A CONVERSATION WITH PAUL KRUGMAN

DEBORAH LEFF:  I welcome you to the John F. Kennedy Library and Museum.  I'm Deborah Leff, Director of the Library and Museum, and on behalf of myself and John Shattuck, CEO of the Kennedy Library Foundation, it’s great to be here for this conversation with Paul Krugman.  I'd like to thank our Forum sponsors -- WBUR, many of whose friends are here with us today, Fleet, the Lowell Institute, Boston Capital, The Boston Globe and Boston.com.

A number of years ago, I don't think anybody would have believed it if you said that the first thing you were going to turn to in The New York Times was an op-ed column by an economist.  Work by economists seemed tedious and inaccessible.  As George Bernard Shaw said, “If all the economists in the world were laid end to end, they wouldn’t reach a conclusion.”  [Laughter]  Paul Krugman has changed that.  He has been called by Washington Monthly the most important political columnist in America and he is now a household name.  Earlier this month, Jonathan Alter, writing in Newsweek, noted that in the current election campaign, Senator Kerry faces a handicap.  Alter wrote, “Kerry’s background is mostly that of a critic.  But if critics won votes, Paul Krugman would be President.”  Not a bad idea.  On the other hand, Charles Barsotti saw it differently in last week’s New Yorker when he sketched these two Thurberesque, confident businessmen remarking, “It tickles me that my vote will cancel Paul Krugman’s.”  [Laughter] One reason Professor Krugman has such credibility is that he is deeply respected by his peers as an economist and regarded by many as a future Nobel Prize winner. 

Currently Professor of Economics and International Affairs at Princeton, Paul Krugman earned his BA from Yale University and his PhD from MIT.  He’s taught at Yale, MIT and Stanford, and in 1991, the American Economic Association awarded him its John Bates Clark medal, a prize given every two years to that economist under 40 who is adjudged to have made a significant contribution to economic knowledge.  Professor Krugman is the author or editor of more than 20 books, including among them the bestseller, The Great Unraveling:  Losing Our Way in the New Century, which he’ll be signing in our bookstore after this Forum.  

I note, incidentally, since we are here at the Kennedy Library, that Professor Krugman appears to have been inspired by the words of President Kennedy. 

Looking at the top executives of such wonder companies as Enron and Global Crossing, he wrote in his book, “Ask not what a high stock price can do for your company, ask what it can do for your personal bottom line.”  In fact, America’s growing and frightening inequality of income is a recurring theme in many columns.  

But Professor Krugman is not without optimism.  “I have a vision,” he writes in the Great Unraveling, “maybe just a hope of a great revulsion, a moment in which the American people will look at what is happening, realize how their good will and patriotism have been abused and put a stop to the strive to destroy much of what is best in our country.  How and when this moment will come, I don’t know.  But one thing is clear -- it cannot happen unless we all make an effort to see and report the truth about what is happening.”

Here with us today, Paul Krugman, a superb reporter of the truth.  And moderating the conversation is the terrific host of WBUR’s On Point, Tom Ashbrook.  Tom.  [Applause]

TOM ASHBROOK:  Thanks very much, and it’s brave of you all to be here on this lousy evening.  

I was just thumbing through some of Paul’s columns from recent weeks.  You’ve all seen them along with me.  A certain tenor emerges.  “This Isn't America,” “Taken For A Ride,” “No More Excuses,” “Weak on Terror,” “Another Bogus Budget,” “Where’s the Apology?” “Democracy at Risk.”  And then we tiptoe into the columns themselves and a certain tenor also in the language that we hear usually applied to the Bush Administration -- sinister, villains, budget con, dismal results, indifference, wishful thinking, corruption, betrayal, propaganda, chutzpah.

Paul, it’s great to talk to you tonight and there’s a lot I want to ask you about, but let me ask you right off the bat, is there any pejorative in your book that does not apply to the Bush Administration?  [Laughter]

PAUL KRUGMAN:  Gee, um …

MR. ASHBROOK:  Take your time.  

PROF. KRUGMAN:  Let’s see, I think I've avoided the four-letter words, which is not, unfortunately, to my credit, because my editors wouldn’t let them pass.  No, look, it’s pretty bad.  Part of the problem, I think, that a lot of the press has had is, in fact, this enormous politeness and this unwillingness that a lot of people in the media have to say unpleasant things.  If you look at some of the reportage just around the Richard Clarke book, and there’s been a number of articles in various publications with titles like “Is He Right?,” and the whole thrust of the article is, in fact, that he’s right, but they can’t bring themselves to actually say that in so many words because that would be pretty insulting.  So I think our politeness has been abused a great deal, and fortunately I don’t suffer from that particular character sin.

MR. ASHBROOK:  It raises an interesting question.  You didn’t really come into such mega media status until pretty deep in your career in economics, your academic career.  Is there a different tone, a greater willingness to be aggressive, to defy mainstream thinking or defy authority in academia that you’ve brought into the media?  Are you conscious of that?

