Guest Host: Paul Brown

Can our mountain of economic woes actually be solved with simple solutions? Paul Krugman says they can be, if we followed a few lessons from the Great Depression. He joins us in studio to explore what he believes policy makers should be doing to get Americans back to work – and why he believes those in government are “out of excuses.”


  • Paul Krugman Op-Ed Columnist, New York Times; recipient, 2008 Nobel Prize in Economics; Professor of Economics, Princeton University; and author "End This Depression Now" (Norton)

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Krugman said it can be difficult to convince some of those concerned with deficit reduction of the need for greater government spending in some concentrated areas because they “aren’t actually concerned about indebtedness.” Krugman says many of the people who claim to prioritize deficit reduction are simply trying to achieve a political end that amounts to a “reverse Robin Hood” system that would punish the poor and reward the rich:


  • 13:06:43

    MR. PAUL BROWNFrom WAMU 88.5 at American University in Washington, welcome to "The Kojo Nnamdi Show," connecting your community with the world. I'm Paul Brown from NPR News sitting in for Kojo.

  • 13:07:04

    MR. PAUL BROWNYou don't need a Nobel Prize in economics to recognize that times are tough for lots of Americans right now. Unemployment is still over 8 percent. And the unemployment rate is considerably worse for workers under the age of 25, but Paul Krugman, a Nobel laureate himself, says the playbook for getting out of this downturn is not the stuff of advanced degrees. He says that policymakers could get Americans back to work with relatively simple measures that worked in the wake of the great depression, if only they would untangle themselves from the complications of politics.

  • 13:07:39

    MR. PAUL BROWNAnd prioritize the short term challenges facing workers and their families over the long term concerns about our national debt. He joins us in the studio to present his argument about why he believes the economic pain Americans are feeling is completely avoidable. You can join us by calling 1-800-433-8850. That's 1-800-433-8850 or email us at We'd love to know what your concerns are about the country's debt, about our economy. We wanna know whether you're comfortable with the idea of spending more money to stimulate the economy and get things going.

  • 13:08:24

    MR. PAUL BROWNWhere do you see the most visible evidence of the damage done by the recession in your life? What do you think should be done about it? Paul Krugman is with us. Paul, thanks for coming in.

  • 13:08:34

    MR. PAUL KRUGMANGreat to be on.

  • 13:08:36

    BROWNPaul is an economist and a columnist for the New York Times. He's also a professor at Princeton University and tells me he's got a class tomorrow so he'll be getting back there. He won the Nobel Prize in economics in 2008. And is the author of several books, the most recent of which is titled "End This Depression Now." Paul Krugman, I've been reading your columns for years and listening to your arguments about how to help turn the country's economy around, get people back to work and balance things out. Briefly, what is the best way to do that?

  • 13:09:11

    KRUGMANYou have to bear in mind what is the problem. And the problem is not that we've lost skill. We're no worse, you know. We're not dumber, we're not less skilled than we were five years ago. The problem is simply there isn’t enough spending. There isn't enough demand in the economy. And while in the long run we expect the private sector to do that spending, it's not ready because it's got a overhang of debt because it's been damaged by the bubble of the last decade.

  • 13:09:40

    KRUGMANAnd so right now is a time for the government to step into that breach, for the government to spend more. And it's actually quite easy now. It's much easier just to talk about what that spending would do now than it was three years ago. Three years ago we were talking about let's look for stimulus, let's look for new projects. What's actually happened is over the past three years we've had big cuts in government spending. We've had a drastic retrenchment by state and local governments. And we can get a big boost to the economy right away just by giving aid to those state and local governments so they can rehire the schoolteachers they've firing, so that they can get back to normal levels of staffing.

  • 13:10:16

    KRUGMANIt's an amazingly easy thing. You can devise a plan almost on the back of an envelope that would get the economy -- maybe not fully back to, you know, where we wanted to be, but get unemployment way back down. And we could do it very quickly.

  • 13:10:28

    BROWNThere seems to be a far amount of concern, at least in the public sphere and in the media about printing money. You know, where is this going to come from? We're in debt. Why on earth should our government be creating and spending more money when we're in tremendous debt?

  • 13:10:49

    KRUGMANFirst thing you say, you know, think about, first of all, the real goods and services. You know, where is the resources gonna come from for this extra government spending? And the answer is it'll come from resources that are now not doing anything. It'll come from employee workers who are now unemployed. So from the economy's point of view this really is a free lunch. We've got mass unemployment. Putting those people to work is not a cost to the economy, it's a benefit. So that's the first thing to understand.

  • 13:11:13

    KRUGMANThen you ask, well, can the government bear this debt? Well, the market thinks so. The, you know, the investors are willing to buy U.S. long-term debt at an interest rate of about 1.95 percent, as of this morning, which in terms once you adjust for inflation is actually zero. So the government is basically able to borrow money for free because investors don't see good other investment opportunities. That won't always be true. Eventually there will be other opportunities, but that will be a sign that we don't need this kind of government stimulus any more.

  • 13:11:44

    KRUGMANLast thing, people say, well, what about the burden of debt? There's nothing that makes the burden of debt look worse than having an economy that is not growing. A depressed economy means a depressed tax base. It means that it has long-term effects keeping -- right now we have 3.9 million people who've been out of work for more than a year. If that goes on much longer lots of those people are never gonna make it back into the workforce, which means we're gonna lose all of the revenue, the tax revenue, that would be generated by having those people working. And that's gonna do more damage to our budget position than spending some more money now to get those people back to work.

