November 12, 2003 | Accustomed in economic circles to calling a stupid argument a stupid argument, and isolated (in Princeton, New Jersey) from the Washington dinner-party circuit, Paul Krugman has become the most prominent voice in the mainstream U.S. media to openly and repeatedly accuse George Bush of lying to the American people to sell budget-busting tax cuts and a pre-emptive and nearly unilateral war.
Krugman cannot be dismissed by opponents as some dyed-in-the-wool lefty. He’s a moderate academic economist who’s been radicalized by the Bush White House and the right wing it represents. Krugman joined The New York Times in 1999 as a columnist on the op-ed Page and continues as professor of Economics and International Affairs at Princeton University. His new book, “The Great Unraveling: Losing Our Way In The New Century” (#9 on the New York Times best-seller list and a top seller on Amazon) is a collection of his op-ed pieces from January 2000-January 2003.
McNally: How did your role in the op-ed pages of The New York Times happen and how has it evolved?
Krugman: I was brought on to write about “my real home,” economics and business, specifically international economics. There were a lot of international crises in the ’90s and The Times thought I’d be writing about policies and disasters overseas, as well as about stuff at home, typically the follies of the new economy. But it was election season, and it pretty quickly became clear to me — and more and more so as we went along — that the really scary follies, the potential disasters that were the greatest risks of concern were at home.
I came on thinking it would be a largely non-political column. I think The Times thought that, too. And then during the campaign, because I knew my stuff — basically, because I could do my own arithmetic — I found myself saying: “You know, these guys are lying…This is a fundamentally irresponsible and dishonest economic program.” Then after the election it increasingly became clear to me that it wasn’t just economics.
So it’s a very strange thing. I’m no wild-eyed radical. Actually, The American Prospect, a very liberal magazine, ran a story in the mid-90s attacking me for my support of Free Trade.
McNally: I remember that.
Krugman: So I was kind of a bad guy from the point of view of more consistently reliable commentators on the left. But of course now all of that seems insignificant compared with the awesomeness of the fraud that they [the Bush Administration] are trying to perpetrate on all of us.
McNally: Exactly. Could talk a little bit about the introduction to your book and the context it sets? I assume you would never have written that at the time you wrote the first op-eds that appear in the book.
Krugman: You’re right. I put a date on the introduction: April 10, just to make it clear that this is what I thought at that date. If we’d found a nuclear program in Iraq or the budget picture had improved, then I would’ve looked like I didn’t know what I was talking about. But of course everything has turned out even worse than I expected. What I realized looking back over my own writings is that it’s pretty easy to identify some very radical intents on the part of the coalition that now runs the country. It’s not just a single group. It’s the religious right, it’s the hard-line conservatives, it’s the anti-environmental industry groups and so on.
Put it all together and what you see is the outlines of an extremely radical program. Maybe reactionary would be the word because a lot of it would be rolling us back to where we were before the 1930s, before Franklin Roosevelt. In any case, a very radical program that would un-do the America that we’ve all grown up in.
I end up quoting Henry Kissinger because his writings gave me the key to why it’s so hard for people — even liberals — to accept what’s going on. He wrote about how when faced with a revolutionary power — who really doesn’t accept the rules of the game, the legitimacy of the system — people who have been accustomed to the stability make excuses. They say: “Oh, well, they may talk that way but they don’t really mean it. If we give them some partial concessions we can appease them, they’ll be satisfied and all of this stuff would stop.” That’s exactly what’s been happening now.
The true radicalism of the Bush Administration — cutting taxes to a level that will not support social programs and dangerous adventurism in foreign policy — has been right in front of our eyes, but most pundits and much of the public are saying: “Oh, let’s not get too extreme here. I’m sure we can work this out. We can find a middle ground.” And there isn’t one.
McNally: Do you think that appeasement approach, that inability to believe that these people are as far out as they say they are, has been exacerbated by September 11? It’s my take that had the economy continued as it was, had the lies continued as they were without Bush in the Commander-in-Chief role, people would’ve picked up on this sooner…
Krugman: Probably, although it’s hard to say. We can’t re-run the tape.
If you say what is actually obvious: that these people took September 11 as a great political opportunity and used it to push both a domestic economic and social agenda and a foreign policy agenda that had nothing to do with September 11 — that’s an extraordinary charge. And the very fact that it’s such a harsh thing to say makes people unwilling to see it. It was obvious in the fall of last year that they were hyping the case for a war with Iraq. But it just seemed too harsh, too extreme to say that the President of the United States would do that. So there was a tremendous soft pedaling in the reporting.
