Krugman Interview: What Should Kerry Do When First Elected?

by Mary

[Part II of my interview with Paul Krugman. Previous posts: part I]

As you are looking forward, and hopefully Kerry is elected, what do you think would be the very first thing in the economic arena he should deal with? Where would you have him start and do you think it would take him one or two terms to deal with the mess that has been left?
First of all, unless it's really a tidal wave election, he is going to have limited ability to pass legislation, at least in the first two years. So there are going to be severe constraints. In fact, if it is a close victory for Kerry, the beginning is going to be a very unpleasant period. It's going to be very nasty unless it is really a landslide election and he can carry along with him the control of the congress -- and maybe we want to talk about that in a bit.

What I would say is as a technical manner, the economic problems are not actually that hard to solve. We actually have a pretty good idea of how you can go about a serious jobs program, to do a lot of New Deal type stuff, for which there is actually a great need for, including homeland security measures, and basically switch [our tax policy]: raise taxes on the rich who are least likely to spend the money and provide increased spending on necessary projects and temporary tax rebates to people with lower incomes who are in fact, likely to spend it. So that's actually not hard.

As for the longer term budget problem, it is serious, but well within the capacity of the US to handle. The US does have the lowest taxes - the federal taxes share of GDP are at their lowest level since 1959, they're way low compared to other advanced countries, so there really isn't a problem technically raising enough revenue to deal with the problem. The trouble is it's a political minefield and it is going to be difficult to get people to accept the kinds of policy changes that are needed. And it probably does take two terms, it definitely takes two terms if we have a divided government.

Do you see any possibility that we might be able to repudiate [the radical Republicans] enough to get them out?
I think that the answer is no. It's a very funny state of mind in the US right now. Probably not, if only because, there's something that I've been calling to myself the "chump factor": to face up to what's actually going on in this country means for a lot of people realizing just how seriously they've been had. And it seems to me at this point not enough people are willing to face up to that. This is even more true among the chattering classes. Certainly if you look at my fellow pundits - people who were talking about what a wonderful leader George W Bush was in the fall of 2001 are going to find it hard to face up to what is really happening, and that colors the reporting. I think we may be heading for a kind of people power moment because people are definitely fed up. We certainly are closer to that then when the hardcopy edition of this book was put out [April 2003].

At that time, I don't think any of us thought it would be possible to get him out of office.
I have to say, that the fundamental thing to understand about the next three months is that the Bushies cannot accept the possibility of losing. There are too many scandals, there's too much stonewalled awful stuff, and that they will do lots of things that you don't think they would do in order to hold off [a loss]. So even though I would say, if we held a fair election today, it would be a Kerry victory, I don't think you can predict that for then. I'm not taking anything at all for granted.

Yes, I'm not sure how willing they are going to be to give up power.
Yes, it's a very extreme situation. Well, we've wandered off economic policy, but let me just follow the thought.

[What] we pretty well know is: there are scandals that are really, really devastating. They are being held just short of breaking out into the open by the Republican control of all three branches of government.

Abu Ghraib, even just reading the appendices of the Taguba report, you know that what we've seen is only just the tip of the iceberg; Halliburton and contracting in Iraq is almost certain to be much, much worse than anything yet seen intimated; the Energy policy; the Justice department's politicization of the terror cases; of course, the Plame affair. But there are other less high profile versions of the Plame affair that are out there.

If they lose their grip, all of this comes out in the open. Of course, above all that could probably be the first thing that Kerry can do - he may or may not have the ability to pass a lot of legislation, but he could take off the cloak of secrecy and then we could see what actually has been happening in this country.

Well, I think that Kerry has proven before in his history that he can be an incredible investigator.
That's right. BCCI and Iran-Contra are very good omens. And in fact, if Kerry wins, my first advice is: "Do not be magnanimous in victory".

It seems to me that one of the biggest mistakes that Bill Clinton made was to say okay, we've won, the pendulum has swung, and we're not going to go after those scandals from the 80's. And the result was the same people, principally the same movement, but in many cases, the same people came right on back. So there is a straight line from Iran contra to Abu Ghraib. We have John Negroponte, who seriously couldn't see the death squads, is now our ambassador to Iraq.

The most important thing is to take off the shroud and see what is happening. And, then we may have a chance to deal with the concrete problems. And the problem, of course, is that the Administration knows that too and that is why it's going to be an incredibly dirty next three months.

I think it is going to be quite frightening on some levels.
Oh, yes. And it's a terrible thing. You take something like this terror alert, and you say well, you really want to believe that it's honest. But it's awfully convenient; and they've done this before; and Tom Ridge did not give a public service neutral explanation of the threat. He turned the announcement into praise for the President's leadership on the war on terror. And you say, well, okay. The July Surprise happened right on schedule. It's going to be hell on wheels.

Tomorrow: Social Security and healthcare.