  • 13:12:22

    BROWNWhat cards do you think President Obama has left to play?

  • 13:12:26

    KRUGMANBefore November, obviously nothing except to hammer on the fact that the other party is blocking any action. After November, if he's reelected then we have several things he can do. It partly depends on what happens with the congressional elections. There's still a possibility that he'll have a democratic Congress. It's not the most likely event, but lots can change in politics in a few months. And he can hammer at Congress. He can go to the American people. He can go over the heads of the Washington inside-the-beltway discussion and say, look, we know what to do and these people are not letting us do it.

  • 13:13:03

    KRUGMANHe has some direct ability to do things like mortgage refinancing, which can provide a significant boost to the economy. He can encourage the Federal Reserve, not bully it, but encourage it to do what it should be doing in terms of a more expansionary policy. So it's not easy, but you don't give up talking about what you ought to do because it's politically difficult. You try and create the political space to do it.

  • 13:13:25

    BROWNOne of the things you've written about this week is that the economy is a disaster for young people who are just trying to get into the job market, young adults, whether they're high school graduates, college graduates, maybe they've been working for a couple of years and they were laid off. It's very, very difficult.

  • 13:13:42

    KRUGMANAnd this is one of the things that actually does get me pretty angry. If you look at the people who are against doing anything to help the economy, are against providing the money to rehire those school teachers and get this economy moving again, they talk a lot about the burden we're placing on our children with all of this debt. What about the burden we're placing on our children by creating an economy where there are no job opportunities, which we know. There's evidence from past slumps that students who graduate from college into a bad job market never recover. Their career will always be on a worse track than it would have been if they graduated in a better year.

  • 13:14:19

    KRUGMANThat's a waste of minds. It's a waste of human capital, to talk like an economist. And it's even bad for our fiscal position. If we take a lot of our best and brightest and deny them an opportunity ever to get a proper start on their working lives, what's that gonna do to the tax base of America in 2020? So this is one of the things where our economic self-interest as a nation and our sense of what's right, what's just should lead to the same conclusion, which is that we need to, like I say in the title of the book, end this depression now. Get these people to work.

  • 13:14:50

    BROWNYou know, when the economic stimulus package was passed and put into place, you wrote over and over again, it's too small. It's not aggressive enough. Not that it's too large. What sorts of things would you have wanted to see done with a larger stimulus package? And given that it didn't pass in the political climate seems very, very hostile to that sort of thing right now, what do you think could be done within the next, you know, year or two, under the best of circumstances to get people back to work?

  • 13:15:24

    KRUGMANA lot of what I wanted in that first package was actually more aid to state and local governments because you could see -- not just more, bigger in the first two years, but longer because it seemed highly likely that it would be an extended period of a depressed economy. And you wanted to set it up so there would be a sustained period of aid to prevent what actually happened, which was that any expansionary effects from federal spending have been swamped by the cutbacks at the state and local level.

  • 13:15:55

    KRUGMANSo I wanted a bigger package of which a large part would have been extended more generous aid to state and local governments.

  • 13:16:02

    BROWNFor public works, for...

  • 13:16:04

    KRUGMANJust to keep...

  • 13:16:05

    BROWN...infrastructure, for what, schools?

  • 13:16:07

    KRUGMANAnd just to maintain services. Maintain schools. I mean, a lot of the representative government employee in America, 'cause most of them are state and local, is a school teacher. And what's happened, the states and local governments operate under rules that require them to have balanced budgets. They can slip a little bit, but it's much more restrictive than the federal level. So when the economy slumps and their revenues go down they're forced into cutbacks unless they get aid from Washington. And Washington should have been providing that aid.

  • 13:16:38

    KRUGMANOver these past three years we've not had a stimulus program, we've had an austerity program. If you actually look at the track of spending in the United States, of government spending in the United States, it's been down. We have actually done just as much austerity here as the Europeans have done.

  • 13:16:58

    BROWNWell, the figures are out in Europe today, with the austerity programs in place we found out that official figures show European unemployment in the Euro zone at 10.9 percent, which is the highest it's been in years. Do you believe that this is a direct result of the austerity programs that are being imposed there or is that too simple a correlation to make?

  • 13:17:18

    KRUGMANIt's actually not too simple. I can't do this on the radio, but you can do a scatter plot of size of the austerity measures versus the change in real GDP on European countries. And it's a pretty tight relationship. Basically, the countries that have been forced into harsh austerity programs have also suffered great depression level economic slumps. And that's what's bringing down the overall European economy. It's leading to this spike in unemployment. We've got almost 25 percent unemployment in Spain, 50 percent young people.

  • 13:17:49

    KRUGMANAnd what's really remarkable about the European experience is that the countries that have done everything that the usual suspects said they should do -- I like to talk about Ireland, which twice now, a lot of people in the United States on the right and even some in the center have talked about, oh, the Irish are doing it right. And look, they're turning it around. Both times it was a false dawn. And so the Irish have done this massive austerity program, gotten no reward for it at all. They've got 15 percent unemployment. They have an economy that is down by double digits from its peak.

