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Austerity on the Ropes: How Krugman Is Winning the Battle and Obama Is Losing the War

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Ideas matter in American politics, no matter what you hear from the pundo/cynical class. They don't necessarily have to be good ideas. Austerity hawks have won the political debate about economic policy for 30 years on a combination of fakery, ideology and repetition. They were helped by the left's inability to articulate an alternative to be sure, but they won, and we're paying the price for it now.

In comes Paul Krugman of the New York Times. Almost single-handedly he has made the case for stimulus and investment, and disemboweled the idea that spending cuts will get us out of this long, slow glide to economic oblivion. It's been an impressive effort. He has explained the theoretical clash well. He has examined the evidence of other economies who have tried austerity and failed. He's called out the avatars of reduced spending and how their predictions of inflation in the U.S. and boom in German-dominated Europe were just wrong.

He's also been justly critical of the politics of the pro-Keynesian camp. Krugman recognizes the long-term unsustainability of large budget deficits. But as he's repeatedly pointed out, again today, is that Keynes wasn't pro-debt. He showed that deficit spending was the way out of economic contractions to be sure. But he also posited that when the economy was booming, debt should be paid down.

The politics of budgeting have not been able to accomadate both ends of the Keynes spectrum. The left has been all for stimulus in bad times. But it's missed the other side of the equation: In good times, pay down the debt. Other than a two year exception under Bill Clinton, the prevailing attitude has been that our needs are so great, let's invest when we have the cash. As understandable and humane and instinct as this may be, it's yielded a political distrust of the Keynesians ability to manage fiscal policy.

Don't get me wrong. This sin is small and forgivable compared with the right's enthusiastic embrace of two wars, massive tax cuts, and huge borrowing. In the race for the title of "Worst Economic Manager" the Republican right sweeps the field.

But we are where we are. Krugman's superior theorizing bumps up against a wall of invincible ignorance and militant stubbornness. The Republican/Tea Party insistence on austerity is ultimately not a function of theory and ideas. It is a reflection of a cultural antipathy toward the Federal government. Any economic theory that cuts back federal power and activity will be embraced, damn the economic consequences to the Nation.

Which undercuts my opening sentence. An admirable willingness to debate economic policy, and Krugman's rapier-like writing will get the country nowhere in the face of this more profound
ideological gridlock. That task fall to Obama, to the President, who alone in our system can make the argument to the American people about what's at stake here.

I'm not an Obama basher. Having spent years in the New York State Legislature I've seen how difficult it is to move an entrenched majority. But it's time for Obama to take on the task. There may be benefit in his criticism of the piecemeal restorations of air service and other cuts which affect Republican Congressmen. But we're down to the essential decisions now, and only an outcry from the American people will push the House Majority into abandoning fiscal austerity. So congratulations, Paul, for defining the issues well and truly. Let's hope Obama is reading your column and understands that the torch has been passed into his hands. It will take a politician, not an economist, to solve this problem.