Paul Kurgman shares his economic insights, observations, and interpretations.
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GUEST: Paul Krugman
I’m Richard Heffner, your host on The Open Mind. And this is the second of two programs with the always extraordinarily readable and provocative New York Times OpEd page columnist, Paul Krugman.
Who is also Professor of Economics and International Affairs at the Woodrow Wilson School at Princeton University. Now, Mr. Krugman, the last time we ended and I was saying something to you about The New York Times and I just had the feeling, looking at you, that if I hadn’t had to say, or if I wasn’t able to say “And that’s all we have time for” you would have come in with something very strong.
Heffner: Like punching me in the nose.
Krugman: No. I think what you were saying was something that in a way … I can see some people would say, “Ah, you see, there a guy who says that The New York Times does have a Liberal bias.” I don’t think that’s what you were saying. But … look, it’s, it’s … what can I say, it’s a wonderful; it’s an invaluable paper. And, and it’s also, by the way, I don’t think it’s the core … it’s also less important than it thinks it is. And I’m less important than people think I am. I’m probably less important than I think I am. The, the point is that in the broader coverage there is one of two positions that news organization’s take. One is a kind of even handedness that blurs any real distinctions.
And the other, realistically, is a clear-cut, unapologetic Right Wing bias. And, you know, it’s, it’s just the way it is. I think we need to recognize that. Now on specific issues … organizations do go out and crusade. And probably what issues you focus on depends on how you perceive it. But I’ve, I’ve been struck on, on somewhat extremely clear-cut economic issues how it’s been impossible to get a clear story out, to except in my 730 words.
Heffner: Yeah, but look … I … you, you felt that I was saying there was a Liberal bias on The Times part. If I said that I’d have to make nasty faces. And I smile when I say that because what I find, as I consider myself a Liberal, I find environmental matters, appointments to the Supreme Court matters, I find matters in very, very many … I’ll admit, social …
Heffner: … and political rather than economic issues. I find The Times wonderfully much on my side, but I also find it wonderfully much on that side in its news columns and that’s where you think I’m wrong.
Krugman: Well, let me just plead lack of expertise and just say that on economic matters The Times, like all honorable news organizations, is very careful to say “on the one hand, and on the other hand”. That you’re, you’re not going to find … I think if you go through … again, if you take my two … well take my favorite issue which is the complete nonsense, the arithmetic nonsense of the Social Security proposals. That you can go through … do a search of The New York Times archives and I don’t think you’ll find a news story that ever says, “this doesn’t add up.” And yet that’s as … you know, that’s as clear-cut as you’re ever going to find in terms of a policy issue. It just plain doesn’t add up.
Heffner: Well, you know … all due respect, I, I have a different feeling. I have that different feeling, too, about your other favorite … tax cut. That it seems to me that The Times, you know, maybe I read Krugman so enthusiastically …
Krugman: I …
Heffner: … I think, “Well, there’s The Times,” but I really don’t think so. I think at times I’ve thought, “Hey, they’re following his lead, he’s taught them something.”
Krugman: I think I do sometimes raise an issue, which gets picked up. Actually you can see that, well, in media issues in the last few days before this, this show. But I’ve actually seen people who’ve gone through all of the major newspapers … specific issue, “what share of the Bush tax cut goes to the top one percent of the population?”
Krugman: None of the major newspapers, including The New York Times, had a clear statement of the simple fact that when it’s all phased in 40% or so of the gains will go to the top 1%. They all reported, “the Administration says this, critics say that”; there was never a simple, “but we’ve done our own analysis and here’s what we find. You just never found that in any major newspaper.
Heffner: Do you think that’s true of other major issues, too?
Krugman: Well, we just identified a couple of …
Heffner: [Laughter] Yes.
Krugman: … you know, … [Laughter] … what more do you want here?
Heffner: Well, as I said to you in the break before our two programs, I think of environmental matters …
Krugman: Well …
Heffner: … and I think The Times, in its news stories, has been as strong in presenting real and important information as it’s taken positions in its editorial page.
Krugman: Well, if I could give you an economist’s gripe, I would say I think that physical scientists are given more credence than economists. With a fair bit of justification. But, you know, even when there’s something where economists really know, it doesn’t carry the same weight as, as when a physicist tells you something.
Heffner: Okay, that’s …
Krugman: And that’s, I think, fair … fair enough. So there … that, that might be the difference here.
Heffner: Okay. I want to pick up something that you had said in our last program and you had said it, you had made reference to it in … [laughter] … a wonderful column the other day, shortly before we sat down at this table …”The Sons Also Rise, And Often The Daughters, Too”. And you talked about this point, which you sort of touched on in our last program, “inherited status is making a comeback”, and you quoted your friend Allan Kruger in his column for The Times, “if the United States stands out in comparison with other countries,” he wrote, “it is in having a more static distribution of income across generations with fewer opportunities for advancement.” And then you end this wonderful column, you write “for years opinion leaders have told us that it’s all about family values and it is, but it will take a while before most people realize that they meant the value of coming from the right family.” You really feel strongly about that, don’t you?