  • 13:18:24

    KRUGMANAnd they have not regained the confidence, even the bond investors. So Ireland is an object lesson in why the doctrine that has been dominating our discussion doesn't work and why we need to do something different.

  • 13:18:35

    BROWNWhat do you think it would take to persuade people who say that they are very concerned about indebtedness to come around to your point of view?

  • 13:18:44

    KRUGMANA lot of those people are not gonna be persuadable because they aren't actually concerned about indebtedness. I mean, you just have to be realistic. A lot of this is pure hypocrisy. If you look at a lot of the proposals that are out there that claim to be deficit reduction proposals, they actually aren't. I mean look at the House Republican budget, it has three parts, tax cuts for the rich, slashing benefits for the poor and then imaginary savings that are not specified. And you take out the imaginary savings and it turns out that it's a plan that will actually increase the deficit.

  • 13:19:13

    KRUGMANSo they don't actually care about the deficit so you can't persuade them to drop their objections 'cause what they're trying to do is pursue a political agenda that has nothing to do with actual deficit concerns.

  • 13:19:22

    BROWNWhat do you believe that political agenda is?

  • 13:19:24

    KRUGMANOh, it's reverse Robin Hood. Take from the poor and give to the rich. I mean it's that simple. And they're using the state of the economy as an excuse to pursue that agenda. They're using the big deficit numbers. But there is a significant body of opinion that is genuinely confused, people who I think are of goodwill but have been spooked by a lot of bad information about deficits. Deficits do matter. In the long run you have to pay your way as a government. And so I'm not saying that we should not be concerned about the long run prospect, but this is not the time. Trying to balance your budget when you're in the midst of depression conditions, which we are, is self defeating even in purely fiscal terms and is just disastrous for our society.

  • 13:20:16

    BROWNLet's go to the phones for a moment. William in Bethesda, Md., you're on the air.

  • 13:20:21

    WILLIAMHi. Good afternoon. A very interesting show. I have this kind of a concern and my concern is that I understand we have so many companies out there with stacks of -- piles of money sitting down there that they are kind of, you know, reluctant to open up and employ people. My point is that when does the line between profit margin and the society in which we live, you know, (unintelligible) ? Because I think if everything is about profit margin that it becomes an individual affair.

  • 13:20:57

    WILLIAMWe are a nation and we have to grow together as a nation rather than some peoples stockpiling on profit margins and not caring about what happens to the other people of the society.

  • 13:21:06


  • 13:21:08

    DR. PAUL KRUGMANCan I make...

  • 13:21:08

    BROWNPaul Krugman, yeah.

  • 13:21:09

    KRUGMANYeah, you know, on these things I'm basically a market economy guy. I think that for the most part we can leave decisions about investment -- not investment in infrastructure which have to be public, but a lot of investment it's okay to leave that up to the private sector as long as we make sure that there is enough demand to give the private sector an incentive to invest. So I don't think that it's really necessary to go out there and start cracking down on corporations that aren't investing.

  • 13:21:42

    KRUGMANWhat we need to do is have a policy of economic growth promotion that gives them a reason to invest. Right now corporations, if you ask them, you know, honestly what's holding you back they'll say, we don't have the customers. Why should we expand our capacity when our factories are not operating at a capacity, when the office buildings we've built are not rented out? Give them that incentive. Give -- rehire those school teachers. The school teachers will have money to spend. Consumer demand will rise and business investment will follow.

  • 13:22:10

    BROWNThanks very much for your call, William. We'll be back in just a moment. We want to take a very brief break. This is "The Kojo Nnamdi Show." I'm Paul Brown from NPR news sitting in for Kojo. With us Paul Krugman, economist. His latest book, "End This Depression Now!" We'll be back in just a moment.

  • 13:24:12

    BROWNWelcome back to "The Kojo Nnamdi Show." I'm Paul Brown from NPR News sitting in for Kojo. And Paul Krugman with me, economist and columnist for the New York Times, a professor at Princeton University and the author of the book "End This Depression Now," his most recent. I want to go back to the phones here with Rona in Columbia, Md. Rona, you are on the air. What's on your mind?

  • 13:24:39

    RONAGood afternoon. And, Paul, you are my sanity check on Mondays and Fridays after listening to, you know, the chatter about the economy. What I was curious about is why isn't the mandate in the health care bill presented as a public health concern?

  • 13:25:04

    BROWNAnd this is the mandate you refer to that most people would be required to maintain health insurance coverage at their own cost if necessary with help of employers where possible.

  • 13:25:12

    RONAYes. Correct.

  • 13:25:14


  • 13:25:14

    RONAI'm in the health care industry and have had experience with people that did not have health care.

  • 13:25:22

    BROWNPaul Krugman.

  • 13:25:23

    KRUGMANYeah, it's an interesting thing. The decision of the Obama Administration -- and I'd have to say a lot of health care economists, was that even though they have a lot of idealistic reasons to support universal coverage, to support the mandate, and a lot of belief that this is actually one area where people make bad decisions as individuals, that that was not the way they were going to sell it. That they were going to sell it basically accepting the framework of while people are rational and they're doing it right and basically not to challenge the paradigm and sell it as a relatively conservative measure.

  • 13:26:01

    KRUGMANThat's not a stupid thing to do. I mean, I actually know some of the people who are involved in this very well. And they're trying -- they have high ideals but they also have a fairly acute sense of what they think will work. So the health care law was sold in a fairly cautious way. We’ll see what the Supreme Court does, but, you know, if it survives that challenge, I don't think -- I don't care how it was sold as long as we get it because the important thing was to get that universal coverage.

