Detroit debacle no big deal? Krugman seems to think so

Jonathan Tobin explores for Commentary readers popular Keynesian economist Paul Krugman’s blasé response to Detroit’s bankruptcy.

Times columnist Paul Krugman is unafraid to confront conservative doomsayers head on and declare the whole thing an insignificant blip on the radar.

While Krugman is dismissed by many on the right as an ideological extremist, his point of view about the mess actually goes straight to the heart of not only the crisis in Detroit but the impending tragedy of debt that threatens every other American city and municipality. If liberals won’t face facts about Detroit, it is not because they aren’t paying attention so much as because they see the sea of debt that their policies have created as merely the natural order of things that must be accepted. As far as he is concerned, if some people are talking about Detroit being “the new Greece,” that ought to be a signal for Democrats to stop listening because he doesn’t even think the problems of that bankrupt European nation are worth worrying about. The “deficit scolds” that he now regularly flays from his perch at the Times and his sinecure at Princeton University are, he says, trying to sell the country on an austerity mindset that is not only wrong but unnecessary. But try as he might, the example of liberal governance that Detroit (and Greece) provides shows that the liberal social welfare project is a one-way path to insolvency with desperate consequences not only for taxpayers and bondholders but to the ordinary citizens that liberals purport to want to help.

Rather than confront the problem, Krugman merely says what happened in Detroit is “one of those things” that just happen in a market economy that always creates victims. He also claims that the underfunded pension obligations that threaten the future of virtually ever state, city, and municipal government in the country are no big deal. The trillion-dollar shortfall may strike Krugman as a mere detail, but Detroit may be just the first of many other large cities that will find themselves in similar predicaments.