full of passionate intensity, oblivious to the grotesque failure of their doctrine in practice.
In today's column, the final two paragraphs hammer home Krugman's understanding, which start with the idea that those whose rhetoric and economic theology have shaped our economic discussions in a way that seems to exclude those who do not believe our highest priority should be to "fix the debt" (as one billionaire-led initiative calls its efforts) from being included in the discussion, with a result that they have undercut
political support for public investment and job creation, has done far more to cheat our children than deficits ever did.Yes, we are cheating our children.
As one who until recently was in the classroom, I saw the impact upon education that was occurring because we had not invested enough in stimulating the economy.
I saw students who entered the military to obtain GI Bill funds to help pay for an education in the future - provided they were not killed or maimed overseas - in order neither to drain familial resources nor burden themselves with huge educational debts.
I saw class sizes increase, electives being eliminated, and teachers economically squeezed with furlough days, increased costs for health insurance, on top of pay frozen for several years.
Krugman's voice issued clarion calls of warning what the impact of our policy was going to be - go reread that column from four years ago, or many columns in the meantime.
Yet still so many have not learned. They accept a false frame, that debt is the problem, rather than recognize how it could - and should - be a major part of the solution.
So let me leave you with the final words of this post, which are also the final words of Krugman's column:
Fiscal policy is, indeed, a moral issue, and we should be ashamed of what we’re doing to the next generation’s economic prospects. But our sin involves investing too little, not borrowing too much — and the deficit scolds, for all their claims to have our children’s interests at heart, are actually the bad guys in this story.