Paul Krugman on Biden's Recovery Plans

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Brian Lehrer: It's The Brian Lehrer Show on WNYC. Good morning, everyone. It's a beautiful day outside if you get to be inside. The view at the window is just fabulous. It's gorgeous. I hope you don't have to travel. If you can go out and play in the snow if you're inclined to do that with your kids, or even if you're a grown-up, great. I hope you don't have to travel. Stay home, listen to the show, enjoy the view out your window of this winter wonderland.

Later this hour, we'll have Democratic New York State assemblyman, Ron Kim of Queens, who is accusing Governor Cuomo of obstruction of justice for the way Cuomo handled information about thousands of New Yorkers from nursing homes who have died of COVID. It's the most serious scandal during Cuomo's 10 years as governor. Assemblyman Ron Kim in about a half hour but first, New York Times columnist, Paul Krugman, joins us to talk about President Joe Biden, the $1.9 trillion coronavirus relief bill, and Biden's economic policies in general. In the president's CNN Town Hall on Tuesday, he said this as a general principle.

Joe Biden: We can come back, we can come roaring back. It's estimated by most economists including Wall Street firms as well as think tanks, political think tanks left, right, and center, it is estimated that if we pass this bill alone, we'll create seven million jobs this year, seven million jobs this year.

Brian Lehrer: The president on Tuesday night. Republicans won a much smaller bill arguing among other things that it was right in the early part of the pandemic to pay people well to stay home but now with the vaccination rate rising, the job will be to open back up safely, not to incentivize people to remain unemployed.

With that as prelude, we welcome Paul Krugman, Nobel Laureate in economics, New York Times columnist for 20 years, distinguished professor at the City University of New York Graduate Center, and the author of Arguing with Zombies: Economics, Politics, and the Fight for a Better Future, now out in paperback. Dr. Krugman, we always appreciate when you come on. Welcome back to WNYC.

Paul Krugman: Brian, good to be on, on this snowy day.

Brian Lehrer: Do you understand where the president's number of seven million jobs comes from and do you agree with that math?

Paul Krugman: Yes, of course, it's economics, so that's seven million plus or minus at least 3 million because no one can do this with any exactitude, but the idea that if we can provide a bridge through the rest of the pandemic, which is what the bill is really supposed to do, that the economy come roaring back and generate, that we can re regain a lot of the jobs that were lost during the pandemic. There's a very strong case for that.

I've been optimistic about the post-pandemic economy for a long time and that's a view that's now shared very much by Wall Street among others. The question is until then, there's a long period still, at least something like six months when we're not going to be able to go back to business as usual, and we need to get through that with minimal damage.

Brian Lehrer: Republicans who won a smaller bill say the economy doesn't need government stimulus per se because there's so much pent-up demand as it is, which sounds like you agree with. When it's safe to go back to work, the economy will take off on its own so it's right to spend money on temporary relief and on vaccines, but the economy, they argue, doesn't need so much money, like $1,400 in checks to people's pockets to stimulate spending. Your reaction.

Paul Krugman: Okay, it's not stimulus. I've been fighting a losing battle almost from the beginning saying, we're not talking about stimulus. This is not a conventional recession where the problem is insufficient spending. It's a problem where a lot of people are out of work. A lot of businesses not able to operate normally because it's dangerous because we have a pandemic, and we are still very much in that universe.

Let me give you the nightmare scenario, how could it all go wrong. The way it could all go wrong is that we start resuming normal life too soon, which we've already done a couple of times, and we have another wave of infections and that wave of infections means that we lose control of the situation just as some of these variants on the Coronavirus come along and prove to be not effectively dealt with by the vaccines, and then we could end up in a total nightmare by the end of the year.

Now, that's not the most likely thing to happen, but you want to make sure that it doesn't happen, so you don't actually want to encourage people to go back to work. You want to maintain the income support. You want to make sure that state and local governments have enough revenue to maintain services. They don't feel that they're compelled to playing chances with the virus because they're in desperate straits.

The idea that the economy has the prospect of a good recovery some ways down the line is not a reason to skimp on economic relief right now. If anything, the fact that the end is in sight is a reason to be especially generous, especially careful in making this interregnum pre-mass vaccination tolerable.

