Borrowing and Spending: The Way to Wealth

Hey, big spenders! It's Paul Krugman to the rescue! In the aftermath of David Stockman's recent New York Times article, Krugman is assuring his faithful readers that the massive debt financing of the Obama administration's spending spree is no big deal and that it is not real debt at all, figuratively speaking.

Why? According to Krugman: "...debt does not directly impoverish us, because it’s money we owe to ourselves."

What does he mean by that?

...think about the macroeconomics; did America really put itself $30 trillion in hock to someone else? No, some Americans lent to other Americans, which is a very different issue.

In other words, it essentially is free money, and the government can engage in this financial trick indefinitely without there being any negative consequences. Essentially, what Krugman is saying is that internal bond finance (mostly by the Federal Reserve System) essentially gets rid of the Law of Scarcity. Government, through money printing and issuance of bonds, is an unlimited fountain of wealth creation, and if there is inflation with all this, all the better, according to Krugman, because inflation will help U.S. exports, creating jobs and making us wealthier. (That is Krugman's Inflation Fairy at work.)

(Gee, I wish whoever is holding my mortgage would buy into this: I don't have to repay you! Don't you see, WE OWE IT TO OURSELVES!! Any harm that would accrue by my default would be perfectly internalized into a zero-sum outcome. I gain, you lose, America is not harmed at all!)

Understand that Krugman is the most decorated academic economist of our time. His face is all over the talk shows, and he is treated with the kind of reverence in academe once reserved for someone like Einstein. Yet, his central message is this: internal bond finance of government trumps scarcity. Yes, the guy actually believes this, or at least one can say he provides the Obama administration with cover for its destructive policies.

Remember, Obama declared that unemployment payments from the government create more wealth than does an oil pipeline, and that a welfare system actually makes the economy stronger and is not an economic burden, but a provider of wealth. Yes, for all of the supposed sophistication of American Progressives (and especially the ones that worship Krugman and Obama), it seems that in the end they confuse financial trickery with wealth creation.

That Fax Machine Must Have Had Some Kind of Impact!

It seems that Paul Krugman's past statements continue to crop up. His 2003 call for Alan Greenspan to create a housing bubble certainly has dogged him, but something he wrote in 1998 exposes even more of his economic ignorance: He claimed that the Internet would not have much effect on commerce and the economy, or at least be no more powerful than the fax machine.

Specifically, he wrote:

The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law" -- which states that the number of potential connections in a network is proportional to the square of the number of participants -- becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's. (Emphasis mine)

As the rate of technological change in computing slows, the number of jobs for IT specialists will decelerate, then actually turn down; ten years from now, the phrase information economy will sound silly.

At one level, his statement is understandable. There are diminishing returns to any kind of technological progress and diminishing returns to capital. Even Keynesians like Krugman can grasp the concept of the margin, even if they cannot apply that concept to money and government spending.

My sense also is that Krugman was responding to some of the "New Economy" rhetoric that was floating about at the time. (Although Democrats were claiming then that pushing the top tax rate to 39.6 percent was the real reason the economy was doing well.)

However, it is quite clear now that the Internet has had a huge impact upon the economy, and that is because it not only has changed how people receive economic information, it also has vastly changed the extent of what we would call "the market." For example, a local bookstore in Frostburg now does not have to depend upon walk-in traffic for all its revenue, as it can market its products to almost anyone on the Internet.

Like most academic economists, Krugman depends upon static models that give us the four kinds of "competition," models that over time will slowly morph into every industry turning into an intractable monopoly. Unless the government steps in to stop this inevitable slide, economic competition will disappear.

Those models were what enabled Oskar Lange and others who were debating Ludwig von Mises and Friedrich A. Hayek in what is called the "Socialist Calculation Debate." Lange and his allies were claiming that all anyone needed were the four models, and that a government, through central planning, essentially could recreate a market that would be better than what currently existed because governments could enforce those things that would better allow the economy to remain in a state of virtual perfect competition.

That is where Krugman and most other academic economists are today. They cannot fully articulate the role of private property and even prices in an economy, and they certainly cannot fully understand the role of information and even those things they call "market failures" because they cannot comprehend the entrepreneur and the economic role of the entrepreneur.

To Paul Krugman, the entrepreneur is someone who starts a business in the garage, but over time has little economic impact because all the important economic decisions are made by big companies that bear little resemblance to any competitive models. Instead, like many academic economists, he is stuck in the mentality exhibited by John Kenneth Galbraith when he likened the economy to consisting of a few monopolies that competed in a death match with labor unions. Prices don't mean anything because they are administered and because the economy does not exactly match the model of perfect competition and all its inherent assumptions.

