Paul Krugman: America Does Not Have a Debt Problem

Krugman Says Forget Debt, Help the Unemployed (PBS)

We recently sat down with former politician and businessman David Stockman to discuss his controversial book, "The Great Deformation," in which he argues our economic system is busted. In the previous Making Sen$e Business Desk post Stockman explains how to fix it. We also asked Nobel economist and New York Times columnist Paul Krugman what he would do. That exchange is below.

Paul Solman: So I asked David Stockman for his prescriptions, economic prescriptions for what ails us. Yours?

Paul Krugman: More spending right now. But if you want operational, I think the first and easiest thing we can do is [give] aid to state and local governments. We had some of that in the first year of the stimulus, but go back to it, 300 billion [dollars] a year of grants to state and local governments for necessary spending. Rehire school teachers, fill potholes, resume infrastructure projects that have been put on hold. That right there is probably enough to bring the unemployment rate down by about a point and a half. So just there you get quite a lot of traction on the economy.

Then there are other things. There are, in fact, some worthy government spending, federal projects. There's a lot we can be doing on the rail system, not grandiose stuff. I'm not gonna say, "let's build a vacuum tunnel from the East to the West Coast," but there are a lot of, you know, just sort of bad stretches of track that need to be fixed that would accelerate stuff quite a lot.