Brian Lehrer: Listeners, we can take your phone calls. Your opportunity to ask a question directly of Dr. Paul Krugman at 646-435-7280, and please don't make them all about the $1,400 stimulus because we've had that conversation 1400 times on the show already, but a little bit if you want, and anything you want to ask Dr. Krugman about Biden-omics, let's call it Biden-omics. 646-435-7280, 646-435-7280, or you can tweet a question at @BrianLehrer.

Biden-omics, if I can call it, that goes too big for conservatives but also, in some cases, goes too small for Progressive's. Here's an exchange at the CNN Town Hall, in which a woman in the audience asked the question about student debt.

Speaker 1: Debt is many people's only option for a degree. We need student loan forgiveness beyond the potential $10,000 your administration has proposed. We need at least a $50,000 minimum. What will you do to make that happen?

Joe Biden: I will not make that happen. It depends on whether or not you go to a private university or public university. It depends on the idea that I say to a community, I'm going to forgive the debt, the billions of dollars of debt for people who have gone to Harvard and Yale and Penn and schools my children-- I went to a great school. I went to a state school but is debt going to be forgiven rather than use that money to provide for early education for young children who come from disadvantaged circumstances, but here's what I think. I think everyone, and I've been proposing this for four years, everyone should be able to go to community college for free.

Brian Lehrer: Dr. Krugman, would you react to that exchange, and particularly, Biden's position that $50,000 of student debt relief would be too much as a blanket policy because it would take too much money from people of ordinary means to give to people who chose expensive private colleges?

Paul Krugman: Okay. I disagree with Biden on this. It's not a foolish position that he's taking. There is some question about whether 50K is going to be rewarding some people who don't need it, but on the other hand, I have to say that the business about elite Ivy League schools, that's a red herring because yes, there are such people, but fact is matter, one of our problems in this country is that so few students get into those elite schools one way or another that it's hardly measures. It's basically just because everybody you see on TV went to one of those schools doesn't mean that any significant number of Americans actually did.

10,000 is just not enough. A lot of people ran up debts not to go to Ivy League schools, but to go to vocational schools, to go to perfectly ordinary schools delivering basic education. I'm more with the Elizabeth Warren wing here saying that it's better to err on giving some debt relief to people who probably don't need it than to err on the side of not giving another debt relief. It's not a huge issue in the sense that you can see that there are both sides to it, but I'm on the, be more generous side of that debate.

Brian Lehrer: Let's take a phone call. Stephanie in Manhattan, you're on WNYC with Dr. Paul Krugman. Hi, Stephanie.

Stephanie: Yes. Hi, good morning. It's an honor to be on to ask you these questions. Big fan, big reader. Three interrelated questions for you, and I admit I'm influenced by my day job, I'm a financial advisor. First of all, on the financial channels, there's a warning sign of inflation in the back half of the year and I'm sure you saw as an economist, bond yields ticked up dramatically yesterday, and all the financial channels were abuzz about that, that's one thing.

Second thing is I've been impressed and not in a good way that this Congress doesn't press harder for state and local relief, and it's a mystery to me because Republicans live in these states, too. The third thing, which really continues to confound me is that this is, as it's described, is a K-shaped recovery, and the argument's always framed out more or less. There are plenty of people look at the stock market, look at the housing market, plenty of people seem to be doing just fine. It just seems to me that the conversation needs to be framed differently.

Brian Lehrer: Stephanie, thank you so much. Three great questions, and by K-shaped recovery, I presume she means at the end of it, some people go up and some people go down. Do you want to take that part first, Dr. Krugman?

Paul Krugman: Yes, so far, that's what we've had because what's happened now is that the people who can work from home, or who have if they are required to go to a place of work, still have relatively safe work environments, tend to be more highly educated, tend to have higher incomes, and the people who are still massively unemployed tend to be in face-to-face service jobs that pay very poorly. We have a situation now where employment for people like you or me, has basically recovered, but employment for the bottom third of workers is still very, very far down.