PROF. KRUGMAN:  Part of what you're rewarded for in academia is being innovative and challenging stuff, and so on.  The main thing is, look, I have another job.  I'm not afraid of being frozen out, I'm not afraid of what are they going to do to me.  Actually, I shouldn’t … Paul O’Neill said something like that and he saw.  [Laughter]  But I think it’s mostly that I'm coming from a background where I have some sense of how you arrive at conclusions, and I'm more willing to take journalistic risks, professional career risks because I'm moonlighting.  I can always just go back to being a professor.  In England, if necessary.  [Laughter]

MR. ASHBROOK:  Or perhaps a more distant nation.  There are many issues we want to talk about, and later on in our conversation tonight we will invite your questions as well.  But among the issues, and it’s related to this one, that I just wanted to touch on with you right away -- we may come back to it because it’s become, I think, a kind of factor.  We heard a number of accolades for you before, but of course not everything out there is accolades for you these days.  You have some serious partisan political enemies.  Donald Luskin writes, “Paul Krugman is America’s most dangerous liberal pundit.”  You describe him in turn as your “stalking-in-chief,” the implication that he’s not the only one.  With your persistent and heavy and unyielding and unrelenting criticism, you have yourself become a kind of factor, a kind of issue.  What do you think of that?

PROF. KRUGMAN:  Leave me out of the story for a moment.  It’s an important part of what’s been happening.  If you're in the media, if you're a journalist, and you say anything mildly critical of the current regime, you find yourself under personal attack.  Of course, your employer is always under attack for being part of the liberal media, which is the most amazing thing, that we’re still talking about the liberal media, but you, yourself, are under personal attack and not simply people saying you're wrong, but little armies of helpful people go seeing that there’s something they can use to discredit you personally.  That has its effect because it’s very chilling.  The first time it happens to you, you think the world is coming to an end, the sky is falling on you.  I believe that a lot of journalists retreat at that point.  They don’t say to themselves consciously, “I'd better not offend these people.”  But, in fact, they’ve been conditioned not to.  And it is something to watch, and it is something to experience.

MR. ASHBROOK:  And just to pursue this a little bit further before we turn to big issues, your own newspaper, The New York Times, on Sunday had a column by Daniel Okrent, the recently named public editor, which was a little ambiguous to me, but there seemed to be a hint of the lash in here for Times columnists, perhaps even for you, saying watch out, be accurate.  What’s your support been from your own newspaper when you're in high dudgeon, which is most of the time?

PROF. KRUGMAN:  I do make them nervous, and there’s an occasional, sort of wistful “couldn’t you maybe talk about Parmalat for a column or two?”  But they’ve been very, very good on this sort of thing.  When there’s one of these “you’ve lied” out there being in the National Review -- usually there, but other places as well -- sometimes they just take a look at themselves and say “come on,” and sometimes I will have a little conversation on how I reached the conclusion.  And they're very good on it, and I think by and large they're convinced that I am actually pretty careful.

MR. ASHBROOK:  Tell us just a little bit more on the personal front.  You have put yourself into such public exposure, and I know that’s not completely unfamiliar to an academic of your stature, but you’ve put yourself way out there.  I saw you one night, late at night on the Bill Maher show.  You were sitting next to Jesse Ventura, Bill Maher and The Comic.  You were absolutely on fire with the seriousness of your criticism and your points, and Jesse Ventura is saying, “Hey, eat my boa,” or whatever.  The contrast of your intense, almost ferocious critique and some of the forums that I see you in, I thought your head was going to explode that night.  What’s the motivator that puts you even out into that really kind of sometimes body public arena with your message?  What’s the source of your ferocity, Paul Krugman?

PROF. KRUGMAN:  I'm scared to death about what’s happening to our country.  [Applause]  As long as we’re talking about me, I spent … I wasn’t actually, before getting into this, a quiet academic.  I was in the policy circuit.  I was going to lots of meetings around the world with bankers sitting at tables with bottles of mineral water, having learned discussions about the international monetary system.  And that was very comfortable, it was all very pleasant.  The easy route for me with the Times column would be to keep on doing that sort of stuff.

If you aren't terrified of where this country is going and where it might be in the very near future, then you're not paying attention.  And since I have been put in this position of writing for The New York Times, I've got to use it.  If I were thinking about a long-term journalistic career, it would be a lot safer not to be so passionate, but there is a very good reason for being passionate now.  If we return to normal times, I think people would be quite disappointed.  My columns might be a lot less fiery.

MR. ASHBROOK:  Right, but they are fiery.  A couple phrases from very recent columns:  “Things aren't as bad as they seem, they're worse.  But, wait, it gets worse.”  The title of your new book is The Great Unraveling.  We’ll talk about the elements of that, but give us the picture, writ large, The Great Unraveling, what is it?

PROF. KRUGMAN:  Well, the title was partly to avoid having to specify; it is a column collection with some new material.  But, look, obviously there are economic problems -- jobless recovery, enormous budget deficits -- stuff that by itself would be extremely scary.  But what really drives my concern is that it’s a political crisis.  The vast right wing conspiracy is, first of all, not really hidden, and it’s certainly not a myth.  We are in a situation where most of the levers of power are in the hands of a coalition between a hard economic right that is really very radical, really is opposed to institutions that we’ve had in this country for 70 years -- Social Security, Medicare, the whole social insurance state -- and a cultural/religious right, which I don’t write about that much, but which is equally important as part of the coalition.  And this is a moment in which what America is is very much in the balance.

