Sunday, July 31, 2011

Krugman: Proposed Debt Deal Will Cost Jobs And Revenue

Nobel Prize winning economist Paul Krugman is very disappointed with President Obama and the Democrats for allowing the Republicans to control the messaging frame of the debt debate. Krugman warned during his comments on ABC's This Week Sunday morning that the proposed spending cuts in a deal to raise the nation’s debt ceiling would end up hurting the economy.
“These spending cuts are even going to hurt the long-run fiscal position, let alone cause lots of misery, said Krugman on ABC's This Week Sunday morning. Then on top of that, we’ve got these budget cuts, which are entirely — basically the Republicans [saying], ‘We’ll blow up the world economy unless you give us exactly what you want’ and the president said, ‘Okay.’ That’s what happened . . . We’re having a debate in Washington which is all about, ‘we’re going to make this economy worse, but are we going to make it worse on 90% of the Republican’s terms or 100% of the Republican’s terms?’ And the answer is 100%.”

Krugman insisted, “from the perspective of a rational person, in other words, a progressive on this stuff, we shouldn’t be talking about spending cuts at all now.”
Krugman’s grim forecast, as a result of Democratic “compromises” with Republicans, which focus on spending cuts, is that the American economy will experience worsening unemployment and general misery in the future.

Krugman repeatedly stressed how bad the situation is and how America will experience economic consequences even worse than Japan’s “Lost Decade.” Yet George Will cheerfully responded that if Krugman thinks the argument that Democrats should be making to the voters is that “government is too frugal” then Will is ready to have that election right now.

Krugman told ABC’s Christiane Amanpour, “We have nine percent unemployment. These spending cuts are going to worsen unemployment… If you have a situation in which you are permanently going to raise the unemployment rate — which is what this is going to do — that’s actually going to reduce future revenues.”

“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,” he added. “There is no light at the end of this tunnel.

Watch the clip from ABC below:

During a speech on the Senate floor Saturday, Independent Vermont Senator Bernie Sanders called on President Barack Obama to invoke the 14th Amendment to raise the federal debt ceiling.

“The Constitution is very clear in saying that the debts of the United States shall not be questioned,” he said. “The president swears an oath to protect and defend the Constitution, and many constitutional scholars believe the 14th Amendment gives the president the authority and responsibility to pay our debts regardless of the dysfunctional state of the U.S. Congress. I think that’s just what he should do.”

Watch video, courtesy of, below:

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