Few economists have been more correct about the economic crisis of the last several years than the proudly liberal Paul Krugman.
Krugman spotted the “liquidity trap” early on (since the problem with the economy was too much debt, cutting rates and creating easier money would not get us out of it).
Krugman shot down the hyperventilation about a coming hyper-inflation, arguing that the global labor glut would prevent easy credit from inflating wages.
Krugman quickly pronounced the Obama Administration’s stimulus as far too small and said it would not get the job done.
Krugman scoffed at the idea that interest rates were about to skyrocket as our creditors decided en masse that we were so fiscally irresponsible that they couldn’t possibly lend us any more money.
He has been right on all counts.
Recently, Krugman has denounced the “austerity” push of the GOP, arguing that tackling our debt and deficit problem right now with spending cuts is the worst move we can make. Such cuts, Krugman argues, will put more people out of work and shrink the economy. And this, in turn, will increase, not decrease, the deficit.
Krugman thinks we should tackle the debt and deficit problem later, when the economy is on more solid footing. He points to record-low interest rates as a sign that the world is still willing to lend us as much money as we want, practically for nothing. And he argues that, instead of cutting back, we should be using that money to build infrastructure, strengthen the economy, and put more Americans back to work.
And some Republicans, it seems, are starting to notice.
A couple of months back, Republican commentator David Frum made a startling observation:
Imagine, if you will, someone who read only the Wall Street Journal editorial page between 2000 and 2011, and someone in the same period who read only the collected columns of Paul Krugman. Which reader would have been better informed about the realities of the current economic crisis? The answer, I think, should give us pause. Can it be that our enemies were right?
Will Frum be ostracized for that remark? After all, Paul Krugman is supposed to be Public Enemy No. 1.
Or will more Republicans begin to agree that, although government spending does indeed need to be cut eventually, and the debt problem does need to be addressed, suddenly chopping, say, $1 trillion of government spending next year is not the best way to get ourselves out of this mess?