Krugman: U.S. Headed for 'Jobless' Recovery
"This Week" Spotlight: Nobel Prize Winning Economist and ABC Contributor Paul Krugman
By JENNIFER PARKER
July 1, 2009 —
Nobel-Prize winning economist Paul Krugman said the nation is on course for a "prolonged jobless" economic recovery unless the Obama administration steps in with a second round of government stimulus money.
"The fact of the matter is that the unemployment rate is much worse than the administration contemplated or that most people expected," Krugman told ABC News. "So the economy is much weaker than we thought it'd be, meaning, in fact, it could use more stimulus."
Krugman: 'I'm Trying to Move the Debate'
Criticizing the president's policies is nothing new for Krugman, 56, a frequent Roundtable guest and contributor on "This Week with George Stephanopoulos."
The Princeton University economist and New York Times columnist has become one of the leading voices of the left critiquing the Obama administration's handling of the economy, the financial industry bailout, health care reform and climate change.
"I'm trying to move the public debate in a better, more sensible direction," Krugman said. "There were not a whole lot of voices at least in the public eye saying what a lot of economists had concluded, which was that the Obama stimulus plan was, if anything, too small."
Krugman has been one of the most vocal opponents of the stimulus package the president signed in February, long arguing the $787 billion price tag was inadequate to lift the country out of recession.
"The last two recessions were both followed by prolonged jobless recoveries when industrial production and GDP rose, but the unemployment rate continued to rise," he said, "We're almost certainly headed for another patch like that this time around which means that we need the economic support more than ever."
However, the president -- embroiled in a battle with Congress over his health reform agenda and climate change bill -- has said a second stimulus package isn't needed yet.
"I think its important to see how the economy evolves and how effective the first stimulus is," Obama said at a White House news conference last Tuesday.
Krugman's Media Megaphone
Krugman's media megaphone got a boost last October when he won the Nobel Prize in economics for his academic research dating back to 1979 explaining trade patterns among countries.
"In the economics profession, people knew my work and either they already thought it was pretty good or they didn't think it was very good in which case they didn't think I should have gotten the prize," Krugman said.
He added, "It certainly helped in terms of a little extra credibility."
Krugman's 'Liberal' Conscience
Krugman gained a following in the 1990s writing about economics for Fortune and Slate magazine.
In 2000, he began writing his New York Times op-ed column, "The Conscience of a Liberal," where he began critiquing public policy.
He quickly became a thorn in the side of the Bush administration, writing about the administration's "general incompetence," Iraq and its response to Hurricane Katrina.
The self-described liberal hasn't pulled any punches now that a Democrat occupies the White House.
His column is published twice a week but Krugman blogs incessantly, sometimes several times a day.
His musings sometimes have the power to move markets, much to the dismay of his critics.
Krugman Predicted End of Recession This Summer
Krugman sparked a rally on Wall Street earlier this month after speaking at the London School of Economics.
"I would not be surprised if the official end of the U.S. recession ends up being, in retrospect, dated sometime this summer," he said June 8 during a lecture in London.
However, Krugman argues people didn't listen to his entire speech, which included dire predictions about lingering unemployment.
"There's a big difference between the end of a recession, which is really only when some things start to turn up, and the return to prosperity," Krugman told ABC News. "I think what people don't get is the difference between the end of a recession in a technical sense and actual recovery, which matters to people."
Krugman: 'I'm Trying to Hold Their Feet to the Fire'
Some economists dismiss Krugman's calls for more government spending to stimulate the economy.
"His views about the impact of government spending on the economy are very different than those held by the majority of economists who are currently doing research on this topic," said UCLA economic professor Lee Ohanian, who argues the focus should be on reforming the banking system.
Particularly troubling, Ohanian said, is Krugman's focus on Keynesian economics, which focuses on public sector policies to stabilize the economy.
"A lot of what I see in his columns and in his blog is using economics from 70 years ago," Ohanian said," He likes to cite Keynes and we stopped teaching Keynes decades ago because like every other science, economics moves forward."
Krugman admits he is doing little research these days, preferring instead to hold Washington accountable through his blog and column for what he sees as misguided public policies.
His most fervent fans say his biggest strength is in translating complex ideas into simple and entertainingly pointed prose.
"He is incredibly good at boiling complex problems down to the simplest terms and explaining them clearly," said Maurice Obstfeld, economics professor at the University of California at Berkeley.
Krugman Blasts Bill Opponents for 'Treason'
Krugman recently accused 212 members of the House of Representatives, who voted against the administration's climate change bill of 'betraying the planet" and engaging in "a form of treason."
He's also derided the president for not pushing hard enough for a large public option for health care reform.
"We knew that the health care plan was not going to be a reformer's ideal," Krugman said. "What we don't know is how far it will stray from the reform ideal. And I'm not saying it has to be perfect."
The biggest question, Krugman said, is whether the Obama administration will "back down" at crucial moments.
"People like me are trying to hold their feet to the fire," Krugman said.
Krugman vs. Noonan
He rails against arguments made by conservatives, like former Reagan speechwriter and Wall Street Journal columnist Peggy Noonan, that the Obama administration's multiple-pronged agenda is moving too fast for the public.
"Paul, if you just limit this conversation to taxes alone, you have some sense that people, normal humans in America, might be getting a little bit nervous about health care and energy care and all of this stuff," Noonan argued on "This Week" Sunday.
"Without getting into the weeds, you have got to assume it's going to cost money," Noonan argued. "At a certain point, you've got to realize, people are going to say, whoa, this is no good."
But Krugman argues "the weeds" are exactly where the health care reform debate should be.
Krugman Argues for Public Health Care Option
He's blasted "balking Democrats" determined to kill the public option and Republicans for spouting jingoism about "socialism" and "government-run health care."
"I think this whole thing is wishful thinking on the part of people who wish the administration wouldn't have such a broad agenda and so they keep on say ,'Well, there's too many things going on.' But there's no real sign that the American public is dismayed by the action on multiple fronts," he said of Noonan's argument.
"A win on environmental protection is actually helping to keep the momentum going on other things like health care."
Krugman Keeps His Distance from Washington
With his high-profile column and frequent appearances on "This Week" one might expect Krugman to frequent elite liberal parties in Washington, D.C., and New York.
But Krugman said he doesn't venture far from his home study in Princeton, New Jersey, and often walks to the university where he still teaches classes.
"Most of the columns you see are hashed out in my home study or in my office at the university -- sitting in my study and looking out at the deer munching on our garden," he said.
He'll take a break from his TV appearances and his column later this summer when he and his wife, Robin Wells, an economics researcher at Princeton University, spend 10 days biking around Scotland.
"That's a ritual, most years we do a bike trip some place," said Krugman, citing previous vacations in Italy and France biking with his wife.
Added the lauded economist, "The weak pound makes it a better deal."
Krugman said he sees his role as an outside-the-beltway agitator trying to change conventional wisdom in Washington, D.C.
Happy for the media bullhorn to make his case for public policy reform, Krugman admits to being somewhat perplexed by the recent attention that has come with the media spotlight.
"I've been kind of exposed especially after the prize," Krugman said, joking, "my life is over examined."