It’s not hard to imagine … how do I say this?  Daily life for people of my class, people like people in this room, is still fine.  The food is better than it used to be, the coffee is much better than it used to be, ordinary stuff.  But if you are paying attention, you realize that we are that close to being a very different, much harsher, much less liberal country in the sense of just a place where both some economic concern for the unlucky and basic political rights that we’ve come to take for granted are not available anymore.  So the whole thing, the whole America that I grew up in is in danger of unraveling.

MR. ASHBROOK:  It’s really not just at all the economics, clearly, anymore that has you concerned.  When did you wake up one morning, or over some years, when did you say to yourself, I've got to bust out of economics as my meat; I've got to speak to the whole picture, because the whole picture is disturbing the politics, in particular.

PROF. KRUGMAN:  I came to the Times thinking I was going to write economics, and, of course, there’d be some politics in it, but not much.  If you actually were to go back and look at the stuff I wrote in the first year, you’d find that a lot of it was … first of all, it was economics, and to the extent it was about politics, it was political.  I was trying to discuss the issues in terms of, well, there are these other people and I disagree with them, and let me explain why it’s right. And then, little by little, it became clear to me that we were not having a rational discussion.  For me, actually, the issue was Candidate Bush’s Social Security plan, that was the one where I … It took me, actually, about 12 columns on that to finally realize that they were not making sense and were not intending to make sense.  It wasn’t a different view, a different theory, it was just “Two minus one equals four, and we can get away with it, and no one is going to call us on the fact that we’re talking nonsense.”  And that, in turn, once you start … I've talked to a lot of people from different areas, and a lot of people who are sort of technical experts in one field or another have gotten radicalized and come towards something like the vision I have, that something terrible is happening politically.  And they’ve all come at it from -- whatever the field they were in -- disagreements about policy in that field, then to a realization, “Hey, these people are just lying through their teeth.”  Then, “Oh, they're getting away with it.”  Then a realization that this is part of a bigger picture.  So you can work your way in from environmental policy towards this grim vision of the political situation.  You can work your way in from economic policy towards it.  You can work it in from international affairs.  

One of the things, actually, that’s been a little bit reassuring to me is that my moderately liberal friends who two years ago were telling me, “You're too shrill,” more and more of them are sounding even shriller than I am.  I was just a little ahead of the curve.

MR. ASHBROOK:  So you began from an economics point of view, in particular with Social Security, feeling your way in, feeling something bigger.  Now you’ve been paying a lot of attention for quite a while.  What’s the whole elephant look like here?  What is this agenda that you feel you’ve discovered?

PROF. KRUGMAN:  I think we’ve got a coalition.  The opening to the book … I found a wonderfully illuminating quote from, of all people, Henry Kissinger, talking about dealing with a revolutionary power.  He had this book which was written about diplomacy in the age of the French Revolution, but he clearly meant it to have wider resonance, and it really has a lot of resonance, and basically it’s the difficulty the people who are accustomed to a stable status quo have in dealing with the fact that they're facing a revolutionary power, their unwillingness to admit.  So we are facing a revolutionary power, and it’s a coalition.  I would now say there are two main elements in it.  One is the hard economic right, people who really want to unravel the whole welfare state, or the social insurance state, or whatever you want to call it, the whole safety net.  And they're quite open about it.  Not the people in the White House, obviously, but the people at the Heritage Foundation are quite open, saying, “We want to get rid of all this.  We want to get rid of Social Security and Medicare.  We want to get rid of the Great Society and the New Deal.”  And they say, “Well, we want to cut taxes to create the lack of revenue so that these things go away; starve the beast.”  It’s a very, very harsh vision of where they want America to go.

And on the other side, there is the cultural/religious right.  I've been playing with words that I haven't managed to use in the column yet, but it’s the plutocrats and the preachers.  This coalition of the plutocrats and the preachers is a very, very radical force that wants to make us into, on the economic side, something like we were in the 1920s, or before.

MR. ASHBROOK:  That would mean what?

PROF. KRUGMAN:  That would mean no social safety net.  It would mean if you're old and you haven't saved, or your savings were lost, you starve.

MR. ASHBROOK:  More power to capital, less to government.

PROF. KRUGMAN:  Yes.  And get away with progressive taxation, eliminate, which is actually in the law now, eliminate the estate tax.  Wealth has its privileges and can be passed on to the next generation, and really no guarantees, no social responsibility for people who fall by the wayside.

Grover Norquist, we love Grover Norquist, who’s a very sinister and very powerful lobbyist, but he also likes to hear himself talk, so he actually says things that are more quotable than what usually comes out of these people.  One of them was, he said, “I don’t want to destroy the government, I just want to shrink it to the size where I can drown it in the bathtub.”   The other one I liked was somebody asked him, “Do you want to roll us back to the way we were before the New Deal?”  He said, “No, I want to roll us back to the way we were before the progressive movement, Theodore Roosevelt, environmentalism, we’ve got to stop that.”  So, really, back to the 1890s, maybe.

MR. ASHBROOK:  What’s your reading of the why in that?