Krugman: Well, first of all … I mean one thing I’m doing in that column is …this is a true fact that is shocking … and I do … I have say I view part of my role, and also part of the fun I get out of life, as being … puncturing people’s comfortable assumptions. And we all have this image of America as the land of the Horatio Alger story. Of the land of upward mobility. And it ain’t so. And it’s becoming less so. And I think it’s important, again, for people to understand that image and reality are really quite, quite different here. And it’s part and parcel of this really radically growing inequality in the U.S.
If you stop for a second, you say, “is it really possible to have a dramatic growth in inequality without that also turning into an increased inheritance of status? It probably isn’t. And certainly is not playing out that way here. We have the makings of a resurgence of the hereditary principle in the way our society is organized. Probably we’ll never admit it explicitly. We probably won’t have titles of nobility, but if you actually look at status in life, it’s likely to become increasingly inherited.
Heffner: Well, you certainly make you point. Just ask the Bush brothers, talk to Elizabeth Cheney, who holds an especially created State Department job; and then you referred to Eugene Scalia, the top lawyer at the Labor Department; and Janet Rehnquist, Inspector General at the Department of Health and Human Services. And then you suggest that we not forget to check in with William Kristol, the Editor of the Weekly Standard and the Conservative commentator, John Podhoretz. Okay.
Krugman: And let me say, in a fit of sheer absence of mind in that column I forgot to mention Michael Powell, the Chairman of the FCC.
Heffner: Yes, indeed. And I was, when you were talking about the FCC before, making reference to what may happen …
Heffner: … I was going to suggest that I wonder whether the sons also rise applies there, too.
Krugman: Well, what’s interesting to me about that list is not so much that I have a gripe about particular people, although in fact I, I think, for different reasons that, that the two Supreme Court Justice heirs are bad for the jobs involved. But the, the lack of comment. The fact that, that this … you know, there’s been nepotism in other Administrations. I certainly … you know, you gotta … there are Kennedy’s, there are Cuomos, although it doesn’t seem to work too well for the Cuomo, the Younger. And so on, but, but I don’t think it’s been quite this concentration of sons and daughters in an administration before and it doesn’t attract comment. It’s as if we’ve sort of become inured already to the idea that “Well, of course, if you come from the right family you have an enormous leg up in life.”
Heffner: Well, let me, let me, let me switch gears a little and ask you a more fundamental question. How do you respond to the question of what sense of the nature of human nature informs your particular economic or political philosophy?
Krugman: Wow …
Heffner: Where did it come from?
Krugman: Oh, I don’t know. I mean that’s … I have to say …
Heffner: In the … in the business about “we‘re all little ‘Liber-als’ or ‘Conserva-tives’ or ‘Jeffersonians’ or ‘Hamiltonians’ or ‘Hobbesians’ and ‘Lockians’,” what … where’s Krugman?
Krugman: Wow. I don’t if I … I don’t know how to answer a question like that without coming across as either silly or pretentious, or both. I mean, I … I think I’m a basically … I probably at some level from the old Liberal, and I don’t mean a now U.S. mired political sins Liberal, but the old tradition that says people are mostly reasonable, but not totally. And they will mostly act in their self-interest, but have some good side to them. And our job is to try to, as best we can, get a society that curbs the worst … it ends up being fairly obvious stuff. What I’m not a believer in is either the utter wickedness of human nature, which says you can’t do anything … which is a view that a fair number of people have. Or, the view that if only you let markets work and individual initiative have its full play, that everything will work out for the best.
Heffner: Well, I was thinking in a sense taking this last comment … just about the opposite. We talk about this triumphant marketplace …
Heffner: … that is America. How could we have the modicum of social justice that you look for in a marketplace directed, dominated society?
Krugman: Well we have a … we have a model … I sound like a Professor here again … we have a model that worked pretty well for several decades. It’s one that includes a certain role for government, a little bit of a mixed economy, though mostly market-driven, regulation, includes the existence of some institutions that are countervailing forces to the power of the marketplace, which included unions, which included a fifth estate with a sense of its own norms and professional standards. You know, these things do work.
Think about … if, if we … if you take a look at the current …the way in which people’s motivations can be suborned by money, you might concluded that all institutions go corrupt immediately. Then you ask yourself, “Well, why does science work? Why, why have we managed for a couple of hundred years now to have a basically honest system of scientific research and discovery that operates on a completely different set of motivations?” So I think it’s possible to do that.
