Did they plan this in advance? Today, former Federal Reserve Chairman Alan Greenspan (subscription required) and Nobel Prize-winning economist Paul Krugman present opposite perspectives on the massive budget deficits currently facing the US.
I feel like I've had a conversation similar to this one with more conservative Americans than I can ever count...from Krugman's article:
"German hawk: “We must cut deficits immediately, because we have to deal with the fiscal burden of an aging population.” (And lets not forget to cut taxes for the super-rich, since they've fallen on really hard times too!)
Ugly American: “But that doesn’t make sense. Even if you manage to save 80 billion euros — which you won’t, because the budget cuts will hurt your economy and reduce revenues — the interest payments on that much debt would be less than a tenth of a percent of your G.D.P. So the austerity you’re pursuing will threaten economic recovery while doing next to nothing to improve your long-run budget position.”
German hawk: “I won’t try to argue the arithmetic (because I know the numbers don't add up so I need to draw your attention away from that). You have to take into account the market reaction. (By which "market" means Wall St., because the Dow is the ultimate indicator of the health of the economy!)”
Ugly American: “But how do you know how the market will react? And anyway, why should the market be moved by policies that have almost no impact on the long-run fiscal position?”
German hawk: “You just don’t understand our situation. (Translation: Stop trying to force the economy to do something good for society, you stupid liberal hippy! I learned everything I needed to know about the economy in Macroeconomics 101 and all humans act in their own rational self-interest, the underlying and incredibly absurd assumption of everything that my thinking is based upon! Because people NEVER, EVER lie, cheat or steal! You just don't want to work and take handouts for the rest of your life, don't you?)” "
Sound familiar?
Also, Krugman is one of the few major economics that I've heard ever acknowledge the budgetary elephant in the room that is really screwing us: our absurd military spending (more than the rest of the world combined) and funding 2 wars. But that's a story for another time...
Here's a nice summary of the two from the Huffington Post.