PROF. KRUGMAN:  That’s interesting.  One question you want to ask is why.  The super rich did rather well under Bill Clinton.  Why this anger?  I think part of it is that actually political movements can be driven by relatively small, highly organized discipline groups.  So if you look at the whole network of think tanks, foundations, the media, we’re not talking about all the rich people in America, we’re talking about a relative handful of rich people who have financed this, who, for whatever reason, have got a chip on their shoulders and want to unravel it.  Then you're also talking about people who become professional right-wingers.  So you’ve created a whole class of people.  All this stuff, it’s been building for 30 years-plus, and so that’s how it works.  Then of course, there’s the religious right stuff, which is a whole different story.

MR. ASHBROOK:  That takes us to the cultural side of this.  Economically, preNew Deal, pre-progressive era even, rich and poor, or at least unprotected labor.  How about on the cultural side?  What’s the revolution pushing for? 

PROF. KRUGMAN:  There it’s a return to, or beyond a return, it’s hard line, it’s America’s ayatollahs, if you like.  Just think about how hard line our religious right really is.  Think about 9/11.  The mythology is that there were liberals who were blaming America first.  I never found one.  But you did have some of the right wing preachers saying this was punishment for our sins.  People with that kind of mindset … there exist such people on the left, you can find them on the crazy left … But you can find them in control of political organizations with millions of members on the right.  So it’s really very, very hard line.  

MR. ASHBROOK:  So there’s a world of robber barons and ayatollahs.  We’re sort of raised to believe, though, that America has a deep base, that it’s kind of self-centering.  You can punch it down, but it comes back to something like a median.  Over time, we’ve seen even progressive policies emerge from that median.  First of all, have you lost faith in that return to the median, and if that dynamic has been lost, how, why?

PROF. KRUGMAN:  Emotionally, I believe it’s all going to turn out all right.  I have this American-bred optimism.  Intellectually, I'm not at all sure.  We have some illusions about … I mean, it did turn out all right, but we tend to imagine that our history is one in which, always, the mass good sins of the people has always prevailed when in fact we had several pretty near misses.   

PBS had a wonderful 30-year retrospective on Watergate.  I don’t know how many people saw that; TiVo is a wonderful thing.  At the end of it, Sam Dash, one of the crucial attorneys, had this little soliloquy where he said people think the system worked.  The system didn’t work, we just got lucky.  If there hadn't been the tapes in the White House, if there hadn't been just a handful of people, if John Dean hadn't come forward, who knows what would have happened to our system. If we get through what I've perceived as this crisis now, most people will say, well, it's America, the system always works.  The fact is, really, I think we’re going to have either a near-miss or no miss at all.

MR. ASHBROOK:  If one pillar of your columns speaks to this, what Henry Kissinger calls revolutionary impulse, the other is about truth and accountability and what you have called an Orwellian moment that we are in.  You talk about,  write about it all the time.  Describe its dimensions.

PROF. KRUGMAN:  As one friend says, I’ll stop calling them Orwellian when they stop using 1984 as an operations manual.  [Laughter]  Just think about how many times we’re told things that are not true, or even the opposite of true.  On the economic front, the White House keeps on saying that … you have Dick Cheney saying, “I'm a deficit hawk,” as he presides over the biggest $500 billion deficit.  We have George Bush saying, “The great bulk of my tax cuts go to people towards the bottom end of the economic spectrum.”  Well, you know, they suppressed, they stopped the Treasury from producing estimates any more, but we can do what they would have, and we do know that this is rather radically not true.

On foreign policy, this is the most amazing thing, the campaign to say “We never claimed that Iraq was an imminent threat.”  And this is not even hidden information, it’s what we all saw watching our TVs.  But they believe they can say we’ve always been at war with East Asia, and the people will believe it.

MR. ASHBROOK:  So there it is everywhere you look.  Jumping off of that, you talk about President Bush pursuing what you call a go-for-broke reelection strategy; you say a strategy to confuse the middle and energize the base.  What do you mean?

PROF. KRUGMAN:  I would have expected -- I've been caught by surprise -- I would have expected some substantive move to the center, even if they didn’t intend to continue it.  I would have expected, for example, that they would have put enough money in to actually fund No Child Left Behind and then strip it away after they win the election; that they would have actually extended unemployment insurance.  This is one of those little things that amazingly just passes by.  

Whenever there’s a serious economic slump, you have the federal government always puts a temporary extension on unemployment benefits, recognizing that it’s a particularly hard time to find a job.  And we put that in in March of 2002.  It was allowed to expire in December of last year.  That’s crazy.  The average duration of unemployment right now is more than 20 weeks.  It’s at a 20-year high.  It’s harder to find a job.  People who lose a job stay unemployed for longer than at any time since the extremely severe recession of the ‘80s.  What would it have cost them to just say “Let’s let the unemployment benefits continue until after the election.  Then we can go and let unemployed workers starve.”  

You go down the list.  There’s a little thing that popped up in, I think it was in today’s Times.  We all know they really don’t want the IRS to have the resources to do its job, but they actually turned down a request for $12 million to help the IRS track down terrorist funds.

MR. ASHBROOK:  Saw that just today, to hire 50 new agents.

PROF. KRUGMAN:  It’s incredible.  

