Saturday, December 5, 2020

Krugman Has Become a Pro-Debt MMTer

Paul Krugman

Although Paul Krugman has clashed with Stephanie Kelton over her absurd book claiming that deficits don't matter (See my rebuttal: Problems With Modern Monetary Theory: A Comment on Stephanie Kelton’s "The Deficit Myth"), Krugman sounds as though he is now part of the MMT camp.

In his latest New York Times column, he writes:

[I]t’s a completely safe prediction that once Joe Biden is sworn in, we will once again hear lots of righteous Republican ranting about the evils of borrowing. What’s less clear is whether we’ll see a repeat of what happened during the Obama years, when many centrists — and much of the news media — both took obvious fiscal phonies seriously and joined in the chorus of fearmongering.

Let’s hope not. For the fact is that we’ve learned a lot about the economics of government debt over the past few years — enough so that Olivier Blanchard, the eminent former chief economist of the International Monetary Fund, is talking about a “shift in fiscal paradigm.” And the new paradigm suggests both that public debt isn’t a major problem and that government borrowing for the right purposes is actually the responsible thing to do...

The bottom line is that government debt just isn’t a major problem these days.

The fact is that government debt, or any other type of government spending, is always harmful in the here and now. It provides an avenue by which the government sucks consumption from the private sector. Thus lowering the general standard of living.



  1. In his defense, a position I’m loathe to take, Krugman has been on the side of borrowing for as long as I can recall. He has long used the standard line that “we are borrowing from ourselves” in defense of the ever-increasing debt — at least when it has been debt used to pay for progressive programs.

    1. "Assault & Battery is fine as long as I do it to myself." [ouch]

    2. Anyone who uses the word "we" to include complete strangers is a scoundrel by definition. In this case the phrase "we are borrowing from ourselves" actually means "I and my pals are "borrowing" from you by force. Oh, and you owe it to our gang now."

  2. "For the fact is that we’ve learned a lot about the economics of government debt over the past few years..."

    -- Is he suggesting that the laws of economics -- of human action, scarcity, incentives, etc. -- have somehow changed in the past decade? You really can't make this stuff up.

  3. He's lost all credibility. Has he no pride or integrity? He HAS to know it's a sham.

  4. "New paradigm". I think I've heard that phrase before. I think it was just before the Dot Bomb crash.