Paul Krugman today, under the headline The Market Speaks, observed:
So the message from the markets is by no means a happy one. What the markets are clearly saying, however, is that the fears and prejudices that have dominated Washington discussion for years are entirely misguided. And they’re also telling us that the people who have been feeding those fears and peddling those prejudices don’t have a clue about how the economy actually works.
Krugman repeats his usual talking point – ignore short term deficits, get the economy going, then deal with deficits. He tackles the usual Very Serious People who have been wrong about everything for at least 20 years now – the same people who were cheerleading the Iraq war are the same people who are cheerleading fiscal austerity.
No, the important point about these particular bad predictions is that they came from people who constantly invoke the potential wrath of the markets as a reason we must follow their policy advice. Don’t try to cover America’s uninsured, they told us; if you do, you will undermine business confidence and the stock market will tank. Don’t try to reform Wall Street, or even criticize its abuses; you’ll hurt the plutocrats’ feelings, and that will lead to plunging markets. Don’t try to fight unemployment with higher government spending; if you do, interest rates will skyrocket.
And, of course, do slash Social Security, Medicare and Medicaid right away, or the markets will punish you for your presumption.
By the way, I’m not just talking about the hard right; a fair number of self-proclaimed centrists play the same game. For example, two years ago, Erskine Bowles and Alan Simpson warned us to expect an attack of the bond vigilantes within, um, two years unless we adopted, you guessed it, Simpson-Bowles.