WSJ has come out all guns firing with a challenge to the spend-more-now camp led by Krug. Naturally their point of view is that the huge increase in debt during Obama is terrible and government spending must be reduced. This couldn’t be more opposite of what Krug writes. I must admit after reading both sides Krug’s argument holds more water. The WSJ point of view seems simplistic:
WSJ: “every dollar of government spending has to come from somewhere, which means it is either taxed or borrowed from the private economy” – Krug has said no – not in the this current economic climate since private sector spending is reduced, who is going to spend – if the private sector isn’t then the government must or else there will be no recovery.
WSJ: “Obama… doubled the debt to an estimated 76.6% of GDP this year” but Krug has explained it is not accurate to measure it straight against GDP – you need to measure it against potential GDP if the economy did not suffer the economic shock - and when looking at it that way debt is not high historically.
Then there is a perplexing passage – first the Journal says “Another reason to reduce debt today is to create some breathing room if we have another recession or an emergency such as a war.” Then right in the next passage then say “Where we agree with at least some Keynesians is that the main policy goal now should be faster economic growth rather than rapid debt reduction.” Very confusing as they just said opposite things. Maybe it was poor editing, but it seems clear Krug has gotten the upper hand as the Journal seems flustered.
Back to his blog, Krug also has fun with a chart showing his blog is 6th most popular blog on the web. And he loves rubbing in the inflationistas (specifically Niall Ferguson - ) face that inflation keeps falling.