The Daily Beast Podcast - Democrats Don’t Care About Debt. And That’s OK.

Episode Date: February 7, 2021

The pandemic shook things up, a lot. It exposed the country’s deepest inequalities, and arguably, made them worse. Now, all eyes are on President Biden to see how he’ll fix it, and Republicans are responding exactly as expected: by crying about the debt. Here’s the thing, though, says Paul Krugman, an American economist and op-ed columnist at The New York Times, there’s really no reason to. It’s a tale as old as time. Both parties spend, but when it’s time for Dems to make the economic plans, and Biden took office, Republicans “suddenly rediscovered that they were worried about debt” he tells co-host Molly Jong-Fast on this bonus episode of The New Abnormal. But it actually doesn’t matter, he claims. “The important thing to realize is that governments are not like you and me, governments don't have to pay back their debt,” he explains. “All they have to do is make sure that their obligations don't grow beyond any reasonable estimate of what they can us over time. That means they never actually have to pay off debt. It's a threat that exists only in the imagination of people who want to have some reason to squeeze government spending.” Instead, says Krugman, lawmakers should prioritize giving money to poor families with children, which is cheap and will get them out of poverty. “You can do an enormous amount for children, fairly affordably,” he says, but for the love of Pete, stop calling it tax breaks. “It's actually just giving people money,” he says, which isn’t a bad thing at all. Will the Trump voters go for this? It’s unclear, but Krugman says Biden’s policies actually help them the most. (“There's basically no place in America that is more dependent upon federal aid. That is more lifted out of absolute misery by massive support from the taxpayers than Eastern Kentucky. And it's very, very hard to find someone who didn't vote for Trump and those in those counties.”) Plus! The past alignments of the Democratic and Republican parties are completely changed, he says. (“People used to describe [the GOP] as being a center, right party, but it's not, it's now an extreme authoritarian, anti-liberal, anti-science, anti-almost-everything party that more or less [resembles] fascist parties of Europe.”) And! A prediction of what economic recovery look like post-pandemic. It’s good news for the working class.  Hosted on Acast. See acast.com/privacy for more information. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Hello, and welcome to another members-only Beast Inside episode of The Daily Beast of the New Abnormal, and we thank you so much for being here. Today, we have a very special guest with economist Paul Krugman, who's a distinguished professor of economics at CUNY, as well as a columnist for the New York Times. Can you talk to us a little bit about the book? It's mostly past columns with some new material, but the ongoing theme, which has been a lot of my writing, is that we mostly don't have serious discussions about politics. see in this country. What we mostly have is people who are trying to be serious, dealing, debating with people who are not actually serious and keep on resurrecting economic and other doctrines that should be dead by now, that have been proved wrong, but have, for a variety of reasons people aren't willing to drop. Everything from, you know, climate change is a hoax,

to tax cuts for the rich or magic, to the debt's going to kill us. The sky is falling. So it's zombie ideas, which is not an original phrase, but I picked it up. There are ideas that should be dead but keep on shambling along eating our brains. It feels like the Biden administration has really internalized the idea that debt is meaningless. Oh, yeah. Republicans are, though, very concerned about it since we have a Democrat in the White. Yeah, they're not actually concerned about it, but this was one of the most predicted and predictable things ever. I mean, we all knew that at the moment the Democrat was in the White House,

they'd suddenly rediscovered that they were worried about debt. debt was an existential threat. I think that's what Paul Ryan said. That was an existential threat with Obama in the White House. As soon as Trump was in the White House, they didn't care at all. The moment that the White House changed hands, they'd be back to it. And sure enough, it's played out exactly like that. Can you explain, like, sort of briefly, why debt is not a big deal?

