Though Republicans claim $2.2 trillion would be saved by their plan for long-term deficit reduction, economist Paul Krugman calls it a “vapor plan,” with few details on where savings will come from. Gwen Ifill talks to Krugman about why he thinks reducing the deficit too fast could push the economy back into recession.

Watch Krugman: Hasty Fix to Deficit Would Cause ‘Austerity Bomb’ on PBS. See more from PBS NewsHour.

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5 Responses to “Krugman: Hasty Fiscal Fix to the Deficit Would Cause ‘Austerity Bomb”

  1. mathdock says:

    I’m NOT a fan of the Krug, but for ONCE I hear a clear argument for Obama’s position that makes sense and what some real numbers the Speaker’s idea reaches. I have to agree the capping of deductions at some modest value won’t get but $300B, so it AND some rate increase is arguable–but don’t tell that to someone in California.
    Eliminating a department like Education, for example, is fine, but the savings would be reduced by the resulting unemployment checks that would have to be given, and the truly beneficial services would have to then be funded at the state level. Same for Defense; a third of the Defense budget CAN be cut (ret AF LtCol, not hard to find), but again, some very talented and well-paid engineers and scientists would be shown the door. Quite a short-term dislocation, I’d say. We can keep knocking off terrorists at a relatively low cost per missile hurled from a drone/autonomous or unmanned aircraft.

    Sadly, the only way to really get Medicare costs down is by figuring out how to lower the cost of end-of-life care. Do we go back to grandparents-in-the-home and palliative care, as was common in the 50′s and earlier? In other words, in some global sense, does the current approach to pursuing the best life-extending medicine in some way ruin the health of society in toto? Is anyone smart enough to say, “that’s enough”?

    It’s one thing to decry euthanasia, but where is the line? I’d like to think that if I saw the expected cost of curing a dangerous disease would exceed $200K I might consider not going there, because surviving it might mean I would die of a more expensive or debilitating disease of the brain, for example. How many stents is too many? How much cancer should I seek a cure for?

    If it was my own money, I’d be free to choose. But to use OPM, and the next generation’s money at that, do I ask what service of value I provide in return for that supply of care?

    Now on to K-man’s SocSec argument. He chose to ignore the much larger impact beyond ten years that bending the cost curve does and is the reason to start the process sooner than later. Other than that, I thought he made some good sense overall. Well, other than saying the deficit doesn’t matter right now. It won’t matter until it does, and then nothing else will matter. Sorry for the long comment, but it’s a worthwhile subject.

  2. lunartop says:

    Also of note Steve Keen – “Briefing for Congress on the Fiscal Cliff: Lessons from the 1930s”

  3. [...] Head Talks About the Fiscal Cliff Barry Ritholtz has the video. I haven’t watched [...]

  4. hestal says:

    There are plenty of ways to control medical costs. Just as there are better ways to manage other aspects of our economy. But the current political system is stacked against them. Krugman’s ideas are superior to those coming from the right.

  5. CharlesII says:

    Mathdoc says, “Sadly, the only way to really get Medicare costs down is by figuring out how to lower the cost of end-of-life care. ”

    This isn’t correct, especially in its implications. While it’s true that spending in the last six months of life is a major fraction of lifetime costs, the system is so riddled with inefficiency that improving the quality of care can reduce healthcare costs by one-fourth, as Grand Junction demonstrated.

    But there’s another aspect to inefficiency. Conditions like autism and dementia are so expensive to treat (though many of the costs are non-monetized costs that are dumped on the family) that it would make sense to focus research efforts on them. Instead, thanks to the deficit hysteria, there has been downward pressure on research for years.

    All government spending needs to be looked at as an investment, and healthcare is no different. But in looking at the investment, we have to look at costs that can’t be monetized, like the costs to the country of having a parent exhausting his or her life taking care of an autistic child. This is the real problem with the Republican economic world view. It only recognizes costs and benefits when they are incurred by private enterprise (or their wealthy contributors). The whole idea of government is to look at the larger picture: how do costs and benefits accrue to the nation as a whole?

    We should be leading the world in both quality of health care and cost reduction. Instead, we are leading the world in waste of dollars and human lives. All because Republicans are so damn blind.