08 February 2013

Krugman the Fiscal Alcoholic

"Screw you man! I can quit drinking spending any time I want. Just not today. Next week. I'll put the bottle down next week. Or maybe, you know, soon. Not now. But soon! I promise."
The Conscience of a Liberal | Paul Krugman | Spending Cuts and Monetary Policy

Austerity right now is a really, really bad idea.
The problem is that Krugman seems to believe this is true irrespective of the value of "now." Can someone point me to Krugman ever asserting "now is a great time for austerity"? In the land of the Krug, austerity is never the right decision.

This is, in a nutshell, my problem with those who've found that good old fashioned Keynesian religion in the last five years. They tell me cutting government spending in a bust is a bad idea. Okay, fine. But where were they in the boom? Where were all the Keynesians saying "hey fellas, let's cut spending now and run some surpluses so we can keep our powder dry for the downturn"? I don't remember hearing that a single time.

Instead when times are good it's "everything's great! let's make sure the government writes lots of checks to spread the lucre around" and when times are bad it's "everything's screwed! let's make sure the government writes lots of checks to keep AD up."

Putting that aside, whether austerity now is a good or bad idea is irrelevant. The important question is whether austerity now is a better idea now than it will be in near future.

All things being equal, I'd much rather a little austerity every year for a while than a whole big whack of austerity all at once, so I vote now is better. Of course, all is not equal. I think austerity in the future is going to be more painful than now, for any number of reasons (e.g. "The Coming Retirement Burden", "continuing the bad news string for ACA"). So it doesn't matter to me how bad Krugman thinks austerity now is going to be until he can demonstrate now is worse than soon.

And even that ignores the fact that Krugman, and virtually everyone else inside the Beltway, has been making "not now, but soon" promises for half a decade. We don't even seem able to get back to the pre "stimulus" levels that Obama was so insistent would be "timely, targeted and temporary," to say nothing of repeatedly delaying the sequester, a device who's entire raison d'etre was to stop Washington from breaking its perennial dessert-now-but-veggies-later-we-swear addiction.


  1. We don't even have to wait for the "Retirement Burden" or Obamacare. Austerity rears its head in a large way when interest rates simply normalize and interest payments in the federal budget triple or quadruple. This event isn't all that far away either.

    1. Very true.

      Like I said, there's any number of reasons to believe spending cuts later are going to be harder than spending cuts now.