Home > Free Market, Market > The reason why politicians love Krugman: he tells them they did nothing wrong in Detroit

The reason why politicians love Krugman: he tells them they did nothing wrong in Detroit

July 22, 2013
Ancient Ruins by Svetlana Tikhonova

Ancient Ruins by Svetlana Tikhonova

Yesterday liberal economists Paul Krugman had an OP-ED published in The New York Times. Krugman has been the favored economists of progressive politicians. In Krugman’s eyes there is no such thing as over-regulation or over-taxing. Since Detroit has been the showcase for progressive big government control of an economy I have been waiting to see how Krugman reconciled what has happened there.

When Detroit declared bankruptcy, or at least tried to — the legal situation has gotten complicated — I know that I wasn’t the only economist to have a sinking feeling about the likely impact on our policy discourse. Was it going to be Greece all over again?

He starts out with a sinking feeling that Detroit would be compared to Greece? Why would anyone do that? Detroit has a remarkable similar size economy to Greece. Or as Krugman puts it “the Greek economy is, after all, quite small (actually, about one and a half times as big as the economy of metropolitan Detroit)”. Did you catch that? Since the Greece economy is a little bigger than Detroit’s it proves that the two can’t be used for comparison. Of course that doesn’t stop him from comparing EU policies to US…

So now the deficit scolds have a new case to misinterpret. Never mind the repeated failure of the predicted U.S. fiscal crisis to materialize

Really? You mean there hasn’t been any financial crisis in the US? I guess the millions of Americans out of jobs due to mishandling of the economy by progressive politicians is “nothing”. I guess the consistent devaluation of the US dollar has been “misinterpreted” as bad; in Krugman’s eyes a devalued dollar must be good!

Are Detroit’s woes the leading edge of a national public pensions crisis? No. State and local pensions are indeed underfunded, with experts at Boston College putting the total shortfall at $1 trillion. But many governments are taking steps to address the shortfall. These steps aren’t yet sufficient; the Boston College estimates suggest that overall pension contributions this year will be about $25 billion less than they should be. But in a $16 trillion economy, that’s just not a big deal — and even if you make more pessimistic assumptions, as some but not all accountants say you should, it still isn’t a big deal.

Wow, so Krugman is saying that those with “pessimistic assumptions” of a $1 trillion shortfall should be ignored because “it still isn’t a big deal”. Now who do you think the politicians are going to believe: the populist economist that says “it will be only $25 billion short” or the conservative experts who say it will be $1 trillion short? I bet we all can agree politicians will side with Krugman once again. And even if he is wrong he can say “it still isn’t a big deal”.

So was Detroit just uniquely irresponsible? Again, no. Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces.

Huh? Really? This will have to be the last part of his OP-ED I quote from. While he does acknowledge “bad governance”, he goes on to say Detroit is a victim of “market forces”. Yet again he fails to mention that Detroit is the poster city for a centrally planned and controlled economy. There has been no semblance of a free-market in Detroit for decades. Sadly there likely never will be. I expect one day in the future Detroit will become the largest ghost town in the world; all in the name of progressive politics!

At least we will always a rocking Kiss song to remember Detroit by:

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