On top of that, yes, to the extent that you own stocks, which is, that most people own zero or only a trivial amount of stocks, and the stock market is up, so the minority of affluent people who are in that market have done very well as well, so it's been very uneven. Now, if we do get a full recovery, just because the parts of the economy that are so far down are the ones that employ relatively low wage workers, we're actually going to see some equalizing from it. It's not going to be K-shaped all the way, we don't think. I can't figure out what letter we're talking about here but we are going to see some recovery.

A lot of the eventual recovery will in fact go to people at the bottom, and in general, a strong economy is good for wages, particularly at the bottom, so that's going to be partially solved, but not enough. We really need a lot more policies to try and promote equality. For what it's worth, if you look at the- I'm trying to figure out a way to say this in English, but the distributional impact of the Biden release plan is actually very equalizing. The benefits, even in absolute terms, and especially as a share of income, are much bigger for people in the lower parts of the distribution.

This is a big step. When you do a side by side comparison of the Trump tax cut and the Biden rescue plan, and one of them is a staircase that goes up where the richer you are, the more you get, and the other is a staircase that goes down where the richer you are, the less you get, and so that's a move in the right direction. I'm a little-- just to say a word about the inflation. This is a big program and there is a possibility that the economy's going to get quite hot and maybe hotter than is sustainable once the pandemic subsides and people still have money coming in from the government and jobs are coming back.

We might have a year or two of above normal inflation to which the question should be, how bad is that? If it becomes a sustained thing, nobody wants to revisit the '70s, but it took a long time to get to a situation of sustained double digit inflation, required many years of getting policy wrong and I don't think that's going to happen this time. If we have a bump in prices as a result of having a very, very good labor market, that's acceptable, that's a risk well worth running.

State and local governments just to say look, there's a lot of money for state and local in this rescue package. It's probably more than they need and that's not for sure, which is okay. If they use some of it to build up their rainy day funds, that will help too. I think that at least, I hate when people say Congress, there are two parties, and they're living in different mental universes, but Democrats are very aware of the need for state and local funding.

Brian Lehrer: Well, see yes, and the caller has three great questions. Stephanie, thank you for all of them-

Paul Krugman: Thank you.

Brian Lehrer: -was asking why Republicans are opposed to state and local government relief because Republicans live in states too that are being stressed economically by COVID and that need to keep up their services as well. Do you have a take on the politics of that? Even broader, I've noticed that in this whole debate about the COVID relief bill between the two parties, there's nothing the Republicans are for, they're only against stuff in the Democrats' bill.

Paul Krugman: It's all about [unintelligible 00:15:54], really. Actually, at a further point, which is that a peculiar thing, precisely because we've had a K-shaped recovery so far, states that have income taxes are actually doing better in revenue terms than states that don't, that rely on sales taxes, because people are not shopping as much, they're not going to restaurants, which means that sales tax revenue is way down, but a lot of people are earning the high, a lot of people are unemployed but the people who are not unemployed, who are earning, tend to be relatively high income and pay a lot of income tax.

If you look at what's actually happening to revenue in New Jersey or California, it's holding up much better than revenue in Florida or Kentucky. It's odd, in some ways, the financial crunch is worse for red states than it is for blue states. Republicans have, first of all, they have this anti-government ideology. They want to starve government, even if it's a government they control. Secondly, they're basically fundamentally opposed to doing anything good. They don't want to make things more tolerable, especially now that there's a Democrat in the White House.

It is an amazing thing, you would think that just the interest of their own constituents would make them want to provide some relief so that we don't have to lay off lots of school teachers, which is really where the rubber meets the road here, but we've learned that the nationalization of politics, ideology, extreme partisanship, seems to just completely override the question of actually taking care of the people that you're supposed to be representing.

Brian Lehrer: Mark in Harlem, you're on WNYC with Dr. Paul Krugman. Hi, Mark.

Mark: Hi, Brian. This an honor to speak to Professor Krugman. One of the things you just brought up to me, I've often thought about, and it was part of the question that I was going to ask. The Republicans seem to have a velvet rope type of mentality where they want to maintain this disparity in income. I guess it creates some sort of privileged position for them because you can't feel rich if everybody's not poor. You can't feel super rich unless people are super poor, but one of the things they also hit us over the head is inflation.

