Paul Krugman hits the nail on the head!


Dueling portraits of Maya MacGuineas: Paul Krugman keeps telling the same story well.

Today, he starts his column with Starbuck’s version of Steve Jobs. He discusses Howard Schultz, a man who is said to be spreading confusion about our budget mess:
KRUGMAN (12/31/12): Brewing Up Confusion

Howard Schultz, the C.E.O. of Starbucks, has a reputation as a good guy, a man who supports worthy causes. And he presumably thought he would add to that reputation when he posted an open letter urging his employees to promote fiscal bipartisanship by writing “Come together” on coffee cups.

In reality, however, all he did was make himself part of the problem. And his letter was actually a very good illustration of the forces that created the current mess.

In the letter, Mr. Schultz warned that elected officials “have been unable to come together and compromise to solve the tremendously important, time-sensitive issue to fix the national debt,” and suggested that readers further inform themselves at the Web site of the organization Fix the Debt. Let’s parse that, shall we?
Krugman parses the letter well. (We suggest you read the whole column.) Before long, Krugman is saying that Schultz is actually part of the problem. He says Schultz’s letter, which blames both sides, is “actively harmful:”
KRUGMAN: Look, it’s true that elected politicians have been unable to “come together and compromise.” But saying that in generic form, and implying a symmetry between Republicans and Democrats, isn’t just misleading, it’s actively harmful.
We can’t help noting one point: It isn’t just Schultz who is pushing the symmetry line. Yesterday, David Gregory’s Meet the Press panel took turns pushing the same doggone script! Even when they said it wasn’t Obama’s fault, they found ways to say it was!

For our money, Tom Brokaw was the most annoying of Gregory's pundits. But such names can’t be named in the Times, so Schultz’s will have to do.

One more name appears in Krugman’s column—the name of Maya MacGuineas. Basically, Krugman says that she is a tool. He says she’s trying to muddle the issue—and getting good press in the process:
KRUGMAN: 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, who’ve been doing their best to muddle the issue. For example, in a new fund-raising letter Maya MacGuineas, the organization’s public face, writes of the need to “make hard decisions when it comes to averting the ‘fiscal cliff’ and stabilizing our national debt”—even though the problem with the fiscal cliff is precisely that it stabilizes the debt too soon. Clearly, Ms. MacGuineas was trying to confuse readers on that point, and she apparently confused Mr. Schultz too.


You might not know it reading some credulous reporting, but Fix the Debt isn’t some kind of new gathering of concerned citizens. On the contrary, it’s just the latest addition to a group of deficit-scold shops supported by billionaire Peter Peterson...
Be sure to read Krugman’s whole column, which is very clearly expressed. When you’re done, read this upbeat profile of MacGuineas from last Monday’s New York Times.

Just a guess: In part, Krugman is referring to that profile when he slams the “credulous reporting” about Fix the Debt. For the record, that profile was written by Annie Lowrey, a “new wonk on the block.”

Lowrey is married to Ezra Klein. (We regard that as a good thing.) She is one the bright young kids who are currently being shaped into a new liberal/mainstream elite.

Our questions:

Is Annie Lowrey a serious player—or is she just a Serious Person? As promised in our post below, we’ll be posing such questions all week.

An additional question: How do these kids get so far so fast? Now you're starting to ask good questions about this emerging elite!


  1. Republicans are accused of being anti-science --a claim that's not entirely unjustified. But, the Dems are anti-arithmetic. The number show that our deficit is too large to be fixed by just tax increases, especially since these tax increases will tend to slow the economy. Very large spending reductions are also essential. These will be extremely difficult from a political POV.

    E.g., the Dems are currently resisting a the tiny impact of a switch to "chained CPI" for Social Security benefits. Use of this inflation measure would mean, e.g., that if the unchained CPI rose by 2.75%, my benefits next year would rise by "only" 2.5% or so. Consider that

    -- the SS benefits my wife and I get put us above average family income, ignoring our other sources of income

    -- the SS benefits we receive are way above what we plus what our employers paid in.

