econscius

Paul Krugman, Can You Spare the Chutzpah?

In American Recovery & Reinvestment Act (Stimulus), Federal Deficit, Government Spending, Obama Administration, Standard & Poor's USA Downgrade on August 8, 2011 at 9:42 pm

Paul Krugman today mocks Standard & Poor’s downgrade of the United States credit rating and accesses blame for the rating cut. [1]   Mr. Krugman says, “And please, let’s not have the usual declarations that both sides are at fault.  Our problems are almost entirely one-sided.” 

I held my breath a moment… wouldn’t this be the perfect place for Mr. Krugman to own up to his long advocacy of even larger deficit spending?  Alas, there’s no humility from Mr. Krugman, only chutzpah. [2]

Mr. Krugman predictably blames the “extremist right” and goes about making light of S&P.  Apparently it was the “extremist right” that demanded a trillion-dollar Stimulus program, Obama’s payroll tax cuts and the creation and continuous expansion of myriad other government spending programs the past 70 years?  Even the most cursory look at the history of the Public Debt shows neither party is blameless, but Mr. Krugman is too partisan.

Be that as it may, it is true S&P was too generous with ratings in the run-up to the financial crisis of 2008 and there is an argument S&P was late to drop the USA’s rating in 2011.  But Mr. Krugman shows chutzpah in making light of the rating drop to “AA-“.  I assume Mr. Krugman understands what rating systems are all about.  The top rating of “AAA” is intended for only the most pristine credits.  “AA+” is a good rating, just not as good as “AAA”.  The USA would have to drop another nine notches to “BB+” to be in speculative (so-called “junk”) territory.  The ratings scale works down to “C” and “D” (default).   Any honest person will admit the financial position of the United States has weakened and the country is not as creditworthy as it once was.  An “AA+” credit is still expected to repay the debt but is a bit riskier than an “AAA” credit.

Mr. Krugman is intelligent but occasionally careless.  Consider his statement: “It’s true that we’re building up debt, on which we’ll eventually have to pay interest.”  Eventually?  While rates are low today, we are paying plenty of interest.   US government interest expense was $414 billion in Fiscal 2010. [3]  Then again, this is the same Paul Krugman who also writes of “a trillion here or a trillion there” like a trillion is inconsequential.  In the rarefied spending air of a massive deficit advocate like Mr. Krugman, perhaps $414 billion is hardly anything at all.  After all, it rounds down to $0 Trillion.

Mr. Krugman said the 2009 Stimulus program was too small and he actually criticized the Obama Administration for its supposedly punctilious policies.  In his own words:

“The good news is that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, is working just about the way textbook macroeconomics said it would …  The truth, which is that the stimulus was too little of a good thing.” [4]

“it was obvious from the beginning [Obama’s Stimulus] was too small.” [5]

“Those of us who say that the stimulus was too small are often accused of after-the-fact rationalization: you said this would work, but now that it hasn’t, you’re just saying it wasn’t big enough. The quick answer to that accusation is that people like me said that the stimulus was too small in advance” [6]

“myself included, actually argued that the plan was too small and too cautious …. for the inadequate size of the stimulus plan” [7]

“[the Obama Stimulus] wouldn’t have been enough to fill the looming hole in the U.S. economy” [8]

Mr. Krugman got less deficit “Stimulus” spending than he had demanded, meaning he favored even greater debts than we actually have now.  But he has the chutzpah to ignore his own culpability and instead blames the messenger (S&P) and then blames the downgrade on, of all people, the Tea Party Republicans!  This is the same Tea Party caucus who has held partial power in the US House for a mere seven months and actually advocates cutting the deficit more than either Democrats or traditional Republicans.  Such chutzpah, Mr. Krugman!

 

[1] http://www.nytimes.com/2011/08/08/opinion/credibility-chutzpah-and-debt.html?_r=2&src=me&ref=general

[2] For the benefit of those not familiar with chutzpah: “Chutzpah (pronounced /ˈhʊtspə/) is the quality of audacity, for good or for bad, but it is generally used negatively. The word derives from the Hebrew word ḥuṣpâ (חֻצְפָּה), meaning “insolence”, “audacity”, and “impertinence” http://en.wikipedia.org/wiki/Chutzpah

[3] http://treasurydirect.gov/govt/reports/ir/ir_expense.htm

[4] http://www.nytimes.com/2009/11/02/opinion/02krugman.html

[5] http://blogs.abcnews.com/george/2010/09/krugman-spend-more-tax-less-almost.html

[6]  http://krugman.blogs.nytimes.com/2010/07/28/how-did-we-know-the-stimulus-was-too-small/

[7] http://www.nytimes.com/2009/03/09/opinion/09krugman.html

[8]  http://www.nytimes.com/2009/02/09/opinion/09krugman.html?ref=paulkrugman

Pictures from wikipedia commons.

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  1. Wonderful views on that!

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