Follow by Email

Monday, July 22, 2013

Paul Krugman, "Detroit, the New Greece": Shit Happens

Bumper Sticker Guy: [running after Forrest] Hey man! Hey listen, I was wondering if you might help me. 'Cause I'm in the bumper sticker business and I've been trying to think of a good slogan, and since you've been such a big inspiration to the people around here I thought you might be able to help me jump into - WOAH! Man, you just ran through a big pile of dog shit!

Forrest Gump: It happens.

Bumper Sticker guy: What, shit?

Forrest Gump: Sometimes.

- "Forrest Gump," 1994

Earlier this month, Paul Krugman, in a New York Times op-ed entitled "War On the Unemployed" (see:, blamed hard-hearted Republicans for slashing North Carolina's unemployment benefits in order to avoid a fiscal disaster. Krugman didn't bother to observe that North Carolina's federal debt is the third largest in the country.  Krugman also didn't consider North Carolina's unfunded retiree health care benefits totaling some $34 billion.

How would Krugman have North Carolina repay this debt? Perhaps we'll never know. What we do know is that states can't print their own money like the federal government. States also can't file for bankruptcy.

Cities, however, can file for bankruptcy.

Today in a Times op-ed entitled "Detroit, the New Greece" (, Krugman begins by reminding us of Greece's recent financial crisis:

"As you may recall, a few years ago Greece plunged into fiscal crisis. This was a bad thing but should have had limited effects on the rest of the world; the Greek economy is, after all, quite small (actually, about one and a half times as big as the economy of metropolitan Detroit). Unfortunately, many politicians and policy makers used the Greek crisis to hijack the debate, changing the subject from job creation to fiscal rectitude."

Or in other words, Krugman would have us believe that Greece was a small isolated situation, having little impact on the larger European whole. Of course, in order to make this argument, Krugman needs to avoid any reference to the worrisome economies of Spain, Italy, Ireland and Portugal, or even, for that matter, of the UK.

Krugman would then also have us believe that Detroit's bankruptcy is an isolated incident involving economic (car industry) misfortune. Paul concludes:

"The important thing is not to let the discussion get hijacked, Greek-style. There are influential people out there who would like you to believe that Detroit’s demise is fundamentally a tale of fiscal irresponsibility and/or greedy public employees. It isn’t. For the most part, it’s just one of those things that happens now and then in an ever-changing economy."

Or in other words, "Shit happens." No need to examine the fiscal travails of other municipalities such as Washington, D.C, Chicago, Cincinatti and . . . New York.

Well, just by chance, Bill Keller has conveniently published today a Times op-ed entitled "New York Is Not Detroit. But ..." (, in which he says of the Big Apple:

"Our great city is not on the verge of collapse — we are not Detroit — but it is in danger of slipping into decline. The issue is the same one that helped send Detroit toward bankruptcy last week and has put other American cities on the disabled list: the immense pile of promises made over the decades to the city’s employees — the teachers and cops and firefighters and bus drivers and sanitation workers and maintenance crews who labor to keep the city, physically and socially, in working order."

Keller refers to "a trifecta of problems" plaguing New York: public workers' salaries, health benefits and pensions. Keller continues:

"Or, to pick another measure of our predicament, the total liabilities of the city now exceed its total assets by $125 billion, a condition referred to as balance-sheet insolvency.

. . . .

In New York and many other places, the preferred option has been to kick the problem down the road. You do not have to be an actuary to marvel at the amount of flimflam politicians at all levels on all sides have employed to avoid facing the problem. My personal favorite: Are we having a hard time coming up with money for our annual payment into the New York State teachers’ pension fund? No problem. Thanks to a gimmick invented in Albany, we just borrow the money — from the pension fund!

. . . .

But while New York is in better shape than many other troubled states and localities, the situation is still insidious."

Query: If New York ultimately slashes benefits to municipal employees, will Krugman find a way to blame the Republicans? Or will he note the departure of many financial firms from the crumbling city and again tell us that shit happens.

No comments:

Post a Comment