Furthermore, Krugman's regulatory models are purely Pigovian in which the wise, omniscient regulator (if the regulator is a Democrat) knows exactly what lines of production are going to be profitable and sustainable (Industrial Policy), so the fact that the Internet could have a huge impact upon information costs is irrelevant.

In short, Paul Krugman sees the economy as a mechanistic entity that is oiled by a circular flow of money. As long as government regulators and central bankers have a free hand, that machine can go on forever, but if private enterprise gets in the way -- as it invariably does -- then disaster strikes.

Thus, a person who views the economy that way is not going to be able to understand the impact of something like the Internet, which to him is a static entity that will be giving decreasing returns to scale. His 1998 statement was his economic logic in action.

Krugman's California Fantasies (Or are They Hallucinations?)

For many years, I have written that Paul Krugman is not so much an economist as he is a political operative, but I was wrong. He is not just a political operative, but also is just another leftist who believes that government debt and government spending actually are wealth-creating things. However, his latest column on California's supposed "comeback" proves my original point that he is no economist.

California, in Krugman's view, has been the victim of Republicans who blocked tax increases and kept the state from building the Ultimate Lefty Pipedream: High-Speed Rail. Now that the Republicans no longer have any political influence or power there, the Golden State can now tax and spend itself into a glorious future, and if that future of massive government spending turns sour, I am sure that Krugman will be able to blame Paul Ryan or Goldstein or Seinfeld or Blowfeld.

Writes Krugman:

...reports of the state’s demise proved premature. Unemployment in California remains high, but it’s coming down — and there’s a projected budget surplus, in part because the implosion of the state’s Republican Party finally gave Democrats a big enough political advantage to push through some desperately needed tax increases. Far from presiding over a Greek-style crisis, Gov. Jerry Brown is proclaiming a comeback.

Needless to say, the usual suspects are still predicting doom — this time from the very tax hikes that are closing the budget gap, which they say will cause millionaires and businesses to flee the state. Well, maybe — but serious studies have found very little evidence either that tax hikes cause lots of wealthy people to move or that state taxes have any significant impact on growth.

Now, even Krugman is not quite ready to proclaim Paradise Regained, although the lack of any opposition to an accelerated tax-and-borrow-and-spend certainly should speed its arrival:

I’m not suggesting everything in California is just fine. Unemployment — especially long-term unemployment — remains very high. California’s longer-term economic growth has slowed, too, mainly because the state’s limited supply of buildable land means high housing prices, bringing an era of rapid population growth to an end. (Did you know that metropolitan Los Angeles has a higher population density than metropolitan New York?) Last but not least, decades of political paralysis have degraded the state’s once-superb public education system. So there are plenty of problems.

The fact that California has the highest taxes in the country, has a virulent anti-business governmental culture, and has rules that increase the cost of just about everything has nothing to do with it. After all, in Wonderland, higher costs translate into more spending, and more spending creates more wealth, so these "problem" to which Krugman refers actually are opportunities for more government spending, which means a brighter future.

Given the leftist fetish regarding the evils of population growth, I'm not sure why Krugman even would cite the end of such growth as a bad thing. After all, as Matt Yglesias writes in Slate:

I'm reasonably certain that California's deteriorating public services aren't really driving the declining population growth. That's because if you look at someplace in California where it would be nice to live—Santa Monica, say, or Palo Alto—it turns out to be incredibly expensive. All the best land is occupied and the people in those communities don't want it to get filled up with more density and California's environmental legislation gives them powerful tools with which to block new residents.

Given that Krugman can afford to live in places like Santa Monica or Palo Alto, and given his strong environmental credentials, I am sure that he would approve of those laws that keep the Great And Beloved Unwashed far away from himself and others who love these folks who help keep Democrats in office but who really should try to live somewhere else. But California has another problem, and for all of Krugman's Greece I Tell You! fetishes, it seems that there really is a Greece connection.

Like Greece, California has great weather, beautiful and rugged mountains, and a magic coastline. Friends of mine who decry the financial madness and out-of-control governments nonetheless do not want to leave because of the quality of life they have enjoyed there. Like Greece, California governments have run up debts that over time cannot be repaid (two of which are discussed below), and like Greece, California is part of a central currency union and cannot print its own money, and sooner or later government employees in California are going to take such a huge chunk of public wealth (as they have in Greece) that the hard choices that are inevitable will create a lot of consternation.