Because I am 42. So I grew up, you know, with the debt clock on the building and everyone being like, there's $10 million of debt for every man. woman and American child. Yeah, that's right. There's a lot of Dr. Evil, you know, $20 trillion. The important thing to realize is that governments are not like you and me. Governments don't have to pay back their debt. Governments are effectively immortal, and they preside over a tax base that is always growing along with the economy, which means that all they have to do is make sure that their obligations don't grow beyond any reasonable estimate of what they can service over time.

time, that means they never actually have to pay off debt. So we had a very high level of debt at the end of World War II. How did we pay that off? Well, the answer is we didn't. In 1960, the debt was actually a bit bigger than it had been at the end of World War II, but the U.S. economy had grown a lot in the meantime. So the debt was way, way down, relative to GDP, relative to tax revenue. So that's all you need to do. And given that our debt is, the U.S. government can borrow at extremely low interest rates. So the cost of paying interest on the debt is actually not a big deal. It's actually kind of low by historical standards. There's no crisis at all in having the kinds of debt that we have. The numbers are big, but everything about America is big. And the debt is just not

a major burden on the U.S. So the whole sort of supposition that debt would come do and China would own America is just completely silly? Yeah, that was completely silly. The idea that would Certainly the idea that China would own America. I mean, there's the old line about if you owe the bank $1,000, you have a problem. If you owe the bank a billion dollars, the bank has a problem. If you actually ask who is actually invulnerable, this is the Chinese, not us, right? Right. As somebody said, China has an empty water pistol pointed at America's head.

Generally, the idea that the debt is coming due and it's a huge burden and that it's going to impoverish our children, none of that ever made any sense. And it's certainly, and it's especially true now. The U.S. government can borrow it about long term at an interest rate of about 1%. That's below the rate of inflation and well below the growth rate of the economy. So it's just nothing. It's a completely, it's a threat that exists only in the imagination of people who want to have some reason to squeeze government spending. But you don't ever have to service that debt?

You service it. You pay the interest, but we actually, we can pay the interest by borrowing more money. And even if we do that, even if we don't, we pay the interest entirely out of new borrowing, the debt will actually grow more slowly than the economy will. If you run a, if we run a big enough deficit, non-interest deficit, then the debt will grow, which in fact it did this past year. And we borrowed an enormous amount of money to deal with the pandemic as we should have. So that, the debt is a bigger number, even relative to GDP than it was a year ago, but that's, it's not a threat. It feels to me like Republicans, I mean, there are certainly Republicans where this is more clear than others, like Iran Paul, but it seems to me like there are a lot of Republicans in elected office who want to show, and this was certainly one of the hallmarks of Trumpism, want to show that the government doesn't work by making the government not work. That's been the point about a lot of things. Look at the long attempts to sabotage or prevent Obamacure.

from going into effect. That wasn't because they were afraid that Obamacare would fail. It was because they were afraid that Obamacare would succeed and show that government can actually do good things. Right. If your political goal is to have minimal government and the least amount of help for people possible, then you want to make sure that the government doesn't actually do positive stuff and prove your thesis wrong. Like one of the things I thought was the most interesting case of, like, Republican sabotaging government working was the post office? Yeah, of course.

Post office is a good case because the post office is a great American institution. By and large, people love it. They've tried everything they can to undermine it. There's not just the, you know, putting somebody who basically hates the post office in charge of it. But there's also this crazy thing. The postal service is required to prepay its health care expenses. decades into the future, which no business has to do. And so they basically tried everything they can't to cripple it,

even though it's actually one of the things that binds us together in the country. Will Democrats be able to change those sort of weird, sneaky Republican legislations that cause kind of the undermining of good government? They'll do some. I mean, a significant amount. I mean, there is the, if the Democrats had won a bigger victory, it would have helped, as it is now we're in a situation where Kamala Harris is going to be casting a lot of deciding votes, and that's not exactly what we want to. And unless they eliminate the filibuster, the rules say that there's only certain things you can do. So you can't, there are a lot of things

you can't. It's only, you can only use reconciliation on things that basically are fiscal and anything that involves regulations or other stuff, you can't. The bird rule. Still, I think you'll be surprised unless catastrophe strikes or, you know, someone of these older Democratic senators dies, which is something we're all very worried about. But if, if, assuming that they are able to maintain that, their working majority, you'd be surprised at how much between legislation and just administrative stuff, how much better the government would be working in a year or two. It seems like this pandemic has caused a kind of new appreciation for minimum basic income. Am I wrong?

