One of the frustrating things about reading Paul Krugman’s blog regularly, as I do, is that I so often have to cut through his nastiness to see if he’s actually saying something important and, even better, true. Why do I read him? Because he often expresses important thoughts and sometimes they’re right.
A recent instance where he’s right in important places is his October 8 post, “Default Deniers.” If you read only the title, you would probably think that he’s castigating people who think that the U.S. government can avoid a default on the federal debt and that he’s doing so because they’re wrong. After all, what does the word “denier” mean? In Krugman’s world, it usually refers to someone who denies something that is true.
But although Krugman’s tone towards those people is fairly nasty, when he gets to the actual issue, Krugman comes close to admitting an important point that many of those he criticizes have been saying: that the U.S. government, absent an increase in the debt ceiling, could prioritize payments of interest and principal to those who hold U.S. federal debt. I wrote about this here over 2 years ago. I’m not commenting on the wisdom or morality of doing so. I actually think holders of debt should be last in line because, unlike those who are owed Social Security, those who bought U.S. government bonds (and I include myself) did so voluntarily. I’m just pointing out, as Krugman almost is, that it could be done.
Where does he almost admit this point? Here’s his key paragraph:
The higher denial involves asserting that the government can prioritize, so as to avoid a default on interest payments, that this would avoid damage to the financial system, and that this means that everything will be OK. This is what you’re hearing, for example, from erstwhile respectable Republican economists, who have (surprise!) mostly fallen in line as the crisis looms. The crucial point here is that even if they’re right about interest payments–which is unclear–the government will (a) still go into default on obligations to vendors, Social Security recipients, and so on (b) be forced into spending cuts so large as to guarantee a recession if the standoff lasts any length of time.
Krugman has real trouble admitting that those whose views he dislikes have a point. So he doesn’t come out and say that they do. He, instead, does it in typical Krugman fashion.
First, he says they’re “erstwhile respectable.” “Erstwhile,” of course, means “in the past.” So could one be “erstwhile respectable” and also be currently respectable? One could. But it seems clear that he wants his careless readers to think that because these economists–oh, and by the way, they’re, ooooh, ick, yuck, Republican!–are “erstwhile respectable,” they’re not respectable now.
Second, he writes “even if they’re right about interest payments.” That opens the door to the idea that they might be right.
Third, he half closes the door by saying “which is unclear.” Why would it be unclear? Blankout, as Ayn Rand would have said. He doesn’t tell us. It’s probably because he can’t. It’s actually quite clear.
Fourth, he moves the goal posts. Whereas the original discussion had been about whether the U.S. government could pay interest and principal in full without raising the debt ceiling, Krugman redefines “default” to being not about default on the debt, but, rather to being “default on obligations to vendors, Social Security recipients, and so on.”
Krugman is a master at this. If I were trying to teach someone how to write clearly, I would use many of Krugman’s posts as examples of something to avoid. (On the other hand, I would use a large percent of his popular writing in the 1990s as a model to emulate.) However, if I wanted to teach someone how to attack a person or an idea while still not actually refuting the idea, I would use as a template many of Krugman’s posts, especially the one I’m commenting on here.
READER COMMENTS
blsdaniel
Oct 10 2013 at 10:46pm
“Third, he half closes the door by saying “which is unclear.” Why would it be unclear? Blankout, as Ayn Rand would have said. He doesn’t tell us. It’s probably because he can’t. It’s actually quite clear.”
David, you should add Ezra Klein to your reading list (assuming he isn’t there already). He has had several posts on why, even if it’s mathematically possible to pay the interest on just revenues, it likely isn’t practically possible, as the computer systems used to pay government invoices are not capable of doing so from either a hardware or a software point of view.
And, if anyone thinks that putting new hardware and software into place is a quick job, let them recall the experiences we’re going through now with the Obamacare start-up.
wm13
Oct 10 2013 at 10:48pm
[Comment removed for ad hominem remarks. –Econlib Ed.]
blsdaniel
Oct 10 2013 at 10:55pm
P.S. Here’s a link to a post by Klein about the softward/hardware issue I raised above: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/10/04/absolutely-everything-you-need-to-know-about-the-debt-ceiling/
One final thing: you’re absolutely right about the sudden use of “default” to describe any payment shortfall. I guess it was just too scary a word to let go of.
David R. Henderson
Oct 10 2013 at 11:39pm
@blsdaniel,
Thanks for the link. Yes, the feds do seem to be super screwed up.
chase
Oct 10 2013 at 11:49pm
I mostly agree with the point of this post. Krugman’s cynicism has seemed to increase proportionately with his popularity. Doesn’t seem much different to me than Scott Sumner’s posts except that Krugman has a clear targeted group in Republicans while Scott’s criticism targets are a little more ambiguous, but might be classified as anyone who isn’t generally accepted as a contrarian. The only thing I would say is that it seems to parallel Keynes’ direct assault on the Austrian school (and specifically Hayek and Mises) in his General Theory. We live within a political system where discrediting those you disagree with is valued more than the ideas you bring to the table. That being the case, if Krugman’s aim is to affect public policy then his turn to lashing out across the isle could be intentional, and even crazier, it just might be effective.
