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Paul Krugman: Naive Fiscal Cynicism: It's Not That We Can't Manage Our Debt, It's That Right-Wing Republicans Seek to Break the Economy and the Government


Paul Krugman:

Naive Fiscal Cynicism: Expansionary austerity has been refuted… even the IMF says that short-run multipliers are big… 90 percent red line… was… fuzzy math… bond vigilantes remain invisible… the confidence fairy refuses to make an appearance… austerian economics has imploded…. Yet there remains immense reluctance to draw the obvious policy conclusion, which is not simply that we have too much austerity, but that right now we shouldn’t be having austerity at all.

As Simon Wren-Lewis says,

If you are walking along a path, and there is a snake blocking your way, you don’t react by walking towards it more slowly!

Yet the orthodox response to the austerian response seems to be at most that we should slow the pace of fiscal consolidation. Why this refusal to follow through? One answer is sheer human unwillingness to admit gross error…. But my read… is that there’s… an attitude… [of] sheer fantasy…. “OK, I see that in principle you might want to stimulate now, and pay for it later. But we all know that stimulus programs, once introduced on an alleged temporary basis, never actually go away; and the reality is that governments never pay down debt in good times.”

I see the appeal of this line; it sounds like knowing, worldly-wide cynicism. But if you look even briefly at the actual history, it turns out to bear no resemblance to reality. Start with stimulus programs…. OK, someone will reply, but what about aid programs like unemployment benefits and food stamps?… [T]his whole “stimulus never goes away” claim is a figment of right-wing imagination. What about the supposed inability of governments to pay down debt in good times?… Reagan/Bush I broke that pattern; Clinton brought it back; then came Bush II…. So the story isn’t “irresponsible politicians will always squander the good years”; it is “conservative Republican politicians run up debt even in good years, because they want to force cuts in social programs.” Kind of a different story, isn’t it?