A speaking tour that took Paul Krugman from the Metropolitan Museum of Art to Westchester Community College brought him yesterday to the New York Times Center opposite the McDonald’s on West 41st Street, for a “Sunday with the Magazine’’ interview with assistant managing editor Gerald Marzorati. In front of a packed house of several hundred ardent admirers, the elfin-eared Nobel Prize-winner displayed the wit and intelligence that have allowed him to become one of the leading public intellectuals of our era. Here is some of what he said:
WHERE WE ARE IN THE FINANCIAL CRISIS Calling the crisis a “wild fire that has run out of things to burn,’’ Krugman said that “things are still bad, but they’re just getting worse more slowly.’’ He said that his “great fear is that we may have passed the `It’s the end of the world!’ stage of the crisis,’’ but that we’re still in danger of falling into prolonged stagnation the way Japan did in the nineties. “We’re already worse than Japan was. We might be stabilizing, but this isn’t where you want to stabilize.’’
NATIONALIZING THE BANKS Krugman didn’t see much coming out of the stress test announcements we’ll see later this week. “They’re still groping for a policy on the banks, and that won’t change Thursday.’’ The reluctance to nationalize the zombie banks comes more from the economic advisors, “who are too aware of how big a deal it would be’’ than the political advisors. The economic advisors are “mostly just scared of jumping into the complete unknown. I think we’ve plunged into the unknown already, and they’re just postponing the inevitable.’’
HOW BANKING GOT SO BIG “Politics. Banking was big in the 1920s—captains of industry 
and all that. But after the Depression, regulations were enacted, and banking became this boring utility. The big surge began around 1980 with the election of Ronald Reagan, who deregulated finance. The giant financial supermarkets became the source of our problems because they are not regulated. If they were regulated the way we regulate banking, you’d be amazed at how calm banking would become.’’
MORE TAXES? Enacting a progressive agenda is going to be costly. “How much can we raise by increasing taxes on those at the top? Not enough.’’ Krugman wondered if opposition to more taxes is likely to be as fierce as it has recently been. “We have not always been a society that believed in rugged individualism.’’ Traditionally, he contended, Americans have been generous when race was not a factor. “We are less like that now, and we are less a cowboy society than we think we are.’’
THE OBAMA TEAM Larry Summers is Obama’s gatekeeper, Krugman said, and the president “told his Robert Reiches to go away.’’ Krugman said “there’s a startling lack of progressive movement economists in the administration, if only to speak up for alternatives. There’s only Jared Bernstein, and there really ought to be more. All of us who said that Hillary Clinton would bring in the Larry Summers-Robert Rubin crew now realize that Obama brought in the Larry Summers-Robert Rubin crew. Of course, Larry Summers doesn’t sound like Larry Summers did 10 years ago.’’
THANKS, PRESIDENT BUSH! “I was radicalized by President Bush,’’ said Krugman. “Anyone who wasn’t radicalized wasn’t paying attention. The radicalizing moment came during the 2000 campaign when Campaign Bush was lying about a whole lot of things, Social Security especially, and nobody would say anything. That made me into a more forceful writer, and I got stronger in the face of the power of the hard right.’’
A REPUBLICAN COMEBACK? “The GOP really has a problem. The idea that Newt Gingrich is one of their intellectual leaders tells you how big their problem is. The premise that Americans hate government and that social issues will be a wedge that will lead to victory—what I call the gay married terrorists formula—showed that it had no traction the moment that Bush tried to privatize social security. Republicans will be back when they bring back the Dwight Eisenhower model—that is, a candidate who accepted Social Security and unemployment insurance and all the other New Deal programs. Actually, Arnold Schwarzeneggar is the future of the GOP. Not him personally, because he still can’t pronounce the name of his state, but someone like him.’’
I really like how Krugman continues to stick to his guns, even though a more favorable administration is in power. I haven’t quite figured out why the Obama Administration has no problem playing hardball with GM and Chrysler, but is so timid when it comes to the banking industry.
Separately, another concern for progressives is who Obama will select as the next Supreme Court Justice. The New York Times reported yesterday that as a law professor, Obama was “skeptical of court-led efforts at social change”–an interesting viewpoint considering the role that the court system played in advancing the Civil Rights Movement of the 1950s and 1960s. (Not to mention the setbacks it dealt the Bush Administration in regards to the rights of prisoners during wartime.)
Good comment, Hugh. Krugman was interesting on that point. He said that he continues to have good relations with the administration, that their dialog takes the form of someone on the financial team phoning him and jawing over his articles. And Krugman says he thinks he’s being helpful to the administration, that the administration finds it’s useful, for example, in fending off criticisms about how large the stimulus package is, to have someone arguing that ti should be much larger. “I’m basically on their side,” he said.