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Monday, October 1, 2012

Paul Krugman, "The Real Referendum": "We Are Not Facing Any Kind of Fiscal Crisis"

Yesterday, I asked in which world New York Times columnist Thomas Friedman is living. Today, I am asking the same question regarding Paul Krugman.

In his latest New York Times op-ed entitled "The Real Referendum" (, Krugman anticipates in November a clear referendum in support of Obama, enabling the president to reject the bipartisan Simpson-Bowles debt reduction plan "that would undermine some key pieces of our safety net." According to Paul, the first reason Obama should dismiss Simpson-Bowles is that America is not facing a fiscal crisis:

"First, despite years of dire warnings from people like, well, Alan Simpson and Erskine Bowles, we are not facing any kind of fiscal crisis. Indeed, U.S. borrowing costs are at historic lows, with investors actually willing to pay the government for the privilege of owning inflation-protected bonds. So reducing the budget deficit just isn’t the top priority for America at the moment; creating jobs is. For now, the administration’s political capital should be devoted to passing something like last year’s American Jobs Act and providing effective mortgage debt relief."

No fiscal crisis? As recently observed by the Congressional Budget Office (

"Over the past few years, the federal government has been recording budget deficits that are the largest as a share of the economy since 1945. Consequently, the amount of federal debt held by the public has surged. By the end of this year, CBO projects that the federal debt will reach roughly 70 percent of gross domestic product (GDP), the highest percentage since shortly after World War II."

Sure, nothing worrisome about that.

If re-elected, Obama should focus on job-creating legislation, "like last year's American Jobs Act"? The anticipated cost of this proposed legislation was $447 billion. In an earlier opinion piece (, Krugman told us that this act would have added 1.3 million jobs by the end of 2012. So divide $447 billion by 1.3 million jobs, and what do you get? Taxpayers would have been saddled with a cost of $344,000 per job.

The American Jobs Act also called for funding a "Pathways Back to Work Fund" in the amount of $5 billion, although it was never quite clear who would administer these funds or for what exact purpose they would be dispensed.

Krugman goes on to say that "America does not have an 'entitlements problem,' but rather "a health cost problem, private as well as public, which must be addressed." I hope Shakespeare will forgive me if I observe that "A road apple by any other name would smell as foul."

Finally, Krugman contends that "if a re-elected president were to endorse [Simpson-Bowles], he would be betraying the trust of the voters who returned him to office." Or in other words, just keep shelling out the funds until the system collapses, because this is what those who voted for him wanted. By the same token, if our children were to demand lollipops for breakfast, Twinkies for lunch, and pink cotton candy for dinner, we should accede to their demands, notwithstanding the consequences?

All of this blather is coming from the same visionary who one year ago declared (

"Occupy Wall Street is starting to look like an important event that might even eventually be seen as a turning point.

. . . .

It’s clear what kinds of things the Occupy Wall Street demonstrators want, and it’s really the job of policy intellectuals and politicians to fill in the details."

Ah, yes, the enlightened stuff which makes for Nobel Prizes in economics.

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