Paul Krugman

He’s the Nobel prize winning economist the president loves to hate, this week on Firing Line 

I don’t want to be partisan but you have to be. 

“Charlatans,” “cranks” and “bad people” are just a few ways Paul Krugman has described his ideological foes in columns he’s been writing for the New York Times for more than two decades 

Everything that one party has said about fundamental economic policy for the past 15 years has been not true. 

When Krugman predicted Donald Trump’s election would lead to economic doom – and possibly worse — Trump took notice

TRUMP: This guy is demented. He is, he’s a demented person, and that’s why The Times is failing.

What does Paul Krugman say now?

Paul Krugman/ Crusading Columnist

Paul Krugman/ New York Times Columnist

Paul Krugman/ Nobel Prize Winning Economist

Paul Krugman/ Author, “Arguing With Zombies”

‘Firing Line with Margaret Hoover’ is made possible by the Margaret and Daniel Loeb Foundation. Robert Graneiri through the Vanguard Donor Advised Fund. The David Tepper Charitable Foundation. Additional funding is provided by. Corporate funding is provided by Stephens Inc. 

 

HOOVER: Welcome to Firing Line Paul Krugman. 

 

KRUGMAN: Hi there. 

 

HOOVER: You are a Nobel Prize winner in the field of economics, an academic, a columnist at The New York Times and a best selling author who has just published a new book “Arguing with Zombies, Economics, Politics and the Fight for a Better Future.” We’re getting to zombies. 

 

KRUGMAN: OK.

 

HOOVER: Before we get to zombies, I have to ask you about President Trump, who tweeted just this week, “Paul Krugman is a lightweight thinker who doesn’t have a clue, caused huge economic damage to, to his followers pocketbooks. He and others should be fired by The New York Times.”

 

KRUGMAN: You know, it’s amazing. I mean, I’m getting to live rent free in his head, which is a great thing, I guess. Why he should be taking time out when, you know, he’s on, he’s facing impeachment. Why he should be taking time out to go after me —

 

HOOVER: Do you think that’s a deflection technique? I mean, it’s clear that he has not been a fan of yours since election night.

 

KRUGMAN: Right. 

 

HOOVER: When you predicted that his election would cause a massive economic downturn. 

 

KRUGMAN: Yes. Although it was funny because I reacted badly. I retracted that column three days later 

 

HOOVER: three days later… 

 

KRUGMAN: –saying, look, you know, unmotivated reasoning. I criticized that in other people. And in fact, the odds are, at least for a little while, we’ll probably get a little bit of a boost because he’ll be running bigger budget deficits, which is pretty much what happened.

 

HOOVER: You did retract that statement three days later in a column. And I wonder how you think about the best practice for when you get it wrong? 

 

KRUGMAN: First of all, admit it. Never, never try to pretend that you are right when you are wrong. And then ask yourself what made me get it wrong? 

 

HOOVER: What did make you get it wrong? 

 

KRUGMAN: In that case it was, just I thought politically it was a total disaster. And I fell into the temptation of thinking that that would lead in the short run to an economic disaster as well. So, you know, listen, always step back and ask, is this my emotions speaking or is this my analysis speaking? In this case, there was nothing wrong with my analytical framework. It was just my emotions that ran away with me. 

 

HOOVER: The economy is doing pretty well at the moment. Do you agree? 

 

KRUGMAN: It’s, yeah, I mean, it’s — there’s a lot of stuff that we’re not taking care of that we should be taking care of. But look, best estimate is that Trump has added about three hundred billion dollars at an annual rate to the budget deficit. That’s a big stimulus. That’s almost as big as the Obama stimulus at its peak. Now that’s actually surprisingly little bang for the buck if you consider the size of the budget deficit, but there’s some bang for the buck, that’s a hell of a lot of bucks…

 

HOOVER: So the Trump economy hasn’t been all bad? 

 

KRUGMAN: No. I mean, full employment is good. I mean, those of us who were screaming for more stimulus back in the days when unemployment is nine percent still think that some stimulus is good even now. 

