Krugman- The Con Goes On

[Jim Lane]

13. Unfortunately, Dean appears to be buying into the deficit hysteria to at least some extent.

He says the fiscal cliff isn't really all that bad because it will effect significant deficit reduction. That's the very reason it is bad. The standard Keynesian view is that the combination of tax increases and spending cuts will reduce aggregate demand and therefore either slow the already-tepid recovery or, even worse, push us back into recession.

Of course, Dean is right that going over the cliff would be better than some of the alternatives that are being bruited about. Nevertheless, it's a fundamental error to evaluate all the options -- the cliff and various anti-cliff deals -- solely or even primarily from the point of view of deficit reduction.