They've been talking about hyperinflation, Weimar Republic, money in wheelbarrows, but I'm 60 years old, it seems to me that the economy is more efficient than ever. There's surplus in housing, surplus in food production, surplus in bread and circuses, right? When you think about it because you don't even have to ship entertainment anymore. It's like this vast inventory of stuff that you just download, so do you agree that this is like some false argument that if you stimulate the economy or you give people more wealth, there's going to be hyperinflation?

The other thing I want to say quickly is about the student loans, I agree with you. I grew up in Harlem, in the projects. I got a scholarship to an Ivy League school locally and when I got out of school, there was a recession, and every 10 years, there's another recession and because I'm a minority, I wasn't able to make as much money as I thought I could when I got into this hallowed school, which I love, right? I still have student loan debt and I feel that women, minorities, the society is just starting to become equitable in a way where we can make money to pay back student loans, but it's still a burden for me. That's my questions.

Paul Krugman: All right-- [crosstalks]

Brian Lehrer: What a great question. With our listeners, by the way, if I can boast about our listeners for just a minute, is this better than teaching a postgraduate seminar at CUNY? You don't have to answer that question. Go ahead.

Paul Krugman: Trouble is that you have too many listeners for me to see them all in the gallery view on zoom, which is what I did in my class last fall, and so I'm not sure what we- but yes, it's great. Just about the student debt. Yes, the idea that anybody who went to an elite school or anybody who spent a substantial sum of money on education is fine, this is just not right. About inflation, look, it is possible even in the 21st century to have a serious inflation, maybe even a hyperinflation though we haven't had one of those in a long time, if you work at it hard enough, but you really need to be majorly irresponsible on a scale that is just not plausible in America right now.

I have to say, one of the things that really drives me crazy is the tyranny of the 1970s over people's perceptions. I was there, just barely, but basically anybody 60 or under has never experienced serious inflation in this country, not as an adult, and yet people hold up this bugaboo of the '70s inflation as a, "Oh, if we do this, we're going to be back to that or Weimar Republic," which nobody remembers.

A lot of bad things have happened that were in many ways worse than the '70s. With the mass unemployment in the early '80s, which was not about inflation, the financial crisis, what we're going through now, why people, I can give you reasons, but I think it's largely political the way that the '70s are always held up as this ominous threat. The worst thing that can possibly happen is for us to relive the Jimmy Carter years.

I remember the Jimmy Carter years and they had problems, but they weren't so terrible. In any case, that's not the clear and present danger. The idea that, and you would think, by the way, just if you're watching cable TV, all of the people warning about hyperinflation now have been warning about hyperinflation year after year, in some cases, for decades. I don't know why there's never any point at which people say, why should we listen to you?

Brian Lehrer: Are those the zombies in the title of your book, arguing with zombies, the dead, but not gone political arguments over the economy from the 1970s?

Paul Krugman: That's one of them. The inflation fears is definitely- the constant worry about imminent hyperinflation is definitely one of those zombies. Zombie ideas or ideas that that should be dead because they've been proved wrong by events and the evidence, but they still keep on shambling along eating people's brains, and inflation is definitely one of them.

Brian Lehrer: First economist ever to come on the show and say, they just keep on shambling along eating people's brains. Political question from Nico in Newark. Nico, you're on WNYC with Paul Krugman. Hi.

Nico: Hi Brian. Thank you very much for having me on. A first caller, longtime listener. My question is quick and it is for Mr. Krugman. Is it clear to you what segments of the Republican electorate they are catering to by being so miserly? That is all. Thanks.

Brian Lehrer: Thank you.

Paul Krugman: We have a pretty good, there is actually two elements in the Republican electorate that are affected by this. One is the, there are the plutocrats, they're still an important wing of very rich people who really want minimal spending for people who aren't rich, partly to make room for tax cuts for themselves and partly because they just don't want people getting stuff. Then there's always been a pretty strong component of people who oppose any government social program because they think it goes to people who don't look like them, so the racial element has always been really strong.

One thing that is really remarkable, I'm amazed that people aren't saying- that it's not making more in the way of news stories, that the Biden economic proposals are incredibly popular. This proposal for big spending, a lot of which is going to people in need, has got something like 75% to 80% approval in the general public, including in most of the polls I've seen, a majority of self-identified Republicans.