  • 13:26:31

    BROWNRona, does that help you out at all?

  • 13:26:33

    RONAWell, I agree with what you're saying but I guess my main concern is the Supreme Court and how they look at it.

  • 13:26:42

    KRUGMANGiving it a different argument would not have changed. If the law -- the constitutional law, everyone I talk to says it's totally clear that they would have no business at all in validating that law. But if we have sufficiently politicized justices that they decide that they want to do it, you know, it's not -- making a better argument was not going to change that.

  • 13:26:59

    BROWNThanks very much for your call, Rona. We appreciate hearing from you. And, Paul Krugman, we actually have an email from someone saying, "What I don't understand is why, as with this show, everyone blames politics. Why aren't they saying Republicans?" Are you saying Republicans or are you not saying Republicans?

  • 13:27:15

    KRUGMANMostly, not entirely because there are actually a fair number of Democrats who have been waffling on the wrong thing, but, no, it's true. There's a new book -- I shouldn't be plugging somebody else's book, right? Supposed to be plugging my own book here. But a new book by Mann and Ornstein, it's saying -- "It's Even Worse Than You Think" is the title, about the political thing.

  • 13:27:33

    KRUGMANAnd they finally say the -- and these are, you know, mainstream respectable congressional analysts. They finally said, look it's the Republicans. It's not when we talk about the political system. It's not both sides. It's the Republicans who have gone off the deep end. So that's a large part of it, but it's also true that a lot of centrist opinion -- there are no centrists in Congress but there are some centrists in the punditocracy. And some people -- even the Obama Administration, some of the people low balled the need to do more.

  • 13:28:01

    KRUGMANAnd I think they've learned better. I think the president has learned better than that now. But those are the people I can hope to move, right. I'm not going to change the opinion of the people whose ultimate goal is basically to roll us back. I think Grover Norquist said, I don't want to undo the new deal. I want to undo the progressive era, right. I'm not going to win over those people.

  • 13:28:21

    KRUGMANBut the people who are honestly concerned about deficits don't understand why that's the wrong issue to focus on. Those people I hope can be won over and maybe we can get a better policy.

  • 13:28:32

    BROWNYour call at 1-800-433-8850 to ask Paul Krugman a question or make a comment. Or you can email us at Also get in touch with us through Facebook or you can Tweet us at kojoshow. We have another email here, Paul. It says, "I'm about to graduate from college. I don't have a job. I'm trying really, really hard. I owe people a lot of money already. But when I try to follow politics, it seems the whole process has been hijacked by people who don't really care about my predicament or the predicament of those other people my age. People talk about class warfare," Kevin says, "but what does Paul think about whether we're experiencing generational warfare?"

  • 13:29:17

    KRUGMANI think it is class warfare which is falling heavily on the young but also on a fair number of the middle aged. So the two groups of people for whom my heart really breaks in this are the students just graduating who are looking at a desperate situation. They're looking at, you know what, how is their life going to start. And guys my age, I'm 59. I know a fair number of people my age who have lost a job and have no prospect of ever getting another.

  • 13:29:45

    BROWNI do too. I do too.

  • 13:29:46

    KRUGMANAnd those are both tragedies. And so it's not the young versus the old. I guess you could say that, you know, you could get pretty angry at the senior citizens, you know, going out there and saying, don't let the government get its hands on my Medicare. But the real opposition is between the people who are opposed to any government action to help this economy because that might suggest that government can actually do good things and therefore might have to tax the rich to pay for them, and the rest of us.

  • 13:30:20

    BROWNLet's go to Mark in Silver Spring, Md. Mark, you're on the air.

  • 13:30:24

    MARKThank you. It's an honor to speak to Dr. Krugman. I'd like to pose some rhetorical questions to make a couple of points. Okay. What if Louie the bookie decided to bet on a Central Park horse to win the Derby, or Kentucky distillery decided to sell 50-proof bourbon as 100-proof? And yet junk bonds were sold as AAA. And Greenspan said that it was a 1 in 200-year possibility of occurrence. No one believed that if you take off the regs that it'll take 200 years to get another crash. And the banks are no longer community pillars.

  • 13:31:08

    KRUGMANYeah, look...

  • 13:31:09

    MARKThey're no longer engines to the economy to just run high stakes. Ninety-nine out of a hundred I lose, one out of a hundred, I win? I cap my losses, I win.

  • 13:31:22

    KRUGMANYeah, this is all true. And there's a lot to be said about that.

  • 13:31:28

    MARKGo right ahead. I'd appreciate it.

  • 13:31:29

    KRUGMANWhat I'm trying to do in this book -- what I'm trying to do in "End This Depression Now" is say, okay, you know, there've been a lot of books written and a lot of books that should be written yet about how this happened. There's a lot of blame, a lot of villains and some of those villains are actually, you know, now placing large bets on Mitt Romney for president. But truly the most urgent question is not how did this happen, but what do we do now.

  • 13:31:58

    KRUGMANSo by all means, let's -- and, you know, I'd love to have a real version of the Pecora hearings that happened in the '30s where they went after Wall Street. And hopefully we can get that still. But meanwhile, punishing the bad guys is important. It's a good -- it's something we should be doing and haven't been doing but we also have to just get this economy moving. Punishing the bad guys is not going to get those young people their first good jobs. It's not going to do something for the 59-year-old guy who never sees the prospect of working again.