There are two issues that are government budget eaters in California, and while Krugman kind of alludes to one (high-speed rail), the other is even more explosive: municipal and state pension obligations that have come about because of the state's powerful government unions. Steven Greenhut has written a lot about the state's out-of-control government unions which have driven a number of municipalities to bankruptcies.

The issue is quite simple: a number of cities, not to mention state agencies, pay their unionized employees very well and have promised even better pensions. However, paying for these things is another matter, and maybe Krugman is right in that businesses and individuals will allow tax hikes to go on forever to pay for the enrichment of others, but I have my doubts.

 High-speed rail, or what Krugman calls "infrastructure," is another California boondoggle that really could manage to bankrupt the state government. The original idea was that the state, through sale of bonds, federal grants, and tax increases, would build a high-speed rail line to run between San Francisco and Los Angeles. Like all such public projects, the original cost projections started out relatively small and have metastasized into something else. (I doubt seriously that Krugman ever will write a future column about the fiscal foolishness of California high-speed rail projects if for no other reason than he actually believes that higher costs will translate into more spending which then will create more prosperity. The Keynesian Way.)

Keynesians believe that government spending creates its own wealth multipliers, so when governments promise huge pensions, fund rail boondoggles, and block the growth of businesses, they actually are making everyone better off, as though government spending has an internal generator that can create something from nothing. The Law of Scarcity, however, cannot be repealed by government no matter what Krugman declares.

Because California now has a Democrat supermajority and will continue that way indefinitely, Krugman believes that there will be nothing to stop the state and municipal governments there from internally generating wealth through tax increases, borrowing, and spending. Even if high-speed rail costs much more than it could collect in actual revenues, that is good because it will mean more spending, and spending is actually a form of wealth production.

Please understand Krugman's larger point. He is saying that the government of California can make it difficult for businesses to operate in a high-tax, high-regulation environment (except businesses that are politically-connected), and try to make up for the loss of wealth through taxation, borrowing and spending. He is saying that the government can internally produce wealth simply by spending money that first must come from other sources.

So, drink up, California! Your future is unlimited all because your politicians and some "economists" believe they can tax you into Paradise.

Update: The Atlantic has a very interesting article on California about what Progressives can learn about governance, and the Democrat that writes it, Conor Friedersdorf, says this about Krugman's California column:

In California, my home state, Democrats have dominated the capitol since roughly 1970. In the last four-plus decades, they've controlled both houses of the state legislature for all but two years. They dominate the state bureaucracy and the leadership of most major cities. And they've long dominated the vast majority of statewide offices, the governorship excepted: Since Ronald Reagan departed in 1975, it has gone back and forth between Democrats (like current and former governor Jerry Brown) and Republicans, most recently the moderate Arnold Schwarzenegger.

Despite this, Paul Krugman, the Nobel Prize-winning economist and New York Times opinion writer, has managed to write a column that proceeds as if, insofar as partisans can be blamed, Republicans are entirely to blame for the state's woes, which he thinks are exaggerated, while Democrats bear no responsibility. As a Californian who hasn't given up on his place of residence, I'm glad to see Krugman thinks there are good times ahead for the Golden State, but the analysis that precedes his conclusion is causing me to doubt him.

Not that Krugman would take notice or admit to being wrong. No, Goldstein is EVERYWHERE and controls all things, don'tcha know?

Our Children ARE the “Ourselves”

Samuel Johnson wrote that “patriotism is the last refuge of a scoundrel,” but in modern America, being “for the children” now has taken that august refuge of the rogue. Thus it is that Paul Krugman has decided to join such company as he appeals to us to think of “our children.”

Krugman doesn’t have any children, but he is such a collectivist that I am sure that he would claim as much “ownership” over my kids as I might do (although no one “owns” kids). I doubt Krugman’s concern for my children would extend to helping pay the substantial bills that accompany their presence.

The normal “cheating our children” has to do with the belief that through government, Americans of my generation (and Krugman’s too, since he and I were born in the same year) have borrowed such huge amounts of money that the debts either will be paid through inflation or through another means that will place a lot of the younger generation in poverty.

Krugman, however, sees it differently. Our “crime” against the children is not borrowing and spending beyond our present means so that we dump huge financial burdens on them in the future. No, our “crime” is that we are not borrowing and spending enough beyond our present means. That’s right; Krugman claims that by seeking to lessen the future financial burdens on our children, we are cheating them.