I think you mean universal basic income. Yes, yes. And it's funny, because I'm actually not a fan of UBI. Can you tell us why? If you try to give everybody sufficient income to live on, that's a huge. amount of money. Even a big spender like me takes a look at what it would take to give everybody an adequate income, no questions asked. And that is just, that's going to be, if nothing else, that's going to put so much purchasing power into the economy. They'll be inflationary on a

major scale. There's a limit. Even, you know, I'm for big spending, not worrying about the debt, but they're not completely without limits. And that would be way over the top. And the other hand, if you scale it back to a level that's affordable, then it's not enough to live on. So if you really want to have an income, if you really want to take care of people, it has to be conditional on something. So generous unemployment benefits, that's great. Payments for children so that every family can afford to provide their children with what they need. That's great. But a universal basic income across the board, the arithmetic just doesn't work.

Right. But do you think what is your sort of dream that Janet Yellen puts in together and sort of sets up for America? I mean, if we think about something like Denmark with lots of generous family payments, lots of generous aid to people in distress, universal health care, it's possible that there's stuff that even the Danes aren't doing, but that's so far beyond the realm of political possibility here that if we could move just, you know, become half Danish, that would make me satisfied for the rest of my days. The things that you really think are kind of the fundamentals are the health care,

the paid family leave. And basic aid to families with children. So healthcare is the big one, and Obamacare got us significant part of the way to Universal, but we should get the rest of the way there. And then the next big frontier is actually children. You can do an enormous amount for children fairly affordably. The U.S. welfare state. We have a significant amount of government spending, but it is very much, if you like,

to the geriatric welfare state. We spend pretty heavily on the elderly, but not on children. And it's cheap. It's like universal health care for children costs almost nothing because children don't have the aches and pains of those of us later in life. I'm sort of always baffled by the idea that there's not more attention paid to capping medical expenses. That could mean different things. But I mean, my thinking is like why does an MRI on one street cost $3,000 and on another street cost $300? Like, why is there not more transparency in medicine and billing in that sense?

Yeah, this is one of these things where you want to ask, first of all, who benefits from the lack of transparency? Right. They're pretty influential groups. And then to some extent, if you're going to have a really decentralized system, that's going to be problematic. Even if you try to enforce some transparency, it's going to be really hard to make that stick unless you're willing to get the public sector much more into the guts of, running health care than we do. And the particular problem also with medicine is that it's very complicated. Even if you publish prices, who would know what they're looking at? And so you can do it. I mean, clearly, the easiest way to keep costs down is to have actual socialized medicine,

which countries that do have it, like Britain, are actually very happy with it. The next best thing is to have a universal, a single-payer system where the government pays for the great bulk of medical expenses directly. And actually, we have that for everybody over 65. But if you're going to maintain a plurality of payers and a largely privatized, overwhelmingly privatized set of providers, then you can still do a fair bit. And one hopes that we will actually start to move that way. But it is not that easy to do with, to reconcile our unwillingly. this to get the government further into the medical business with the kind of price control effectively or cost control that you're talking about.

I mean, the thing I'm so struck by is that we seem to not be able to figure out how to effectively tax our corporations. That's actually not true. If we haven't been able to tax them effectively, then there wouldn't have been such a big drop in corporate tax receipts after Trump got his 2017 tax cut through. Right. And we're still collecting quite a lot of money, and we could be collecting more with fairly easy changes. I mean, easy in terms of technically.