  • 13:32:30

    BROWNMark, thanks very much for your call. We appreciate hearing from you. Paul Krugman, there is an argument out there that there are now structural issues in the economy, when you talk about that 59-year-old guy who'll never, never see a fulltime job again, that technological changes, changes within the marketplace, jobs being exported, fields simply going away are responsible for some of the loss of employment. And I personally will say that I've existed through several changes of this sort so I can understand the arguments.

  • 13:33:10

    BROWNYou know, for example, when I was in my 20's I was a furniture upholsterer, okay. I went to trade school. This was my trade and I took pride in it and saw, aside from the very top tier luxury shops, all of the factory work slowly disappear out of the south. Then I became a journalist and I've watched journalism transform. Numerous friends of mine who have been in the newspaper business are out of work. Some of them have gotten jobs, some of them may never. Those who could make the transition to electronic media have done a little bit better.

  • 13:33:45

    BROWNThen, low and behold, all of the engineering structures within radio and journalism started to change. And at NPR for example where I work we let go of a lot of engineers because of new technology. So the argument goes -- and I've spoken with economists in the manufacturing and other product sectors of the economy -- that it is natural to have churn and to have change in the needs of the market. And that in those changes we're going to see lots of people out of work or having to completely refit themselves for a new era.

  • 13:34:25

    BROWNDo you think that explains what's going on, and is that a legitimate way to justify what's happening in the labor force with unemployment at, you know, a nominal 9 percent when it's actually much higher if you count the people who've just dropped out of the job market entirely? Or do you think that's bogus?

  • 13:34:44

    KRUGMANSo, no. This -- of course stuff like this always happens. Actually there's a new research paper from the Federal Reserve Bank of San Francisco about structural mismatches, skills -- worker's skills not matching what employers feel they need. And they say there's a substantial amount of structural mismatch, but there always is. There's no evidence that there's any more of that than there was five years ago or ten years ago. And yet we had 5 percent unemployment not that long ago.

  • 13:35:09

    KRUGMANSo there's always change, there's always churn, but there's no more churn going on right now than usual. My friend Dean Baker from the Center of Policy Research had a little bit of fun in a kind of black humor way by putting up a quote -- extensive quote from an article from the Washington Post about how workers don't have the skills businesses need. And it's going to be really hard to have full employment. The thing is it's from the Washington Post in 1935.

  • 13:35:37

    KRUGMANPeople were telling exactly -- and I've found some other stuff like that. During the Great Depression there were all kinds of explanations that American workers just don't have the skills that our modern 1930s economy requires. And then all of a sudden came a large stimulus program, otherwise known as World War II. And suddenly all of those workers were very much in demand. So this is a dodge and one question you want to ask is...

  • 13:36:00

    BROWNBut, you know, Paul, a lot of manufacturing has either left the country or manufacturers have learned to get along with far fewer people through technology. This isn't the economy of the 1930s. It's the economy of 2012.

  • 13:36:11

    KRUGMANNo, but first of all, we're actually on the cusp. You can see that the manufacture revival is waiting to happen. Manufacturing's actually been pretty strong this last year.

  • 13:36:23

    BROWNIt's doing well. It's recovered very well.

  • 13:36:24

    KRUGMANIt's doing well. And given an actual strong economy...

  • 13:36:26

    BROWNBut employment hasn't.

  • 13:36:27

    KRUGMANBut even manufacturing employment has been coming back. It's not too far below where it was in January, 2009. So we're making progress on that front. And but manufacturing is not the only thing out there. So we can have more manufacturing. I think we can have quite a lot more if we have a stronger economy for industry to sell into. And there are lots -- you might as well have said, look farming, we don't need so many farmers to feed us and so all those millions of people who used to work as farmers can't possibly find other jobs.

  • 13:36:56

    BROWNWell, it's been said and they've left the farm over decades.

  • 13:36:59

    KRUGMANThey've left the farm and they found something else to do over generations. I don't want to minimize structural change and the pain it causes, but what we're looking at right now is a situation where nobody is doing well. It's not as if there were large groups of people who have the right skills who are doing well, right. Where are these classes of workers who are really in demand? You can find, you know, narrow, narrow niche specialties, but basically across the board we seem to have workers that nobody wants. And that's the signature that the problem is inadequate demand, not structural change.

  • 13:37:33

    KRUGMANRegions. People say, oh, you know, people are in the wrong places in the country. So where are the parts of the country that are full employment? And the answer is well, Nebraska and the two Dakotas, which have a combined population of about the same as Brooklyn, right. So but basically it's a recession. It's a depression, I would say, everywhere. So this is the structural thing. Of course you can find evidence of mismatch of skills, regions that are in the wrong place. But you always can. That's not the reason why this economy is so much worse than what we had just a few years ago.

  • 13:38:00

    BROWNThe economy is growing, but very slowly.

  • 13:38:04


  • 13:38:04

    BROWNWhy is it growing so slowly?

