The bigger picture: Paul Krugman and "What Went Wrong?"

In case you don't know already, Paul Krugman is a much-honored, market-oriented economist at Princeton who also writes a regular column for The New York Times. He's very moderate, and because of that, and because he's been pointing out the lunacy of the economic policies of the claque that has seized control in Washington, he finds himself labeled a dangerous leftist. (The man has multiple websites, and claims to know nothing about The Unofficial Paul Krugman Archive, but recommends it as the best place to see what he's actually done and written.)

"What Went Wrong?" he asked in his talk last night at The New School, because up until 3 years ago, everything seemed to be going right in the US economy. There had been real economic growth, a recovery from the disastrous Reagan & Bush I years, with a "bubble" -- a "natural Ponzi scheme," Krugman called it, where people were suckering themselves into paying inflated prices for dot-com stocks and everybody was spending like mad -- which burst, so we had a decline but one that was easily fixable. What you do when there's a slowdown -- every standard economic text will tell you this -- is, first, you reduce interest rates to encourage more investment; when that's not enough (as it hasn't been, in this case), you give tax breaks to those most likely to spend the money (not to those so rich they'll sock it away in savings or investments), and you encourage job creation. The gang in Washington has perversely decided to do just the opposite -- huge tax giveaways to those who need them least, starving state budgets and forcing them to cut back on employment, and so on. But you know what's going on. Krugman's question was, Why?

He claimed to be holding out some of his answers for his next book, due in the fall, but I don't think he really knows. He does know a critically important part of the story, though, which is how the economy is being wrecked by ideologues without an ideology (unlike Reagan, with his goofy "supply side economics" theory, they don't even have a rationale for their policies; they just lie, claiming that depression is stimulus, benefitting the rich is benefitting the poor, and so on). Something similar -- widening income disparities -- is occurring worldwide, but nothing like in the US, where, as Krugman puts it, "Gordon Gecko won -- 'Greed is good.'" He is expecting this huge economy to soon be looking like Argentina -- an idea I've already expressed here. (I don't mean to imply that Paul Krugman gets his ideas from reading my blog. Nobody reads my blog, or almost nobody. But the economic danger is obvious enough to occur even to a non-economist like me). I'll repeat another of my earlier bloggisms: The coming economic collapse of the US is going to undermine all our great imperialist adventures. Not only won't we be able to pay for the weapons without heavy borrowing from the Asian countries -- which are already our biggest creditors -- we won't have young people healthy enough and educated enough to operate them.