James K. Galbraith

Un nouveau débat entre J. K. Galbraith et P. Krugman

In the New York Times blog on Saturday, two posts from Paul and my replies, one of which Paul graciously promoted from comments:

http://tiny.cc/v0cdy and http://tiny.cc/77qki

My second reply is not yet published, so I include the text below.

For those with an interest in the analytical issues, this blog-post is helpful: http://tiny.cc/qofwl.

“Paul, thanks for this response.

Let’s first notice that the concerns about national bankruptcy,
hyperinflation and so forth that characterized your first post have now
disappeared.

At this point, we agree on the (fairly trivial, and highly remote)thesis
that at full employment, a higher rate of (garden-variety) inflation can be a problem.

And we agree that this thesis is both trivial and highly remote.

However, there still remains an important question.

Should we, or should we not, act *today* to cut *projected* deficits at
some future date?

For instance, by cutting Social Security and Medicare?

I say no.

I say there is absolutely no economic reason to enact future cuts in these vital programs.

I say that the economic forecasts of vast deficits and high interest rates after the return of full employment are implausible and internally inconsistent, for reasons given in my testimony to the deficit commission, and elsewhere.

I say that good policies cannot be based on bad forecasts, that we should solve the unemployment problem first, and that when we have done so, the most likely thing is that tax revenues will rise and the deficit forecasts will be proven wrong.

This is what happened in the late 1990s. Why should we think it wouldn’t happen again?

Paul, I challenge you to drop the long-term deficit argument entirely — it will be used in a few months, in a dishonest way by unscrupulous people, to support cuts in Social Security and Medicare that cannot be justified by economic logic. These are cuts which, I am sure, you will oppose when they are proposed.

Don’t set yourself up.”

JG