Krugman: Democrats Should Risk Debt Default and Not be 'Blackmailed' by Republicans 'Holding Bomb Over Our Head'
New York Times columnist Paul Krugman said Sunday that Democrats should risk a debt default to avoid being blackmailed by Republicans that are holding a bomb "over our head" in the form of serious budget cuts.
This came moments after FDIC chair Sheila Bair told ABC's "This Week" panel, "I think maybe there's a little too much testosterone in this debate. It’s too much about winning and losing and not enough both sides are right, let’s come together and have a solution" (video follows with transcript and commentary):
SHEILA BAIR, FDIC CHAIR: I do think that both sides have a point. Last November, I published an op-ed in the Washington Post where I said if we didn't get these deficits under control I thought it would precipitate the next financial crisis. I also agree with the administration though that it's irresponsible to even entertain the idea of a so-called technical default on the public debt. So I think both sides have a point and I hope they come together and gentlemen, if you’ll excuse me, I think maybe there's a little too much testosterone in this debate. It’s too much about winning and losing and not enough both sides are right, let’s come together and have a solution.
A few minutes later:
PAUL KRUGMAN, NEW YORK TIMES: I actually I think it may be necessary to take this up to the limit because the fact of the matter…
CHRISTIANE AMANPOUR, HOST: And default?
KRUGMAN: Possibly if we have complete, if we have demands for a large change in policy, under threats of debt limit, this has to be the point where you say, “No, we don't believe in letting hostages be taken.”
AMANPOUR: Do you, I mean, do you agree with that?
ROGER ALTMAN, CLINTON DEPUTY TREASURY SECRETARY: No, I don't. I respect Paul, but I don't. I think default would be a profound and hugely negative step. I think it would be terribly destabilizing. I think it would reduce the amount of institutions around the world that would, in the future, buy treasury debt, and, and be a tremendous mistake.
KRUGMAN: Let me make my case here. Okay, let me just say, we have an enormous budget dispute. We have vastly opposed poles in policy. That is not something we should resolve with a, you know, with a bomb hanging over our head. It's not something we should try and change. And so Democrats have to make clear that they’re not going to let themselves be blackmailed in that way.
So Krugman is willing to risk a possible destabilization to the financial system in order to preserve current spending levels as well as the existing structure of entitlement programs which just Friday were announced to be going bankrupt faster than previously thought.
Shouldn't a Nobel laureate in economics be less concerned with politics than our nation's credit rating?