 

HOOVER: OK, let’s talk about zombies. This is how you write — zombie ideas are, quote, “Ideas that should have been killed by contrary evidence, but instead keep shambling along eating people’s brains. The most persistent such zombie is the insistence that taxing the wealthy is hugely destructive to the economy as a whole so that cutting taxes on high incomes will produce miraculous economic growth.”

 

KRUGMAN: That’s right. It is the most persistent universal zombie. It’s been wrong. It was wrong for the Reagan tax cuts. It was wrong for the Bush tax cuts. It was wrong in Kansas. It has turned out to be wrong for the Trump tax cuts and people still say it. Treasury Secretary Mnuchin said it just the other day in Davos. There are zero success stories for the doctrine. But it’s still out there. 

 

HOOVER: So why does the Dallas Fed say that most economists would agree that reducing taxes on labor and capital income is likely to increase economic activity? 

 

KRUGMAN: Oh, that’s a different, very different proposition. The zombie idea is that the disincentive effects of taxes are so large that cutting taxes will lead to this fountain of economic growth, that will actually mean that you collect more revenue. Now, the idea that taxes have some incentive effect, that people work a little bit less hard, maybe, if they pay a high tax rate, that’s, that ought to be true, although it’s actually remarkably hard to find evidence. 

 

HOOVER: So in your book, you talk about your methodology. You say, one, you stick with the easy stuff. Two, you write in plain English. Three, you’re honest about dishonesty. And four, you say, don’t be afraid to talk about motives.

 

KRUGMAN: Right. 

 

HOOVER: Do you believe it’s impossible to have good faith arguments today? 

 

KRUGMAN: It’s not impossible, but it depends on what it’s about and who you’re arguing with. So there’s a huge debate about quantitative easing and monetary policy. And there are people there are reasonable people on both sides of that.

 

HOOVER: For the sake of the audience, do me a favor and define quantitative easing. 

 

KRUGMAN: OK. Quantitative easing is when the Fed, Federal Reserve, instead of just doing its usual thing and buying short term government debt to move interest rates, goes out there and buys longer term stuff. It buys mortgages guaranteed by federal agencies. It buys long term government debt in an attempt to get some extra traction. It’s something that the Fed does a huge amount of, about four trillion dollars worth of during the financial crisis. Was it effective?

 

HOOVER: So your view is that it’s too early to tell?

 

KRUGMAN: My, I’m, I’m a skeptic. I’m not sure that… If  pressed, I would say it wasn’t very effective, but perfectly reasonable people can make the other argument. So that’s a good faith debate. 

 

HOOVER: Would quantitative easing, in your view, have been more successful, had there been more stimulus? 

 

KRUGMAN: Well, the economy would have been more successful if there had been more stimulus. I think quantitative easing didn’t matter much one way or the other, but I could be wrong about that. This is, you know, this is… that’s a hard question and certainly not something to be writing about in the op ed page of The New York Times, because the readers are not in a position to judge that debate. 

 

HOOVER: You did write about it in the columns of the New York, in your columns. 

 

KRUGMAN: Well, I wrote about it saying that the fears about it were greatly you know, we’re all wrong. 

 

HOOVER: One, some of the fears were that it would create massive inflation. 

 

KRUGMAN: That’s right. There were you know, it’s a who’s who list an enormous number of people, mostly on the right, said, oh, this is going to lead to inflation. 

 

HOOVER: It didn’t end up leading to — 

 

KRUGMAN: It did not. 

 

HOOVER: …consumer price index inflation, although there has been some inflation in asset values. 

 

KRUGMAN: Yeah, but that’s not clear that that’s related and it’s not clear that’s a problem.

 

HOOVER: I mean, there’s an argument I’ve read as I’ve followed this debate that quantitative easing may actually have exacerbated some of the income inequality disparities that we have in the sense that it has kept interest rates so low that ordinary people don’t have vehicles for growing their savings and growing their wealth in the way that they would have. 

 

KRUGMAN: Wow, okay. 

 

HOOVER: After it, after a decade of not having interest rates. 

