Nobel Prize winning economist Paul Krugman warned Sunday that proposed spending cuts in a deal to raise the nation’s debt ceiling would end up hurting the economy.
“From the perspective of a rational person, we shouldn’t even be talking about spending cuts at all now,” Krugman told ABC’s Christiane Amanpour. “We have nine percent unemployment. These spending cuts are going to worsen unemployment… If you have a situation in which you are permanently going to raise the unemployment rate — which is what this is going to do — that’s actually going to reduce future revenues.”
“These spending cuts are even going to hurt the long-run fiscal position, let alone cause lots of misery. Then on top of that, we’ve got these budget cuts, which are entirely — basically the Republicans [saying], ‘We’ll blow up the world economy unless you give us exactly what we want’ and the president said, ‘Okay.’ That’s what happened.”
“We used to talk about the Japanese and their lost decade. We’re going to look to them as a role model. They did better than we’re doing,” he added. “There is no light at the end of this tunnel. We’re having a debate in Washington which is all about, ‘Gee, we’re going to make this economy worse, but are we going to make it worse on 90 percent the Republicans’ terms or 100 percent the Republicans’ terms?’ The answer is 100 percent.”
Watch this video from the ABC’s This Week, broadcast July 31, 2011.