Why? Because, according to Krugman, if the government borrows lots of money and then spends it immediately, there actually is no effective opportunity cost. He writes:

Contrary to almost everything you read in the papers or see on TV, debt doesn’t directly make our nation poorer; it’s essentially money we owe to ourselves. Deficits would indirectly be making us poorer if they were either leading to big trade deficits, increasing our overseas borrowing, or crowding out investment, reducing future productive capacity. But they aren’t: Trade deficits are down, not up, while business investment has actually recovered fairly strongly from the slump. (emphasis mine)

He goes on to explain how the lack of current spending is depriving young people of teachers, more aid to college, and, of course, he mentions the “I” word, infrastructure. In Krugman’s view, it is a simple thing; just borrow, print and spend, and a strong economy will appear out of the mixture. Malinvestments? No problem. Just spend enough and the economy will expand to the point where there are no malinvestments.

So, there we have it. Borrow, spend, run up the credit card. We "owe it to ourselves," which means that government borrowing also manages to cheat the Law of Scarcity. Borrow now and the kids won't owe anything at all. The Inflation Fairy will do the rest. Just believe and do it for the children. For the children.

Krugman's Cyprus Solution: Seize Property and Print Money

In answer to the "What would you do about Cyprus if you were dictator?" question, Paul Krugman has shared his Nobel-level of economic intelligence with the rest of us, and it comes down to two actions: the Cyprus government should seize as much private property as it can, go off the euro and print its own currency, lots of it. Krugman writes:

...Cyprus should leave the euro. Now.

The reason is straightforward: staying in the euro means an incredibly severe depression, which will last for many years while Cyprus tries to build a new export sector. Leaving the euro, and letting the new currency fall sharply, would greatly accelerate that rebuilding.

He continues:

If you look at Cyprus’s trade profile, you see just how much damage the country is about to sustain. This is a highly open economy with just two major exports, banking services and tourism — and one of them just disappeared. This would lead to a severe slump on its own. On top of that, the troika is demanding major new austerity, even though the country supposedly has rough primary (non-interest) budget balance. I wouldn’t be surprised to see a 20 percent fall in real GDP.

What’s the path forward? Cyprus needs to have a tourist boom, plus a rapid growth of other exports — my guess would be agriculture as a driver, although I don’t know much about it. The obvious way to get there is through a large devaluation; yes, in the end this probably does come down to cheap deals that attract lots of British package tours.

Getting to the same point by cutting nominal wages would take much longer and inflict much more human and economic damage.

At one point he is correct in that the boom that Cyprus enjoyed by playing the role of bankster is over, kaput. (The biggest offender of banksterism, the government-owned bank Laiki, does seem to contradict Krugman's belief that government usually is a responsible entity and only private enterprise is reckless.) But the party is over, truly over, although Krugman seems to want us to believe that Cyprus can avoid consequences by engaging in yet more financial tricks and that a Cyprus with its own government-issued scrip will be just fine.

By the way, Krugman (as a true Keynesian) believes that no one will notice that by getting out of the euro and printing its own money (and converting the deposits in its banks into Cyprus-scrip) that Cyprus has gone bankrupt. In reality, everyone there still will be getting a major head-shaving. We are talking about a currency that would be as popular in world markets as the Zimbabwe dollar at the height of that country's hyperinflation. Imports would fall to near-zero, to be paid only by the euros and other currencies in the seized bank accounts.

In other words, we are not looking for a happy ending. On one side, Cyprus and its people could face the truth, take the up-front medicine, and then try to create a real economy producing things people actually might want to purchase. On the Krugman side, Cyprus goes on with its "let's pretend" game of slashing real wages through inflation and continuing the Big Lie that the only problem there is a currency problem.

My sense is that Krugman's easy solution might be less attractive than what he might predict. First, given the proclivity of the government there to seize the property of others, I doubt seriously that the government would offer a true market exchange rate when those hordes of British tourists invade Cyprus looking for the Good Deal. Instead, we will see the infamous Third World "dirty rates" that are notorious elsewhere.

Second, people who are the victims of outright theft -- and that is what Krugman has been advocating -- are not going to take their situations lightly. Tourists are not going to want to come to a place where mobs are pillaging and burning -- and robbing tourists. (Well, completing the robbery process that would start when the government cheated on the exchange rates.)

The best way to avoid a crisis is not to create one in the first place. Booms created through monetary tricks and inflation have a way of blowing up, and starting a second boom to replace the first is not as easy as Krugman thinks it is.