How do we reverse those? Well, first, you'd have to repeal that tax cut, and then you probably need to actually get a tax law that not that hard to do, but that rules out a lot of the dodges. What we have now is the most important thing that's going on is that is their corporations are able to do a little bit of basically life. accounting fraud, although it's not legally fraud. But they're able to make sure that their profits all pop up in the Bahamas or in Ireland instead of here. That's one of my favorite coinages. When there was this year that supposedly Ireland's economy grew by 30 percent, that didn't actually happen. It was just that the corporations made a change in track, mostly Apple, made a change in tax strategy. And I called it Leprocon economics. And the Irish, luckily,

are good sports. They thought it was funny instead insulting. It's not very hard to devise tax schemes that would rule that stuff out. But of course, we've been unwilling to do it because there's a lot of a lot of money riding on not doing it. Do you believe these child tax credits could lift children out of poverty? Oh, yeah. Can you explain why and how? Well, first of all, I hope that we won't call them tax credits. Okay. Explain why. One of the things that we really need to stop doing is, is phrased pretending that everything is a tax cut. So we say something is a refundable tax credit when it's actually just giving people money. Right. And it's just, it's just, buying into the tax cut ideology.

And so, well, hopefully, we'll just call it child cash allowances. Look, if you give a bunch of people money, many of them will no longer have income so low that you will consider them poor. And the thing about this is that lots of families with children have very low incomes. And in the United States, it doesn't require giving them a lot of money to bring them above that line. So if you, it's just give people money and they'll have more money. And the estimates I think are quite solid say that there's something along the lines of what's in the Biden proposal would cut child poverty at half.

So, and there's no reason. There are some things. If you give people money for, if you get people higher unemployment benefits, then under some circumstances, though not where we are now, But if you're an economy where jobs are available, you might have some adverse effects, people choosing not to take jobs. But children can't decide to not exist. So if you just give people money, if you just essentially give families with children money, which is there's no downside to it.

It just plain gives those families more money. One of the things the Biden administration seems poised to pass is a minimum wage increase. We've talked a lot on the show about people who study fascism. And it seems that like what they all tell us is that the Democrats actually, have to deliver for, you know, these people that they claim went to Trump because, you know, they're common people and they weren't seeing any benefits from Democrats getting elected. Can you talk to us about your feelings on this? Okay.

First, just my quick take on the politics. I'm not a political scientist. I don't even play one on TV, but I do read them. And there's a lot of doubt about the whole economic anxiety thing. It's if you actually ask, do Democrats actually do stuff? for a lot of people who voted for Trump, the answer is they do. You can't get, there's basically no place in America that is more dependent upon federal aid, that is more lifted out of absolute misery by massive support from the taxpayers than eastern Kentucky.

And it's very, very hard to find someone who didn't vote for Trump in those counties. So I'm not sure that that's the right story. But if the question is, can the Democrats actually do, assuming they can actually pass legislation, can they do a lot for particularly lower income working families? Yeah. I mean, the minimum wage in particular is one of those things where there's been a huge change in what economists believe about it. Economists used to be very worried that minimum wage increases would destroy jobs, and they've pretty much changed their minds, and they've done so for a very peculiar reason, namely, there's a lot of evidence. came in. And so the facts actually support a push for substantially higher minimum wages. Do you think it'll get passed? I don't know. I have no particular insight there. I mean, I know that Joe Manchin, who given the 50-50 Senate, in some ways he's the president, that Joe Manchin has suggested, it's not completely crazy, that he's saying that, well, a $15 minimum wage makes sense in New York and

California, but maybe not in West Virginia, which is true. It's a lower productivity, lower income place. Most of the estimates suggest that there may be something to that, but it's probably not as much as he may imagine. But maybe, I think there will be some minimum wage increase, whether it'll be the full 15, how gradual the phasing will be, I don't know. But I think the time is clearly there for a significant increase and maybe something that will at least bring it to 15 in most of the country. So interesting. Can you talk about how meaningful it is to have Bernie sharing budget? Oh, I mean, it is certainly a big change.

I mean, we're thinking about 2009 versus, versus 2021. You know, the difference between, I guess, was Max Baucus, right? And Bernie Sanders is quite a big difference. Now, as some people point out, what's actually happened is not that the, that the conservative Democrats of 2009 became more liberal, but is that they were replaced by Republicans. Right. But still, it is the fact that even taking that into account, you have a much, just in general, the Democratic Party is much more solidly center-left.

