I didn’t get my Newsweek in the mail until yesterday, after the Krugman vs Ferguson dispute had played out. But after reading the article in Newsweek (Why Obama Must Go), I’m thinking Niall Ferguson and Paul Krugman are more political pals than rivals.
Describing the debt to GDP ratio as reaching 70% when it should have fallen to 66%, Prof. Ferguson makes the argument that the more important ratio is the debt to revenue ratio, which has risen to 262%. The argument he is making is that we are taking in too few taxes, an argument with which I think Prof. Krugman can agree.
Later, he notes that the fiscal stimulus of 2009 had faded fast, implying, as has been Prof. Krugman’s signature argument, that it should have been larger. Then he takes the President’s health programs to task for not being change enough to truly bend the cost curve. Critiquing the President’s economic plan, Prof. Ferguson argues that it did not adequately resolve the central problem of financial concentration, an argument against the 1% on which Prof. Krugman has spent much ink. Criticizing Dodd-Frank for its gargantuan 243 rules, 67 studies, and 22 reports (does that sound like a lot?), he launches into a criticism that the large banks were not broken up and remain a significant danger to the economy and the country. Could Prof. Krugman have said it more succinctly?
Prof. Ferguson continues by castigating the President for sidelining Simpson-Bowles, whose $3 trillion in cuts and $1 trillion in added revenues would have dramatically improved the budget problem (though as I remember it, it was Republicans on the panel who voted it down because it had any added revenues). I think Prof. Krugman would also applaud something on the order of Simpson-Bowles, and he and Prof. Ferguson can propose a toast to their agreement on such substantial issues.
The professors part, I’m sure, over some of the other prescriptions in Prof. Ferguson’s article. He proposes increasing defense spending while applauding the Ryan budget plan which will lower taxes, and somehow by the miracle which evaded Ronald Reagan, balance the budget. But these seem a mere fracas among friends amidst what seems like much agreement.