MR. ASHBROOK:  $12 million is about a nanosecond of the Iraq operation.

PROF. KRUGMAN:  They won’t make the smallest gesture towards the center, believing they can drown that out, and meanwhile they're doing, of course, everything to the base; more and more tax cuts and $10.7 billion for a missile defense system that, by all accounts, is incapable of shooting down a seagull.

MR. ASHBROOK:  And at this moment, who knows what will happen?  There’s months to go yet, gas prices are going up, lots of things can happen, the job creation is still not good, but President Bush, for all of the Krugman critique, is running at least neck and neck with John Kerry, if not ahead.  You’ve begun to evolve into a kind of political observer as well as economic; how do you interpret that?

PROF. KRUGMAN:  I don’t know anything about what drives elections?  I know no more than anybody who reads the papers. 

MR. ASHBROOK:  But time after time you are appealing to American citizens, through your columns, with a point of view; some of it’s sticking, but some of it clearly is not.

PROF. KRUGMAN:  The Times has a readership of a few million.  That’s not a lot in a country with almost 300 million people.  The newspeople actually see is …  that’s Fox, or it’s CNN, which is not Fox, but it’s pretty cowed.  And also, look, 9/11, people reacted by wanting to believe in the goodness and wisdom of our leaders, and it’s very hard to shake that off.  To face up to the enormity of the extent to which that goodwill was abused is something that very few people want to do.  And most people are getting on with their lives, so they're not paying a lot of attention.  So it’s very difficult.  It’s mostly a function of a weak domestic economy.  John Maynard Keynes said, “When I receive new facts, I change my opinion.  What do you do, sir?”  So I'm prepared to reconsider, but I don’t think I've seen that evidence now.

MR. ASHBROOK:  And, briefly, on John Kerry’s proposal just last week that would change the way companies are taxed on overseas earnings to create penalties for going abroad and reward them staying home?

PROF. KRUGMAN:  That looked to me like a man carefully walking through a minefield.  Which is right, it is a minefield.

MR. ASHBROOK:  ... (inaudible) carrying an effective load.

PROF. KRUGMAN:  I think it would help a little, and it was revenue neutral as far as I could make out, and it was not something to stir the blood, but it was a sensible, internationalist-minded guy trying to do something.  This is always going to be a problem in the campaign, that one side is full of bold, really stupid ideas, and the other side is full of cautious “we really need to watch what we’re doing here.”  I actually haven't gone through the details, but I thought it showed somebody who understood that it’s a tough issue and wants to do something that’s helpful, but doesn’t want to bring the house down.

MR. ASHBROOK:  You may have just answered this question, actually.  I wanted to ask you about your colleague, Tom Friedman, who travels throughout India.  He’s telling us that outsourcing is just ducky, and in the end we’re all going to be real happy about it.  So why are we worrying?  I don’t know how a layperson is then supposed to figure out is this a good thing when people who aren't in India are saying it’s certainly not a good thing.  Friedman is certainly respected and how much are we to believe?

PROF. KRUGMAN:  What I think is that if you're serious … we have this rule, of course, Times columnists never trash each other … I think if you're serious, you have to appreciate that these are morally ambiguous issues and on both sides.

MR. ASHBROOK:  Morally ambiguous, not economically?

PROF. KRUGMAN:  Economically also in the sense that … I think you can make a very strong case that the outsourcing will, in the long run, mean a richer US economy, but a lot of individual Americans may actually be made worse off by it.  And so it’s not clear that that’s not 100% a good thing.  You also have to recognize, if you're horrified by it, that, look, this is from the point of view of India, this is a very good thing.  And surely we should care that the second most populous nation in the world has got these signs of hope.

MR. ASHBROOK:  The economy is supposed to work for everyone, after all, globally, not just the … 

PROF. KRUGMAN:  But then on the third hand you have to say, but what about our own compatriots who suffer, and isn’t it easy … I've seen circulating on the Internet ... (inaudible) a spoof Tom Friedman column, but it’s not a Tom Friedman column; it’s by the guy in Bangalore who’s replaced Tom Friedman.  They even managed to find a photo of a South Asian man who kind of looks like a South Asian version of Tom Friedman.  [Laughter]  

By and large, I think from a global point of view, globalization, this expansion has been a good thing, that it has hurt a few million people in the West and helped a few tens of millions of people in the Third World.  What I would say, really, in response to Tom on this is that talking about what a wonderful thing it is is a lousy political strategy for defending it because it just rings hollow.  When you have Fast Company Magazine -- the latest issue has photos of the outsourced on the cover, and says “Will you look into their eyes and tell them that globalization is a good thing?”  We need something more than that.  We need something that addresses the fears here.  But to my friends who are further left than I am, which is quite easy, I say do you really want to shut down this thing which is a source of much good in the world.

MR. ASHBROOK:  Though could use some buffeting for those people who get buffeting.

PROF. KRUGMAN:  Then I’d come back and say if we really had universal health insurance, and we really had adequate unemployment insurance during the transition, and we really had an effective stimulus program at home, the buffeting would be a lot less, and we’d be able to discuss this a lot more calmly.

MR. ASHBROOK:  I don’t think they had those things before the progressive era.  

