An Economy that Works for Working People: A Conversation With Paul Krugman

Paul Krugman, distinguished professor of economics at The Graduate Center, CUNY and a faculty member of the Stone Center on Socio-Economic Inequality, is broadly known for his long-running New York Times column exploring economics through the real-life effects of social policy and politics. His most recent book, Arguing with Zombies: Economics, Politics, and the Fight for a Better Future, is an accessible guide to basic economics and the ideas and beliefs that drive public policy in the United States. He recently sat down with The Thought Project podcast host Tanya Domi to discuss why the U.S. should expand the Social Security system, how subsidized childcare could help the economy bounce back, and why he strives to be an economist whose scholarship represents the needs of everyday people. Check out a shortened, edited version of the interview below, then listen to our podcast to hear the full conversation.

Tanya Domi:
In Arguing with Zombies, you write that punditry was never part of your plan, but you also note that in 21st-century America everything is political. Is this one of the reasons you decided to stake out a public intellectual platform?

Paul Krugman:
Well, yeah. I almost backed into it accidentally, because I was known as being a good writer for an economist — which is one of those backhanded compliments — and was invited to write for various public forums and broader-interest platforms. It turned out I was pretty decent at it. I was doing periodic columns for Slate and for Fortune, but then the invitation to write for the Times — the best journalistic job in the world — came out of the blue. I had intended it to be mostly about business and economics, but it turned out that, while I try to keep the focus there, as I said, everything is political. You can’t talk about business, economics or economic policy without bringing the hyper-partisanship and the sheer craziness of the American political scene into the story.

Tanya Domi:
You wrote in your book that the biggest threat to Social Security is political. How can the Biden administration strengthen Social Security? I want to hear your thoughts about that.

Paul Krugman:
I think the main thing about strengthening it is to just not worry about a potential financial shortfall in the Social Security budget. When you’re making projections 75 years out, lots of stuff can happen. But we do have an aging population, so there are fewer people of working age per retiree. Since we have a system which is basically one that taxes people during their working years to pay benefits to people after they’ve retired, that creates a financial problem, but it’s not a big problem. It’s certainly well within the resources of the United States to deal with it. It would require fairly simple legislation to add to the resources of the system. It’s trillions of dollars, but we’re talking about the U.S. economy here, so it’s really not that much money. There’s actually a case for making benefits more generous. Our retirement system is a pretty thin living for those who rely primarily on Social Security, and that’s actually most people. But there’s just not a (financial) crisis there. It’s a made-up crisis.

Tanya Domi:
We have two CUNY faculty policy experts, Mimi Abramovitz and Deepak Bhargava, who are proposing universal Social Security and delinking it from work. That could bring millions out of poverty. They point out that, ironically, Mitt Romney has proposed a child allowance through Social Security that in some respects is more generous than Biden’s. But more importantly, Romney’s plan builds on existing Social Security system that delivers monthly payments more effectively than the tax system. What do you think about that?

Paul Krugman:
The idea of a universal allowance for children that is delinked from work, definitely. There’s actually no reason not to do that. Do we even want to be forcing parents of young children to work to make ends meet? The thing about improving children’s lives is it’s cheap. It doesn’t take a lot of money to achieve a huge reduction in poverty and misery. At the opposite extreme, a universal basic income for everybody is either going to be vastly inadequate to live on or impossibly expensive. Maybe if there’s a future where robots are doing all the work, we can get there, but we’re not there.

Tanya Domi:
Speaking of people who are staying home to take care of children, anecdotal reports indicate that women workers have become one of the biggest casualties during the pandemic economy, with millions leaving the workplace to stay at home, helping care for the family and support children who are learning from home. We are one of the few Western developed countries that does not provide subsidized childcare, except to our military members. They have childcare centers that operate on a 24/7 basis. What are your thoughts about this really big issue in people’s everyday lives?

Paul Krugman:
Childcare is one of those areas where it’s not just about the money. It’s partly about making it affordable, but it’s also about a strictly publicly regulated, maybe publicly run, system that would be reliable in a way that ad hoc arrangements are not. Right now you have no really good way, particularly if you’re a lower-income person, to know that your children are being properly looked after. The assurance of knowing that there are standards, there is enforcement, that the workers are decently paid would be a huge thing.

