Over at Washington Monthly, Ryan Cooper wrote a nice, easygoing response to Michael Kinsley. As you may know, last week, Kinsley wrote, Paul Krugman’s Misguided Moral Crusade Against Austerity. In it, he tried to argue that the pro- and anti-austerity forces weren’t that much in disagreement. There were two problems with this. First, he made the major mistake of putting economics in a moral context. He made the critical error of writing, “I don’t think suffering is good, but I do believe that we have to pay a price for past sins, and the longer we put it off, the higher the price will be.” Kinsley was particularly attacked for that by various great minds. I also attacked him.
The second problem with Kinsley’s article is perhaps even worse, although it hasn’t gotten as much attention. It is just not the case that the pro- and anti-austerity forces are largely in agreement. I discussed this last year regarding a debate of sorts between anti-austerian Paul Krugman and pro-austerian Niall Ferguson on Fareed Zakaria GPS. I wrote:
And this is what Kinsley wrote. It is what austerity apologists always say: the anti-austerians are right that we need stimulus now but the pro-austerians are also right that we need austerity later. That’s what the anti-austerians say!
Cooper rightly notes that what Kinsley is really worried about is debt causing inflation. If you feel a little marginal about this stuff, I suggest reading the article. It is short and, I thought, very clear. What I want to focus on is this supposed connection between debt and inflation that the austerians are so concerned about. Check out this graph that shows bond rates since 2000:
Look at the extremes: 2000 and 2013. In 2000, our debt was low and getting lower. Yet the treasuries—the amount the federal government had to pay to borrow money—was high: almost 7%. In 2013, our debt is high and getting higher (although at a slowing rate). Yet the treasuries are low: about 1.5%. This is not an argument for federal debt causing high inflation. Of course, what’s really going on is that in 2000, the economy was doing great. The private sector was investing and thus there wasn’t a lot of spare cash around for borrowing. Now, the economy is doing poorly. The private sector isn’t investing that much. Instead, they are sitting on piles of cash looking for any safe way to use it. The safest way is in US treasury bonds.
We know, however, that most of the people who push economic austerity are not doing it out of concern for inflation. That is all a ruse. Instead, austerity and the fear of inflation is used to justify harming liberal policies. Of course, that’s not what’s going on with Kinsley. He’s just been fooled and frightened by those who want to destroy programs that Kinsley himself believes in. It’s sad.
Cooper’s article is actually about a brand new Kinsley article where he defends himself against Krugman and his “attack dogs.” I thought a lot more of Kinsley before I read it. He doesn’t seem to understand that the reason everyone imputes bad motives to the austerians is that neither economic theory nor economic facts support their position. I hope that Cooper’s article will help in that regard. But I doubt it. In the new article, Kinsley spews a lot of nonsense that I would think he would be smarter than. I’m afraid he’s lost all perspective.
Update (22 May 2013 9:18 pm)
One more thing. Kinsley seems to think that his austerity obsession is okay, because he thinks that the way to balance the budget is to raise taxes. That’s sweet. But it’s also naive. Austerity is overwhelmingly a conservative movement. That means that if austerity wins the policy debate, we are going to get something like the Ryan Budget, not the Progressive Budget.
None of that really matters, however. The point is the austerity position is wrong. If Kinsley got his wish and we balanced the budget with tax increases, it would still hurt the economy. And that’s what all this about: what is best for the economy. And the austerians are provably wrong.