DEBATING POLITICS, ECONOMICS AND OTHER TIMELY TOPICS WITH PAUL KRUGMAN OF THE NEW YORK TIMES

FRIDAY, JULY 24, 2015

PAUL KRUGMAN

A Wasteful Project Takes Precedence Over Public Health

Some years ago, I facetiously suggested on CNN that we should invent
a fake threat from space aliens in
order to break the destructive obsession with deficits and create the
fiscal stimulus that the American
economy so badly needed. (Watch
the video here: huff.to/q6gHGM
although the idea came from an episode of The Outer Limits, not the
Twilight Zone.) No one followed
up on my suggestion. But something
along the same lines is now going on
in Texas.
Texas is a Medicaid-rejection
state officials there have refused
to accept billions of federal dollars
to help the states less fortunate. But
money for a largely pointless borderprotection project? Now youre
talking.
According to an article from
Bloomberg: In Rio Grande City,
named for the river that splits the
U.S. from Mexico, footpaths cut
from the brush by drug smugglers
and illegal immigrants have a new
look, rehabbed into family-friendly
hike-and-bike trails. Now that the
state has authorized $800 million to
ratchet up security on the Mexico
line, more troopers are on their way
to deliver another shot to what might
be the biggest stimulus program this
needy part of Texas has ever seen.
(Read it here: bloom.bg/1J1HWvb.)
This really is Keynes and burying
bottles of cash in coal mines: Spending that actually helps people is unacceptable, but pure waste is O.K.

The Inconceivable
Success of Obamacare
For my sins, I recently attended
FreedomFest, the libertarian conclave in Las Vegas, and debated Stephen Moore from the Heritage Foundation. It went pretty much as you
might expect: evidence, evidence,
evidence versus Reagan, Reagan,
Reagan. But in a way, the most interesting thing was the audience reaction when I described the Affordable
Care Act as a major success story so
far: boos and hisses.
Whats amazing about this is that
the good news about Obamacare
isnt really debatable. Its a simple
fact that there has been a stunningly
rapid drop in the number of uninsured Americans, and the evidence
is coming from multiple independent
sources. Its also a simple fact that
outlays on Medicaid and exchange
subsidies are coming in well below
projections.
You can argue that this is all temporary, that insurance premiums
will eventually skyrocket, even
though they havent yet, or that the
laws predicted death spiral will
come back from the, er, dead. But
Obamacare is, by any measure, doing better than even its supporters
expected.
Of course, this wasnt supposed to
happen and, therefore, given the
epistemology of the modern American right, it didnt. Failure was inevitable, success inconceivable so
failure must have happened.

ERIC GAY/THE THE NEW YORK TIMES

An officer with the Texas Department of Public Safety patrols the border between the United States and Mexico near Mission, Texas.

BACKSTORY

READER COMMENTS FROM NYTIMES.COM

Texas Spends Big on Border Security

Earlier this year, lawmakers in
Texas passed a series of bills allotting $800 million for security measures along the states border with
Mexico. Initiatives include a new
5,000-acre training center for border security officers, funding for
heavily increased helicopter surveillance and the hiring of several
hundred new law-enforcement personnel, who will be paid salaries
well above the average income in
the border region.
Much of the funding will flow
into the Rio Grande Valley, which
borders Mexico and includes some
of the nations poorest areas
Starr County, for example, has a
median household income of about
$24,000. News reports have suggested that many residents in the
region are hopeful that spending on border security will have a

long-term economic impact as new

personnel frequent local businesses and build houses in towns along
the border. Tax revenues in Rio
Grande City, Starr Countys county seat, for instance, are expected
to rise with each new wave of personnel that is hired.
However, critics of the border
legislation have charged that Texas is wasting money on an issue
that no longer warrants so much
spending, given that the number of
undocumented immigrants apprehended from Mexico has dropped
dramatically from 1.6 million arrests in 2000 to 230,000 last year.
Proponents of the bills have cited crime reduction as a major aim
of the spending program, but the
crime rate in the Rio Grande Valley is also lower than in previous
years, according to government

statistics.
Much of the momentum behind
the new security initiatives is often attributed to the large, temporary influx of undocumented immigrants who began arriving on
the border from Central America in 2014. The migration, which
largely consisted of unaccompanied children fleeing violence in
their home countries, was strongly
criticized by state Republican lawmakers during the recent election
campaign.
Though that immigration wave
has subsided, Republicans have
attempted to crack down on socalled sanctuary cities municipalities that have chosen not to
enforce immigration laws and
end the states policy of providing
in-state college tuition rates for undocumented immigrants.

