The centrality of deficit-slashing to the debate in Washington is finally receding. And Paul Krugman knows why.
The New York Times columnist declared victory over the “fiscal scolds” in his column yesterday. Krugman writes that those obsessed with cutting spending and imposing austerity “are no longer able to define the bounds of respectable opinion.” The increased stature of Elizabeth Warren, even after she proposed expanding Social Security rather than cutting it, proves that the deficit-obsessed pundits and politicians are losing the debate.
Here are the four reasons Krugman says drove this shift:
1) “Centrism” died. He writes that the death of moderate Republicans blew up the lie that both parties can meet halfway to compromise on tax hikes and spending cuts.
2) Federal borrowing has decreased because of falling spending and rising tax receipts.
3) The deficit-cutters, who have predicted doom for years, have been proven wrong. There has been no economic crisis as a result of America’s budget deficit.
4) The intellectual underpinnings of austerity collapsed. The economists who claimed that government debt exceeding 90 percent of Gross Domestic Product would cause a drag on the economy were utterly discredited. (See AlterNet’s Lynn Parramore for more on how the most famous advocates of austerity, economists Carmen Reinhart and Kenneth Rogoff, were discredited.)
While it’s true that things like cutting unemployment benefits are still occurring, the debate has shifted, Krugman writes. “While policy remains terrible, we’re finally starting to talk about real issues like inequality, not a fake fiscal crisis. And that has to be a move in the right direction.”