Niall Ferguson 'irons' Paul Krugman
In a recent Newsweek article, "An Empire at Risk" (December 7, 2009), Niall Ferguson offers a very bleak, even alarming analysis of America's economic future. I usually cast a cold eye toward alarmist prognostications on life, on death, especially those that casually refer to the US as an 'Empire', but Ferguson is not to be so readily scoffed at in his concerns over the American deficits. Besides, he admits that he didn't have to call America an 'empire':
Call the United States what you like -- superpower, hegemon, or empire.I'd choose one of the first two, but perhaps Ferguson wanted to annoy some readers. Among readers that he apparently did want to annoy is Paul Krugman, as becomes clear in this passage:
Now, who said the following? "My prediction is that politicians will eventually be tempted to resolve the [fiscal] crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt. And as that temptation becomes obvious, interest rates will soar."In other words, Krugman was against deficits when they were Bush's fault but in favor of deficits now that they are Obama's achievement.
Seems pretty reasonable to me. The surprising thing is that this was none other than Paul Krugman, the high priest of Keynesianism, writing back in March 2003. A year and a half later he was comparing the U.S. deficit with Argentina's (at a time when it was 4.5 percent of GDP). Has the economic situation really changed so drastically that now the same Krugman believes it was "deficits that saved us," and wants to see an even larger deficit next year? Perhaps. But it might just be that the party in power has changed.
Just a little 'ironing' to straighten Krugman out . . .