Robert Murphy notes that Krugman's "solution" is to "ignite a boom" in place of the boom that has crashed. Of course, Krugman does not come clean and tell us what will happen when that boom inevitably crashes. No doubt, his "solution" is to create yet another boom, but in reality, financial trickery has a way of being exposed and at some point, not only is the party over, but people who have been fed a diet of inflation become so addicted to it that they cannot and will not do what is necessary to fix their economies.

In the end, Keynesianism is not about long-term solutions. It is about monetary manipulation in hopes that something -- Anything! -- can hide the fact that inflation is destroying the economic fundamentals. But to the homogeneous-factors Keynesians, there are no fundamentals, just the printing press and government, lots of government. Krugman's Inflation Fairy turns out to be a wicked witch after all.

Krugman Supports Capital Controls

In reading Paul Krugman for more than a decade, it seems that he has established a firm ideological pattern: Markets evil, government good. Thus, he has decided the solution for the crisis in Cyprus: capital controls.

Now, Krugman will not admit that capital controls are essentially an act of police-state theft, although that is exactly what they are. Instead, he promotes capital controls as the epitome of “responsible” government trying to beat back the evils of capitalism. He writes:

Whatever the final outcome in the Cyprus crisis — we know it’s going to be ugly; we just don’t know exactly what form the ugliness will take — one thing seems certain: for the time being, and probably for years to come, the island nation will have to maintain fairly draconian controls on the movement of capital in and out of the country. In fact, controls may well be in place by the time you read this. And that’s not all: Depending on exactly how this plays out, Cypriot capital controls may well have the blessing of the International Monetary Fund, which has already supported such controls in Iceland.

That’s quite a remarkable development. It will mark the end of an era for Cyprus, which has in effect spent the past decade advertising itself as a place where wealthy individuals who want to avoid taxes and scrutiny can safely park their money, no questions asked. But it may also mark at least the beginning of the end for something much bigger: the era when unrestricted movement of capital was taken as a desirable norm around the world.

But it gets better:

It wasn’t always thus. In the first couple of decades after World War II, limits on cross-border money flows were widely considered good policy; they were more or less universal in poorer nations, and present in a majority of richer countries too. Britain, for example, limited overseas investments by its residents until 1979; other advanced countries maintained restrictions into the 1980s. Even the United States briefly limited capital outflows during the 1960s.

Over time, however, these restrictions fell out of fashion. To some extent this reflected the fact that capital controls have potential costs: they impose extra burdens of paperwork, they make business operations more difficult, and conventional economic analysis says that they should have a negative impact on growth (although this effect is hard to find in the numbers). But it also reflected the rise of free-market ideology, the assumption that if financial markets want to move money across borders, there must be a good reason, and bureaucrats shouldn’t stand in their way.

As a result, countries that did step in to limit capital flows — like Malaysia, which imposed what amounted to a curfew on capital flight in 1998 — were treated almost as pariahs. Surely they would be punished for defying the gods of the market!

Yes, when the socialist Labor government of Great Britain following World War II was seizing property and “nationalizing” industry after industry, the government also made sure that those people who were the victims of this theft could not legally get their money out of the country. (And, as we know, the great British experiment in socialism was a disaster as the nationalized industries became famous for poor quality goods and declining productivity, leading to high rates of inflation and even an IMF bailout.)

As I read this Krugman column, I get the sense that he is claiming that governments are financially and fiscally responsible, but it is those evil people in private enterprise that are making things worse, and the only reason that they might want to get their money out of the country is that they are being selfish. So, when Argentina and Bolivia installed capital controls in the middle of their hyperinflations, no doubt Krugman would claim that it was no big deal. Hey, they had more money than ever, right?

Lest it looks as though I am exaggerating, here is Krugman in his own words:

It’s hard to imagine now, but for more than three decades after World War II financial crises of the kind we’ve lately become so familiar with hardly ever happened. Since 1980, however, the roster has been impressive: Mexico, Brazil, Argentina and Chile in 1982. Sweden and Finland in 1991. Mexico again in 1995. Thailand, Malaysia, Indonesia and Korea in 1998. Argentina again in 2002. And, of course, the more recent run of disasters: Iceland, Ireland, Greece, Portugal, Spain, Italy, Cyprus.

What’s the common theme in these episodes? Conventional wisdom blames fiscal profligacy — but in this whole list, that story fits only one country, Greece. Runaway bankers are a better story; they played a role in a number of these crises, from Chile to Sweden to Cyprus. But the best predictor of crisis is large inflows of foreign money: in all but a couple of the cases I just mentioned, the foundation for crisis was laid by a rush of foreign investors into a country, followed by a sudden rush out.

