A gray beard and a 2008 Nobel Prize in Economics go a long way to establishing a fellow’s credibility in discussing the current situation in Greece and how it relates to the U.S. economy. In his May 13 New York Times op-ed piece, “We’re Not Greece,” Paul Krugman gives us permission to breathe a collective “there-but-for-the-grace-of-Zeus-go-we” sigh of relief. “America’s fiscal outlook over the next few years isn’t bad,” Krugman calms.
No one can deny the soft-spoken economist’s brilliance nor his passion. Nevertheless, one can’t help thinking: what if Paul Krugman is wrong?
Like a good Socratic dialectician, Professor Krugman lays out the opposing point of view at the top of his essay before assailing it:
The crisis in Greece is making some people — people who opposed health care reform and are itching for an excuse to dismantle Social Security — very, very happy. Everywhere you look there are editorials and commentaries… asserting that Greece today will be America tomorrow unless we abandon all that nonsense about taking care of those in need.
In Krugman’s words of would-be reassurance, “America is not Greece.” No, not yet. But is it really true that our current fiscal road doesn’t eventually lead directly to Athens? More Krugman reassurance:
We still entered the crisis in much better shape than the Greeks…I wish that growth were faster; still, it’s finally producing job gains — and it’s also showing up in revenues. Right now we’re on track to match Congressional Budget Office projections of a substantial rise in tax receipts. Put those projections together with the Obama administration’s policies, and they imply a sharp fall in the budget deficit over the next few years.
First of all, entering the crisis in better shape than the Greeks isn’t exactly saying a whole lot. When King Lear decided to move in with daughter Goneril over daughter Regan because she allowed him to keep twice as many of his servants, he too used Krugmaniac logic: “Not being the worst stands in some rank of praise.” But in the quintessential play about entitlements, the retiring monarch wound up learning a pretty harsh lesson in what austerity programs really mean.
Second, those job gains were so good, they lowered the unemployment rate from 9.7% up to 9.9%. Oops. Make that “raised the unemployment rate.” In ancient Greece, that’s what you call a Pyrrhic victory. And how many of those newly-created jobs were short-term temporary Census positions? According to this government website an estimated 800,000 have been added to the payroll for a period of only a few months.
Third, CBO projections are about as reliable as the oracle at Delphi. As one economic wag described the CBO projection process vis-à-vis Obamacare on a recent Kudlow & Company panel, “Fantasy in, fantasy out.”
Fourth, Krugman claims “the Obama administration’s policies” will contribute to a sharp fall in the deficit. If Krugman could explain how the addition of a several-trillion dollar (not the bogus CBO “FIFO” numbers, but the real ones) new entitlement program will accomplish that feat, he deserves a second Nobel Prize.
In a May 14 op-ed entitled “Guess What Greece Has to Jettison,” Investors Business Daily argues it is precisely such a vast entitlement program–Greece’s single-payer health-care plan–that has put the Hellenic Republic in its current bankruptcy death spiral:
Greece was told that if it wanted a bailout, it needed to consider privatizing its government health care system. …The requirement…is a tacit admission that national health care programs are unsustainable. Along with transportation and energy, the bailout group, according to the New York Times, wants the Greek government to remove “the state from the marketplace in crucial sectors.”
This is not some cranky or politically motivated demand. It is a condition based on the ugly reality of government medicine. The Times reports that economists – not right-wingers opposed to health care who want to blow up Times Square – say liberalizing “the health care industry would help bring down prices in these areas, which are among the highest in Europe.”
Rahm Emanuel said it best: “You never want a serious crisis to go to waste.” As this IBD essay screams, “What more do we need to see?”
Already we’ve seen government agencies tell us that the initial estimates for the Democrats’ health care overhaul were too low. We’ve watched as patients have suffered in Britain and Canada because the large demand placed on their “free” health care systems caused them to be overloaded.
IBD is in good company in feeling insecure about Krugman’s sense of security. Nouriel Roubini, the economic Cassandra who utters future truths no one wants to believe, sees a much weaker recovery than Krugman. Roubini envisions an unemployment rate peaking close to 11% in 2010 and remaining “at a very high level for two years or more.”
Krugman, with pitch-perfect Socratic disingenuousness, facetiously dismisses his ideological position as “nonsense about taking care of those in need.” But after nearly three decades of just such care-taking has bankrupted Greece, who’s now stuck taking care of it? The European Union along with the U.S. taxpayer, courtesy of the IMF. Welcome to Bailout Planet.
Whatever you say about their methods, those older two Lear girls knew a thing or two about economics. No doubt they could have implemented their austerity program a bit more kindly, but they could tell a bloated entitlement mentality when they saw it. Let’s hope this November the American voter will elect someone who can learn a lesson from modern Greece and/or medieval England.