Paul Krugman: Trump Is Putting Us on the Path to Economic Ruin
In a recent interview with the Economist, Donald Trump inexplicably took credit for inventing the phrase “priming the pump,” first used by economist John Maynard Keynes during the Great Depression. FDR used the expression to explain using deficit spending to stimulate the economy. In FDR’s case, that meant funding badly needed social services and programs to get Americans back to work. Trump is using pump-priming to excuse massive, deficit-increasing tax cuts for the rich.
Sure, the lies are terrible, but as Paul Krugman explains, the economics, the impacts of those tax cuts, are even worse.
Temporary deficit spending can sometimes help the economy. Krugman cites the 2008 financial crisis as an example, when “unemployment was very high, and the Federal Reserve—normally our first line of defense against recessions—had limited ability to act, because the interest rates it controls were already very close to zero. That was a time for serious pump-priming; unfortunately, we never got enough of it, thanks to scorched-earth Republican opposition.”
Our economy is very different in 2017: “unemployment is near historic lows; quit rates, which show how confident workers are in their ability to find new jobs, are back to pre-crisis levels: wage rates are finally rising; and the Fed has begun raising interest rates.” Whether or not we’re back to full employment is for the economists to debate, but Krugman notes, “the economic engine no longer needs a fiscal jump-start. This is exactly the wrong time to be talking about the desirability of bigger budget deficits.”
It is true, Krugman continues, that America could certainly stand to invest in infrastructure, even if it means borrowing: “We desperately need to expand and repair our roads, bridges, water systems, and more. Meanwhile, the federal government can borrow incredibly cheaply: Long-term bonds protected from inflation are paying only about 0.5 percent interest. So deficit spending on infrastructure would be defensible.”
But that’s not what Trump and his lackeys in the GOP are after. “He’s calling for exploding the deficit so he can cut taxes on the wealthy,” Krugman reminds us. “And that makes no economic sense at all.”
We can’t pretend that the so-called deficit hawks in Congress are going to put up a fight. Headlines may suggest that conservatives will object, but when have Republicans ever protested tax cuts for the wealthy? When that’s on the table, suddenly an exploding deficit doesn’t look so bad.
Just in case any of us are confused as to the GOP’s sincerity about its deficit concerns, Krugman leaves us with a simple test:
When they propose sacrifices in the name of fiscal responsibility, do those sacrifices ever involve their own political priorities? And they never do. That is, when you see a politician claim that deficit concerns require that we slash Medicaid, privatize Medicare, and/or raise the retirement age — but somehow never require raising taxes on the wealthy, which in fact they propose to cut — you know that it’s just an act.
The GOP talks a big game about fiscal responsibility, but somehow the 1 percent is never asked to step up.
Read the entire column.