The Pundit Wars

By John Lumbard.

The economy is accelerating.  It’s been almost four years since the official end of the 2007-2009 recession, yet New York Times op-ed columnist Paul Krugman is still calling for more stimulus spending!  Maybe if we were to pave every road every year . . .

Last month the former economist joined a grad student at U. Mass Amherst in attacking data showing that heavily-indebted countries don’t grow as quickly as well-managed ones.  The study has been interpreted, worldwide, to mean that these countries should temper their enthusiasm for going even deeper in debt.  Pundit Paul fired back:

“The drive for austerity has lost its intellectual fig leaf, and stands exposed as the expression of prejudice, opportunism and class interest it always was.”

Fiscal responsibility and good government;  it’s just another form of class warfare, racism, and greed!   The growing debate became even more entertaining when talking head Henry Blodgett, banned for life from the securities business for pumping internet stocks at the top of the 1999 bubble, jumped in to declare Krugman the winner.  Then Partisan Paul offered up Japan as a reason why we could afford to take on a lot more debt!

Japan has been following the Krugman program since 1990, with nothing to show for it other than a moribund economy and the world’s largest debt.  Japan’s government now spends twice as much as it raises in taxes, because each year it takes more and more caffeine to give the same jolt.

No worries!  The new plan is to print vast quantities of money to buy up the government’s debt, drive down the value of the yen, and push inflation to 2%.  So far it feels great, but 2% inflation will surely push the yield on Japanese debt to 2% or higher.  At 2% the interest cost on the bonds will consume half the nation’s tax revenue.








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