October 14, 2003

#125: He's bailed out ...

P. Krugman

On the surface Don't Look Down (10/14/03) by Paul Krugman is just another recycle job lamenting the disastrous economic policies of the Bush administration. But a closer look shows something different. The reason he is afraid to "look down" is because he has bailed out of his dire assessment of the near term economic outlook and, by implication, of the political outlook.

After a litany of comparisons between the U.S. and third world countries concerning budget and trade deficits, legal systems and corporate governance issues�all purporting to show why the U.S. is in as bad a shape as, say, Argentina�he notes,

"....financial markets are generally willing to give advanced countries the benefit of the doubt. Even when an advanced country seems to be deep in a financial hole, lenders usually assume that it will somehow find the resources and political will to climb back out."
Well no kidding! Wonder what these hard-headed lenders know about advanced countries that Krugman doesn't?

And then, a confession of sorts,

"...there's no question that the U.S. has the resources to climb out of its financial hole. The question is whether it has the political will."
By "political will" he means the will to raise taxes on the top 1% (he doesn't actually say that, but...)

And finally, a time frame shift. Even if the Bushies continue to "screw up" Krugman can't seem to identify an immediate problem for them prior to the 2004 election,

"The crisis won't come immediately. For a few years, America will still be able to borrow freely, simply because lenders assume that things will somehow work out."
And indeed things will work out! First, with a strengthening U.S. economy (it's already happening). Next, with the re-election of Bush along with larger Republican majorities. And finally, with permanent tax cuts and approaches to retirement and health insurance that rely on competition and market based solutions rather than on entitlements.

Krugman must have had a sleepless night over this column!

Posted by John Weidner at October 14, 2003 9:31 AM
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