Freedom Line Blog

If America continues to be a sober nation, there will be a time a few decades from now when Paul Krugman’s economic hypochondria will be viewed with the same sneering contempt as Paul Ehrlich’s crazed claims that hundreds of millions would die from famine in the 1970s and 1980s or the fears of the rise of Japan that dominated public discourse in the late 1980s and early 1990s (the old empire’s economic lost decade intervened).

On his blog at the New York Times today, Krugman frets aloud (his muscle memory prevents him from doing otherwise) that Americans may tank the economy by attempting to pay down their unsustainable levels of debt (further proof that Keynesianism is the economist’s version of a drunken weekend in Vegas). But the big story here is buried in the complaint that undergirds his thesis:

So what will happen? In the end, I’d argue, what must happen is an effective default on a significant part of debt, one way or another. The default could be implicit, via a period of moderate inflation that reduces the real burden of debt; that’s how World War II cured the depression. Or, if not, we could see a gradual, painful process of individual defaults and bankruptcies, which ends up reducing overall debt.

Hang on a tick. World War II? Hasn’t Krugman spent the past two years using every inch of column space available to him to advocate that President Obama embrace aggressive neo-Rooseveltism? But now it’s the war — not the New Deal — that ended the Depression? We know that Krugman is a specialist in non-falsifiable theories (if only the stimulus had been bigger …), but if the eight years that FDR had set aside for “bold, persistent experimentation” prior to Pearl Harbor weren’t sufficient to heal the nation’s markets, maybe that was a sign that the problem was strategic and not tactical. Maybe the Sage of Hyde Park should have taken some pointers from the benighted Warren Harding.

This is all a bit shocking coming from a Nobel Laureate. After all, if Paul Krugman doesn’t speak with authority on economics … then maybe Barack Obama doesn’t speak with authority about peace.