If you remember back to the 2008 primary campaign, you will recall an ad put up by Clinton against Obama: the 3 A. M. call. It was raising the idea that Obama was too unseasoned to be ready to address the kinds of international crises that could arise in the middle of the night and Clinton was not. Whether or not that was the reason, it is notable that Obama did choose Clinton as Secretary of State.
Krugman, in his column in today’s New York Times, itself titled The 8 A. M. Call, starts with that ad, which he calls “a fairly mild jab at Barack Obama’s lack of foreign policy experience.” He also notes that Obama turned out to be a fairly cool head who handed, in Krugman’s opinion, foreign crises pretty well (although obviously Republicans, with the incessant series of Benghazi hearings, disagree). He also says that it is perfectly legitimate to ask how a presidential candidate might react to a crisis.
Krugman then pivots to a different time of day, 8 A. M., as the focus point of a different kind of crises that the next president will face, when s/he gets a call warning that the financial markets face meltdown when they open:
For make no mistake about it: The world economy is still a dangerous place. Financial reform has, I’d argue, made our system somewhat more robust than it was in 2008, but fumbling the response to a shock could still have disastrous consequences. So what do we know about the shocks we might face, and how the people who might be president would respond?
Krugman posits two possible sources of such a crisis, China and oil.
As to China,
Many economists, myself included, have been pointing out for a while that China has a severely unbalanced economy, with too little consumer spending and unsustainable levels of investment
Krugman notes China’s failure to truly address the inbalance, papering over its problems with a massive — and ultimately unsustainable — expansion of credit, then write
Now, with capital fleeing the country at the rate of a trillion dollars per year, it may well be headed for a bust. And China is a big enough player that a bust there could have major spillovers to the rest of the world.
Certainly, given how much of a source of goods coming into this country, as well as a still lesser but important marketplace for some US producers, this could have a major impact in the United States: thing of major American companies, starting with Apple, who could see their supply lines suddenly in jeopardy.
As for oil, it is not a question of rapidly escalating prices, but rather the opposite: a bust caused by a glut in supply,
with many producers having run up large debts they probably can’t repay. You could say that shale oil is the new subprime.
People in North Dakota are already experiencing the reality of that new subprime.
So Krugman wants us to consider how the remaining candidates with any realistic chance of becoming President might react to such crises. He considers only three: Trump (obviously) and Cruz on the Republican side, and Clinton on the Democratic side.
I do not think you have to try very hard to figure out who he thinks is best, but it is worth considering his reasoning.
First, he offers only one paragraph about the Democratic front-runner:
Well, Mrs. Clinton isn’t just the most knowledgeable, well-informed candidate in this election, she’s arguably the best-prepared candidate on matters economic ever to run for president. She could nonetheless mess up — but ignorance won’t be the reason.
she’s arguably the best-prepared candidate on matters economic ever to run for president — after all, she had 8 years up close to watch what her husband did, and as Secretary of State not only saw what the Obama administration was doing, but was involved because there were aspects of stabilizing the word’s financial system that inevitably involved her department.
Krugman then pivots to the Republican front-runner, beginning with this paragraph:
On the other side, I doubt that anyone will be shocked if I say that Mr. Trump doesn’t know much about economic policy, or for that matter any kind of policy. He still seems to imagine, for example, that China is taking advantage of America by keeping its currency weak — which was true once upon a time, but bears no resemblance to current reality.
He notes how much international cooperation is involved in addressing any crisis today, goes on to point out that there are things like “currency swap lines (don’t ask)” which were critical in avoiding another world-wide depression, and asks the obvious rhetorical question:
How well do you think that kind of cooperation would work in a Trump administration?
Both President Obama and former Secretary Clinton have commented upon or at least alluded to the concern of many key foreign allies about the Trump phenomenon, which may tell you what the probable answer is to that question.
But consider what Krugman next writes:
Yet things could be worse. The Donald doesn’t know much, but Ted Cruz knows a lot that isn’t so.
Cruz believes that gold is the basis of a sound dollar (and I wonder, given that he is from Texas, has he been infected by Ron Paul)? Further, his senior economic advisor (also from Texas) is Phil Gramm, of whom Krugman opines that he was
an architect of financial deregulation who helped set the stage for the 2008 crisis, then dismissed warnings of recession when that crisis came, calling America a “nation of whiners.”
We have not in the debates so far in either party have had serious discussions about economic matters, either domestically or internationally, except to some degree about minimum wage and how to pay for college on the Democratic side. Yes, we have had arguments about trade policy on our side, as well as questions about wage equality among genders, but economic issues go far beyond those
Certainly both domestic and international financial and economic matters are very important. Certainly wage policies and trade policies are part of that. One could well argue that insofar as addressing some of these issues requires international cooperation, these are also matters of national security.
Which leads me to Krugman’s final paragraph, which brings us back to the notion of the 8 A. M. phone call:
I don’t know how much play the candidates’ readiness for economic emergencies will get in the general election. There will, after all, be so many horrifying positions, on everything from immigration to Planned Parenthood, to dissect. But let’s try to make some room for this issue. For that 8 a.m. call is probably coming, one way or another.
Indeed it is.