 

KRUGMAN: So this is a non-zombie idea. Zombie ideas are things–

 

HOOVER: I’m so flattered–

 

KRUGMAN: –that we know are false but that just keep on shambling along and eating people’s brains. And this is an idea that has a little bit to it, but less to it than people imagine. And I think the problem is that people like you or me, we have an exaggerated notion of how much in the way of savings people have. I mean, half the population lives mainly on Social Security and retirement. A quarter of the population lives entirely on Social Security for their… The idea that the interest that they earn on their bank accounts is an important thing, that’s already an elite concern. That’s not a that’s not a problem for the common population. 

 

HOOVER: So you’re saying that the average American doesn’t have savings to put in a certificate of deposit, so it doesn’t matter that interest rates are .0 percent…

 

KRUGMAN: That’s right–

 

HOOVER: .. point 0.3 percent.

 

KRUGMAN: One thing I think being sort of in the, in the economic elite, even the lower reaches of the economic elite, is that you have no idea how close to the edge most Americans live.

 

HOOVER: Yeah

 

KRUGMAN: And so the interest that they get on their bank deposits is just not an important thing. 

 

HOOVER: So bottom line, quantitative easing is not a zombie debate, it’s an honest debate. 

 

KRUGMAN: It’s an honest debate. And I can… Ben Bernanke disagrees with me. He thinks it was much more effective than I do and he could be right. And, and I don’t have any questions about his motives. 

 

HOOVER: When will we know?

 

KRUGMAN: We’ll never know, the trouble is–

 

HOOVER: Never?

 

KRUGMAN: No, because the trouble is that history doesn’t usually give you clean experiments. Too many other things were going on at the same time. So we’ll probably never really know what it, what it did. 

 

HOOVER: So this other part about your methodology where you say, “Don’t be afraid to talk about motives.” How does that play in? 

 

KRUGMAN: I think it’s important. Now, you know, if you’re having a good faith debate, fine. Then let’s just talk about the facts. If you have people who keep on espousing views that are demonstrably wrong, that just have failed again and again, you’re– You’re cheating your readers if you don’t explain to them why these people are saying these things. So again, I mean, I like Mnuchin as a whipping boy, what the hell. But here we have- why would the treasury secretary of the United States say something that is manifestly untrue about taxes? Well, think about who he works for. Think about who the campaign contributions for his party come from. So this is- you have, you cannot explain the persistence of this zombie faith in tax cuts without asking who it benefits and how the benefits to a handful of wealthy people affect political positions.

 

HOOVER: So you go so far as to believe that you understand the motives of Steven Mnuchin for saying that, that it’s because he has wealthy donors and they don’t want those policies to affect them. 

 

KRUGMAN: Yeah. Now, most people are pretty good at convincing themselves that they’re being honest even when they’re not, right? Even when it’s actually motivated. But if you want to ask what’s driving this, that’s what it’s about.

 

HOOVER: I mean, I read your column this week. One of the ways you approach these arguments is that you, you lay out an argument that is very sound. But then you have this throwaway line, it’s something to the effect of, ‘Republicans don’t want to admit that government can do anything effectively, because if they did, then maybe they’d realize it could help with health care, too.’ Right? 

 

KRUGMAN: Yeah. 

 

HOOVER: And it was in the context of Republicans have no interest in, in doing something for the greater good. Right? Do you think that undermines your ability to engage and win the argument? 

 

KRUGMAN: No, I don’t think so. Because you need to be careful about what I’m saying. I’m not saying that every one, every person who says ‘I am a Republican’ is part of this. But I think it’s fair to say that almost every, if not every Republican member of Congress is in this position. One of the funny things you discover on a number of issues, rank and file Republicans often have much more nuanced views than what you hear from the party. And the views are more nuanced and closer to the truth, the less politically aware they are because they don’t know what the party line is. But it’s the organized party that has completely forsaken any interest in the truth. 

 

HOOVER: Do you think that the Trump era has made you more of a partisan? 

 

KRUGMAN: That’s a good question. You know, I think I saw this happening well in advance. The polarization of the parties and the asymmetry of the polarization. Republicans have moved to the right in a way the Democrats have not moved to the left. They have moved to the left, but not to the same extent.

 

HOOVER: Yep.