The funny thing is we have all of this constant claim from the right side of the political spectrum that various kinds of things like tax cuts for corporations, tax cuts for wealthy individuals, will largely or totally pay for themselves, almost all of which is nonsense. In fact, childcare, by freeing women to enter the paid workforce, probably wouldn’t pay for itself completely, but a significant part of it would come back in the form of revenue. It would actually be pro-economic growth and pro-tax revenue. This is one of those things where the whole way we treat children is completely shameful.

Tanya Domi:
Turning to the COVID pandemic: the incompetent management of it and the fact that we reached 500,000 dead is just absolutely unbelievable. Biden is working, I think, 24/7 in trying to turn that around. How important do you think the administration being successful will be not just to our country, but also to our external role in the world?

Paul Krugman:
Let’s imagine a year from now what I think is a fairly reasonable scenario, which is that we’re pretty much back to normal life. The pandemic is no longer vastly constraining. The economy has grown 7% or 8% over the past year. We’re back to something close to full employment. We’ve reentered the world global organizations. That will be not just the direct payoff in terms of our lives being better, but America will be a much more credible, much stronger player in the world because we turned it around. We want to do all those things anyway, but it will also help on the international relations front.

Tanya Domi:
Can we talk about what recently happened with the power grid failure in Texas when the state got hit with snow and freezing temperatures?

Paul Krugman:
Yeah, we’ve seen a massive failure of deregulation, and we’re also getting to witness the birth of a zombie — a reference from the line in my book. We had a power failure which was the result of a freeze that probably would’ve wreaked some havoc no matter what, but Texas notably did not impose any requirements that would’ve ensured stability of the system in the event of a natural disaster. The freeze affected everything, but primarily gas-fired power plants. The plants froze. The pipelines froze. The wellheads froze. But the immediate reaction (by Texas leadership) was to say, “Oh, it was the wind turbines,” some of which also froze. And “it was the Green New Deal,” which hasn’t even happened, but somehow or another, AOC was responsible for the lights going out in Texas. It’s all been shown to be false, but we know that that’s not going to matter. This will become the legend that everybody on the right believes from now on. It will be a zombie belief that wind power, a renewable energy, is why Texas went dark and froze.

Tanya Domi:
I still remain curious, though, why a party and its leaders would buy in and embrace failure repeatedly. Now, that’s the zombie element, isn’t it, part of it?

Paul Krugman:
Well, part of the answer is because they can. The Republican Party remains very competitive politically. Yeah, the Democrats control of the Senate and the White House, but not by a big margin.

I sit in the Stone Center, where we study inequality. One of the reasons we study inequality is not just because of the enormous damage that high inequality does, but also because we think that politically, high inequality is a problem, that it undermines democratic values. There’s a lot of talk about the plutocratic aspects of American politics. But that’s not the only thing that’s going on. What’s really clear now — and this is what you’re seeing not just in the U.S., but in these right-wing European parties (too) — there’s a lot of racial inequality, but also racial hostility and authoritarian impulses. In a way, the story of American politics is that the plutocrats took over a party, wanted it in order to win elections, exploited all of this illiberalism, all of this hostility, racism, sexism, and then discovered that they were not in control, that it was actually that the people they thought they were using were using them instead. Now we have all of this worse stuff. It’s a minority of the American public, but it’s not that small a minority.

Tanya Domi:
Agreed. On that note, what are the issues you’re most concerned about right now? What are your big worries?

Paul Krugman:
I’ll give you them in temporal order. The most immediate thing is it’s (now) looking really good on COVID, but after this horrific year, not feeling safe about that. There’s a scenario which is that we relax too soon, we allow it to spread, and then the variants come along, and the thing mutates ahead of the vaccines, and we plunge fully back to the nightmare. That’s my big worry for the next year. A little bit further on, well, the U.S. political system is still hanging on by its fingernails. If we had the midterm elections six months from now there’s enough voter suppression stuff underway that it would probably mean Democrats would lose Congress and the Biden administration would be completely paralyzed. So there’s an immediate political threat. Then the chance of Donald Trump becoming president again is not negligible. That’s the thing. Then beyond all of that, environment.