Now, let me give you a strange parallel. Just before I came to this, to this taping I was in a meeting which was discussing corporate governance. And the problems now are so obvious and they are so overwhelming and it’s so easy to see how the safeguards that ought to be there are subverted and how the imperial CEO suborns the Board and how the analysts become part of the system. And at a certain point a couple of people in the meeting said, but, you know, the question is, “Why did the system every work?”
And the answer is, “Well, you know, you could think of all the reasons why motives can be corrupted, but it does often prove possible to appeal to the better angels of our nature and if you give it enough institutional support, it … you can actually make these things work. And that’s not a very inspiring doctrine, maybe. But I think it is possible to set some bounds. To allow the marketplace to do what it does well, but to have some sense that not everything should be driven by, by the market.
Heffner: Suppose the answer were … or an answer offered there were, “If never did work, it was all preliminary to where we are now. It was building to where we are.”
Krugman: Actually someone passed me a note during that conversation … he said “Adam Smith”. If you actually go to Adam Smith he said corporations won’t work. The only thing he thought they might be able to do successfully was run canals. And, and maybe in the long run he was right. [Laughter] You know, it’s just … but, you know, after you’ve had a couple of hundred years of, of success you have to say that the alternative is possible.
Now it’s, it’s possible that … again, it’s possible that what I think of as the Good Society that the US had for, for thirty years … the Good Society .. To some extent we still have, although I think it’s eroding fast … was an aberration, that it was a lucky accident from, you know, from tragedy, from Depression and War. I guess we’ll eventually have a verdict on that. But I prefer to think that it’s possible by sustained argument, by sustained discussion of what we should be and what’s actually happening to, to construct … to re-construct some of those good things deliberately.
Heffner: Of course you say, “With sustained argument” …
Heffner: And I think often of John Milton’s “Whoever knew truth put to the worse in a free and open encounter”, and you keep making the point, and you really do, whether you use the same words or not, that the free and open encounter isn’t there because we live with lies and there is too little willingness to pick up the cudgels.
Krugman: Well, I … that’s … if you like, you know … a lot, a lot of people, including people who are sympathetic to my views say, “Why are you, why are you so strident? Can’t you be gentler … can’t you give …
Heffner: Be nice.
Krugman: … be nice. Why don’t you give these guys some credit.”? And I guess my feeling is there are plenty of people doing that. There are too many people doing that. Why not actually say what I think and maybe it works in the long run, maybe it doesn’t, but we have to try.
Heffner: About what you think. What about Henry Kissinger’s appointment to tell us what went wrong?
Krugman: It’s … it’s amazing. I mean it’s …
Heffner: You’re laughing.
Krugman: … well, what can you say? I mean it’s, it’s … it would be a joke if it, if it weren’t reality. I guess my colleague Bill Safire made the best argument that as somebody who was engaged in deception all his life; he might be best equipped to discover it.
Heffner: Yeah, at the bottom of that column?
Krugman: What … sorry.
Heffner: At the end of the day Safire was saying “Okay.”
Krugman: Yeah. That’s …so maybe … look there’s a lot of things that are happening right now that are … if you had said a couple years ago, this is, this is the way what’s going to happen, people just said “Oh, come on, that’s silly.” And the Kissinger appointment is one of them. Although my favorite is the, is the clause in the Homeland Security Bill that specifically benefits Eli Lily and … at the expense of people who’s children have, have got autism … and everybody insists, “No, I didn’t put it in the bill.” Nobody will admit that they would, you know … the idea that you could have a special interest clause and whoever put it in the Bill can get away undetected …so there we are. That’s the world we live in now.
Heffner: Have your friends on the reportorial staff of The Times seen any fingerprints there?
Krugman: I’m much less connected to all of that than you …
Krugman: … might think.
Heffner: All right.
Krugman: So why don’t I just say I’m not … I work in New Jersey.
Heffner: Do you know of any fingerprints?
Krugman: No. But it’s … you know, that’s not the sort of thing I would know. I’m not, I’m not Bob Woodward. I’m not even sure Bob Woodward is Bob Woodward any more. But anyway.
Heffner: Okay, I … I really wonder at times, how you do get away with what you do and I’m fascinated by the incredible variety of things you touch on. I make a habit of tearing out …
Heffner: … columns which bothers my wife a lot because I do it before she’s read the Editorial Page. And going back to June of this month, “Greed is Bad, The Revenge of Gordon Gekko”, it’s … you touch on so many damn basic things that I, I don’t know how they haven’t put a contract out for you or on you.
Krugman: I think they probably have. It’s just that … it’s, it’s not one that involves bullets. But it’s one that involves organized, organized letter writing campaigns and that sort of thing.
Heffner: Do you … do you get them?
Krugman: Oh, yeah. Oh, yeah. No, I often feel that I need, that I should pick up my mail with tongs; it’s pretty amazing, actually. There’s a level of, of intense hostility, and often orchestrated in, in the stuff that I get and the stuff that I know, in fact, goes to the, to the management of The Times.
