Paul Krugman: Take debt limit fight to default if necessary

Jeff Poor Media Reporter
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While Republicans have been chastised for their willingness to take the debt ceiling limit battle to the brink if necessary, there’s a similar view on the opposite side of the political spectrum on how far the fight should go as well.

Nobel Prize-winning Princeton University economist and New York Times columnist Paul Krugman said he believes his side should be willing to play chicken if necessary on this battle. On ABC’s “This Week” on Sunday, Krugman said the debt ceiling debate should be taken to the limit, including to the point of default when he was pressed by host Christiane Amanpour.

“I actually — I think it may be necessary to take this to the limit,” Krugman said. “[I]f we have demands for a large change in policy, under threats of debt limit, this has to be the point where we say we don’t believe in letting hostages being taken.”

Former Deputy Treasury Secretary Roger Altman, who served under President Bill Clinton, disagreed with Krugman’s suggestion and explained what it would mean if acted upon.

“No, I don’t [agree],” Altman said. “I respect Paul, but I don’t. I think default would be a profound and hugely negative step. It would be terribly destabilizing. I think it would reduce the amount of institutions around the world that would in the future buy Treasury debt and be a tremendous mistake.”

Krugman reiterated his argument and said if Democrats didn’t act like they were willing to be taken to that point their bargaining position would be weakened.

“Let me just say – we have an enormous budget dispute,” Krugman said. “We have vastly opposed poles of policy. That is not something we should resolve with – you know, with a bomb hanging over our head. It’s not something we should try and change. So, Democrats have to make clear they’re not going to let themselves be blackmailed in that way.”