 

KRUGMAN: That’s something that’s been documented by a lot of academics. Fundamentally, I’m a professor at heart. And so I just saw Trump as the culmination of this. So I’m not sure that Trump has made me any more partisan or cynical than I was already. I actually find it a little bit harder to write during the Trump era than I did during the presidency of George W. Bush because there’s just such an overwhelming cascade of outrage that it’s actually hard to talk about the policy issues. People are, I look at the most —

 

HOOVER: Do you think you contribute to that, though? Do you think you are swept up in that? 

 

KRUGMAN: I try not to be. I actually am, if you look at what’s being written in The New York Times, you’ll probably find that I’m writing a lot less about Trump than many of my colleagues on the op-ed page. Much more about policy, much more about the broader issues. It’s, by the way, the readers are not necessarily- the readers want more raw outrage. 

 

HOOVER: Do you feel yourself having to pull back from that just because the readers want it?

 

KRUGMAN: Well, I feel that I need to do a little bit of counterprogramming. 

 

HOOVER: Yeah, you have a responsibility….

 

KRUGMAN: I have a responsibility to broaden the debate, to push a few issues to get beyond just the ‘Trump is a terrible person’ thing and say, ‘OK, but let’s talk about policy.’ And it’s not necessarily what the readers want. I mean, if you look at what the most popular paper stuff in The New York Times, it’s actually kind of funny these days, it’s kind of: Impeachment. How to Boil a Perfect Egg. Impeachment. Grilling with Mayonnaise. Impeachment. Right? And it’s a little bit hard to be talking about fiscal policy. 

 

HOOVER: But let’s talk about fiscal policy and monetary policy for that matter, ideas that are influencing the current debates. Can you just define for us quickly, how do you define monetary policy and fiscal policy?  

 

KRUGMAN: OK. Monetary policy is the Federal Reserve basically changing the money supply, the amount of stuff in circulation, which it does by buying and selling U.S. government debt. But it doesn’t involve spending money on anything. It doesn’t involve cutting people’s taxes or raising them. 

 

HOOVER: Which is fiscal policy.

 

KRUGMAN: And fiscal policy is when the government goes out there and decides to build a high speed rail link, or a new tunnel under the Hudson, or cut your taxes, or raise your taxes. Whatever it is. So it’s taxing and spending. 

 

HOOVER: John Maynard Keynes, the economist who influenced Franklin Delano Roosevelt in the Great Depression and influenced the economists and the thinkers around that time that federal spending would help us get through an economic depression. He influenced you.

 

KRUGMAN: Very much. Keynes was the greatest economist of the past century by far. 

 

HOOVER: Then I’d like to get your reaction to another Nobel laureate who was on this program in its original incarnation with William F. Buckley Jr. The program ran from 1966 to 1999. And in 1968, Milton Friedman was on this program talking explicitly about Keynes.

 

FRIEDMAN: I’ve always regarded it as a great tragedy that Keynes died when he did because one of his great capacities was flexibility. 

BUCKLEY: Yes.

FRIEDMAN: He could shift as times changed. Had Keynes been alive, what is called Keynesian economics would never have been carried to the extremes that it did, had he lived beyond 1946, Keynesian economics would never have been carried to the extremes that it was carried. Keynes was a he was a he was a great economist. We mustn’t, it seems to me you must avoid denigrating the man because some of his disciples carried some of his arguments much too far. And I think that had he lived longer, he would have led a retreat. 

BUCKLEY: So so that the generation of people who studied economics between, let’s say, 1940 and 1952, 3, 4, 5 were more or less, took it as received doctrine that the way to prevent excesses in economic cycles was through the manipulation of fiscal policy. And you say that increasingly they have now been- become convinced that it is not fiscal but monetary policy that is crucial. 

 

KRUGMAN: Milton Friedman was a great economist. But, you know, we know a lot more than we did when he was on Firing Line all those years ago. 

 

HOOVER: It is true. And the study of monetary policy has advanced far beyond what we knew in 1968. 

 

KRUGMAN: And what we learned is that actually under Depression conditions, under conditions when interest rates had dropped to just about zero, Keynes was right and Friedman was wrong. 

 

HOOVER: Why? 