  • 13:38:06

    KRUGMANBecause the -- two things. One is that the nature of the recession we had was a financial crisis in its aftermath. And it's much harder to bounce back from that than from other kinds of slumps. When you had something like the recession of the early '80s, that was brought on more or less deliberately by the Federal Reserve, which raised interest rates to squeeze out inflation. And all it had to do was let go and bring the rates down again. That got the economy moving much harder now because we had an excess investment in housing.

  • 13:38:38

    KRUGMANAnd we also have a large overhang of private sector debt, household debt. Households borrowed a lot of money, a lot of it during the bubble years of the last decade but also even before that. And now they are being forced to pay that down, which means the consumer demand is for an extended period going to be below where we would hope it would be. That means that the private sector is not ready to step up with a strong recovery. It doesn't mean that we have to have slow growth. It means that somebody else has to step up, which in this case means the government.

  • 13:39:12

    KRUGMANBut what we've actually had is the reverse. We've actually had a big pullback by government. By the way, this was predictable and predicted even before everything went to hell. I was writing the articles blog posting, this recession that's coming is going to be a long one. It's a post modern recession. We're not going to see the V shaped recovery that some people think was going to happen. And so it has proved.

  • 13:39:40

    BROWNWe'll be right back. We'll take a brief break. We're talking with Paul Krugman. His latest book is "End This Depression Now." It's The Kojo Nnamdi Show." I'm Paul Brown sitting in. Stay with us. We'll go back to the phones after this break.

  • 13:41:37

    BROWNIt's "The Kojo Nnamdi Show." I'm Paul Brown from NPR News sitting in for Kojo. And with us Paul Krugman, economist and columnist for the New York Times, Princeton University professor, Nobel Prize Laureate in economics for 2008, his latest book "End This Depression Now." And he's with us in our studio. Let's go to the phones. Randall in Washington, D.C. You are on the air.

  • 13:41:58

    RANDALLHello. There's two things that sort of bug me and I'm sure there're many more. But one is, Obama doesn't get enough credit for advocating the right policies and I think he has because he followed economists that seem to be the Keynesian economists, and it almost sounds like what Mr. Krugman is advocating.

  • 13:42:21

    RANDALLSecondly, I just think if you have people that proclaim -- like the leader -- I can't think his name from Tennessee -- claimed that his job is to see that Obama is not elected for a second term and being a southerner as he is, I think is driven by race. So they don't want to see government succeed firstly. And number two, they don't want to see Obama succeed as a black man setting a good example of being a very capable person.

  • 13:42:56

    RANDALLAnd one thing he did very capably was take good advice. And he's advocating, I think, the policies for which Mr. Krugman's book is also advocating.

  • 13:43:07

    BROWNWell, Randall, I think you're referring to Senate Minority Leader Mitch McConnell of Kentucky. And, Paul Krugman, what do you think of the job that President Obama has done so far? Is he basically trying to do the right thing, or as Randall says, has he been stopped by other people who oppose what he's doing, or is Mitt Romney right in saying that he simply hasn't handled this well?

  • 13:43:33

    KRUGMANNo. I think -- of course, always the question is relative to what. So has Obama been ideal? No. I think there was a serious miscalculation early on in his administration where they low-balled the amount of trouble that the economy was in. And there were some things they could've done that they didn't. But they did face -- squashed their political opposition. And so you have to give them a lot of allowance for that.

  • 13:43:59

    KRUGMANThey made a wrong turn, I thought, after the midterm elections where they tried way too hard to reach a deal with people who are unreached deal -- you know, you can't reach a deal with those people.

  • 13:44:09

    BROWNThey're not going to play.

  • 13:44:10

    KRUGMANRight. And so that was kind of a wasted year. But right now, they are proposing and pushing for the right things. I'm reasonably, you know, it's -- given the -- I understand the political realities. Given those realities I've been pretty happy with the White House positioning since last fall. I think they are, in fact, pushing for the right things. And of course we're going to have -- so you have to know as a Times columnist I don't do endorsements. I'm not allowed. So you have no idea who I'd rather see win the election.

  • 13:44:38

    BROWNNo, none whatsoever.

  • 13:44:39

    KRUGMANBut given the economic platform coming from the Obama Administration versus the economic platform coming from the Republican side, one of them is not everything I'd like to see, but is in the right direction. The other is a recipe for turning this into a full scale re-depression. So no question about who's got the better plan right now.

  • 13:45:03

    BROWNRandall, thanks very much for your call. And, Paul, you know, before the break we were talking about these structural issues and whether part of the problem or a large part was that people simply don't have the skills they need and it's difficult to retrain. You say that you don't give that as much credence as a lot of people. But at the same time you seem to be acknowledging that some of that always exists and that there may in fact be, at any time of change in the economy and technology and the way we do things, a fair amount of dislocation and some actual suffering in the labor market. You're not denying that, are you?

  • 13:45:38

    KRUGMANNo, that's why full employment as a policy matter is not zero unemployment, it's five, right. So nobody sensible is suggesting that we can have a country in which nobody is being dislocated, which nobody has found that the job they worked at for some years has disappeared from under their feet. That's...

  • 13:45:57

    BROWNBecause nothing moves forward in that scenario.

  • 13:45:59

    KRUGMANRight. The economy is always changing. And part of the -- and there are casualties with that change. And so when I'm not talking about (unintelligible) crisis, I talk about having a strong safety net so that the amount of human misery that's created by those changes is not too great. But you do have to let markets work in that dimension but that's not what's happening now.