Heffner: Do you think that that’s really substantially different than it was when license plates carried “Impeach Earl Warren” and the like.
Krugman: Oh, yeah. It’s a much .. the machine is much better oiled now. That was … you know, those things were organized, but these things really now have … you know, in the end a lot of it is being financed directly or indirectly by Richard Mellenscape, or whatever. You know, the vast Right Wing conspiracy … it’s out there and it’s not particularly hidden. And it, it does orchestrate these things and I’m certainly one of the prime targets. Now the thing is, as long as it’s just nasty letters, you know, I’ve learned to deal with. I have to say I do believe that many journalists do get unnerved by it, as I was at first.
Heffner: Meaning what?
Krugman: That you say something, say certain kinds of things … criticize … you know, to mention the business careers of Administration officials and what they might say about their current attitudes leads to an avalanche of certainly disturbing and in some cases, threatening mail. A lot, a lot of people in journalism probably shy off from doing that again after it’s happened once or a couple of times. It’s not pleasant; you have to develop a thick skin.
Heffner: Are there no massive fortunes on the other side that can create these foundations?
Krugman: Well, it’s an interesting … this may come back to the Liberal versus Conservative divide.
Heffner: “We don’t do that sort of thing.”
Krugman: George Soros has gone out there, spent, you know, many hundreds of millions of dollars doing good things in poor countries. I suppose, my guess is that his sympathies are, are on the Liberal side. If he had spent that money to twist the domestic political system that way some, some people of comparable wealth have done on the Right, it might have made a difference. But it’s … no … in the nature of things there’s going to be more Right Wing billionaires, than Left Wing billionaires. And at, at this point the Liberal billionaires have not put their money behind political movements in the same way.
Heffner: The counterpart of that, has to do, of course, with campaign finance reform.
Heffner: What do you think is going to happen there?
Krugman: I haven’t the faintest idea, it’s one of those issues that would take a lot of effort to wrap my mind around and I haven’t actually done it.
Heffner: You haven’t written about it.
Krugman: I haven’t written about it, and let me say that hat when you see these columns there’s more, there’s more homework than maybe immediately apparent. I mean I try not to write about something unless I actually really do feel that I’ve talked to the right people to understand the issue. And that, and that’s one of them where I just haven’t, haven’t put in the investment, haven’t done the homework to figure out even what I think.
Heffner: But as an economist and a, and a economic historian, and you are that … because you know the economic history of the United States …
Heffner: If the Constitutionality … if, if the campaign finance reform movement doesn’t past muster Constitutionally or at least before our courts what do you think will happen then?
Krugman: Well, it’s not … my pure amateur opinion is that it’s very hard to make it work anyway. And I applaud the effort, but I’m not sure that the, the ways in which you can use money in politics, and use money to influence politics are, are many and varied, and it’s not clear to me that we’re going to succeed in having … I’ve heard very contradictory things about the law that’s already in effect. And it’s not entirely clear to me that it even does … even if it stands up to the court challenges that it does what it’s intended to do.
Heffner: Okay, one other question in the two minutes we have left. And you may say, nolo contendre again has to do with political candidates. Commented on Al Gore, on the question of the media … where do you think your interest, your sense of what should be will be best represented in candidates?
Krugman: I can actually tell you I’m strictly forbidden to answer that question. I can imply all I like, but I can’t endorse a candidate.
Heffner: Well, imply.
Krugman: But … the truth is, in terms of individuals I have … I really haven’t got a judgment. I think that …
Heffner: Is that a bad sign by the way?
Krugman: Probably. Probably is. I just think that, that what I think of as camouflage strategies are not going to work. I think if, if the kinds of things I think that are important are going to be revered, it’s going to be by a candidate who actually says what he or she thinks. Who doesn’t try to soft-pedal it, who doesn’t try to say, “Well, of course, we’re for smaller government and low taxes, too.” And refuses to say the tax cut of 2001 was a mistake. Now, maybe … maybe there’s no way for someone to win on what I think are the right issues. But I … I’m, I’m in general … I’m in favor of firm, strong voices here. And that has some obvious implications for who I don’t think would be a good candidate in the next election … but
Heffner: And I won’t press you any further …
Heffner: … because our time is over. And thank you very much for joining me again, Paul Krugman.
Krugman: Well, thank you.
Heffner: And thanks, too, to you in the audience. I hope you join us again next time, and if you would like a transcript of today’s program, please send $4.00 in check or money order to The Open Mind, P. O. Box 7977, FDR Station, New York, New York 10150.
Meanwhile, as an old friend used to say, “Good night and good luck.”
N.B. Every effort has been made to ensure the accuracy of this transcript. It may not, however, be a verbatim copy of the program.