Morning Joe Scalds The Ferret

Ordinarily, I usually avoid the cognitive dissonance of Joe Scarborough, but even a blind squirrel finds The Ferret occasionally...

   
I would like to believe that Paul’s “Morning Joe” routine was simply an attempt to be provocative and bring to camera the ideological Vaudeville act that he performs daily on his hilariously entitled New York Times blog. This is where Krugman flails about at windmills while professing his omnipotence daily, in between stints as a serious economist.

By Joe Scarborough

America's fiscal predicament is serious. The problem has become obvious in the last few years, but it has been building for decades, largely the result of promises of extensive social benefits without a corresponding willingness to pay for them.

Investors may be growing skittish about U.S. government debt levels and the disordered state of U.S. fiscal policymaking.

From the beginning of 2002, when U.S. government debt was at its most recent minimum as a share of GDP, to the end of 2012, the dollar lost 25 percent of its value, in price-adjusted terms, against a basket of the currencies of major trading partners. This may have been because investors fear that the only way out of the current debt problems will be future inflation.

More troubling for the future is that private domestic investment—the fuel for future economic growth—shows a strong negative correlation with government debt levels over several business cycles dating back to the late 1950s. Continuing high debt does not bode well in this regard.

As the biggest economy in the world, America has a lot to say about how the world works. But the economics profession is beginning to understand that high levels of public debt can slow economic growth, especially when gross general government debt rises above 85 or 90 percent of GDP.

The United States crossed that threshold in 2009, and the negative effects are probably mostly out in the future. These will come at a bad time. The U.S. share of global economic output has been falling since 1999—by nearly 5 percentage points as of 2011. As America's GDP share declined, so did its share of world trade, which may reduce U.S. influence in setting the rules for international trade.

Putting U.S. government financing on a sustainable path will require painful adjustments over a number of years—increased government revenue and painful reductions in government outlays, almost certainly including outlays for defense and international affairs. During the necessary period of fiscal adjustment and constrained government resources, U.S. international influence may decline yet further.

If you believe that I am wrong and Paul Krugman is right, if you disagree that America's debt crisis is serious today, that it is draining American soft power globally, that it is devaluing the dollar, that it is undermining our influence with international trading partners, that painful adjustments in government outlays will be necessary, and that we cannot afford to wait until 2025 to worry about Medicare and other drivers of U.S. debt, then take it up with the RAND Corporation, whose senior economist wrote everything you have read here other than this concluding paragraph. The debt crisis is real and waiting another decade to fix it is not an option. Anyone who suggests it is operates well outside the mainstream of where serious economists reside.

Later...

 

Paul Krugman is a frustrated man — a Cassandra whose wise warnings are regularly ignored by fellow economists, policy experts and political leaders alike. This past week has been especially difficult for the Nobel Prize winner, who like Sisyphus, must continue to push back against the ignorant fools who dismiss his debt-denying ways as reckless.

Mr. Krugman came on “Morning Joe” and declared that Washington needn’t worry about its long-term debt problem until the moment that programs like Medicare begin melting down.

“If we are worried about health care costs in the year 2025, why do we have to worry about it now?” asked The New York Times columnist. It is a question regarding our looming entitlement crisis that is every bit as ridiculous as a healthy 50-year-old man asking why he should bother buying life insurance.

Paul Krugman justified this indefensible position by saying that since Washington politicians are too stupid to walk and chew gum at the same time, they are incapable of running short-term deficits while worrying about long-term debt.

The Krugman solution? Simply ignore America’s long-term debt.

That reckless conclusion shocked even the hardiest of Keynesians on the “Morning Joe” set last week. President Barack Obama’s car czar, Steve Rattner, described Krugman’s views as dangerous. Columbia University economist Jeffrey Sachs concurred, saying Krugman’s views were reckless, Democratic leader Ed Rendell politely explained to our guest that investment and debt control were not mutually exclusive, and Council on Foreign Relations President Richard Haass dismissed this form of debt-denial as deeply irresponsible.

Mr. Krugman responded to the flurry of criticism he received by excoriating “in-crowd” types like “Joe Scarborough, Erskine Bowles and Pete Peterson,” (and anyone else who disagreed with him) as members of an incestuous clique populated by shallow simpletons who draw their economic conclusions based on hearsay instead of rigorous study and hard data.

Unfortunately for the self-consumed professor, his latest lurch left has created an entirely new collection of critics that are a far cry from the right-wing straw men that he usually sets up to knock down. Instead, Krugman’s extreme view that Washington should ignore long-term debt until the bottom falls out of entitlements now places him at odds with liberal Keynesians as well as conservative Republicans.

I would like to believe that Paul’s “Morning Joe” routine was simply an attempt to be provocative and bring to camera the ideological Vaudeville act that he performs daily on his hilariously entitled New York Times blog. This is where Krugman flails about at windmills while professing his omnipotence daily, in between stints as a serious economist.

Krugman doubled down on that act this week, posting four blogs addressing his one “Morning Joe” segment. In those posts, he characterized me as an angry deficit scold who accused him of being outside the mainstream of economic thought.

That charge is only half right.

Krugman’s views on long-term debt are, in fact, wildly outside mainstream economic thought. But he is wrong in saying that his interview made me angry. Watch it here and see how I was polite, engaged and entertained by the preposterousness of his debt-denying logic. Far from being angered, I found the interview to be one of my favorites of the year. He is welcome back anytime. 

Unfortunately, Paul Krugman and his merry band of bloggers were not as excited by the “Morning Joe” appearance, as they rushed to their laptops to launch a ham-fisted defense of debt denial. Krugman’s apostles then proceeded to mischaracterize his critics and reframe the debate. 

Bloggers from The Washington Post, Business Insider and New York Magazine all wrote posts accusing Paul Krugman’s critics of being ignorant of basic economics. All three then proceeded to embarrass themselves by mixing up the most basic concepts of economics by repeatedly confusing the terms “deficits” and “debt.” 

The Washington Post’s Greg Sargent at least circled back to write a follow-up post that bothered to accurately reflect the views I have been repeating every morning for five years now. But the same could not be said of a fabulously misleading Business Insider post that claimed to list 11 economists who shared Krugman’s debt-denying views. Never mind the fact that most of the links provided actually undercut Krugman’s reckless position and supported my view that the most pressing fiscal crisis is not next year’s deficit but next decade’s debt. 

The Business Insider link to an Alan Blinder piece was particularly supportive of the “Morning Joe” panel’s view. Blinder, a former Fed vice chairman and Princeton economics professor, warned of “truly horrific problems” caused by long-term debt, health care costs and interest on the debt. Paul Krugman’s Princeton colleague even shared my conclusion that the coming Medicare crisis will be so great that Democrats won’t be able to tax their way out of it. 

Far from supporting Mr. Krugman’s extreme position, the link to Professor Blinder’s New Yorker article undercuts his Princeton colleague’s exaggerated “In-the-end-we’ll-all-be-dead” approach to U.S. long-term debt. 

After watching his debt-denying performance on “Morning Joe,” one wonders whether Paul Krugman will be as haughty and dismissive of his fellow Princeton economics professor as he is of all who disagree with his marginalized position. One hopes he instead does something that Mr. Krugman hates to do: just admit that he was wrong. 

I won’t hold my breath.