  • 13:46:20

    KRUGMANYou know, we are a significantly poorer country than we were five years ago. And we have not had a plague of locusts. We have not had an earthquake that destroyed a lot of our productive capacity. Our workers haven't gotten stupider or less skilled. What we have is we have a mishandling of the management of demand. And that's fixable. So all of the structural things are -- sure, the economy is always changing. There's structure, there's mismatches. That's part of the normal background noise of the economy. It's not the story of what has gone wrong since 2008.

  • 13:46:59

    BROWNLet's go to Tony in Arlington, Va. Tony, what's on your mind?

  • 13:47:04

    TONYHi. Yeah, Dr. Krugman, it's a pleasure to talk to you. I agree with most of what you're saying. And I have maybe two questions. One is, it seems that during the Great Depression if you look at the percent growth rates for years before FDR got in it was negative 15 percent three years in a row. And as soon as he got in and put in the new deal, and I think especially at WPA and the CCC which hired 11 million people, growth went to 15 percent positive for the next three years until 1936 when the austerity budget was put in.

  • 13:47:44

    TONYSo my question on that is, maybe what we need now is not to stride for jobs that are perfectly suited to someone's career, but just to have an intern job that some can go do such as clearing out the woods so we don't get a, you know, monster forest fire that destroys the whole country. And at least that way people would be working and have money in their pocket and money to spread around.

  • 13:48:08

    BROWNA new civilian conservation corp, a new works progress administration.

  • 13:48:10

    KRUGMANWell, look, I mean, fine. And I would be happy to get those things. But let me just come back to the point I've been trying to drive home, and I think this is something that is not fully understood. We can put a lot of workers, a lot of people back to work just by undoing this austerity that we've had these past three years. You know, normally state and local employment, which is school teachers, police, fire -- largely school teachers -- basically school teachers. I mean, that's roughly half of it. Normally that grows along with the population. Instead, it's actually fallen by 600,000.

  • 13:48:48

    KRUGMANIf it had grown with the population it would've grown by 700,000. So right there we can put 1.3 million people to work, not by doing anything new, not by having any kind of CCC or WPA type program, but just by restoring the basic functions of government. And that's a lot. I mean, 'cause we're not actually in -- luckily, we're not in something that quite matches the Great Depression. If we could just put those people back to work.

  • 13:49:14

    KRUGMANGet back to things like delayed road repair. The State of New Jersey where I live is full of potholes and I think that's true everywhere. You can pump probably about 300 billion a year into the economy without any of these things.

  • 13:49:26

    BROWNThose were the shovel-ready projects, weren't they, that President Obama was talking about, many of which fell by the wayside.

  • 13:49:31

    KRUGMANYeah, and in early 2009, you could actually complain that there might not have been enough shovel-ready projects. But we've been letting the potholes proliferate ever since. So there's plenty of shovel-ready projects out there right now. And that in itself, that's enough -- do, you know, the arithmetic. That's enough to get us below 7 percent unemployment just doing those fairly modest things. And I think that's enough to really create a kind of jumpstart for the economy.

  • 13:49:57

    BROWNAnd that would be a big change, wouldn't it?

  • 13:49:59

    KRUGMANThat'd be a huge change. It would change the whole field. It would greatly reduce the suffering. And I think it would give us a pretty good prospect of a self-sustaining recovery.

  • 13:50:07

    BROWNTony, thank you very much for your call. Let's go to Jill in Silver Spring, Md. Jill, you're on the air.

  • 13:50:14

    JILLHi. Thank you for taking my call.

  • 13:50:15


  • 13:50:17

    JILLI wanted to ask about a really interesting article that was in the Washington Post yesterday that was talking about people in their 20s and early 30s who are living with their parents...

  • 13:50:28


  • 13:50:29

    JILL...who are not moving out into their own apartment. And the article talks about the drag that this is creating on the economy, not only in the rental market, but in, you know, allied markets like furniture or things like that. You know, my impression is that there are people in that age group who truly cannot afford to leave their parents' home. And there are people who would prefer not to live in a studio apartment or who don't want to live in a less cool neighborhood or who just don't want to take a job outside of their field.

  • 13:50:58

    JILLSo I was wondering if you could comment on that phenomenon and what kind of an effect that's having on the economy.

  • 13:51:05

    KRUGMANYeah, so there're always going to be some young people who are, you know, who are going to live in subsidized housing provided by mom and dad even in -- but there's been a huge increase in the number of people who are shacking up with their parents because they can't afford -- because they can't get jobs. And that's one of the reasons why I believe that if we did what I've been saying we should do, which is to get those school teachers back to work, get those potholes filled, it could easily turn into a strong self-sustaining recovery.

  • 13:51:40

    BROWNBecause it would create more demand and create the need for more jobs in other sectors? Is that what you're saying?

  • 13:51:44

    KRUGMANThat's right. And particularly we had a vast housing bubble and we built way too many houses. But that bubble burst six years ago and we've built very few houses since then. We've built some rental housing, but not nearly enough. If we create a job market where those young people can move out of their parents' houses and start to move into housing, you're going to create a demand for housing that's going to help to drive a significant revival there.

  • 13:52:10

    KRUGMANIt's starting to happen very slowly already spontaneously, but we could move that way up on the calendar. We could get a really self-sustaining recovery out of that.