AUDIENCE:  Good evening.  My name is Steven Goode.  I'm a history teacher here in Boston.  What I'd like to get tonight is something to take back to the history class for my students tomorrow.  So my question covers two areas.  The first area is the WTO.  Is that the new evil empire?  And the other question, the consumption of oil.  If we are controlling Iraq, could you shed some light on why the prices at the pumps keep going up, and share with the audience what is the actual percentage of oil that we actually get from the Middle East?

PROF. KRUGMAN:  WTO, World Trade Organization, it’s much overrated on both sides, much overrated in the way it changes things.  We’ve had since the ‘40s the General Agreement Tariffs and Trade, a set of rules, and basically the World Trade Organization is just the GATT with a better Secretariat.  The rules have got a better organization and a little more enforcement power, but it really has much less effect on constraining national policies than imagination has it.  What it really says is that it’s a little more effective at enforcing the non-discrimination aspects.  So it turns out that there was the famous case of the WTO saying the United States could not exclude highly polluting gasoline from Venezuela, and people said, “See?  The WTO undermines environmental regulations.”  But what it really said was the United States cannot impose stricter rules on Venezuelan gasoline than it imposes on gasoline from US refineries, that we were supposed to have equal treatment.  So it said you can’t be selective in your environmentalism in a way that just happens to protect a domestic special interest.  So I think the whole WTO thing is exaggerated.  It’s not the core of what’s going wrong.  So I’ll just say that.

On oil, the price of oil is … If you ask why isn't our control of Iraq pushing down oil prices, it’s because the insurrection keeps on blowing up the pipelines.  We’re not managing to export more oil out of Iraq than Saddam was.  Less actually.  It’s been recovering, they’ve made some progress on that, but the basic fact is that these ideas that we were going to double the exports within a year were about as realistic as all the rest of the post-war planning.  And that’s why it hasn’t had a big impact.

Now, there is this question:  Do these people in the White House really want lower oil prices?  It’s not clear they have much impact either way, but there was this very funny stuff just before September 11th where OPEC had reduced output to drive up oil prices and somebody actually asked Bush at a press conference about it, and he was all sympathetic to the Saudis.  So there is a funny attitude there.

MR. ASHBROOK:  The oil man in him.  And the new move by OPEC to cut back on production, how do you interpret it?

PROF. KRUGMAN: Well, they think they’ve got a good thing going.  They think they can extract quite a lot of money along the way, and I think that there are no real penalties for doing so.  

MR. ASHBROOK:  And, again, the White House is fairly muted in their response.

PROF. KRUGMAN:  The White House will say, “Well, there’s nothing, it wouldn’t make a difference and yelling at them doesn’t help.”  But yeah, it is interesting how little is actually being done.  This is fairly big stuff in terms of the economic recovery.  If gas prices stay at current levels, it wipes out any stimulus from last year’s tax cut.

AUDIENCE:  I'm sorry, I wasn’t quite sure I got the percentage.

PROF. KRUGMAN:  Oh, percentage from the Middle East.  The answer is I don’t know, but it doesn’t matter.  Oil is fungible.  There’s a world price of oil.  It doesn’t matter, even if we bought all of our oil from Mexico and Venezuela, the price would be reflecting events in the Middle East.  So it really doesn't matter.

AUDIENCE:  There’s a lot of unemployment.  There’s decreased spending across the board.  The future for the next couple of years in this country for personal economic stability for many people does not look positive.  In the light of those unsustainable threats, or rather that economic growth does not look particularly sustainable at this point in time, what do you advise for people to hold on to their fragile investments?

PROF. KRUGMAN:  Oh, I hate when people ask me for investment advice.

AUDIENCE:  I know, I know you would hate this, but I still had to ask.

PROF. KRUGMAN:  I think stocks and bonds are wealth overvalued, although I often do, so you should know I have a track record of believing that through even the midst of great stock market booms.  I kind of like cash right now.  I kind of like certain kinds … there’s probably a real estate bubble of some kind, but there’s also, in many ways, a lot of land that -- maybe it’s colored by living -- it happens where I live -- in central New Jersey -- is roughly the frontier.  It’s the place where you look at a cornfield, turn around to look in another direction and turn around again, and it’s filled with McMansions.  So I see this enormous, insatiable demand for land on the fringes in the metropolitan areas.  But I don’t really know.  I don’t see anything that’s really great out there.

If you’d asked me eight months ago, I was telling people that the euro was going to go up, and I was right.  I guess I think if you could figure out a way to buy Chinese Yuan and get the money out again, that probably is a pretty good investment for the next couple years.

AUDIENCE:  If we continue on the current economic path, when do you see us hitting a crisis point, when Medicare goes bankrupt in the next four years?  What’s the prognosis?

