Paul Krugman: "We Should Kick The Can Down The Road. It’s The Responsible Thing To Do"

Tyler Durden's picture

The below article, recreated in its grotesque entirety, is a real, serious Op-Ed written by a supposedly real, non page-view trolling, Nobel-prize winning economist, in a serious paper, the New York Times. It can be classified with one word: jaw-dropping.

We can only hope that some time in the next five years, when the global economy is in ashes following the implosion of the final central bank bubble, that the US department of injustice will prosecute authors of such drivel (and all those sell-side analysts who have had Buy recommendations in the 2009-2013 period) with the same ferocity it has demonstrated toward those US-downgrading rating agencies, which are now supposed to be solely accountable for the Second Great Depression and the $30 trillion or so in misallocated capital in the past five years.

Kick That Can

By Paul Krugman

John Boehner, the speaker of the House, claims to be exasperated. “At some point, Washington has to deal with its spending problem,” he said Wednesday. “I’ve watched them kick this can down the road for 22 years since I’ve been here. I’ve had enough of it. It’s time to act.”

Actually, Mr. Boehner needs to refresh his memory. During the first decade of his time in Congress, the U.S. government was doing just fine on the fiscal front. In particular, the ratio of federal debt to G.D.P. was a third lower when Bill Clinton left office than it was when he came in. It was only when George W. Bush arrived and squandered the Clinton surplus on tax cuts and unfunded wars that the budget outlook began deteriorating again.

But that’s a secondary issue. The key point is this: While it’s true that we will eventually need some combination of revenue increases and spending cuts to rein in the growth of U.S. government debt, now is very much not the time to act. Given the state we’re in, it would be irresponsible and destructive not to kick that can down the road.

Start with a basic point: Slashing government spending destroys jobs and causes the economy to shrink.

This really isn’t a debatable proposition at this point. The contractionary effects of fiscal austerity have been demonstrated by study after study and overwhelmingly confirmed by recent experience — for example, by the severe and continuing slump in Ireland, which was for a while touted as a shining example of responsible policy, or by the way the Cameron government’s turn to austerity derailed recovery in Britain.

Even Republicans admit, albeit selectively, that spending cuts hurt employment. Thus John McCain warned earlier this week that the defense cuts scheduled to happen under the budget sequester would cause the loss of a million jobs. It’s true that Republicans often seem to believe in “weaponized Keynesianism,” a doctrine under which military spending, and only military spending, creates jobs. But that is, of course, nonsense. By talking about job losses from defense cuts, the G.O.P. has already conceded the principle of the thing.

Still, won’t spending cuts (or tax increases) cost jobs whenever they take place, so we might as well bite the bullet now? The answer is no — given the state of our economy, this is a uniquely bad time for austerity.

One way to see this is to compare today’s economic situation with the environment prevailing during an earlier round of defense cuts: the big winding down of military spending in the late 1980s and early 1990s, following the end of the cold war. Those spending cuts destroyed jobs, too, with especially severe consequences in places like southern California that relied heavily on defense contracts. At the national level, however, the effects were softened by monetary policy: the Federal Reserve cut interest rates more or less in tandem with the spending cuts, helping to boost private spending and minimize the overall adverse effect.

Today, by contrast, we’re still living in the aftermath of the worst financial crisis since the Great Depression, and the Fed, in its effort to fight the slump, has already cut interest rates as far as it can — basically to zero. So the Fed can’t blunt the job-destroying effects of spending cuts, which would hit with full force.

The point, again, is that now is very much not the time to act; fiscal austerity should wait until the economy has recovered, and the Fed can once again cushion the impact.

But aren’t we facing a fiscal crisis? No, not at all. The federal government can borrow more cheaply than at almost any point in history, and medium-term forecasts, like the 10-year projections released Tuesday by the Congressional Budget Office, are distinctly not alarming. Yes, there’s a long-term fiscal problem, but it’s not urgent that we resolve that long-term problem right now. The alleged fiscal crisis exists only in the minds of Beltway insiders.

Still, even if we should put off spending cuts for now, wouldn’t it be a good thing if our politicians could simultaneously agree on a long-term fiscal plan? Indeed, it would. It would also be a good thing if we had peace on earth and universal marital fidelity. In the real world, Republican senators are saying that the situation is desperate — but not desperate enough to justify even a penny in additional taxes. Do these sound like men ready and willing to reach a grand fiscal bargain?