  • 13:52:19

    BROWNJill, thank you very much for your call. Let's go to Ben in Fairfax, Va. Ben, you're on the air.

  • 13:52:26

    BENHi. Thanks for taking my call.

  • 13:52:27


  • 13:52:28

    BENIt's an honor to be able to address Professor Krugman. Professor, as you discussed, we may think we know in America why Republicans are pushing austerity measures as an excuse to shred the safety nets they've always hated. But in Europe, we also have this terrible suffering under austerity. Why do you think that European leaders and, you know, the hopefully very smart IMF economists, why are they pushing this terrible policy? Or do they have a hidden agenda there as well?

  • 13:52:56

    KRUGMANOkay. So the IMF, the International Monetary Fund, they're actually pretty much the good guys in this stuff. If you actually look at what the -- given that they have to operate within the constraints of the European political environment, the IMF has been the one saying, hey, not so much austerity, please. They're actually good guys. And this is not your father's IMF. They're actually on the side of the angels here. And if you listen to the chief economist at the IMF, he sounds, within the limits again of what he's allowed to say, an awful lot like me, which is not too surprising 'cause he was my colleague at MIT for many years.

  • 13:53:31

    KRUGMANBut in Europe there -- first of all, there are people with this agenda. They have their own version of the right. If you look at what the Camden government is doing in the UK, a lot of that is driven by the same kind of attempt to use the crisis to dismantle the welfare state that you see here. But the other thing is there's an international dimension. And in Europe, it's the German's imposing austerity on the periphery.

  • 13:53:57

    KRUGMANAnd the Germans have a very strong welfare state themselves, which they show no sign of wanting to dismantle. But they have this notion of, well, as some people say in Germany, economics is a branch of moral philosophy. In German, the word for debt and the word for guilt are the same word. And so they're imposing their moral vision on the rest of Europe and are very resistant to any amount of evidence saying it's not working.

  • 13:54:23

    BROWNDoes that help you, Ben?

  • 13:54:25

    BENThat does answer my question very well. Thanks very much.

  • 13:54:28

    BROWNThank you very much for calling. So I have an email here, something I've been wondering also. Of course, you know Ben Bernanke. He brought you to Princeton, as I understand. And I have an email saying, "Do you know the Chairman of the Fed personally from your time at Princeton? Do you ever talk anymore? What do you think of the job that Mr. Bernanke is doing?" We have just a brief moment for this.

  • 13:54:48

    KRUGMANYes. So we don't talk and that's by mutual agreement, not out of hostility, because I'm politically explosive. And he can't be found to be talking to me. That's okay. We talk indirectly through statements. And, I mean, I thought he did an excellent job in the heat of the crisis. And I've been really disappointed with the way he's laid back since then. I hope that in his inner heart he knows better and just feels he can't do it politically.

  • 13:55:15

    KRUGMANBut I went after him pretty hard in the Times magazine last weekend, but that was to help him, you know, to give him something to hold up against the people who are trying to bully him into doing less.

  • 13:55:26

    BROWNDoes that help? I would imagine it does and thanks for talking about that. I was wondering about the same thing because I understand that Mr. Bernanke is a very quiet person. I've never spoken with him. And he's coming in for a lot of criticism. Do you think the criticism from all quarters, liberal, conservative, elsewhere is justified?

  • 13:55:47

    KRUGMANThe criticism from the right is bonkers. They're accusing him of doing precisely what they're not doing, which is being runaway inflationists and so on. That's destructive. It's all wrong. The criticism -- well, of course, I would say this, right, the criticism from my side of the spectrum is justified. And there were a lot of -- there were some excellent papers written about why Central Banks should be much more adventurous than the Fed is being. Many of them written by a guy named Ben Bernanke when he was a professor at Princeton.

  • 13:56:17

    KRUGMANAnd so all we're saying is, hey, you know, you were right back then. You're still right. Why isn't Chairman Bernanke doing what Professor Bernanke used to say he should be doing?

  • 13:56:25

    BROWNSo you believe the solutions to our major problems, Paul Krugman, really are within reach if we will just take the lessons.

  • 13:56:34

    KRUGMANFiscal and monetary action. We've got the knowledge, we've got the tools. All we lack is the will.

  • 13:56:40

    BROWNPaul Krugman is an economist, a columnist for the New York Times, a professor at Princeton University, Nobel Laureate in economics for 2008, the author of a number of books including the most recent which is "End This Depression Now." Paul Krugman, thanks very much for coming in.

  • 13:56:55

    KRUGMANThank you.

  • 13:56:55

    BROWNIt's been a great conversation. And thank you, those of you who've been on the phones waiting. We've tried to get to as many of you as possible. Some great questions coming in today. I'm Paul Brown from NPR News. "The Kojo Nnamdi Show" is produced by Brendan Sweeney, Michael Martinez, Ingalisa Schrobsdorff and Tayla Burney with help from Kathy Goldgeier and Elizabeth Weinstein. Diane Vogel is our managing producer.

  • 13:57:20

    BROWNPodcasts of all shows, audio archives, CDs and free transcripts are available at our website Natalie Urovlifker is on the phones. And thank you very much. We encourage you to share your questions or comments with us by emailing, by joining us on Facebook and by Tweeting at kojoshow. I'm Paul Brown for NPR News. This is "The Kojo Nnamdi Show" on WAMU 88.5.

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