Krugman Shifts on the Deficit

Michael Mandel

For years, I've argued that the hardline anti-deficit position of the Democratic party was a political and economic loser. For example, here I wrote in December 2004:

From Walter Mondale's promise to raise taxes in 1984 to John Kerry's attacks on the deficit in 2004, a central thesis of the Democratic economic platform has been that Republican tax cuts can cause budget deficits, budget deficits are bad, vote for us. This position has been a disaster on several levels. Politically, the anti-deficit argument has garnered little support, producing only one Democratic President, and a string of congressional losses. Economically, little evidence shows that big budget deficits have impeded U.S. economic growth, the strongest among all major industrial countries over the last two decades. And because an anti-deficit stance makes it harder to fund social programs, it's tough to understand how opposing the budget deficit makes the poor and minorities, the ostensible Democratic base, better off.

See also here , here, here , here , here, and here. (THe last one is an essay entitled "Faith, Hope, and Progress").

Now Paul Krugman has written a NYT column which says in part:

The lesson of the last six years is that the Democrats shouldn't spend political capital trying to bring the deficit down. They should refrain from actions that make the deficit worse. But given a choice between cutting the deficit and spending more on good things like health care reform, they should choose the spending.

Yes, Paul, you've got it. The Democrats have done themselves and the economy no favors by adopting hair-shirt economics. To the extent that the federal government has long run fiscal problems, they are connected with long-term medical spending, not the current deficit.

Greg Mankiw, Brad DeLong, and Mark Thoma respond to Krugman. William Grieder applauds Krugman, writing :

If Democrats stick with the Hooverite logic of Rubin--whacking entitlements and shrinking budget deficits-- they will forfeit the opportunity to rebuild their party by restoring the country

A poster at Daily Kos objects to Krugman, writing that
"While his argument is clear and cogent, it is also 100% wrong."

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