Nobel prize-winning economist Paul Krugman on Sunday explained to Wall Street Journal columnist Peggy Noonan that she was wrong to slam President Barack Obama for not compromising with Republicans on the debt ceiling because you don't negotiate with "hostage takers" who are trying to "blow up the world economy."
"The White House position, which is right, is that there should be no bargaining over this," Krugman told a panel on ABC's This Week. "If the Republican majority in the House wants to cut spending, let them propose legislation that cuts spending and pass it, not hold America hostage."
Bloomberg columnist Al Hunt agreed that the way Republicans were refusing to raise the debt ceiling until the president agreed to drastic spending cuts was a "total and complete fraud."
"In the end, the Republicans are not going to want to say, 'We're going to put the full faith and credit of the Unite States at risk so we can cut Medicare,'" Hunt predicted. "That just won't happen."
"We should not allow this to become or be thought of as a legitimate budget strategy," Krugman warned. "This is hostage taking, this is walking into a room and saying, 'I've got a bomb, give me what I want or I'll blow up this room.' This has never happened before and should not be allowed to happen."
"This is much scarier that the fiscal cliff because we don't know what it does," he continued. "What we do know is that U.S. government debt is the global safe asset. It is what every financial transaction relies on as the ultimate, this is what value consists of -- and better than gold, better than anything. U.S. Treasury bills are the thing. If they are called into question, nobody knows what happens."
Noonan, however, insisted that the president "should be sitting down and talking with those who would attempt to move forward on spending."
"I consider it unusual that this president can never make a deal with those folks," she opined.
"This is not something you negotiate over," Krugman shot back. "You do not negotiate with hostage takers. That's the White House position. They're right about that. You just don't negotiate on this. You can negotiate on the sequester, you can negotiate on taxes, but not on someone who is threatening to blow up the world economy if he doesn't get his way."
"My goodness," Noonan replied. "That appeared to be the White House position on the fiscal cliff just a month or two ago. Why can nothing ever be worked out? We do have a president, we do have legislative leaders, we do -- it should be noted -- have a spending crisis in America. It is not an eccentric thing to worry about the amount of spending that America does."
"You don't do it this way," Krugman disagreed. "This is a doomsday, this is really saying, 'I will blow up world unless you give me what I want.' And you don't negotiate on that."
Watch this video from ABC's This Week, broadcast Jan. 13, 2013.