A Fake Threat Might Spark Some Progress

All we have to do is trick the Republicans into believing some fake
threat, and they will create jobs!
Fooling conservatives should not
be too difficult, given that a bunch
of people in Texas recently thought
that a standard military exercise
was really a federal invasion meant
to take their guns.
B., VIRGINIA

This situation actually confirms

what I have suspected for a while:
If we want serious stimulus, we
have to elect a Republican president.
After that, the G.O.P. will stop obsessing over spending. All this antideficit drivel is just a smart strategy
aimed at preventing President
Obama from doing what Republicans themselves want to do.
G.J.C., IOWA

Remember that this is Texas,

after all. Its a state that requires

a picture ID at the polls in order to

combat a nonexistent wave of voter
fraud. But while a student ID is not
acceptable, a concealed-weapon
card is.
BOB DOBBS, CALIFORNIA

Have we forgotten the Y2K

scare? The threat that computer
systems would crash in 2000 drove
a very broad-based technological
reboot across public and private
sectors. It had the right balance of
vagueness and existential panic,
and the scare had a clear deadline
that also served as a point at which
we could all relax. It even helped pull
older workers back into key positions.
It would be an interesting exercise to figure out how much of the
economic momentum of the last few
years of the Clinton administration
can be attributed to that one threat.
TODD, HONG KONG

We already solved our problem

with illegal immigration from Mexico and the rest of Latin America:
We exported to Asia the millions
of entry-level jobs that those immigrants used to seek. And then we
blew up our economy with a massive
financial fraud and panic. Today, net
immigration on our southern border
is approximately zero.
N., MINNESOTA

More security means immigrants will resort to even more

dangerous routes, leading to more
smugglers, more crime and more
death.
A.P., CONNECTICUT

ONLINE: COMMENTS
Comments have been edited for clarity
and length. For Paul Krugmans latest
thoughts and to join the debate online,
visit his blog at krugman.blogs.
nytimes.com.

PAUL KRUGMAN

Reflections on a Vast Economic System

KEITH MEYERS/THE NEW YORK TIMES

A tugboat approaches the Hyundai Glory container vessel to help

guide it under the Bayonne Bridge in New Jersey.

READER COMMENTS FROM NYTIMES.COM

A Necessary Perspective

On a recent Friday, I drove from

Vermont to New York, but as usual
avoided driving into Manhattan
and parked at Secaucus Junction,
a quick train ride into the city and a
good jumping-off point for a drive to
Princeton, N.J.
As I headed south from Secaucus
on my way to Princeton a couple of
days later, I had one of those moments when the sheer scale of the
world economy hit me.
The vista: in front of me the New
Jersey Turnpike, 12 lanes wide at
this point, and already full of trucks
early in the morning. On the right,
Newark Liberty International Airport only one of three airports
in the New York metro area with
many planes taking off and landing.
On the left, the massive cranes of the
Elizabeth container port marching
off into the distance.
These days New York is only one

of many huge metropolitan centers

across the globe. The scale of the
whole thing is, more or less, inconceivable, in the sense that nobody
can picture the reality of our getting
and spending.
Maybe the reason that this realization hits me now and then is that
in my normal line of work I analyze
this gigantic system using little
stylized models that reduce its vastness to a couple of intersecting lines.
And thats O.K. people who reject
stylized models invariably end up
relying, whether they know it or not,
on implicit models that are even less
realistic because the assumptions
underlying them go unexamined.
Furthermore, those stylized models have been hugely successful in
recent years, predicting the quiescence of inflation and interest rates,
the adverse effects of austerity and
more.

