Krugman: 2010 Vote Will Prove a "Catastrophe" that Dooms U.S. to "Years of Political Chaos and Economic Weakness"
This post originally appeared at the Political Animal.
We'll know soon enough what the midterm elections have in store for us, but it's interesting to see how political observers prepare for the likely outcome. Given the expected rancor and gridlock, it's not unreasonable to wonder just how bad things might get in 2011 and 2012.
For some, there's no reason to be too worried. Over the last couple of decades, we've seen the White House change party hands more than once, and the same goes for fleeting congressional majorities. We've been pushed to the brink, and some constitutional crises have popped up, but we've generally weathered some unpleasant storms. For much of the '90s, we even enjoyed peace and prosperity.
For others, the avoidable future poses a more a serious danger. Paul Krugman, expecting a GOP majority, noted yesterday that " this is going to be terrible."
Worse, the Nobel laureate predicted that "future historians will probably look back at the 2010 election as a catastrophe for America, one that condemned the nation to years of political chaos and economic weakness."
When Republicans took control of Congress in 1994, the U.S. economy had strong fundamentals. Household debt was much lower than it is today. Business investment was surging, in large part thanks to the new opportunities created by information technology -- opportunities that were much broader than the follies of the dot-com bubble.
In this favorable environment, economic management was mainly a matter of putting the brakes on the boom, so as to keep the economy from overheating and head off potential inflation. And this was a job the Federal Reserve could do on its own by raising interest rates, without any help from Congress.
Today's situation is completely different. The economy, weighed down by the debt that households ran up during the Bush-era bubble, is in dire straits; deflation, not inflation, is the clear and present danger. And it's not at all clear that the Fed has the tools to head off this danger. Right now we very much need active policies on the part of the federal government to get us out of our economic trap.
But we won't get those policies if Republicans control the House. In fact, if they get their way, we'll get the worst of both worlds: They'll refuse to do anything to boost the economy now, claiming to be worried about the deficit, while simultaneously increasing long-run deficits with irresponsible tax cuts -- cuts they have already announced won't have to be offset with spending cuts.
So if the elections go as expected next week, here's my advice: Be afraid. Be very afraid.
I'd feel slightly less horrified if Krugman didn't have such a good track record.
What's more, his dire warning doesn't even touch on the likelihood of a government shutdown, the possibility of default if the GOP blocks a debt extension, the partisan witch-hunts, and the mind-numbing fight to keep the progress we've already made.
Of course, there's still a little more time before the bulk of voters head to the polls, and who knows, maybe the "Rally for Sanity" will give a boost to voices of reason.
More on that later.