Krugman Opens The Overton Window

The upcoming cover of Newsweek, the Village weekly reader, will feature Paul Krugman, or at least 60%-65% of his face, with the headline "OBAMA IS WRONG: The Loyal Opposition of Paul Krugman.”

Krugman, who won the Nobel Prize in economics last fall, has been arguing that Obama is doing too little to respond to threats to the nation’s banking and economic system, and he has contended that the $787 billion stimulus bill should have been bigger [...]

Newsweek Editor Jon Meacham explains the choice in a letter to readers: “Every once a while, … a critic emerges who is more than a chatterer—a critic with credibility whose views seem more than a little plausible and who manages to rankle those in power in more than passing ways. As the debate over the rescue of the financial system—the crucial step toward stabilizing the economy and returning the country to prosperity—unfolds, the man on our cover this week, Paul Krugman of The New York Times, has emerged as the kind of critic who, as Evan Thomas writes, appears disturbingly close to the mark when he expresses his ‘despair’ over the administration’s bailout plan. …

“There is little doubt that Krugman—Nobel laureate and Princeton professor—has be come the voice of the loyal opposition. What is striking about this development is that Obama’s most thoughtful critic is taking on the president from the left at a time when, as Jonathan Alter notes, so many others are reflexively arguing that the administration is trying too much too soon.

"A devoted liberal, Krugman hungers for what he calls ‘a new New Deal,’ and he prides himself on his status as an outsider. (He is as much of an outsider as a Nobel laureate from Princeton with a column in the Times can be.) Is Krugman right? Is the Obama administration too beholden to Wall Street and to the status quo, trying to save a system that is beyond salvation? Does Obama have—despite the brayings of the right—too much faith in the markets at a time when prudence suggests that they cannot rescue themselves? We do not know yet, and will not for a while to come. But as Evan—hardly a rabble-rousing lefty—writes, a lot of people have a ‘creeping feeling’ that the Cassandra from Princeton may just be right. After all, the original Cassandra was.”

Now, some supporters of the President might see this rise of Krugman as a negative development. I see it differently. Krugman has been remarkably consistent to his principles, praising Obama where warranted, even on economic issues. He appreciated Obama's budget and his very legitimate move toward health care reform. His is not a knee-jerk reaction in opposition. Rather, Krugman has taken a critical look at each Obama proposal and made his judgments on the merits based on his own expertise. He has consistently argued that we are in a crisis where the normal rules no longer apply, and we need to look to the past to use the principles of Keynesian economics to dig us out of this rut. And with respect to the banks, he has argued the increasingly consensus view that insolvent banks must be taken over temporarily, their management and bad assets cleared out, and their institutions sold off after the debts are resolved, rather than what he sees as the half-measure of the Geithner plan. In addition, he has the opinion that banks that are "too big to fail" are too big to exist, and we need to fundamentally restructure the financial sector instead of making the sector whole and just turning back the clock to a couple years ago.

Now, you don't have to agree with everything Krugman says - I've seen some very good critiques of things he's said recently. But he is a serious thinker and this is his area of expertise, and he performs an important function. It's an odd quirk of fate that Krugman has as big a megaphone as he does, and so using it to put pressure on the Obama Administration from the left does several things: 1) provides a counter-weight to the conservative critiques of the President, which are usually so nutty that they pale in comparison to reasoned dissent, 2) forces Obama to at least debate the merits of his proposals rather than dismiss all critics, and most important, 3) gives Obama space on the left to put out an more progressive agenda than otherwise. Bill Clinton sums up the dynamic:

I recently heard an interesting anecdote about the 1993 budget fight. While it is probably the most progressive piece of sizable legislation to pass into law in two decades, it was a grueling fight--passing both branches of Congress by a single vote--and it still could have been better. At the signing ceremony, President Clinton found then Representative Bernie Sanders, and told Sanders that he, Sanders, should have made a much bigger public display of how he, Clinton, wasn't giving enough to liberals in the new budget. Such a public display would have provided Clinton more room to maneuver on the left.

The moral of the story is that if no one is criticizing a Democratic administration from the left, then there is no rationale or political space for that Democratic administration to operate on the left. Such criticism is thus even useful to, and desired by, a Democratic administration. If the left stays quiet, it will not be relevant.

Krugman is fulfilling that role, opening what many have called the Overton window, moving the conversation away from the failed conservative ideas of the past.

I also appreciate Krugman's modesty in reacting to the cover story:

I’ve long been a believer in the magazine cover indicator: when you see a corporate chieftain on the cover of a glossy magazine, short the stock [...] Presumably the same effect applies to, say, economists.

You have been warned.

The full article is here.