Is Steve Martin writing Paul Krugman’s blog posts these days? We strongly suspect it, because only a comic genius could create parodies of such stunning grandeur. For sheer zany silliness, however, Krugman’s latest, just off the ether, tops anything he (or Martin, for that matter) has ever issued. Krugman writes that “failing to raise the debt limit could be widely read as a signal that we are, in fact, a banana republic.”
Admire it. Wonder at it. Don’t try to absorb it all at once; its scope is too vast, its brilliance too complex, and its hilarity too profound to embrace in just one reading.
Krugman’s reasoning is as loopy as his assertion. Let’s look:
“First, US government debt plays a special role in the financial system: T-bills are the universal safe asset, the ultimate collateral. That’s why, during moments of financial stress, the interest rate on T-bills has actually gone negative. Make that safe asset suddenly unsafe, and it might cause vast disruption.”
That’s right. Krugman actually just tried to argue that abiding by the spending cap — making some small attempt to put our fiscal house in order — will make our creditors think that our government debt is less safe.
Okay, Professor Krugman. Let me spell it out for you in a way that even a Nobel Prize-winning economist from Princeton can understand: Banana republics are countries whose rulers are despots whose policies are unopposed, and who engage in reckless and irresponsible government spending to keep the serfs in line. Demanding unswerving fealty to our Leader strikes us as rather closer to that scenario than offering resistance to raising again a limit that was put in place for a very good reason.
Why do we have spending caps? Why, so we can raise them whenever we get close to reaching them, of course. According to Krugman, “failure to raise the debt limit could act as a terrible signal about the US political system.”
Marvelous, isn’t it? Krugman concludes that the way to calm the fears of our creditors, who have watched with increasing horror as the nation’s spending spree has flipped our deficit to its highest level, as a percentage of GDP, since World War II, is to spend even more! Works for you, doesn’t it? Nothing soothes the spirit like watching someone who owes you a whopping trillion or so walk merrily past you whistling “Happy Days Are Here Again” and turn into the nearest casino flashing a handful of credit cards.
We know well by now that Krugman wants more stimulus, more government spending, and higher taxes, all of which would be good ideas if we hadn’t already tried that and failed utterly. Keynes, whom Krugman claims to channel, did not say that government stimulus be unlimited, nor did he suggest that raising taxes during an economic slowdown was anything but insanity. And, in fact, Republicans are not rejecting an increase outright. What they are asking is what will Obama do, if the cap is raised, to make at least some progress towards fiscal discipline. But for Krugman, even this concession is unreasonable:
“Once the crazies know that they can get whatever they want by threatening to blow up the economy, they’ll just keep demanding more and more. Obama just can’t let that dynamic get started without setting up an even worse crash down the road.”
So the people asking for action aimed at restoring the creditworthiness of the US are “crazies” who are “threatening to blow up the economy?” That’s a bit of a stretch even for Krugman. Obama, in the name of all that’s good for the red, white and blue, must refuse any negotiation? Make no concession to fiscal restraint. Just spend more and more, and when we blow through that cap, demand it be raised again?
Krugman is not crazy, and he is not stupid. But this latest attempt at sorcery — where leaden claims are passed off as nuggets of wisdom — will require more than a Philosopher’s Stone to convince any but the traditional gullibles who comprise Krugman’s chorus. And while we have watched with some satisfaction Krugman’s daily whining and mounting tantrums when his Word is not heeded, this last one is so far beyond the pale as to make us wonder if he’s indeed channeling — but the spirit he’s tapping sounds less like Keynes and more like Groucho Marx.
So we advise Mr. Krugman to relax. We assure him that not even one of our creditors will find this very small sign of fiscal restraint troubling — quite to the contrary, as Mr. Krugman knows well. This latest blurt of outright nonsense is nothing more than a wheezing attempt to fool the suckers one more time, and since it appears that Krugman preaches only to the choir these days, we have little to fear from his latest sermon. But it’s still a lot of fun watching him try to pull this one off; in fact, we applaud his ambition: it seems only fitting that this refugee from academe set his sights on winning an Academy Award, this time for “Best Performance In The Theater Of The Absurd.” I know they don’t actually give out one of those, but maybe this year they should consider it.