Although I think your critique of Krugman’s candor is accurate, I would just caution that your entire blog about Krugman being nasty and cynical is, well, nasty and cynical.
blsdaniel
Oct 11 2013 at 12:47am
@David,
If by “feds” you mean Congress, you’ll get no argument from me. But the issues of the computer system used to handle government invoices seems to be an issue of someone getting what they asked for. If no ability to prioritize was requested when the system was made, it’s hardly surprising none exists.
I suppose it can be claimed, in retrospect, that it should have been obvious that such functionality was desirable. But given how many invoices hit the system each month (apparently close to 100 million) and how much weaker computers were years ago, it may have simply been the case that it would have been too complex and expensive a feature to include, especially for what would then have appeared to be a purely theoretic situation.
David R. Henderson
Oct 11 2013 at 1:31am
@blsdaniel,
If by “feds” you mean Congress, you’ll get no argument from me.
No. By “feds,” I mean the U.S. federal government. That includes Congress but also, of course, the executive branch and the judiciary.
David Friedman
Oct 11 2013 at 1:49am
I believe Krugman is wrong about social security recipients. Given the odd accounting for the SS trust fund, the debt limit doesn’t affect it.
Suppose the trust fund needs a billion dollars from the treasury. The treasury diverts a billion dollars of revenue to the trust fund. Doing so reduces the amount the treasury owes to the trust fund by a billion, which reduces the national debt by a billion, which permits the treasury to borrow another billion and spend it on whatever it had planned to spend the first billion on.
I discussed this in a blog post last time around:
http://daviddfriedman.blogspot.com/2011/07/social-security-debt-ceiling-and-obama.html
Brad
Oct 11 2013 at 3:37am
Who honestly believes this administration would allow a default? I don’t. Come 18-Oct, OMB does not order the Treasury to change course and everything remains status quo. Sure, the Treasury failed to honor the statutory debt ceiling but the consequences of this action < consequences of default. In other words, what could be done if the administration decided to not honor the debt ceiling? Not much.
David R. Henderson
Oct 11 2013 at 9:51am
@chase,
Although I think your critique of Krugman’s candor is accurate, I would just caution that your entire blog about Krugman being nasty and cynical is, well, nasty and cynical.
I agree with you about accuracy but disagree that it’s nasty and cynical.
@David Friedman,
Good point. I had seen you and others make it last time around and I should have made it here. I think I might have even made that point in a post last time around.
Hazel Meade
Oct 11 2013 at 10:07am
@David Friedman:
That’s only the case if SS brings in more revenue than it spends. I.e. if there is a SS “surplus”.
If I recall correctly, SS started paying out more than it takes in last year.
That might have changed with the payroll tax hike on Jan 1, but I haven’t heard any news about it lately.
RPLong
Oct 11 2013 at 10:12am
If The Last Psychiatrist had not already claimed the title, this one would have gotten my vote as blog post of the year. Excellent analysis, Prof. Henderson.
Patrick R. Sullivan
Oct 11 2013 at 12:05pm
You think there are going to be a lot of investors willing to buy T-bonds that haven’t been authorized by congress (as the Constitution requires)?
Mark
Oct 11 2013 at 12:23pm
[Comment for name-calling.–Econlib Ed.]
Daublin
Oct 11 2013 at 1:07pm
Very nice digging, David! I am glad to be able to say that Krugman has conceded the main point.
To Mark’s point, I broadly agree that we are seeing theater. It looks like we really can freeze the debt ceiling, and the only bad effect will be that some government services we are used to having will go away.
Interestingly, if the budgeting is done via the debt ceiling, then the president gets to select what gets defunded.
@bisdaniel: The president is already shutting down specific payments that he considers lower priority. It’s being called a “shutdown”, despite the majority of the government continuing to operate.
@chase: I think David’s comments about Krugman’s tone were pretty level headed. Reread the quoted paragraph and ask whether someone ought to call Krugman out on it.
Floccina
Oct 15 2013 at 4:40pm
How are we owed anything from Social Security? We bought nothing, we paid for nothing. We were taxed to pay to current recipients. In fact it would make more sense to take the FICA collected each month divide it by the number of recipients and send that amount to each recipient. SS is a welfare program we are not owed anything at all.
Because people are hoping and betting that they get something from SS, we should avoid stopping it suddenly.
IHMO we should CPI increases for those who get more than $700/month in today’s dollars until everyone gets same amount (equal to $700/month in today’s dollars).
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