Paul Krugman, "When Prophecy Fails": Confusing Doomsday With a Slow and Agonizing Decline

As December 21 approached, my wife, who had been cautioned by her spiritual guru regarding the significance of the date and the possibility of an impending calamity, told me that the Mayans were a very wise tribe. "Yes," I replied, "and they practiced human sacrifice." To which my wife rejoined, "They also had the good sense to replace their spouses every seven years."

December 21 has come and gone, and what new nonsense will be next to arrive on the scene? The answer was quick in coming: Paul (Spend! Spend! Spend!) Krugman's latest New York Times op-ed entitled "When Prophecy Fails" (http://www.nytimes.com/2012/12/24/opinion/krugman-when-prophecy-fails.html?_r=0). The good doctor writes:

"Seriously, at every stage of our ongoing economic crisis — and in particular, every time anyone has suggested actually trying to do something about mass unemployment — a chorus of voices has warned that unless we bring down budget deficits now now now, financial markets will turn on America, driving interest rates sky-high. And these prophecies of doom have had a powerful effect on our economic discourse.

. . . .

The key thing we need to understand, however, is that the prophets of fiscal disaster, no matter how respectable they may seem, are at this point effectively members of a doomsday cult. They are emotionally and professionally committed to the belief that fiscal crisis lurks just around the corner, and they will hold to their belief no matter how many corners we turn without encountering that crisis."

Yet another JG Caesarea challenge: Which untoward, albeit not cataclysmic, event does Paul fail to mention in his opinion piece? One . . . two . . . three. Sorry, time's up. As reported by The Washington Post on August 5, 2011 (http://articles.washingtonpost.com/2011-08-05/business/35417342_1_downgrade-aaa-credit-ratings-government-debt):

"Standard & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.

Lowering the nation’s rating to one notch below AAA, the credit rating company said 'political brinkmanship' in the debate over the debt had made the U.S. government’s ability to manage its finances 'less stable, less effective and less predictable.' It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings 'fell short' of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future."

So, the US credit rating was downgraded for the first time. A disaster? No. I'm still delighted to be paid in US dollars. But what will the next downgrade bring?

I don't believe in a doomsday, because the US government can always print more money. Rather, I believe that inasmuch as US debt is fast growing unsustainable, America's economic demise will be slow and painful.

Krugman himself told us in a very recent opinion piece (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0) that the ratio of debt to G.D.P. is "the best measure of our debt position." Well, those "fools" at the nonpartisan Congressional Budget Office also recently warned that "U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037" (http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook).

Doomsday? No. Most likely our children and grandchildren will watch as the magnificent edifice crumbles.