It's now what Europeans would call a social Democratic Party, which it really wasn't a dozen years ago. It's now clearly a party that believes in using the power of government to improve the lives of less affluent people. And that's a big deal. But the Republican Party is just nuts, right? Yeah, the Republican Party is a real outlier. I mean, people used to describe it as being a center-right party, but it's not. It's now an extreme authoritarian, anti-liberal, anti-science, anti-almost-everything party that is really has. It's more like the more or less fascist parties of Europe than it is like their center-right parties.

It's more like the AFD in Germany that it is like the Christian Democrats. And that's a pretty scary thing because it's still a very potent political force. Do you think that if the vaccine's work, we will have this VCHE recovery? Yeah. I hope I'm right about this. But I believe a lot of people are fighting the last war on the economics, that they are thinking that because the last economic crisis sort of went on forever, that that will happen again. But this one has very, very different causes. And it's really the pandemic that's holding us back. Those of us who've been able to keep on earning, those of us who have been able to work, work from home or otherwise have jobs that were not shut down, have actually been saving like crazy.

There's a lot of pent-up demand. So I think the odds are for a pretty rapid, it may be very rapid growth. I mean, some of the Goldman Sachs is predicting growth rates that are kind of morning in America level of growth rates once the vaccines are widely distributed. So you don't think it's going to make income inequality worse? Actually, the recovery will not because the pandemic did. The pandemic really disproportionately hit low-wage workers, and those are the jobs that will come back. So we will get some, I think there'll be some equalizing. Now, there's still, obviously, they're huge unequalizing forces in our society. But put it this way, if people start going to stores and going to restaurants and not,

ordering stuff on Amazon, that's actually, that's a pro-equality thing to happen. Is there an economic effect to having half a million people die? Not necessarily. Because I'm just curious. I'm just wondering how exactly that affects America besides the fact that it's tragic. Dying kind of severely reduces your quality of life. So, I mean, that is, properly speaking, a major cost, even in economic terms. I think the point in terms of GDP, this is not the black death. We're not actually seeing a large part of the potential workfor is dying off. What we are seeing is mostly that even in places where the government has not imposed lockdowns, people don't go on living their lives as usual, don't go on doing business as usual when they're rightly afraid.

So I think the real cost in economic terms is the fear, not the actual mortality, although that's obviously the thing we should really care about. But you don't think there's like a world in which, like, we're losing so many elderly people, too, that that will shift or, you know, we're losing a lot of, like, I'm just curious to know if you think there's larger repercussions from that. I don't think so, even though, I mean, it's, it's a human tragedy. And if you were going to be, on the other hand, if you're going to be totally cynical and brutal, you'd say, well, that means less Medicare expenses because the recipients will have been knocked off. But it's not enough, really. The truth is it's not, this is a horrible, horrible thing. And it's worse than any of our wars. But it's not a mass death thing.

It's not actually changing our demography a whole lot. So I'm sorry to ask that question because it's so grim. But I know. I continually think like here we are 500, you know, at the end, I mean, the real numbers are probably 600,000. You know, we're going to have this large swath of people who are no longer here. Yeah. But, again, it's, it's, it's, it's, America's a very big country. And so that's a, that's still, you know, a fraction of a percent. So it's, uh, not to minimize it because it's obviously, the lots of things that people are, you know, people shape their lives around fear of things that are a lot less deadly than COVID-19. But it's, but it turns of the, in the end, when we look at the people who died, it won't be that it won't be a reshaped country because of it. Yeah. Thank you so much. Thank you. Thank you. Thank you. Take care.

On that note, we'll wrap up this episode of the new abnormal from The Daily Beast. In future episodes, we'll be talking with smart folks in the Daily Beast and beyond from media, culture, politics, and science who will help us understand what's happening to our country and the world. We hope you'll subscribe to us on your favorite podcast app and share the show on social media. If you'd like to follow us on Twitter, I'm at Molly JongFast, and he's at the Rick Wilson. Thanks so much for listening, and we'll see you again on the next episode. Want more great listens?

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