Yeah, yeah, I know — this thing is 47 minutes long! Watch ten minutes now, and come back to it.
Nobel Prize-winning economist and New York Times columnist Paul Krugman argues that saving money is not the path to economic recovery. Instead, he tells Bill, we should put aside our excessive focus on the deficit, try to overcome political recalcitrance, and spend money to put America back to work. Krugman offers specific solutions to not only end what he calls a “vast, unnecessary catastrophe,” but to do it more quickly than some imagine possible. His latest book, End This Depression Now!, is both a warning of the fiscal perils ahead and a prescription to safely avoid them.
Some moments from the conversation:
ON JACK LEW, NOT KRUGMAN HIMSELF, AS POSSIBLY THE NEXT TREASURY SECRETARY
“I probably have more influence doing what I do now than I would if I were inside trying to do the court power games that come with any White House, which I don’t think I’d be any good at… What the president needs right now is he needs a hard-nosed negotiator. And rumor has it that’s what he’s got.” Watch this clip.
ON SAVING VERSUS SPENDING
“We’re awash in excess savings. And if you decide to save more, it’s not actually going to help society… If there’s one crucial thing to understand about all this it is that the global economy, money moves around in a circle. And my spending is your income, and your spending is my income. And if all of us try to spend less because we want to save more, we don’t succeed. All we end up doing is creating a global depression… the thing that all the evidence of history says works in a situation like this is the private sector won’t spend, government can step in and provide the spending that we need in order to keep this economy afloat.”
ON THE POWER OF JOB CREATION
“The only obstacles to putting people to work, to having those lives restored, to producing hundreds of billions, probably $900 billion a year or so of extra valuable stuff in our economy, is in our minds. If I could somehow convince the members of Congress and the usual suspects that deficit spending, for the time being, is okay, and that what we really need is a big job creation program, and let’s worry about the deficit after we’ve had a solid recovery, it would all be over. It would be no problem at all… All the productive capacity is there. All that’s lacking is the intellectual clarity and the political will.”
ON WHAT SHOULD BE OBAMA’S ECONOMIC PRIORITY
“[Obama's] policy priority right now should be doing whatever he can to at least move in the direction of the kinds of policies that we want for full employment, that we need for full employment. And that the obsessions of Washington about a grand bargain on the deficit are really pretty much beside the point right now. That, if given a choice between doing something that will help the economy in the next two years, and something that will allegedly settle our budget problems for all, you know, for all time, which it wouldn’t, that he should go for the stuff that will help the economy now…
In the Great Depression, people listened to Franklin D. Roosevelt urge full employment, on their radios; this statue is part of the FDR Memorial in Washington, D.C. – Photo credit: Koshyk
We happen to have a very intelligent man as president. He’s for real. And he does understand. You can have real discussions with him. And I think he understands that, although things have improved some… it’s a glacial pace, compared with the way we should be… We cannot allow ourselves to be blackmailed into spending cuts, partly because blackmail should not be part of how the U.S. operates, and partly because spending cuts would be disastrous right now. So Obama’s right to say he doesn’t negotiate. I’d like to know exactly what he will do if it turns out that there is not a quorum of sane people in the Republican party.”
ON THE LONG-TERM DAMAGE OF A BAD JOB MARKET
“We have pretty good evidence on how long does it take to make up for the fact that you happen to graduate from college into a bad labor market. And the answer is forever… You’ll miss years getting onto the career ladder. By the time you get a chance to get a job that makes any sense, you know, that makes any use of your skills, you will already be tarred as somebody, ‘Well, you’re 28 years old and you haven’t held a responsible position?’ ‘Well, yeah, I couldn’t because there were no jobs.’ It just shadows your whole life. And it’s very clear in the evidence from past recessions, which have been nowhere near as bad as this one.” Watch this clip.
ON COVERING BOTH THE ECONOMY AND POLITICS
“If you write about economics right now and implicitly adopt the perspective, ‘Well, let’s get reasonable people together in Washington and reach a solution here,’ you’re paying no attention to reality. And, of course, if you talk about the politics without talking about the economics, you’re also missing everything. So how could I not be writing about both?”