Paul Krugman Demolishes GOP's Bogus 'Long-term' Economic Thinking
Newly emboldened President Obama is calling for a significant increase in spending in his new 10-year budget, finally reversing years of harsh and ill-advised spending cuts that likely deepened and prolonged the recession. Paul Krugman applauds this move in the right direction in Monday's column, writing, "Maybe Washington is starting to get over its narrow-minded, irresponsible obsession with long-run problems and will finally take on the hard issue of short-run gratification instead."
He's being flip, he admits, but his subject really is why the obsession with long-term deficits has, in fact, been the real cop out in recent years. It has provided an excuse not to deal with the country's pressing problems of rising inequality, decaying infrastructure and punishing labor market. And it has probably damaged both the short and long run.
"Think about it," Krugman says, "Faced with mass unemployment and the enormous waste it entails, for years the Beltway elite devoted almost all their energy not to promoting recovery, but to Bowles-Simpsonism — to devising “grand bargains” that would address the supposedly urgent problem of how we’ll pay for Social Security and Medicare a couple of decades from now." Furthermore, the obsession with so-called "entitlement reform" fails to take into account one of the offshoots of Obamacare, the dramatic slowing of increases in health costs.
Krugman attacks this obsession with the long term as "craven and irresponsible." It's also just plain lazy. Krugman explains:
About laziness: Many people know what John Maynard Keynes said about the long run, but far fewer are aware of the context. Here’s what he really said: “But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.” Quite. All too often, or so it seems to me, people who insist that questions of austerity and stimulus are unimportant are actually trying to avoid hard thinking about the nature of the economic disaster that has overtaken so much of the world.
Obama's new budget will, of course be attacked by Republicans; that's a given. But, Krugman notes, so-called centrists will also accuse him of failing to address long-term budget deficits. "It’s important to understand who’s really irresponsible here," he concludes. "In today’s economic and political environment, long-termism is a cop-out, a dodge, a way to avoid sticking your neck out. And it’s refreshing to see signs that Mr. Obama is willing to break with the long-termers and focus on the here and now."