Realistically, we’re not going to resolve our long-run fiscal issues any time soon, which is O.K. — not ideal, but nothing terrible will happen if we don’t fix everything this year. Meanwhile, we face the imminent threat of severe economic damage from short-term spending cuts.

So we should avoid that damage by kicking the can down the road. It’s the responsible thing to do.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
gould's fisker's picture

We are four years from the stimulus bill and follow on efforts of keynsian stimulus, and beyond stabilizing the us economy immediately after the market crash of late 2007 very little has been accomplished beyond making said economy more and more dependant on government stimulus. So from that perspective krugman is right in so far as cutting government spending will inevitably lower GDP. But where he is completely dishonest is admitting that stimulus has not only failed but every day that government stimulus is made preeminent to market activity via government policy makes any private sector led recovery more difficult to achieve. Essentially. Krugman and his gang avoid the issue of the economic inefficiency produced by government management of the economy. The best example is green energy which has been made totally inefficient with recent discoveries of shale oil and gas, demonstrating why a properly overseen (overseen so private sector participants don' turn into crooks) market is far more efficient than an economy run by bureaucrats. Self interest will drive investments into profitable enterprises, while government interests continue to pursue a losing proposition in already failed green initiatives. This is the argument that krugman avoids because he knows his economic ideology has already failed. He just won't admit it. Similarly, the government continues to subsidize student loans without focusing on creation of jobs to begin with--a lack of trained workers only comes into play when an excess of jobs can't be filled. Current economic policy contends that education alone will produce jobs and a vibrant economy, and this is clearly not occurring. Failed policy all around. Krugman is therefore a charlatan and a disgrace.

PAWNMAN's picture

A few other prime examples are Amtrak and the good ol US Postal Service. Billions in red ink year after year.

JPMorgan's picture

Ok how much?

What was your price Krugman to puke this bullshit piece out.

The responsible thing to do... please.

Confront it now, confront it later the result is going to be the same.

sawman's picture

Now kicking his arse down the road a spell. That would be the responsible thing to do.

Freewheelin Franklin's picture

OK. Let's follow Prof. Krugman's line of thought.


How long can the Fed hold interest rates down? What happens when CPI hits 3-3.5%? The Fed will have no choice but to raise interest rates. Then, all of the debt will have to be financed at higher interest rates. Which means higher interest payments on the debt. So, the Treasury will have to borrow even more money to make the interest payments on the debt, and 'round and down we go. But maybe that's not so bad.


Prof Krugman may have a Nobel Prize in economics, but he don't know shit about finance.


And, BTW, that Nobel Prize he got was for work on Comparative Advantage against Ricardo's Theory. Ricardo was recently shown to be correct and Krugman wrong by 2 economists at.....wait for it......MIT. Krugman's alma marter.

NitneLiun's picture

Krugman received his Nobel for work in the study of global trade patterns. I have to remind his googly-eyed lefty groupies of that fact more frequently than I would like.

Freewheelin Franklin's picture

IIRC, his study was too reliant on technology. Soemthing like, countries that are more technologically advanced have an advantage over those not. That may have been true to some degree in the 70s. Not so much, today.

Room 101's picture

OT.  Here is some other information you need to be aware of.  Black swan in the making in agriculture. 

What has happened: huge over winter bee colony losses throughout the U.S. and into Canada this year. Really, really bad. And beekeeping hasn't been doing exactly well in the past 20 years.

What's the impact: farmers of fruits that need pollinators are going to be scrambling. Almonds, apples, berries, cucumbers, peppers, tomatoes, strawberries.  

Disclosure: I'm a beekeeper but not a gambler in commodities.

Link to two articles on the almond pollination season coming up now.  Almond growers can't get enough bees for ANY price.  Beekeepers can't provide what they don't have and the almond pollination is the most profitable event for beekeepers every year bar none.  Honey is just a byproduct that pays for gas.  The pollination is where the money is.



NitneLiun's picture

So I should be long almond futures?

Room 101's picture

Folks in places like Texas and AZ have them and work them.  Same with South and Central America.  They're just ornery as hell. 

