Paul Krugman, writing in the Sunday New York Times about Detroit’s bankruptcy, explains that trillion dollar pension deficits aren’t a problem because they’re not that big a deal compared to the overall economy. What Krugman fails to explain is that states can’t print money like his friends at the federal level continue to do. Krugman, Mr. Kick the Can down the road fails to address the fact that when states run trillion dollar deficits then they are on the hook for trillion dollar deficits. They can’t inflate them away– someone has to pay. It’s the union thugs and politicians that are to blame for their failure as fiduciaries but Krugman blames the mess in Detroit on market forces with this gem “So was Detroit just uniquely irresponsible? Again, no. Detroit does seem to have had especially bad governance, but for the most part the city was just an innocent victim of market forces.” Wrong again Krugman.