To read Krugman, one would think that people just dumped money into a country and then took it out for no good reason, and THAT was the cause of the crises. In other words, the flow of capital was not a response to what was occurring, but rather was a cause. This would be consistent with Krugman’s statist ideology, and to be honest, I am not surprised to see him embrace the policies that once were the staple of banana republics.

Notice what never receives blame in a Krugman piece: central banks. No, in Wonderland, the only sin that a central banker can commit is not inflating enough. We are supposed to believe that the rapacious capitalists flinging their money around the globe create the financial crises and then responsible governments and central bankers must come in and clean up the mess.

It never seems to occur to Krugman that the various austerity packages that governments are imposing exist for the purpose of propping up the banks, or if Krugman actually acknowledges that fact, he then claims that such policies exist because of a mystical bout of ideology. The ties between bankers, politicians, and central bankers never are explored as though these people all operate in separate spheres of life.

I have no doubt that the vast amounts of movement of capital around the globe can exacerbate a crisis, but not create it. However, capital controls are a form of theft, period, although it is a theft that Krugman supports. He wants us to think that because Great Britain had capital controls and imposed socialism, those were the good old days, and there was no economic price to pay for such policies.

Margaret Thatcher and Ronald Reagan did not come to power because a mystical ideology suddenly appeared in books and in newspapers, an ideology that convinced people who were living in great and prosperous times that things really were terrible. When Thatcher took office, inflation in Great Britain was more than 20 percent and it was 13 percent in Jimmy Carter’s last year in office in 1980. The very policies that Krugman currently endorses came to fruition in the late 1970s. Just because he wants to rewrite history and try to convince us that it was conservative Republicans who pushed through most deregulation does not mean the guy is telling the truth.

Marches of the Non Sequitur

I really was ready to shout, "Hallalujah!" when I saw the title of Paul Krugman's latest column on the 10-year anniversary of the U.S. invasion of Iraq. When I met Krugman in 2004 at the Southern Economic Association meetings in New Orleans, we were discussing Iraq and I told him that I was afraid we would live the results of that war for the rest of our lives, and he agreed. I hated the war then and always will hate what the U.S. Government has done there.

Had he left things at that, I would have written a post filled with hosannas for Krugman's good judgment. Alack and alas, The Great One was using Iraq as a warmup for claiming that since the war was bad and the media did a terrible job in dealing with it, then any media criticism of the current federal budget deficit also is bad. Don't you get it? Media wrong then; therefore, media wrong now.

This is what the ancients once called the non sequitur (Latin for "it does not follow") in which the conclusion is not supported by the premises. If Washington was "wrong" on Iraq, then Washington certainly must be "wrong" on anything regarding the federal budget. Everyone knows that!

Even beyond Krugman's logical fallacy, there is another problem with his argument: Washington hardly is a place where "austerity" is being practiced, much less preached. The Republicans hardly were "austere" during their days of controlling all branches of the federal government and when people talk of "draconian budget cuts," they really are referring to alleged "cuts" in the INCREASE of spending. In other words, any slowdown in the rate of increase in spending is termed "austerity" by people who should know better.

Then there are statements like the following in which Krugman wants to claim that the mainstream media is on the side of "austerity":

...now as then we have the illusion of consensus, an illusion based on a process in which anyone questioning the preferred narrative is immediately marginalized, no matter how strong his or her credentials. And now as then the press often seems to have taken sides. It has been especially striking how often questionable assertions are reported as fact. How many times, for example, have you seen news articles simply asserting that the United States has a “debt crisis,” even though many economists would argue that it faces no such thing?

To be honest, I cannot recall reading anything recently in the mainstream press recently that referenced a "debt crisis." However, I would add that the U.S. Government is not paying its debts via any methods other than financial trickery, something that cannot continue forever without serious consequences. The U.S. Government pays its debts either by borrowing more money or essentially printing the payments, neither of which is sustainable.

No, we are not in a current "debt crisis," as one might define the term. Not even the Austrians are making that claim. The Austrians do say, however, that the real financial damage that the government and the Federal Reserve System has been doing is not going to have a happy ending. Krugman and his True Believers may believe that printed money essentially is real wealth (and that ultimately is what they are claiming), but the laws of economics have a way of making themselves known, and there will come a time when Ben Bernanke has no more rabbits to pull out of his hat.