McNally: I’ve talked about this with [UC Berkeley journalism professor] Mark Danner and others… Is it because the press is afraid of Bush’s popularity and basically the media don’t want to be caught ahead of the people? Is it corporate profits? Is it just a loss of true journalism? What do you attribute it to? You must talk with your colleagues about this.
Krugman: Well, actually, less than you might think, in terms of talking with colleagues. I’m based in Central New Jersey…
I’m not even sure I believe that the corporate influence thing is important yet. It may be at some future date, but I think that — outside of Fox News, which is of course simply part of a machine — it’s not that crucial. By the way, I insult Fox News whenever I can, hoping that they’ll sue me.
McNally: Best if they can do it while the book is fresh in the stores, right?
Krugman: That’s right. But meanwhile, I think a better story is two things. One is that the media are desperately afraid of being accused of bias. And that’s partly because there’s a whole machine out there, an organized attempt to accuse them of bias whenever they say anything that the right doesn’t like.
So rather than really try to report things objectively, they settle for being even-handed, which is not the same thing. One of my lines in a column — in which a number of people thought I was insulting them personally — was that if Bush said the earth was flat, the mainstream media would have stories with the headline: “Shape of the Earth — Views Differ.” Then they’d quote some Democrats saying that it was round.
Journalistic organizations are afraid of being accused of bias. There’s also a fair bit of low rate intimidation of journalists themselves. I have received a couple of elliptical death threats but they weren’t serious. The real stuff is the hate mail that comes in enormous quantities. Organizations try their best to find some scandal in your personal life and disseminate it. I don’t think a lot of journalists are sitting around saying: “I better not cross these guys, they’ll ruin me.” But they do know that every time they say anything the right doesn’t like to hear, they get the equivalent of a nasty electric shock. They sort of get conditioned not to go there.
McNally: Your initial op-eds dealt with Bush’s campaign economics, but now you’ve grown to believe that the lying and the other things are basic approaches across the board, haven’t you?
Krugman: Sure. Whatever you think about the Iraq war, the way it was sold was exactly the template they use for selling the tax cuts. The hyped evidence, the misleading statements, the bait-and-switch, the constantly shifting rationale. And the same things can be seen in less politically hot issues…the “Healthy Forests” plan, for instance.
In terms of naming things, Orwell had nothing on these guys. So the “Healthy Forest” plan turns out to be a plan to allow more logging of the forests. The “Clear Skies Initiative” turns out to first, get rid of new source review, which is an integral part of the Clean Air Act, and so on down the line.
So it’s definitely a pattern. And if you step back a moment and look at it, you start to realize that, although looking at selling of the 2003 tax cut and what it does to our physical future is a bad thing, looking at the whole picture makes you feel a whole lot worse.
McNally: You point back to Reagan who had ideas you didn’t agree with but at least sold them on what he believed to be their merits. Whether it was true or not, it was the actual case.
Krugman: That’s right. Reagan, I think sincerely believed in trickle-down economics. Look, it’s funny. Not only do I miss Reagan who I thought had bad policies but didn’t approach the skullduggery of these people, I actually miss Nixon. Although God knows he did skullduggery, as John Dean says, even Nixon didn’t go after the wives.
McNally: The CIA leak of Ambassador Joe Wilson’s wife…
Krugman: Yeah. Also Nixon seemed to be at least sincerely interested in governing. He was actually trying to run the country. He didn’t think anybody else should have a chance to run it, but he actually tried to solve problems. The old hands of the Environmental Protection Administration will tell you that the Nixon years were a golden age. These people now… they’re ruthless, they’re dishonest, and they haven’t actually tried to deal with any of our real problems.
McNally: I read one quote where you said: “Tell me one real problem that they took on and offered an actual solution.” Can we narrow our focus to economics? What is most alarming about the deficit? We know in Keynesian economics deficits are okay… What’s the real problem here? Why is it as bad as you think it is?
Krugman: I’m sorry, there’s one-and-a-half problems. It’s still a jobless recovery. That’s a very nasty prospect and we have seen no real sign of turn-around there. But beyond that… Look, deficits are okay, but Keynes never said it was okay to run deficits forever. He said that deficits are good for stimulating the economy temporarily during downturns.
