If one is to believe New York Times columnist Paul Krugman, public debt and budget deficit are minor side issues. In his August 9th column, he speaks of the 'false fear factor' for debts. On May 31st, he embraced the notion that it does not matter much for growth whether a country has a debt-to-GDP ratio of 50% or 150%. Krugman reminds me of the former Belgian Budget Minister, the Walloon socialist Guy Mathot, who in the early eighties said that "debt comes naturally and automatically goes away again." Mathot went away, his mountain of debt remained.
Mathot was a charlatan and Krugman, who was awarded the Nobel Prize for Economics in 2008, is starting to become one. During that period, some Nobel Prizes had a political character: protest against the Bush administration. In 2007, former Vice President Al Gore re-born as an environmentalist received the Nobel Peace Prize. In 2009 it was Barack Obama, who had just assumed office as president. Officially Krugman was awarded the Nobel Prize for economic research on trade flows, but his columns against Bush allowed him to gain fame. He became a gunner of progressive America.
Krugman believes that only a big government with its spending can provide for sufficient employment through the Trinity: high deficits, high debt and high taxes. Krugman was obviously pleased with President Obama as world champion debt creator. When Obama took office in early 2009 the U.S. debt was 65% of GDP, now it's 105%. The Republicans in Congress wanted to slow the debt explosion by means of "automatic cuts". Krugman was furious: "That's a lie. We should not cut spending, we need to spend more", he wrote on February 22nd. Republicans were "fools". Krugman predicted a disaster. "Cuts destroy jobs and cause economic contraction." But the disaster did not occur. Meanwhile, the debt explosion slowed, the budget is somewhat under control and employment is increasing. There are limits to make debts.
Krugman is a Santa Claus on credit with the halo of a Nobel Prize winner. If the amount of the debt does not matter, Greece and Detroit would be economic heavens. Greece built a debt of 130% of its GDP, a deficit of 12% and falsified budgets. Krugman on June 17, 2012: "Greece is the victim". According to him, Greece has made mistakes but the blame lies with other European countries, such as Germany, that have to spend more. Krugman must go to Athens quickly, where he will be brought in as an Olympic hero. Detroit, which collapsed under a mountain of debt of $18 billion, is, according to Krugman on July 21st, "the innocent victim of the free market". The Nobel Prize winner should talk to ex-Mayor Kwame Kilpatrick about governing with foresight. He has to go to Detroit's jail for that though, because that is where the ex-mayor currently resides on the charge of corruption. Detroit's bankruptcy is not a natural disaster, but a man-made disaster.
In Europe, Krugman is increasingly becoming the authority against budgetary discipline. He is praised by the European left but his recipes are all self-defeating. When in 2010 the Greek crisis began, his advice was "more Greek government spending". How could that even happen with such a mountain of debt? Too high a debt crowds out public expenditures such as education, health care or public transport. High debts have antisocial effects. According to Krugman, the Dutch government is all wrong with its fiscal policy. With a deficit of nearly 4%, The Hague should "not cut", according to the Nobel laureate. 'Cutting back' is incidentally not the right word because the state budget is still growing, only slightly less quickly. Krugman never speaks of structural reforms. I recommend Geert Wilders, leader of the far right PVV and Emile Roemer, leader of the far left SP, share a subscription to the New York Times to quote from the works of the famous columnist during the budgetary debate in the Dutch parliament. Krugman is their man.
For the Netherlands and Europe, Krugman is the wrong man. In 2007 he published his book "Conscience of a Liberal", a leftist creed and title of his blog. The title refers to the book "Conscience of a Conservative" by Barry Goldwater. He lost to President LB Johnson in 1964 as a Republican presidential candidate. Americans did not want to experiment with the inexperienced and dogmatic Goldwater.
Krugman does not behave as a worthy Nobel laureate. He is a pamphleteer and degrades himself as an economic scientist. Actually, he is the Goldwater of leftist America, and soon of the European left as well.