This can’t go on… or can it?
By Paul Krugman: Seattle P.I.
Nov. 14, 2003
Academic economists often cite Stein's Law, a principle
enunciated by the late Herbert Stein, chairman of the Council of
Economic Advisers during the Nixon administration. The law comes with
various wordings; my favorite is: "Things that can't go on forever,
don't." Believe it or not, that's a useful reminder.
For we're now led by men who think that macho posturing makes
Stein's Law go away, On issues ranging from budgets to foreign policy,
they insist that we can sustain the unsustainable. And when challenged
to explain how, they engage in magical thinking.
The prime example I have
hammered on in this column is, of course, the federal budget. Realistic
budget projections say that current policies aren't remotely
sustainable. For example, a month ago a joint report of the Committee
for Economic Development (a business group), the bipartisan Concord
Coalition and the Center on Budget and Policy Priorities concluded that
under current policies, federal debt would rise by $5 trillion over the
next decade. And then baby boomers will start collecting benefits, and
our debt will really explode.
Such explosive growth in debt can't go on forever, and it won’t.
Yet our current leaders and their apologists insist that the problem
will magically solve itself. Last year's deficit came in slightly below
forecasts, and we've had one quarter of good economic growth - see,
we'll grow out of the deficit.
But we won't, and there will eventually be a day of reckoning.
As Bill Gross of Pimco, the giant bond manager, says,
"Sooner, perhaps later, our Asian
creditors will wake up and smell the coffee." (Yes,
the federal budget
and the value of the dollar now depend on huge purchases of Treasury
bills by the governments of Japan and China.) When they do, he
predicts "higher import costs, a cutback in spending on cheap foreign
goods, rising inflation, perhaps chaotic financial markets, a lower
standard of living." Something to look forward to.
But the day of reckoning seems closer on a different front.
Some Americans may share the views of the Republican congressman
who said that progress in Iraq is, "a better and more important story
than losing a couple of soldiers every day." (The congressman,
Washington Republican George Nethercutt, added, "which heaven forbid is
awful.)" (Support the troops.)
But whether or not you think troop losses are important, there's
growing evidence that our Iraq strategy is unsustainable. The immediate
issue is manpower. Some politicians are calling for a bigger force in
Iraq - but even our current force levels can't be maintained.
In September the
Congressional Budget Office analyzed how many
U.S. soldiers could be kept in Iraq without extending tours beyond one
year. The conclusion was that force levels would have to start dropping
rapidly about five months from now, and that the forces in Iraq and
Kuwait eventually would have to shrink by almost two thirds. As the
report explains, the Pentagon can use various expedients to maintain a
larger force in Iraq, but all of these expedients would threaten to
undermine our military readiness.
At a broader level, the
accelerating pace at which Americans are
being killed and wounded and the strains of occupation duties clearly
pose difficulties for recruitment in a volunteer military And at a
still broader level, public support for this war - whose original
rationale has turned out to be a mirage, if not a deliberate deception
- will wilt if losses go on at this rate, no matter how tough the
For sure, good things are
happening in Iraq. But are we making
the kind of progress that would allow us to withdraw large numbers of
soldiers, and greatly reduce casualties, in the fairly near future?
That's a hard case to make.
Yet we keep expecting a magic solution. We'll get European,
Indian and Pakistani forces to help us. But since we went to war
without international support, they're not interested. We'll bring in
the Turks. But the Iraqi Governing Council itself is bitterly opposed.
Well engage in "Iraqification," creating local forces that take the
place of American troops. Let's hope that works - but hope is not a
Just as the federal government is in no immediate danger of
running out of money, our forces in Iraq are in no danger of outright
defeat. But in both cases, current policies appear to be unsustainable:
we can't go on like this indefinitely. And things that can't go on
Paul Krugman is a columnist for the New York Times. Copyright 2003 New
York Times News Service. E-mail: email@example.com