Economist Paul Krugman

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The Nobel Prize-winning economist and Princeton University professor assesses the impact of the continuing brinksmanship that dominates Washington.

Called "the Mick Jagger of political/economic punditry," Paul Krugman is an economist, professor and New York Times op-ed columnist. Now at Princeton, he's taught at Yale, Stanford and MIT, where he earned his Ph.D. He's also been a consultant to the World Bank, International Monetary Fund and the United Nations and, during the Reagan administration, served on the Council of Economic Advisers. Krugman has won numerous awards, including the 2008 Nobel Prize for economics, and is the author/editor of 20 books, primarily about international trade and international finance, and several hundred professional journal articles.


Tavis: Well, we’ve been here before, and depending on when this program airs in your neck of the woods, our government is either shut down or it’s still open for business, barely.

That’s just one crisis, of course, that we’re dealing with. Joining me now to get an assessment on what this continued brinkmanship means for the rest of us, Paul Krugman, “New York Times” columnist and professor of economics and international affairs at Princeton, where he joins us tonight. Professor, good to have you back on this program, sir.

Dr. Paul Krugman: Glad to be back on.

Tavis: So the president spoke earlier today, and appears at the moment to be standing firm. For those who think that his standing firm represents recalcitrance, not wanting to negotiate, not wanting to work with the other side, so the argument goes, your thoughts about his standing firm today?

Krugman: No, what’s going on right now, this has no precedent. We have bargaining, compromise, but never before in this country’s history has a political party said, okay, we’re going to destroy the government, we’re going to destroy the economy, unless you give us what we want.

You don’t give in to that. You have to take a stand that this is not a legitimate form of behavior. This is not something we bargain over, because this is something that’s in everybody’s interests, to keep our government functioning, to keep our credit good.

So he has to say look, I am not going to blink here. This has got to get resolved. This has to be the time.

Tavis: Since this brinksmanship is so unprecedented – and I’m not naïve, of course, in asking this, but for those who’ve not been following this every day like you and I do, how did we get to the point where the government could be held hostage again?

Krugman: Well, actually, it’s kind of different. We’ve had hostage crises of a kind before. We had the government shutdown in ’95-’96 because Newt Gingrich was trying to extract cuts to Medicare, and we had a threatened default on the debt ceiling in 2011 because the Republicans, having won big in the midterms, were basically trying blackmail, and succeeded to a certain extent.

What’s funny about this right now is the Republicans are off having lost an election. It’s quite clear that the Republican leadership is not in control, that it’s running scared of the extreme wing of its own party.

So this is actually in some ways worse. There’s nobody to talk to. This is a party gone basically crazy. This is a party that’s lost it, with leaders who are too afraid for their own political skins to do the right thing, and no one knows how this ends.

Tavis: What do you make of the fact that, to your point now, Professor Krugman, that a handful of legislators in Washington – essentially a handful in the Republican Party – can sort of hijack this process, to your point, and you’re not the first person to make it?

Everybody sees this as clear as day that John Boehner, speaking of being held hostage, is himself being held hostage by a small group in his party. What do you make of the fact that that group could really, again, take this thing all the way to the edge of the cliff?

Krugman: Well, I will say that this is saying a lot about John Boehner, it’s saying a lot about the Republican leaders, because there comes a point when you have to say okay, we know that if there was a – if Boehner allowed a vote in the House, then it’s all solved.

There will be a continuing resolution so the government doesn’t close down, and there will be a rise in the debt ceiling, both of which would be passed with all Democrats and many Republicans. So it’s not actually – there is actually no problem there.

This is the personal fear – this is John Boehner, Eric Cantor, a couple of people who want – who are afraid because their personal careers would suffer. They might be booted out of their leadership positions if they allowed these votes.

Doesn’t there come a point where sheer patriotism, saying hey, my political career is less important than the state of America – isn’t there come a point when that’s supposed to rule?

So by all means, let’s talk about the crazies on the Republican right, but let’s also talk about the profile in cowardice that we’re seeing from the Republican leadership.

Tavis: I can give you examples on the left as well as the right where we see persons who make decisions based upon their own careers and their own political futures.

At the moment, of course, we’re talking about John Boehner. But talk to me more broadly about what this says about the kind of leadership that we have, or don’t have, as it were, in Washington on all of these issues.

Krugman: Well, I think there are degrees and degrees, and we don’t expect to have saints in the U.S. Congress. We don’t expect our politicians to completely ignore personal ambition.

I actually would say that everything we’ve seen up to this point has been within the range of normal human behavior. We want another Abraham Lincoln, we want another FDR, but it’s not shocking that we don’t have it.

This is special. What you’re seeing here is that one of America’s two great political parties is having a complete nervous breakdown, that it has reached the point where a sufficient number of Republicans are completely off the edge.

That they are unable to function as a partner in running the country, and the problem is we don’t know how to deal with that.

Tavis: If this is not the case, he’s doing a pretty good acting job, but it seems, at least to the casual observer, that the Republicans are not at all concerned about the price that they’re going to have to pay for doing this.