PROF. KRUGMAN:   If financial markets believed in us up until the bitter end, then it’s really not until well into the next decade.  If people say it’s America, they’ll always repay the debts and we just keep on lending and lending, and then at some point -- and only when there’s actually no money in the till at all -- then it’s something that’s ten years off or more.  That’s not usually what happens.  In my previous life, I invented currency crises.  Not the thing itself but the academic field.  And business has been good.  I'm used to seeing these abrupt … you see a country that goes along for a number of years with really what should be flashing warning lights, and then all of a sudden, for some reason, something makes people say, “My God, they have unsustainable budget deficits, or unsustainable trade deficits, or both,” and then crash.  So we’re going to have one of those, I think, if we continue on this course, and it will happen well before the last possible moment.  But the date, it’s what … this is not original with me, but the Wiley

Coyote moment.  If people are familiar with classics, in “Road Runner” cartoons, Wiley Coyote always runs about seven or eight steps off the cliff before looking down and seeing there’s nothing under him, and then “choo.”  So there’s a Wiley Coyote moment on the US deficits, and I would say it’s not this year, but it’s before the end of the decade, and it’s probably in the middle of the next Presidential term, I guess.

MR. ASHBROOK:  Chinese Yuan.

PROF. KRUGMAN:  Chinese Yuan, yeah.

AUDIENCE:  George Soros says that the current administration will probably do things to keep the economy stable through the election.  What would those things be, and are they doing them?

PROF. KRUGMAN:  I don't think they have.  I don’t see any substantive policy proposals coming along at all at this point.  Maybe if things are really falling apart in the summer, they might do yet another tax cut, just ram it through, despite everything.

AUDIENCE:  Would that have a bolstering, quick impact?

PROF. KRUGMAN:  Probably not, but it might if you throw enough money.  Maybe they would even, maybe in extremis, if they're really terrified, they might actually do something sensible and actually start a bunch of public spending or something in a great hurry.  I'd be curious to know what Soros thinks they would do.  I think they're banking on things being not … either things turning up, economies do tend to spontaneously recover, often despite the best that governments can do, and they're banking on things either turning up or at least staying sufficiently ambiguous that it’s not a killing issue on them and running on terror, terror, terror.

MR. ASHBROOK:  You don’t see a kind of economic miracle in the pocket here?

PROF. KRUGMAN:  It’s nothing I've heard of.  And again, there’s this question, who would be devising this plan?  

MR. ASHBROOK:  Greg Mankiw?

PROF. KRUGMAN:  I have both indirect and a little bit of direct evidence that he finds out about the policies afterwards. 

AUDIENCE:  I'm at the front end of the post-war baby boom, and I am growing increasingly afraid that my generation is going to end up competing with its children and grandchildren for resources as we age, as we’re the elephant that goes through the python and resources keep shrinking.  Do you have some fresh ideas, or what kinds of efforts people can make?  I'm an educator; what kinds of efforts can we make to promote economic literacy, both among people who read The New York Times and for those who don’t.

PROF. KRUGMAN:  I think it’s just a question of … obviously I hammer away, but that’s limited impact.  I'm in favor of harassing the media, actually.  God knows, I get harassed enough, so might as well spread it around.  Many times, it’s just stuff that … when there’s just wrong stuff being disseminated, people should write, they should email, they should phone.  The truth is, these are not complicated things.  It’s not as if people need to know about Stochastic calculus and smooth pasting conditions.  Mostly it’s just arithmetic.  Social Security is actually a pretty simple issue to understand.  What are the problems facing the system, how big are they, what would it take to make the thing solvent for the next 75 years.  And there’s no excuse for network reports to get it wrong, which they often do.  

MR. ASHBROOK:  Here’s an educator asking, what can I or my colleagues inculcate in the young Americans that we’re teaching that would make them more critical, better informed judges of what’s going on?

PROF. KRUGMAN:  I'm not great on this.  Arithmetic.  So much of this is just saying it adds up.  You have to pay for what you want.  They're awfully simple things.  

MR. ASHBROOK:  Maybe it’s more an attitude than the toolkit’s presumably there.

PROF. KRUGMAN:  I’ve talked to Canadians who talk about … Canada in the ‘70s and partway through the ‘80s had a history of serious irresponsibility.  They said there was somehow a mind shift, a mental shift that took place, where all of a sudden people had had it, and it became necessary -- so they tell me, I haven’t followed Canadian politics -- but it became necessary if you were going to be a serious candidate in Canadian politics to talk in terms of fiscal responsibility.  And I don’t know what brought that on.  But that’s the kind of thing.

Or I thought for a while in the ‘90s that we were that kind of country, but it went away.  Maybe if enough people say “be responsible.”  I don’t know; Ross Perot and his charts, we need him back.

MR. ASHBROOK:  A bumper sticker.  Just got time for another question or two.

AUDIENCE:  Impeachment proceedings were brought against Clinton for lying about a sexual encounter; why has there been no discussion about impeachment against the lying that Bush has done about matters that affect our national defense and national security?  [Applause]

PROF. KRUGMAN:  I think the answer is, because … obviously it’s not going to happen, right, because you have Republican control of both Houses and Democrats running scared.  A lot of people still view Bush with that halo of the post-9/11 halo.  You just would not be able to get people behind it.  

Now, the question is, is there enough stuff -- it’s not a politically smart thing to do, to raise that.  It’s not going to happen, and there are enough people who are uneasy about what’s going on, but are not yet outraged, and you need those people.  It’s not a good direction to go.  It is worth bearing in mind that some pretty bad stuff has happened, and what really is impeachable, we don’t know. 

