Paul Krugman is an NYT op-ed columnist, economics professor at Princeton, and everything that is wrong with academic economics. His recent article aimed at blasting Rand Paul about a tweet is a great example of his academic shortsightedness.
His worst quote is the following:
“issuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers from obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates. So this is a very good time to be borrowing and investing in the future, and a very bad time for what has actually happened: an unprecedented decline in public construction spending adjusted for population growth and inflation.”
This would have made since back when the National Debt was 1/10 what it is today. Had that borrowed money been spent on infrastructure like Krugman is suggesting, we’d have amazing roads (maybe even paved in gold!), freeways, practically no student loan debt, an abundance of water retention systems in California, and massive alternative energy infrastructure. Instead, our roads are in horrible condition and cost us an average of $515/month (after double taxes – income and excise- mind you).
Sure, Krugman’s statements make sense on paper. I’ve seen this kind of thinking before when I was studying economics in college. It’s the same shortsightedness that had me question whether a degree in economics was worth anything more than the paper it is written on. Spoiler alert: the ink costs more than the paper.
Earlier this year, Krugman wrote another half-witted articles about debt (amongst so many others).
With statements like “Because debt is money we owe to ourselves, it does not directly make the economy poorer (and paying it off doesn’t make us richer)”, Krugman proves that studying economics at Princeton is a waste of money. First, our national debt is not owned entirely by American citizens. Second, owing YOURSELF money is fine (great example is taking a loan against your 401K) ONLY IF you pay it back. At some point, you aren’t going to have income, and if you’ve borrowed your entire 401K, you’re really hurting your retirement as well as what you are leaving behind for your family. The argument that the microeconomics doesn’t apply to the macroeconomics is false.
It’s certainly a reasonable argument to make that America borrowing money from itself and then paying it back is a good thing much like borrowing from a 401K is a good thing for an individual. However, if that money doesn’t get paid back and just piles up instead, you’re left with an accelerated increase in debt:
Even adjusting for inflation, the $4,118 only equals a mere $11,926.11. That’s quite a bit off from the $57K each citizen owns. It gets even worse when you only count taxpayers.
Borrowing and paying back is fine, but that’s not what America is doing. We’re borrowing and then having someone else pay it back (maybe, if they can). That’s called a Ponzi scheme. If America was borrowing from itself (which it isn’t since 35% is foreign owned) and paying back the debt within a generation, we’d see a much smaller national debt than the $18MMM+ we currently have.
At the end of the day, it appears Krugman is too smug with his academia version of national debt that he can’t see the flaws of his logic when applied to the real world as opposed to the fictitious one in which he wants to believe actually exists. He’s played his cards right and gotten to a level of academic prestige, which is great for him and the New York Times; not so good for public perceptions of debt.