Room 101's picture

That might be one takeaway.  Pollinator services are cheap compared to the value of the crop.  But if you can't get pollinators your crop doesn't set and you are F-u-c-k-e-d. 

Uber Vandal's picture

Add a drought, maybe a dash of locusts, and the hunger games may no longer be a book or movie series......

It has been said that we would follow the honey bee into oblivion.

Old article below, but spot on.

Room 101's picture

Very good article, and not much has changed.  Last year was very good for beekeepers and the thought was that we might finally be turning the corner.  Looks like we did...right into the path of a speeding train. 

Globalism at work. Stay hungry my friends, stay hungry. 

falak pema's picture

kicking the can to save Pax Americana and the NWO, is adding insult to injury.

Kicking the can to muzzle the Oligarchy, reestablish rule of the representative people, to nationalise the oligarchy market with the extirpation of its inherent evil of fractional reserve and banksta derivative fed oligarchy; to reinistate the real economy under true unfettered, non polluted government and strict regulation, yes; I'll buy into a return to responsibilty of elected, separation of powers and people centric market capitalism. Balance...

But Krugman does not speak for that as aim, he speaks for current oligarchy as the POLITICAL STATUS QUO and kicking the can as a means...sterile stockholm syndrome reasoning. Better to let this beast die, whatever the price to the people.

Don't sell human values down the river for false gods. We will always rise again; thats history.

Super Broccoli's picture

imagçne I beleived what wad told to me during whatever campai,gn ...

ShrNfr's picture

The gentleman has peripheral artery disease of the cranium. Gangrene has set in. If you can't make it better, don't make it worse. Gad.

q99x2's picture

Arrest those pig bankers and gay economists. No more decadence. The world's too old for this bullshit.

topspinslicer's picture

Look at the eyes -- they scream RETARD (or acid tripping)

Atomizer's picture

Krugman comedy hour launches: Leaving links exposed to copy. :0


Constant-demography Employment (Wonkish But Relevant) - 

Persuasive Advertising Techniques, just not in Argentina. 

The New York Times Predictor


Don’t forget to click on the NYT predictor tab created back in 2006. You can produce your very own 2013 Krugman Newspeak headlines. /sarc

fdgdfgd's picture

He has an infinite ego and ambition, would kill to get closer to the inner circle, and he has got it all wrong. Thats why he does what he does.

The situation in the U.S. does not look very dissimilar compared to Europe, by the way.

monopoly's picture

I find this hard to believe that he really believes the lies he writes. Beyond words. My God.

NaiLib's picture

I happened to see Mr Krugman on Bloomberg the other week. First they called him a "Nobel Prize winner" (as do Zerohedge above). That is of course not correct. He ia a winner of "The Swedish Riksbank's Prize _in memory_ of Alfred Nobel". Not a Nobel Prize. Alfred nobel did never have the intention of giving economists anything at all.

Secondly. Mr Krugman spoke about Sweden with glittering eyes. "Sweden is a good place to live in" "They have high taxes, _mainly v.a.t._ (sales tax)" That is so far from reality you can come. The Sales Tax in Sweden is 25%, However Swedes pay _more_ than 60% of their earnings each year! Once again more than 60% of their earnings go to the centralized government.

If Mr Krugman is this sloppy with reality when talking about Sweden. How sloppy is he when talking about the US?

Im sure you can find a clip at with Mr Krugman talking.

Atomizer's picture

Monday Headline sponsored by DHS as PSA

Experts: Democracy, Freedom Increases Crime Rate

TNTARG's picture

You have to work "for the club" interests to have any chance of getting The Swedish Riksbank's Prize _in memory_ of Alfred Nobel.

Arbysauce's picture

What we need Krugman is more productivity. "Jobs" may or may not lead to that, and new government jobs at the margin will not.

Restate Krugman's "basic point" as "Slashing government spending eliminates sinecures and causes productivity to increase" and he has a great point. Where's my Nobel Prize in common sense?

The question is does Krugman believe his own BS? Maybe he is just a hater.

mark mchugh's picture

Here's the biggest flaw (of many) in Krugnuts reasoning:

The federal government can borrow more cheaply than at almost any point in history...


When the government has to borrow two dollars to get GDP to grow by one dollar, it's borrowing at 100%.


The first $5 Trillion in US government debt produced a $10 Trillion economy.

The last $10 T grew it by $5T.

