Paul Krugman Slams Starbucks CEO's Naive Fix for Fiscal Fiasco

News & Politics

There’s no deal yet in broken Washington that would avert the tax increases and fiscal cuts coming our way on January 1. And the CEO of Starbucks, Howard Schultz, knows why: “both sides” have yet to “come together.”

The misleading nature of Schultz’s prescription for how to avert those tax increases and budget cuts was blasted by Paul Krugman in a New York Times Op-Ed this morning. Krugman notes that “the blame rests entirely with one side of the political divide”--the right.

The column was prompted by Schultz sending a letter to his employees urging them to write “come together” on customers’ coffee cups to promote the need for a deal. The suggestion was taken up by Starbucks workers in Washington, D.C.

In the letter, Schultz writes that U.S. officials “have been unable to come together and compromise to solve the tremendously important, time-sensitive issue to fix the national debt.”

But Krugman slices and dices Schultz’s letter in his column. “It’s true that we face a time-sensitive issue in the form of the fiscal cliff: unless a deal is reached, we will soon experience a combination of tax increases and spending cuts that might push the nation back into recession,” Krugman says. “But that prospect doesn’t reflect a failure to ‘fix the debt’ by reducing the budget deficit — on the contrary, the danger is that we’ll cut the deficit too fast...How could someone as well connected as Mr. Schultz get such a basic point wrong? By talking to the wrong people — in particular, the people at Fix the Debt.”

The other Schultz point that Krugman savages is Schultz’s idea that both sides just have to “come together.” But that ignores the Republican intransigence and extremism that have characterized the fiscal talks between President Obama and the GOP.

Krugman notes that Obama has already compromised--to the point of offering to cut Social Security. But “in return, the Republicans have offered essentially nothing. Oh, they say they’re willing to increase revenue by closing loopholes — but they’ve refused to specify a single loophole they’re willing to close. So if there’s a breakdown in negotiations, the blame rests entirely with one side of the political divide,” the columnist writes.

What explains how Schultz was so wrong? Well, he’s a supporter of the “Fix the Debt” coalition--which Krugman describes as a group that “seems much more concerned with cutting Social Security and Medicare than with fighting deficits in general — and also not nearly as nonpartisan as it pretends to be.” Schultz fell for the “Fix the Debt” con, as Krugman puts it.


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