I had the pleasure of watching Nobel Prize-winning economist and New York Times columnist Paul Krugman speak at the Chicago Council on Global Affairs this past week, which I will partially remember for his edifying remarks on the state of the economy and partially for the an argument I had with a man about a book flap.
Well, not really an argument. What happened was that I brought my copy of Krugman’s prescient classic “The Return of Depression Economics” to get signed, yet everyone else had a copy of his new book “End This Depression Now.” As dozens of us queued in line following the talk, there was a woman from the Council who snatched the book out of your hands when you were about to reach Krugman to open it to the appropriate flap in order to quicken the pace of the signing. I, of course, found this idiotic, since I could easily open the book to the page I wanted him to sign, but whatever—life’s too short, lady.
However, then all hell broke loose because the predetermined “pre-flap” page (it felt like there were dozens of these Council people running around screaming about everyone having their books “pre-flapped”) on my book was different from the “pre-flap” page on everyone else’s book, so when I reached Krugman, there was a second pre-flap guy who'd lost his mind. He whipped through the pages of my book, saying, I hope to himself, “Where’s the page with the picture? That’s the pre-flap page! You can’t have him sign this page. This is not the right pre-flap page!”
After several seconds of careful explanation, he finally let me pre-flap my book to whatever page I had in mind. I handed it to Krugman, saying, “Hey, man, love your stuff but you really need to write more about climate change.”
“Oh, yes,” he said in his perspicacious, professorial nasal drone. “I know it. It’s coming.”
So there you go. You can thank me personally for the next Krugman climate change column.
As for his talk, to sum it up is not rocket science and very accessible to non-economists: 1) We have an unemployment crisis due to a lack of aggregate demand. 2) The best way to solve this crisis is for a spender of last resort to come in and create demand, i.e. the government (this is what the stimulus did successfully, but it wasn’t enough). 3) Our economic problems are almost entirely politically driven in large part by a moralistic faction that views the debt not as math but as some kind of pseudo-religious sin. Oh, and there’s a contingent of conservatives who want an excuse to do away with Social Security, Medicare and Medicaid.
Most striking about the fire-breathing Keyensian's latest pitched battles with “mainstream” D.C. thinkers and professional pundits is that he does not give a what about our deficits. I’ve written about this before, but lest you think it’s just those pinkos Markley and Krugman who think our debt is not an existential crisis, it’s what the majority of economists are saying as well as financial markets. Treasury borrowing rates are so low, it’s like deficit scolds are making an argument that the Seattle Sonics will win the NBA title this year. Sure, it’s possible that the NBA will re-admit a franchise to Seattle in the next few months and somehow amend the rules so that this expansion team may play in the playoffs and somehow that team of D-League players will make a run to win it all—but anything’s possible.
What we learned in the ’08 crisis is that when financial markets are in chaos or anything disruptive happens in the world, investors sprint to United States Treasury bonds and bottled water—and they tend to prefer T-bills to the water. Even the so-called Tea Party downgrade of the U.S. credit rating in 2011 was immediately followed by people vacuuming up even more U.S. debt.
You wanna know why? Because the United States is a stable, democratic government that prints its own currency and has an enormous economy. If investors determine the U.S. can’t pay its bills, it means the world is ending and no one needs to give a shit anyway.
And slowly the conversation appears to be drifting in this direction. As Krugman put it, “I was relieved to hear what President Obama had to say about the debt in his inauguration speech, which was nothing. Which was what he should have said about it.”
For those of you who don’t have favorite economists the way you have favorite baseball players, Krugman is the era's most prescient economic voice (though I would trade a Krugman MIT rookie card for two Alan Binders and an Austan Goolsbee). As with his analysis in “The Return of Depression Economics” the guy’s forecasts always look eerie in retrospect: he hammered at the Bush tax cuts in the early Oughts and was proven exactly right in their deficit-ballooning effect. He became a vocal critic of the Iraq invasion back when it was extremely unpopular to do so. He warned of the housing bubble. And when the crisis came he was “tearing his hair out in public” about the insufficient size of the stimulus that would usher in a political inability to get through more stimulative measures. He correctly assessed Treasury’s pitiful plan for homeowners with underwater mortgages that has since proven a particular sore point in the recovery.
Also, he’s a terrific and lucid writer, who can explain economics cogently, whereas many economists write like they’re vomiting out the most inscrutable parts of textbooks. He’s occasionally a less than stellar political analyst (he was a very adamant Jon Edwards fan in the 2008 primary even though it was clear Edwards was a spineless political weathervane long before his gory sex scandal broke), but his work has the blunt rhetorical power of a hammer tenderizing meat. In the era of that pseudo-religious thinking about economics where tax cuts and deregulation are the only articles of faith, it’s indespensible to have that hammer coming down over and over again. Fifty years from now, he’ll surely be remembered as one of the most important—if not the defining—economist, intellectual, and columnist of our era.
Pre-flap his books and columns, is what I’m saying.