We know what happened in ’95 and ’96, and to your earlier point, that has apparently not been informative enough or instructive enough for them not to take this – to play this card again. So help me understand what they’re not afraid of.

Krugman: Well, I think the thing to say is first of all we’ve got – it’s a very peculiar thing now, where partly because of gerrymandering, but partly just because of the accident of the way our districts are drawn, Republicans don’t need a majority of voters to have a majority of the House.

In fact, they got fewer votes than Democrats, one and a half million fewer votes than Democrats in 2012, and still have a fairly solid House majority. That means that even if the public disapproves of what they do, there’s a pretty good chance they hang on to that majority.

So as a party, they’re not that much afraid. Then a lot of their members are in very safe Republican districts where their biggest fear is that a Tea Party challenger will boot them out in the primaries.

So from the personal point of view, they have no incentive to be reasonable here. Now, it does hurt the party. If they act out, if we go through this whole thing, that measurably reduces the chances of Republicans taking the White House in 2012 – sorry, 2016; (laughs) in 2012 they did not, to the relief of many.

But that’s a – as some people have been saying, this is like a classic problem like pollution or something. In a way, each individual Republican in Congress has an incentive to pollute his own party’s future because it’s personally profitable to him to do so.

Tavis: See, you’ve hit the nail on the head where I’m concerned, and I’ve raised this issue time and time again, that the real culprit here is gerrymandering, it’s redistricting.

Yet to my mind at least, maybe – I was going to say you know something I don’t know; you know a whole lot that I don’t know. That’s why you’re a Nobel laureate. But when you mentioned gerrymandering and redistricting, that, to my mind, is the real problem here.

But here’s the tragedy – that the term “gerrymandering,” the term “redistricting,” shuts down – it’s like sequestration. You can’t get the American people to have a real conversation about redistricting, and of course the state legislatures control this.

So if you and I are both right, that so much of this brinksmanship and this hostage-holding in Washington on any number of issues beyond the ones we’re talking about today has to do with gerrymandering and redistricting, how do we fix that? How do we even get traction on a conversation about that?

Krugman: Well, if Democrats win big enough, I guess one way to say this is that national elections aren’t the only ones that matter. That if they retake state houses in a number of elections, retake state legislatures, they can move to redress some of this.

It’s also, I have to say gerrymandering is a pretty big thing, but a lot of it is also just the accident of geography. Particularly African American voters tend to be highly concentrated in certain districts, vote very Democratic, which means that there’s a bunch of districts that have got typically 70, 80 percent Democratic votes.

Then unfortunately if you want some sort of real representation in the United States, then that leaves a lot of districts which are 55 or 60 percent Republican, which means that the Republicans have a majority – even aside from the gerrymandering, the Republicans have a majority in the House, even if they lose the popular vote, as they did last year.

I think the only way this changes is either that there’s a real wave of revulsion against these people nationally that causes them to lose despite this distortion of the system, or there – believe it or not, we’re counting on big business to pound some sense into their heads.

I think people’s story now about how this has a non-disastrous ending mostly involves Wall Street going to the Republicans over the next few days and saying what the hell are you guys doing, and if you want any money from us, you’d better stop doing this.

It’s a terrible thing when we’re actually counting on the rationality of plutocrats to save us from the craziness of politicians.

Tavis: Since you mentioned Wall Street, let me go to the other end of the spectrum, and that is this increasing war on the poor in our country. Years ago, as you’ve noted a number of times in your column, during the Johnson years we had a war on poverty. That war on poverty has now turned essentially to a war on the poor.

So let me close, as one might expect, with an economics question for an economics professor, and that is what’s the financial impact, what’s the financial fallout going to be if this government shuts down and stays shut down for any significant period of time, on the American people?

Krugman: Well, it’s not good. One thing that people – people look at the ’95-’96 shutdowns and say oh, that was just a blip, it didn’t really seem to do a whole lot of harm.

One thing about that is that we had a booming economy right then. We were in the middle of that great Clinton-era expansion, business investment with all the new technology was keeping the economy strong. So it was able to ride through that pretty easily.

That is not going to happen this time. Right now we have an economy that is weak, that has actually been suffering a lot from government cutbacks. More cutbacks, which is what happens when you shut most of the government down, is exactly the worst thing.

Then of course there’s that bit about the debt ceiling, which is real unknown territory. We have never defaulted on our debt, and the United States is – the U.S. dollar, U.S. government debt is the bedrock on which the whole world financial system is based.

If that suddenly becomes viewed as dubious pieces of paper, God knows. So this is much, much scarier than anything we’ve seen. It’s much scarier, actually, than 2011, and even – and far scarier than ’95-’96. So wow, it’s very interesting times, which is not a good thing.

Tavis: His stuff is must-read copy for many of us in “The New York Times” every week. He’s a professor, of course, at Princeton, and a Nobel laureate. Paul Krugman, always good to have you on the program, and thanks for your keen insights.

Krugman: Thanks for having me on.

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Last modified: October 1, 2013 at 11:16 pm