 

KRUGMAN: Well, Friedman thought that the Great Depression could have been prevented if only the Fed had printed enough money. But the main point was that we came to 2008 when we had a kind of a replay, another severe downturn, and we had Ben Bernanke at the Fed-

 

HOOVER: -who had studied, by the way, Friedman and Keynes and the Great Depression, as his major focus of his study when he was at Princeton.

 

KRUGMAN: And Ben Bernanke engineered a very expansionary monetary policy, the kind of thing that Friedman said could have prevented the Great Depression. And even so, the unemployment rate went to almost 10 percent. And within a couple of years, people at the Fed were saying, ‘we could really use some help from fiscal policy here.’ So, in fact, we got to run this experiment a second time. And it turned out vindicating the Keynesian- 

 

HOOVER: Well, 10 percent unemployment is a lot better than 25 percent unemployment, which is what you had in the Great Depression. 

 

KRUGMAN: But the big difference was that we had – I would say – was, was that we had a much bigger government so that even though we had a very limited, deliberate stimulus, we had a huge amount of what economists call automatic stabilizers. You know, your job might have disappeared, but Medicaid money was still flowing. Medicare money was still flowing-

 

HOOVER:  There was already a safety net. A safety net was in place.

 

KRUGMAN: A safety net was still in place and, and taxes went down. So if you look at what happened to the U.S. economy, the mere existence of a pretty big federal government provided a pretty strong cushion under the economy. 

 

HOOVER: I want to play a few things that you’ve said over the years, which can also be found in your new book. 

 

KRUGMAN: OK. 

 

AUDIOBOOK CLIPS: 

‘Paul Ryan, the current but departing speaker, is a flim flam man.’ 

‘Republicans don’t just have bad ideas. At this point, they are necessarily bad people.’ 

‘It’s not just that Trump has assembled an administration of the worst and the dimmest. The truth is that the modern GOP doesn’t want to hear from serious economists, whatever their politics. It prefers charlatans and cranks.’ 

‘The Right’s denunciation of AOC’s insane policy ideas serves as a very good reminder of who is actually insane.’ 

 

KRUGMAN: I stand by every one of those remarks. 

 

HOOVER: So, Republicans are bad people? That’s the one that, I mean, that’s one of, one of them that stands up. 

 

KRUGMAN: Yeah. Professional Republicans, right? An ordinary person on the street, you know, somebody I might meet over lunch who declares herself a Republican can perfectly well be a perfectly nice person. But to be a serving Republican member of Congress right now, to be backing the Trump administration with all of the information that you have, to be refusing to hold it to account, that makes you a bad person. 

 

HOOVER: And, is there any way to engage in an arena of ideas, when you’ve demonized your opponents in that way? 

 

KRUGMAN: Well, is it demonizing if they already actually are demons? I mean-

 

HOOVER: Well, I think you’re proving my point right there. 

 

KRUGMAN: But that’s- The trouble is that you cannot- This is the, in a way, the whole point. The reason I talk about arguing with zombies is that zombie ideas about fiscal policy, about climate change, about a whole range of issues, health care policy, have completely taken over official Republican discourse. That doesn’t mean that every Republican in America is like that, but it means that everybody who is-

 

HOOVER: That’s very generous of you to distinguish people who identify with the Republican party and the people who they elect to serve them. 

 

KRUGMAN: Yeah. No, I have people that I’ve had long-term good relations with in the economics profession who still call themselves Republicans, but either they dissociate themselves from what the modern Republican Party is actually doing or they’re just kind of oblivious. They still imagine that they’re- that this is the Republican Party of Dwight Eisenhower. And it isn’t.

 

HOOVER: Given the escalation and partisanship that you’ve described, do you think through whether there is an opportunity in your column to heal the country? 

 

KRUGMAN: I don’t think- We are not having a good faith argument on most issues. And-

 

HOOVER: Aside from the political debates though. Can people who are informing the ideas of the debates that then feed these policymakers their ideas for legislation, can people like you and your counterparts not have good faith debates? 

 

KRUGMAN: Oh, we certainly can. But is anybody in an actual position of power listening? There are many, many Republican or at least formerly Republican economists who could be advising this administration on policy, could be advising Congress on policy. None of them are- they’re, they’re all on the sidelines. They’re not wanted.

