Paul Krugman: Hasty Fiscal Fix to the Deficit Would Cause ‘Austerity Bomb’
GWEN IFILL: In fact, you call it an austerity bomb. Describe that, what you mean by that.
PAUL KRUGMAN: Yes.
Well, what’s happening is that we are scheduled, unless something is done, basically to do to ourselves gratuitously what has been happening to some of the European economies.
We’re going to have substantial spending cuts, substantial tax increases at a time when the economy is still very weak. And, of course, that’s a recipe for sliding back into recession.
So, we set ourselves up with the land mine in the road in front of our economy, which is not based on anything real. It’s just based on our political mess.
GWEN IFILL: Well, speaking of political mess, both sides now have what they say are — what appear to be opening gambits on the table. President Obama released his last week, which called for $1.6 trillion in revenues. And the Republicans came back with their own yesterday.
As you have looked at each approach, what do you see in that?
PAUL KRUGMAN: Well, I think it’s important. I think the reporting has been a little weak on the Republican plan. It needs air quotes around it, because it isn’t really a plan.
They’re claiming $2.2 trillion in deficit reduction, but the specifics they have actually laid out, such as they have, are only about $300 billion. And the rest of it is all just vaporware, claims that they will close loopholes, but they won’t say what, claims they will cut spending, but they don’t say how.
So, the Republican plan is actually just — it’s just a smokescreen. It’s a Potemkin plan. There’s nothing real there. So, the Republican plan is actually just — it’s just a smokescreen. It’s a Potemkin plan. There’s nothing real there.
The Obama plan is a very good, very sensible plan, which, as we know, has very little chance of taking place in its current form. But it’s — at least it’s a real plan. At least we know dwhat it is he’s proposing to do.