But every once in a while, it does

seem worthwhile to contemplate the
enormity of the system were talking
about.

by cars, trucks and aircraft. Each

system grew reasonably fast, until
a more efficient technology was introduced.

I had a similar feeling while flying over Lower Manhattan a year

after the attacks of Sept. 11,
2001.
Even though I was familiar with
the geography below, I had to search
for ground zero.
I realized that as painful the attacks were, they were limited to a
small portion of Lower Manhattan,
which is only one-fifth of New York
City, which itself is dwarfed by the
rest of the tri-state area, all of which
could probably fit into a county in
Texas.

ply you saw before you.

As we each do our part in the
maintenance of our ever-expanding
virtual universe, it behooves us to
take off the blinders every once and
a while and look around.
This is why vacations were invented.

JAMES JORDAN, VIRGINIA

So many interlocking pieces

make up our complex domestic
and international systems. They
depend on each other, and they must
work within acceptable parameters
or the entire system falls apart. It is
all frighteningly fragile.
NAME WITHHELD, OHIO

Mr. Krugman, your encounter

along the New Jersey Turnpike
stirred your awareness of the
realities of the worlds economic
future. I also hope it will turn your
focus toward the future of transport.
History shows that transporta-

tion is the most important influence

on the American economy. And
through the years, we have come to
greatly rely on hydrocarbon-fueled,
rubber-wheeled vehicles traveling
on paved highways.
But this system has become too
congested, too dangerous and too
dependent on the planets finite resources.
We have to keep in mind that efficiency is the principal factor in the
successive replacement of transport
technology. Horses gave way to
canals; canals were replaced by
railways; railways were replaced

In other words, Mr. Krugman,

your message is to look out the
window once in a while something
many policy makers and pundits
often fail to do.
STEVE, NEW ZEALAND

I think success in understanding just how the economy works

in a larger sense comes not from
the intellectual agility one demonstrates in developing little models,
but from the humility with which one
approaches the task.
NEALE ADAMS, CANADA

NAME WITHHELD, NEW JERSEY

Mr. Krugman, the stylized little

models and the economic truths
behind them are what support all
the software that drives the pano-

No Shaving Grace
Serious matters are afoot, but I
dont know if theres anything more
I can say about them right now. So,
on to a subject where I think I can
make a useful intervention: Peter
Dormans query about why so many
economists wear beards (read his
blog post here: bit.ly/1CZdywR).
Actually, other economists, in addition to Mr. Dorman, have asked
the same question and found that
bearded Nobelists are not quite
as prevalent as one might have
thought.
Mostly its about the impression
conveyed by myself and Joseph Stiglitz, although Simon Wren-Lewis
has an even more impressive dis-

R. LAW, TEXAS

When I became an assistant

professor in 1982, undergraduate students could legally drink
beer, and faculty were expected to
occasionally mingle with them. I remember that at one fraternity event,
a student turned to me and asked:
What are you majoring in?
So on came the beard, which Ive
had for the last three decades.
JONATHAN WIGHT, VIRGINIA

play.
But to the extent that there is a pattern here, it basically comes down to
the whiz-kid culture of economics,
in which careers can take off very
quickly and ones appearance
may not have kept up with ones professional reputation.
In my case, I grew my beard when
I was 26, and it was definitely a defensive move. There I was, writing
what I hoped were groundbreaking
papers everything everyone
has said about international trade
is wrong! and looking like an
undergraduate. (Seriously when
I went to see a colleague once, some
of the students waiting to see him
complained that I was cutting ahead
of the line.) So I was looking for a bit
of hairy gravitas.
And by the time I no longer needed
that gravitas, the beard had become
part of my persona.

Paul Krugman
joined The New
York Times in 1999
as a columnist on
the Op-Ed page
and continues
as a professor of
economics and
international
affairs at Princeton
University. He was awarded the
Nobel in economic science in 2008.
Mr. Krugman is the author or editor
of 21 books and more than 200
papers in professional journals and
edited volumes. His latest book is
End This Depression Now!