 

HOOVER: What I hear you saying is: There is no way to debate and engage in ideas in a Trump era with Republicans in Washington right now. 

 

KRUGMAN: That’s right. Republicans in Washington are essentially lost to any kind of honest debate. I wish that weren’t true. I wish there was a way to reach out, but there hasn’t been and it hasn’t been for a long time. Probably not – I think – since John McCain passed away, right? There, there’s been nobody you could talk to. 

 

HOOVER: And you don’t think there’s anyone behind closed doors that you can engage with? The part that strikes me, right, is that it’s washing your hands of an entire cast of people. 

 

KRUGMAN: Well, you know, if there is a Republican senator, let’s say, who privately believes that climate change is an existential threat, then the fact that he’s not saying that, is itself an enormous abdication of responsibility. So I don’t really care whether he’s- that’s what he actually says behind closed doors if he doesn’t have the courage to say it in public. Then he’s not doing anybody any good. 

 

HOOVER: Hold on, are you saying that there is not a single Republican senator that believes climate change is an existential threat? 

 

KRUGMAN: Oh, I don’t know that. There may well be. For all I know, there may be 30 or 40 of them who believe that it is, but not one of them willing to say it. 

 

HOOVER: Lindsey Graham has said it. Marco Rubio has said it. One’s from the- state that actually is facing climate change right now in a very dramatic and drastic way, Florida. 

 

KRUGMAN: But when, when, when push comes to shove, when you talk about doing anything about it, they’re always against it.

 

HOOVER: Lamar Alexander and Lisa Murkowski also believe in climate change. They say it’s an existential threat. 

 

KRUGMAN: But they’re not doing anything. So, you know, we’re- you know, it may be that if, if the political winds shifted, they would sort of come out of the closet and reveal themselves as being reasonable people. And I’d like to hope that would happen. But the only way that’s going to happen is if Republicans lose really badly in an election. 

 

HOOVER: You’ve been writing very positively about Elizabeth Warren. Is she your preferred policy prescription? For the time?

 

KRUGMAN: Oh, yeah. She’s, I mean, I’m a progressive. She’s very progressive. I’m also somebody who likes well thought-out plans, and she has very well-thought-out plans. And she happens to be the only one of the Democratic presidential candidates I know personally, and I like her. But whether she’s actually the best choice for nominee, I have no idea. I don’t think we know a whole lot about electability. In terms of policy, I think it makes almost no difference which person the Democrats nominate because in practice – whether it’s Joe Biden or Bernie Sanders or Elizabeth Warren or anybody you name, Mike Bloomberg – what you’re gonna get is a moderate expansion of the social safety net. Some increase in taxes on high incomes. And it’s probably going to be about the same set of policies in practice, whoever it is. 

 

HOOVER: There are sort of mainstream Democrats, maybe more moderate Democrats, who think that Joe Biden is more electable too, because they’re frankly worried about a 33 trillion dollar single-payer health care option. 

 

KRUGMAN: Yeah. I am not worried at all about the size of the bill for everything that Bernie Sanders is promising because it isn’t going to happen. The reality is-

 

HOOVER: So, if it were realistic, would you worry? 

 

KRUGMAN: It’s big enough that we would need to have a lot of additional taxes to pay for it. That’s true, regardless of your economic doctrine. We’re talking about a whole lot of spending.You know, if, if you’re going to propose a Denmark style welfare state for the United States, you’re probably going to have to have Denmark style taxes as well. And so, but you know, on the other hand, Denmark, two things. First, it’s not going to happen. And secondly, Denmark is not exactly a hellhole, so I’m okay with it regardless. I’m not worried about the programs of any of the Democrats. I worry about electability all the time. But, I actually I’m also aware that I- I don’t know anything. 

 

HOOVER: With that, Paul Krugman, thank you for coming to Firing Line. 

 

KRUGMAN: Thank you. 

 

HOOVER: Good luck with your book. 

 

KRUGMAN: Thank you. 

 

HOOVER: And thank you for being here, I appreciate it. 

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