Get it, Paulie?

Arbysauce's picture

I say change the GDP calculation by subtracting debt incurred. Krugman's ability to help the "economy" goes up in smoke. But no, Krugman doesn't want to admit that one risk taking entrepreneur is worth more than a thousand Krugmans. We want clarity, which is why I want a crash.

hooligan2009's picture

you mean more debt doesn't = more sales? hmm..unless you have a PhD, i'm not sure i am allowed to agree with you///sarc off!

From Germany With Love's picture

"...that the US department of injustice will prosecute authors of such drivel (and all those sell-side analysts who have had Buy recommendations in the 2009-2013 period)..."

No, no, no. Freedom of speech does include freedom to spout drivel, to say things that are wrong or misleading. It includes misleading advice. Everything else opens up the gate to dictatorship. What we need instead is mass media that act as an actual free market for  ideas and perceptions - where consumers get informed and which isn't biased towards some mainstream attitude which causes every dissident getting treated like a basket-case.

Krugman has a right to his own opinion and to publish it too; it's just that one doesn't have to agree with him.

Paracelsus's picture

Just got back from the public pistol range here in Cali.The range master said he had never seen anything like it (a group of fifty men and women getting firearm safety training thru a 2 yr. college). Then I almost get roadraged on the way home.Go figure....

casaananda's picture

Just fucking stack. And keep stacking.

Doug's picture

Krugman has the Stockholm syndrome.  Full blown.

IamtheREALmario's picture

More likely possessed by a demon.

besnook's picture

krugman must have a picture of wimpy in his wallet for inspiration because wimpy understood that a burger today for payment on tuesday was the best burger.

Miffed Microbiologist's picture

"So we should avoid that damage by kicking the can down the road. It’s the responsible thing to do."

Perhaps in Krugman's vernacular " kicking the can" means " kicking the ass". As in our ass. It makes a lot more sense in that context. Pompous asshole.


Mark1J's picture

Kicking the can soon to end.....the Dems in the Senate are going to propose a $120 Billion cut in spending over 10 YEARS. Problem solved!!!

malek's picture

Finally he lets the cat out of the bag and openly proclaims:

Let's do the easy thing now and the hard thing later!  (Has worked thousands of times before - NOT.)

ironmace's picture

I refuse to believe what I just read.

Downtoolong's picture

Come on, just one more money fix, you know, to hold us over til we catch a break. I promise it will be the last time.

Spoken like a true addict.



trendybull459's picture

we gave to mr.Krugman our comments on

because he is a member of....talking in english,we did it in english to by own comments

Chartist's picture

Say what you want, but when one of you guys, including Tyler Durden, wins a Nobel prize, I will take you seriously.

IamtheREALmario's picture

That is really, really, really stupid. Obama won a Nobel peace prize. If that does not tell you that the Nobel organization is a corrupt bunch of cronies, then nothing will. They give the prizes to their pet insiders, not to the people who deserve them... should be obvious.

Chartist's picture

A Nobel peace prize is a stupid award....

notadouche's picture

And the prize for voodoo economics is???????????????

IamtheREALmario's picture

Kinda uncomfortable with spoiled children who believe they only deserve the benefits and never the consequences of their choices, running the country and the world.

notadouche's picture

I question the notion that the federal debt to GDP under Bill Clinton etc... wasn't sustainable and not "real" due to the fact that when Bill Clinton left office his "goldilocks economy" was a farce due to phantom wealth, employment and "profits" from the Y2K sham, dot com fraud (essentially millions in temporary jobs, tax revenue and implied riches in tech that evaporated by 2001) and even throw in Tobacco settlement to the coffers (go ahead and throw in some real spending cuts due to welfare reform) all led to a false surplus that was destin to go the way of Verbal Kent/Kobayshi, and poof it was gone.  

Phony fraud phony fraud temporary fraud phony false fraud fraud fraud fraudfraudfraudfraudfraudfraudfraudfraudfraudfraudfraud.............................................


khakuda's picture

Thank you. Budgets balance magically when stocks trade at records vs GDP and enormous PEs.

notadouche's picture

Oh and don't forget that the Nasdaq was already in free fall, down 50% as his minions stole all the W's off the keyboards.  

goldenbuddha454's picture

Krugman is not even worthy of being quoted anymore he's so deluded.