On Bloomberg Television Monday, champions of two diametrically opposed schools of thought duked it out on issues ranging from the government’s role in the American economy to monetary policy.
Texas Rep. Ron Paul, a libertarian-leaning Republican candidate for president, and New York Times columnist Paul Krugman, a Nobel Prize-winning economist, faced off in a much-anticipated, but more-or-less predictable policy debate.
“Well, he believes in big government, from what I read and hear, and I believe in small very government,” Paul said. “And I emphasize personal liberties. I do not like a managed economy, whether it is a true central economic planning or monetary policy or even Congress doing it. So, it is a completely different philosophy that markets are supposed to work, you know, in a natural way.”
Paul pointed to interest rates, wages, prices, and where the government has failed in the past when it comes to managing an economy.
Krugman attempted to refute Paul’s philosophy by explaining that there always has to be some governmental role because if the government completely neglects management, the economy is subject to volatility.
“Well there are certain things — you can’t leave the government out of monetary policy,” Krugman said. “If you try to think ‘we’re born to lead it set itself,’ it does not happen. The government, the central bank is always going to be in the business of managing monetary policy. If you think that you can avoid that — you’re living in the world that was 150 years ago, right? We have an economy in which money is not just green pieces of paper with faces of dead presidents on them. Money is a result of a financial system that includes a variety of assets. We’re not sure where the line between money and non-money is. It is kind of a continuum. And look, history tells us that in fact a complete and unmanaged economy is subject to extreme volatility, subject to extreme downturns.”
The two debated on other topic areas, including monetary policy and the role of the Federal Reserve. Paul denied that he wanted to completely abolish the agency, but insisted that he would wind its role down.
Krugman on the other hand has been on something of a pro-inflationary policy push in recent weeks, including in an appearance on ABC’s “This Week” on Sunday. Krugman’s argument was that inflation may be a means to rescue the U.S. economy from its “depression.”
Paul said that government debt was the biggest issue facing the American economy. But Krugman said that in an economic downturn government spending should not be a guiding concern.