Peterson wants a balanced budget and only grudgingly acknowledges the need for stimulus. Krugman wants the stimulus and only grudgingly acknowledges that there are limits: You can’t borrow forever. Nevertheless, the two men — representing opposite ends of the spectrum in this debate — agree on how we should proceed.
There’s just one problem: The plan they agree on is impossible. Well, let’s say close to impossible. Miracles do happen.
Step No. 1 of the Peterson-Krugman plan is working well enough. We’ve all done a great job of barely cutting spending, barely raising taxes, not reforming entitlements, and all told spending about a trillion dollars a year more than we bring in. Plenty of stimulus (though stimulus hawks like Krugman wanted more).
But is there a shred of evidence that the citizenry and our political leaders are ready for Step No. 2? That’s where everyone agrees to enough spending cuts and tax increases to close the budget gap. I’ll believe that when I see it.
Just for the record I suspect that what Lord Keynes actually proposed for dealing with cyclic downturns would work if a) we made him world dictator and b) he directed the operation personally. Paul Krugman is not John Maynard Keynes and we’re not going to make him world dictator.