What’s really, really important right now is to say you’ve got to be practical.  Not practical in the sense of pretending that everything’s okay and trying to make it just a dry debate about economic policy.  You have to be outraged, but you also have to stay within the limits of what has some chance of happening politically.

After the ’92 election, there was a conscious decision on the part of the Clinton administration not to go look into the scandals of the ‘80s, not to look into Iran Contra and S&Ls, and just let all that go.  That would be a terrible mistake.  I think one of the things we really need to do as a nation, if and when we emerge from this tunnel, is to have a real reckoning with what went wrong and how close we came to the edge of something really awful.  So I'm not for impeachment, but I am for … I do not intend to let bygones be bygones when this is all over.  [Applause]

MR. ASHBROOK:  We believe that somehow.  

AUDIENCE:  You mentioned your peer in the Council of Economic Advisors being temporarily neutered by Karl Rove and the President, but there’s also John Marburger in what used to be the Office of the Science Advisor to the President, which is now the Science Advisor to Andrew Card.  And a couple of years ago Marty Feldman, who I think is revered by most economists of both liberal and conservative persuasions -- working with Andrew Samerrank (?), a younger economist, on the Bush privatization of Social Security program -- taking four and four and somehow managing to have that add up to four.  What is going on?  Do you have any insights in what is going on when you have just three highly qualified academics risking their stature, a lot more than you are by sticking your neck out as a columnist, in endorsing policies that don’t make sense?

PROF. KRUGMAN:  My friends and I speculate about this a lot, actually.  It’s a combination of things, I think, and I don’t fully understand it.  But a lot of it is a feeling that this is, for conservatives, the time they're really going to have the chance to get the agenda.  And people I used to think of as moderate conservatives, people I would disagree with but I could talk to, we could have rational discussions, seem to be unable or unwilling to face up to the fact that the people running the country, running their party are not actually their sort of people.  It’s a horrifying thing to say to yourself, “I'm a moderate Republican.  I've worked for three decades to try to bring about an administration that understands my ideas, and these people flatter me and say they care, but they’re actually crazy radicals.”  It’s very, very hard to face up to that.  

AUDIENCE:  But it didn’t use to be.

PROF. KRUGMAN:  But there is power behind this.  Let me take the cases of the people who were dismissed, someone like Larry Lindsey, who was always a political creature, but, still, he was dismissed from the Bush Administration.  And it was done gracelessly, insulted, thrown out, the President made insulting remarks about his personal appearance.  Nonetheless, he remains an avid defender.  And the question is, what can be the motivation?  One thing that occurs to us, and I don’t know that this is true is, well, what would happen to his consulting income if he turned on them?  It was that very revealing remark by Paul O’Neill who said, “I can tell the truth.  I'm old, I'm rich, what can they do to me?”  Within hours they said, “We think you’ve revealed classified information.”  It turned out they weren't able to make that stick, but it just shows.

I think people get sucked in because they want to believe, and then they stay inside because they’re terrified.  These are scary, vindictive people.  Just think about what they're trying to do to Richard Clarke, and bear in mind that everyone who’s been involved and starts to have second thoughts realizes that if you go public with those second thoughts, that’s what you're going to face.

MR. ASHBROOK:  I'm going to steal the one last question.  We’ve scarcely touched it, but we are practically out of time.  The war on terror and Iraq, a big subject, little time to speak to it, but your basic view on where we’re headed.

PROF. KRUGMAN:  I don’t know anything more than any fairly well read person about national security.  I do get a sense from who makes sense and what the views are.  I came out anti-Iraq War fairly early, because I could just see that the selling of the policy was just like the selling of the economic policies.  I said, there they go again; it just feels the same, and even though I don’t know anything myself about weapons of mass destruction, this just doesn’t sound like people who have a good case, and it sounds like it’s another pet peeve.

I also understood, just in a vague sense, that there are limited resources.  Economists are supposed to understand that, that this looks like we’ve taken …   The satirical magazines and websites have been much more accurate than allegedly serious news all these days.  And there’s something called Ironic Times that I occasionally read, and their description of US foreign policy is, “We’re sending a message to the world:  If you attack us, we will strike back at someone else with overwhelming force.”  [Laughter]  That doesn’t seem like a sensible policy.

Of course, more is coming out and it’s much worse than I imagined.  And this is scary.  Realistically, Islamic terrorists are not going to bring down the West, they're not going to bring down the United States.  There’s a fundamental huge imbalance of power.  But they can kill a lot of innocent people.  We really appear to have … Richard Clarke’s book, he says we could not have -- I'm paraphrasing here -- if Osama bin Laden had scripted our response to 9/11, he couldn’t have done better than what we’ve actually done in terms of providing exactly the -- both the diversion of resources that allowed al Qaeda to probably become much, much harder to wipe out now, and giving him the perfect cause, the perfect motivator for more of these guys.  So it’s a real disaster.  I suppose most people saw some of the images from today, and just think about how great a gift we’ve given to the terrorists by creating those scenes unnecessarily.

MR. ASHBROOK:  Paul Krugman, we are awed at your prodigious feistiness and your prodigious ferocity, and we thank you for spending this time with us tonight.  Thank you very much.  [Applause]