Benjamin Studebaker

Joe Scarborough, a former congressman and currently a co-host for the show Morning Joe on MSNBC, had Paul Krugman on his show the other day (you can view the clip in its entirety here). In the segment, Krugman gave what amounts to a standard Keynesian view of the global economic crisis–spending cuts damage growth, the stimulus package was insufficiently large, debt and deficits should be tackled only once growth has been restored, and so on. For those of us who check in with Krugman on his blog, they amount to the key set of Keynesian insights Krugman chooses to highlight. What is much more interesting is the opinion piece Scarborough wrote afterwards, in which he demonstrates that, like Jon Stewart, he is not an economist.

Scarborough’s response to Krugman consists primarily in highlighting the fact that he knows a lot of people who don’t agree with Krugman:

maintaining calm was not as easy for Council on Foreign Relations president Richard Haass, who agrees with former Joint Chief chairman Michael Mullen, that longterm debt poses the greatest threat to America ‘s national security. Richard took exception to the suggestion that deficits don’t matter and that longterm debt can be pushed to the side for years to come . Mr. Haass, Admiral Mullen and former Clinton chief of staff Erskine Bowles all believe that entitlements and debt are the most pressing challenges we face as a country over the next few decades.

Yes, lots of people believe that debt and deficits are the most important challenge and that they must be addressed right this moment, but Krugman’s argument is that these people are wrong, that they have not based this belief on any sophisticated economic reading of data but on a mere arbitrary consensus. To say “I know lots of people who don’t agree with you” does not invalidate the argument that “lots of people believe X, but lots of people are wrong”. It is incumbent upon Scarborough to demonstrate why all of these people aren’t wrong and why Krugman is wrong instead. What he offers here is the fallacy of argumentum ad populum, the notion that because many people believe a thing, it must be so.

Scarborough goes on to drop another name that disagrees with Krugman, but this time expects it to be more persuasive on the grounds that this person used to work for the Department of the Treasury:

That response drew a spirited email from former Treasury official and “Morning Joe” regular Steve Rattner in defense of Mika’s analogy, who wrote the following:

“We are putting millions of tons of carbon in the air every day; we are also adding billions of dollars to our future entitlement obligations every day. We are borrowing (stealing?) from our children to pay far more in benefits to seniors than we are paying into the system.

We have something like $60 trillion in unfunded liabilities to Medicare and Social Security. Paul Krugman would like us to just wait until those programs run out of money, at which point those unfunded liabilities would be just that much larger.”

Scarborough does not bother to mention that Rattner’s work for the Treasury was not in the formulation of macroeconomic policy but was primarily confined to the auto industry rescue. There is no reason to assume that his expertise transfers. As for Rattner’s comparison of Krugman’s views on the deficit and entitlements to climate change, with cursory research, either Rattner or Scarborough could have found Krugman’s response to just such an argument:

It seems probable if not certain that we will eventually either have to cut SS benefits (relative to current law) or raise additional revenue. So the threat, if you like, is that future benefits will fall short of what people now expect. To avert this threat, the usual suspects insist that we must gradually reduce the program’s generosity. That is, in order to guard against cuts in future benefits we must … cut future benefits. Huh?

Krugman also points out that, with climate change, every moment you do nothing directly worsens the problem (more carbon emissions, more misplaced investment in the wrong technologies, etc.). In contrast, with entitlements, there are myriad unknowns that can change the equation–the size of health care cost increases, GDP growth, immigration, birth rates, all manner of things. On top of that, the leap is often made that, were we to address entitlements, the only way we could do so would be to cut them–but, as Krugman points out, isn’t that precisely what we are trying to avoid? And what about revenue? Were the payroll tax cap, which prevents payroll taxation of revenue above the $110,000 threshold, to be removed, Social Security would be made solvent for a minimum of 75 years. Are we really meant to reduce benefits now so that 75 years from now we might not have a problem? So much can happen in 75 years. The programme was only created in 1935–it was 75 years old in 2010, and the conditions expected to prevail in 1935 certainly did not correspond to the world as we saw it three years ago. By the time there’s any chance of danger, the programme’s life will have been doubled. The argument for benefits cuts really goes something like this:

1. Right now, with a minimal reform, we could double the lifespan of Social Security.
2. However, because the programme could have problems at the end of that lifespan, we should not do this.
3. Instead, we should cut benefits.

Here’s a hypothetical equivalent argument to the scaremongering over entitlements :

1. Right now, with the push of a button, we could double the lifespan of all human beings.
2. However, because people would still be at risk of dying eventually, we should not do this.
3. Instead, we should all eat less, have less fun, and experience a poorer quality of life.

Functionally, we have doubled the human life span (from around 40 to around 80 in the developed world), so the hypothetical, while silly, is not even altogether ridiculous. It illustrates the same principle–in the pursuit of guaranteed immortality right this moment, entitlement opponents are willing to take a pass on higher quality longevity with the potential for further extension down the line.

Scarborough closes his piece by ridiculing Krugman’s Nobel Prize (which he mistakenly says indicates that Krugman is “valued by Norwegian royalty”–the prize is awarded by the Royal Swedish Academy of Sciences) and by posting a couple of scary graphs showing how big the debt is. What Scarborough misses is that the fact that the debt exists is not proof of its potential for harming us. One must make an economic argument illustrating how debt and entitlements will do us in, something I suspect that Scarborough does not know how to do and could not provide, both because he is not an economist or a social scientist or theorist of any kind–his academic background is in law–and because there is no rational basis for such an argument.

Note:

This piece is a response to Joe Scarborough’s position. It presupposes some familiarity with the Keynesian arguments concerning debt and deficits. One who is not familiar with these arguments may, understandably, be sceptical of them. In addition to Paul Krugman, there are a wide variety of Keynesians making similar arguments in greater detail than this post has space to convey–Brad DeLong, Joseph Stiglitz, and the Federal Reserve Chairman Ben Bernanke all come to mind. Or, if you’d rather just read more of my blog on the subject, here are a few relevant pieces that may provide some introduction to the Keynesian position:

• This website’s first post, on the many tools available to states that help them manage seemingly very large debt and deficits.
• This post, on how prioritising economic recovery can make debt and deficits more manageable in the long term.
• This post, explaining the concept of “liquidity traps” and how they make it possible to temporarily run higher debt and deficits than usual.
• This post, on why a Greek-style financial crisis is not possible in the United States.