It's actually even the Republican base it's is at least sympathetic to this program. It's only the professional Republican politicians who are not giving an inch and the package is going to pass almost surely on a straight party line vote, but that's really amazing. You're going to get exactly 50% of Republican senators-- You're going to get a 100% of Republicans opposing a package that 80% of the general public, including more than half of self-identified Republicans is in favor of, that's an amazing and not very encouraging fact about our political situation.

Brian Lehrer: I just pulled up some numbers. A Quinnipiac poll this month showed nearly 70% of Americans support the stimulus package, and a CNBC poll, according to what I'm reading, reported 64% believe the price tag is sufficient or not even enough, while only 36% said it was too much.

Paul Krugman: Those are among the lower numbers I've seen, but Data for Progress I think had even stronger numbers. YouGov, [unintelligible 00:25:41]. The polling is consistent. This is an enormously popular set of economic proposals, but the Republicans-- I think it's pretty clear not a single Republican in the House, and probably no Republican senators will support it even so.

Brian Lehrer: Let's take one more call before we run out of time in a couple of minutes. I was going to close by asking you about longer term structural economic justice, but I think Mary in Highland Park is calling to do exactly that so I'm going to let her do it. Mary, you're on WNYC with Dr. Paul Krugman.

Mary: Oh, hi. This is terrific. I've always wanted to write you a letter, Dr. Krugman. I actually wanted to make the first comment was about this pandemic. I have a theory that it would be over, but for tech, if everybody wasn't able to stay home, make money and pretend to send their kids to school from home, it would be over by now, but, Brian, you queued up that other question.

The general problem of inequality. Is it right to frame it that by having so many affluent people in a market, say the housing or health insurance markets, that it prices people out at the bottom, and that while it's terrific to have a minimum wage, I think that that might help deal with the problem of subsidizing red states and in a couple of different ways. That really the only solution is to raise taxes to get everybody more in the same market. Otherwise, if we just raised the minimum wage, that people are just going to- landlords are just going to ask more for money, and so forth.

Paul Krugman: Let me just-- These things are not really scarce. Healthcare, we can expand the number of doctors and hospitals. This is not actually a problem, and housing shouldn't be at a scarce good. This is one of the few places where I have to say a lot of liberals are not being helpful is nimbyism, is opposing housing construction. It's a big country, even densely populated metropolitan areas are able, you can still build up more. We could expand the housing stock.

The problem that, the reason why housing is so expensive, obviously, of course, in San Francisco, but even to some extent here in New York, is it's an artificial problem. We could do things that would allow us to have a lot more affordable housing. I want to tax the rich, there are a lot of reasons to do that, but you don't need to tax the rich in order to make housing affordable. That's a quite separate issue and there's is one place where I'm afraid a lot of people who have progressive values and support a lot of the right things are actually on the wrong side. Someplace where I did-- I'm not with my affluent neighbors on everything.

Brian Lehrer: In our last minute, getting back to normal, pre-pandemic normal, or pre-Trump normal is not enough. We're at a moment after 2020, where hopefully the racial justice movement doesn't just mean police reform, but it also means economic justice. What would you say are the couple of biggest things that the government needs to do? Is it reparations? However, we define that, is it some other set of things to diminish this horrifying and absolutely immoral wage and wealth gap between white Americans and Black Americans?

Paul Krugman: Certainly, there's a whole lot of things on the racial justice front. I have to say, I don't claim any special expertise on that, except to say that we do need a bunch of policies, but it's also true that to some extent, the racial wealth gap is reflecting just the general inequality of wealth and income. Those are things we can deal with, at least in part, with everything from child subsidies, child tax credits, which is something that Democrats are pushing for minimum wage increases, but also one of the big under the radar things that I actually think would make a much more difference, we're going to have the first pro labor union pro labor organizing administration that we've had in a long time. We might, given what I've seen of history, that could matter far more for equality and to some extent, even racial justice than most people imagine

Brian Lehrer: Paul Krugman, Nobel Laureate in economics, New York Times columnist, distinguished professor at the City University of New York Graduate Center, and author of Arguing with Zombies, Economics, Politics and the Fight for a Better Future now out in paperback. We so appreciate it every time you come on. Thank you very much.

Paul Krugman: Thanks for having me on.

 

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