    -- we're getting an annual increase, even though the workers who are paying our benefits mostly aren't getting raises

    -- the switch to chained CPI isn't nearly enough to make SS sustainable.

    It seems to me that the switch to chained CPI should be a no-brainer. The fact that it isn't tells me that Congress will resist mightily the magnitude of spending reductions necessary.

    Krugman thinks idea that we can keep spending now, but switch to enormous reductions when necessary. I don't buy that. If we spend more now, we'll spend more later, making the eventual disaster worse and sooner.

    Mort Zuckerman has a well-written discussion of our financial situation.

    1. The numbers don't actually show any such thing. Most of the deficit is a direct result of the depressed economy, and will disappear when it recovers and more people stop using the safety net and get back to participating in taxable activities.

      Are you under the impression that we have had a massive increase in the size of the welfare state since the late 90's surpluses that would require these very large cuts you're advocating? Otherwise you're not trying to fix the problem you're just using it as cover to push an ideology.

    2. Here are some changes since the surpluses of the late 90's:

      -- Higher ratio of retiress on SS and Medicare vs. the number paying into these programs. And, this ratio will continue to rise.

      -- Growth of SS disability. Number has nearly doubled since 1998.

      -- Continuing rise of SS cost due to inflation adjustment to beneficiaries being larger than the wage inflation.

      -- Huge rise in Medicare costs, due to rise in medical costs.

      -- GWB's addition of partial prescription drug coverage to Medicare.

      -- Rising cost of SS and Medicare due to improved mortality.

      -- Rise in Medicaid costs due to medical inflation and improved mortality.

      -- Obama's health care reform will eventually have substantial federal cost, once if fully kicks in.

      -- Rise in the cost of government worker and military pensions and retiree health care, due to medical inflation and improved mortality. There are more and more retired federal workers, who get generous, inflation-adjusted retirement benefits and excellend health coverage.

      -- General rise in government spending as programs expand and new programs are started. Programs are seldom eliminated or shrunk.

      Also, the late 1990's economy represented a temporary boom. It has not been the norm. And, we were at peace then. Hopefully we will soon be out of Afghanistan.

      Anon -- I'm not saying that all these spending increases are bad things. It's just that they cost a lot of money -- more than can be raised by only increasing taxes on the wealthy.

  2. Hey, first of all I apologize if the ideology crack was rude.

    To your list, I have to say that it is not as impressive as its length would imply. Demographic changes may soon become a problem for social security but they don't explain the jump over the last 5 years. Job losses for people near retirement age leading to an increase in early enrollment is the better story. Increasing disability enrollment is also clearly caused by the weak economy, unless you think there's been an epidemic of injuries or seriously weakened enrollment standards over the last five years.

    When it comes down to it, most of your list will disappear when the economy eventually recovers, and the rest of it is attributable to rising health care costs, the antidote to which is not benefit cuts. Also I think you're overstating longevity growth, which over the last several decades has almost exclusively benefited people in the upper income brackets. And that does not describe most federal pensioners.

    Your last paragraph, about spending increases not necessarily being bad - I agree. But to lift the relevant quote from your first post, you said that "Very large spending cuts are also essential" in order to fix the deficit. That would only be the proper medicine if runaway spending was the cause of the deficit, which is pretty clearly untrue, and also only if running a balanced budget were a desirable outcome. In a depressed economy that also is clearly not the case. That's what really gets me about Krugman's deficit scolds. None of them ever address the point that running a deficit in current conditions is a feature, not a bug.

    1. That was aimed @David in Cal, obviously.

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  4. When it comes down to it, most of your list will disappear when the economy eventually recovers, and the rest of it is attributable to rising health care costs, the antidote to which is not benefit cuts. Also I think you're overstating longevity growth, which over the last several decades has almost exclusively benefited people in the upper income brackets. And that does not describe most federal pensioners.

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