On ABC’s This Week, Paul Krugman warned that the proposed debt ceiling deal is going to make unemployment worse and cause more misery for the American people.
Here is the video from ABC News:
When asked about the spending cuts in the debt ceiling deal Krugman said,
We shouldn’t even be talking about spending cuts right at all now. We have 9% unemployment. These spending cuts are going to worsen unemployment. It’s even going to hurt the long run fiscal picture, because we have a situation in which more and more people are becoming permanent long term unemployed, and if you have a situation in which you are going to permanently raise the unemployment rate, which is what this is going to do that’s actually going to reduce future revenue, so these spending cuts are ever going to hurt the long run fiscal position let alone cause lots of misery, and then on top of we’ve got these budget cuts which are entirely, basically the Republicans we’ll blow up the world economy unless you give us exactly what we want, and the president said, ok. That’s what happened.
Krugman laid out the scenario for America if we cut spending and don’t increase revenue,
We’re looking; I mean we used to talk about the Japanese and their lost decade. We’re going to look to them as a role model. They did better than we’re doing. This is going to go on. I have nobody I know who thinks the unemployment rate is going to be below 8% at the end of next year. With these spending cuts, it might well be above 9% at the end of next year. There is no light at the end of this tunnel, and the revenue debate in Washington, which is all about gee, we’re going to make this economy worse, but are we going to make it worse on 90% of the Republicans’ terms or 100% the Republicans’ terms and the answer is 100%.
While we have all gotten caught up in the politics of determining winners and losers the debt ceiling battle, it is important to look at the actual economic impact of any deal that is based on the framework that is being reported right now. Recessionary economies don’t improve with spending cuts only. Cuts without addition revenue strangles the system even more, and makes things worse.
Democrats have completely lost sight of the fact that Republicans aren’t trying to rationally or logically solve the problem. The people on the other side of the aisle are governing strictly by ideology. What matters to them isn’t the outcome, but the implementation of their belief system about the economy.
The most frustrating thing about this debate is how, not just Obama, but all Democrats have been willing to discuss the debt ceiling on Republican terms. Spending cuts should have never factored in to raising the debt ceiling. Yet, I have not heard a single progressive or Democrat in Congress or the White House stand up and ask why are we talking about spending cuts? This is about the debt ceiling. The two aren’t the same thing.
This isn’t just on Obama. It is also on all of those progressive activists who are screaming don’t touch entitlements. They also bought into the Republican construct. The left should have been screaming in unison with the Democrats in Congress that that there will be NO votes for any deal that ties spending cuts to raising the debt ceiling.
Those on the left who are angry at Obama tend to forget that leadership goes both ways. If they feel that this president is getting off course, then the pressure should be placed on congressional Democrats to lead, and right the ship. As it stands, only our resident socialist Sen. Bernie Sanders, who isn’t a Democrat, has called this what it really is.
The most frustrating thing that all of Washington seems to be oblivious to the fact that millions of people in this country are going to lose or not be able to find a new job because of this deal. By averting a crisis they have added to our problems.
It is still debatable whether this deal will have the votes to pass. Our government is so dysfunctional that nothing may pass. The economic consequences of doing nothing and going into default would certainly be worse than this deal, but the millions of Americans who are struggling right now are likely to be screwed either way.