Paul Krugman is doubling down in his battle with deficit hawks.
The Nobel Prize-winning economist struck back at those who doubted his rationale for not being concerned about the budget deficit in a blog post Monday afternoon. Krugman described in a column in The New York Times that morning how The Wall Street Journal, former Federal Reserve Chairman Alan Greenspan and others predicted that fears over rising U.S. government debt would spook investors. In reality, he noted, interest rates on U.S. government debt are at historic lows, indicating that investors aren’t worried about America’s ability to pay off its debt.
Still, Krugman wrote in his blog post that he received “remarkably foolish” feedback on his column as deficit hawks continued to doubt that low interest rates prove investors aren’t concerned about America’s debt.
“The persistence of the inflationista, eek! deficits! view despite year after year of failure -- and the amazing effort put into making excuses for year after year of failure -- are a wonder to behold,” Krugman wrote in the blog post.
Deficit reduction has become a major point of contention as Congress and President Obama scramble to reach a budget deal before the end of the year to avoid the “fiscal cliff” of tax increases and spending cuts, which some economists say could plunge the economy into recession. Republicans have insisted on a deal that includes major spending cuts and minimal tax increases on the rich to reduce the deficit, while Obama is seeking to raise taxes on Americans making more than $250,000 to narrow the budget gap.
The Washington Post’s Ezra Klein argued in a blog post Monday that Republicans’ resistance to tax increases is actually an indication that they aren’t as concerned about deficit reduction as they seem. Instead, their actual goal is to reduce the size of government, Klein wrote.
“For Republicans, agreeing to those tax increases means agreeing to a larger government than would be possible in the absence of those tax increases,” Klein wrote. “That undermines their real goal: Not smaller deficits, but smaller government.”