What we have is the prospect of deficits that are not temporary. The last estimate is, of the $500 billion-plus deficit, only about $60 or $70 billion would go away even if the economy does recover. And it’s much worse once the baby boomers retire, which happens in about 10 years. We have the finances of a banana republic right now. If current tax rates and current programs continue, at some point the U.S. government will simply be unable to pay its debts — and long before that point happens, industries will pull the plug.
And we have the same thing internationally as well. We have a huge trade deficit. It roughly matches the domestic deficit, and foreigners are lending the country money to cover that. At some point they will pull the plug. Some people say we now have a faith-based currency. I think we have a faith-based government. People believe that we’re going to get our act together, but there’s no sign that we will.
McNally: So perhaps a lulling effect — similar to the one we were talking about earlier — may be working right now to cover our butt for a while, but it could turn quickly.
Krugman: That’s right. At the moment, the actual fiscal state of the federal government is substantially worse than that of the state of California. The laws are different: the state of California is obliged by law to balance its books each year. It’ll fudge a bit but eventually it has to clear the books. The federal government does not.
Also, you might say that Bush has some un-earned credits from the responsibility of his predecessors. In the past, U.S. presidents have always in the end done enough of the right thing so that the solvency of the government was never at stake. And it comes back to this denial that I talk about. People can’t believe that we’re dealing with something completely different now, but we are.
McNally: Let me get this straight. You’re not saying that we will actually go bankrupt, but that we are too dependent on foreign investors and at some point, they’ll say: “You know what, I’m putting my money elsewhere.”
Krugman: Well, in fact, that does produce something that looks like bankruptcy. When you have a huge debt, not only do you have to pay interest on it, but you have to keep rolling it over. The point comes when investors say: “I don’t trust these Americans. They don’t seem to be responsible.” Then all of a sudden you cannot raise the money to service the debt when it comes due.
McNally: We’ve watched this happen in other countries and the thought is — that’s Thailand, that’s not the U.S.
Krugman: That’s Argentina. This is my specialty. I watched it happen in other countries and you look at the numbers and you say: “Geez, we have a budget deficit that’s bigger compared with the size of our economy than Argentina before their 2001 crack-up. We have a trade deficit that’s bigger compared with the size of our economy, than Indonesia before its 1997 crack-up.” You say: “Well, yeah, but this is America and it can’t happen here.” But there’s a lot of things we didn’t think could happen here. Something very seriously wrong is going on now.
McNally: What I haven’t heard quite yet is the point which you make very strongly in the book, that the purpose behind the tax cuts is to bankrupt the government, to undermine social programs, so that no one who comes into office after them will have an easy time restoring them.
Krugman: I’m not making that up. That’s exactly what the lobbyists and the others behind these people say. The program that the Administration is following looks as if it was designed to implement their ideas. I think it is.
McNally: What would you do? And let me ask it two ways. What would Paul Krugman’s solution be? And then, if Paul Krugman were Howard Dean or Wesley Clark or John Kerry — if he were running for office, what would his solution be?
Krugman: Okay. First off, you have to have a plan to get the budget back into balance. It’s not possible to have a plan that doesn’t include phasing out the bulk, if not all, of the Bush tax cuts. Not all in the first year, we’re still in a recession. But a gradual plan to eliminate those tax cuts, bring the tax system back to about where it was in 2000. This would get us most, though not all, of the way to a balanced budget. You could talk about other things on the side, but that would have to be the core of it.
Meanwhile, we need to get the economy moving. To do that, you have to do the things that governments always do during recessions, but this government hasn’t. Aid to state and local governments so they aren’t laying off schoolteachers and firemen just when the economy is slumping. Public works programs. As it happens, we have a whole backlog of homeland security spending: ports and so on that we should be doing that the government is nickel-and-diming away.
McNally: And a huge amount of federal infrastructure that we just ignore completely.
Krugman: That’s right. Just go and do these things which we need done anyway and particularly now. They would also help create jobs. Maybe on top of that we need another round of rebates, but rebates that are fully refundable and go to the people most likely to spend the money.
Is that guaranteed to work? I don’t know. But it’s certainly has a good chance of working and we haven’t tried any of these obvious things.
McNally: How much of that do you think a candidate could say and get away with?
Krugman: I think a candidate has to be fairly forthright. We can argue about whether the whole Bush tax cut or just the upper brackets need to go. But at least they have to say that the upper brackets must go.
And look, I don’t know that we’ll win. I don’t know what tricks the Administration will come up with to divert people’s attention, but I think that unless a candidate is really prepared to come out swinging, to say these people are doing the wrong thing by the country, there’s no chance. Saying “I’m like Bush only less so” is not going to win this election.