The Nightly Business Report


PAUL KRUGMAN (Perspective): Both sides in the debate over NAFTA are playing fast and loose with the facts. NAFTA's opponents are much more dishonest than its supporters. The opponents are telling malicious whoppers, while the supporters are only telling little white lies. Still, neither side has been willing to face the uncomfortable truth, which is that NAFTA will have virtually no effect on the U.S. economy, good or bad. How many people know that the average U.S. tariff on imports from Mexico is already only 4 percent? In other words, any U.S. firm that wants to move production to Mexico can already do so while paying what amounts to only a nominal fee to ship its output home. Do you really believe that a 4 percent tariff is all that stands between us and the great sucking sound that Ross Perot tells us we will hear as all our jobs drain away? On the other hand, claims that NAFTA will create hundreds of thousands of jobs are also far-fetched. Mexico's economy is only 1/20 as big as ours and its markets are already pretty open to our products. Sure, NAFTA will help our exports, but don't expect anything dramatic. All serious studies of the effects of NAFTA, by which I mean studies whose authors weren't paid to come up with predetermined conclusions, find that the benefits will be larger than the costs. But these net benefits are no more than a few tenths of one percent of income, less than the U.S. economy spends on health care every week. So let's cut out the hype and see NAFTA as it really is: an agreement that will have almost no visible effect on the U.S. economy. I'm Paul Krugman.

October 4, 1993

PAUL KRUGMAN, PROFESSOR OF ECONOMICS, MIT: The rules of the game have certainly changed a lot. Most of what it comes down to is the first, those 25 good years after World War II was a very broad based prosperity. Everybody's income doubled, basically, whatever you were doing, whatever your job was. The last 20 years it's been enormous prosperity for a small number of people, middling prosperity for a slightly larger number and a lot of stagnation or actual decline in incomes. That's new.

October 29, 1996

PAUL KRUGMAN, ECONOMICS PROFESSOR, MIT: There's probably not very much that the government can do to change the wages that people are being paid, not very much we can do stop people from being laid off from one job and finding another job that's not as good. The government can do a lot to make sure that the worker who is laid off in this changing economy doesn't lose his health care. And that's the kind of thing you should be thinking about. What can we do to provide a little bit of a cushion for people. Not what can we do to prevent the economy from delivering all of these difficult results.

October 31, 1996

PAUL KRUGMAN, COMMENTARY: Last week George W. Bush's hand picked commission on the form of Social Security issued a gloomy prognosis. Social Security, it said, will be in trouble in 2016, the year when payroll tax receipts are projected to fall short of benefit payments. After all, says the commission, Social Security has no real assets. This statement is an act of grand larceny. The Social Security system has been running surpluses for many years. These surpluses helped the federal government cover its deficits in the '80s and early '90s and have since allowed the government to pay off some of its debt. In return, Social Security has accumulated a growing portfolio of government bonds. But now Mr. Bush's appointees declare that those bonds are not real assets. That's a stunning double standard. Apparently it was OK to use Social Security money to cover the deficits produced by Reagan's tax cuts, but it's not OK to repay the Social Security system for the favor. So American workers, most of whom pay more in payroll taxes than in income taxes, have been paying money for nothing. Or more accurately, their money will now be expropriated to cover tax breaks for a wealthy minority. This is an outrage and the commission should be ashamed of itself. I'm Paul Krugman.

July 23, 2001

PAUL KRUGMAN, COMMENTARY: Recently, medical researchers discovered an amazing new treatment. Someone who receives this treatment at the age of 65 will stay healthy and active for 30 years. But it's expensive. Most people couldn't afford to pay for it themselves. And to provide it to every American would cost about five percent of GDP. Should we cover the treatment under Medicare, which will require higher taxes? Or should we leave the treatment uncovered, which will mean that only the affluent can afford a long and healthy life? OK, I made all of that up. There isn't a treatment like that, not yet. But my little fable gets at the essence of the medical dilemma that our society will face over the next few decades. Never mind Social Security. That's a fake crisis manufactured by ideologues. But Medicare faces a real crisis. Because of new medical technologies, experts expect the cost of Medicare to rise by about five percent of GDP over the next 50 years. If you think there are easy answers to this trend, you aren't paying attention. We're talking about a lot of money, enough to give even a big spending liberal pause. On the other hand, a knee jerk free market response misses the point. Are we really willing to let money be the difference between life and death? The future of medical care ought to be the great budget and political issue of our time. I wish I believed that any of our politicians will address that issue honestly. I'm Paul Krugman.

August 20, 2001

PAUL KRUGMAN, COMMENTARY: Last week I did something I've never done before: I took a train from New Jersey to Boston. I wasn't afraid to fly, but the extra hour or so I would have had to spend at the airport because of the newer security measures helped tip the balance. Should it have required an atrocity to induce me to take the train? During the 1990s, most things in America got better: incomes increased, jobs became more plentiful, crime declined. But transportation definitely got worse. The time lost by the average American to traffic jams tripled between 1982 and 1999. And thanks largely to congestion, air travel delays also got much worse. Road and air congestion are costs we impose on each other. When I fly or drive, I make it more difficult for you to do the same. Yet we have no incentive to take those costs into account. No doubt for many purposes, cars and planes are the only realistic transportation methods. But in some cases there are alternatives, and if we offered the right incentives, people might take those alternatives. So in a way, it's a shame that the immediate response to the crisis has been to subsidize the airlines. I understand why it may have been necessary-the example of Swiss Air shows that letting the airlines go bankrupt might have been disruptive indeed. But maybe in the near future we can step back and ask, literally, whether air and car travel is really the way we want to go. I'm Paul Krugman.

October 8, 2001

PAUL KRUGMAN, COMMENTARY: Something good recently happened in my home state of New Jersey, about 30 years too late. A new rail station finally opened up at Newark Airport. Finally it's possible for arriving travelers to get into New York, or, for that matter, for me to go to Princeton, without having to face the increasingly nightmarish traffic on New Jersey's highways. But even as the new airport stop opened, Congress announced that Amtrak is in trouble because of its failing to achieve financial self- sufficiency. And New Jersey Transit, which is desperately overcrowded, lacks the money to expand service. There's something wrong with this picture. Why, exactly, do we demand that passenger rail pay its way when we heavily subsidize road and air travel? In the Northeast Corridor, anyone who takes the train instead of driving does his fellow citizens a substantial favor. Each additional car on the roads contributes to traffic delays. At a conservative estimate, your decision to drive from Central New Jersey to Manhattan imposes $20 or more in lost time and increased gasoline consumption by other commuters. And that's not even considering the impact on air pollution, or on our dangerous dependence on imported oil. We like to think of America as the land of great open spaces, but my part of the country is as crowded as any European nation. It's time that we learn something from Europe and get ourselves a quality rail system. I'm Paul Krugman.

November 19, 2001

PAUL KRUGMAN, COMMENTARY: So now Europe has a single currency. Should Americans care? At first, the euro won't make much of a difference to you and me. Vacations in Europe will be a bit easier to arrange, but they will also be a bit more expensive because the arrival of euro notes will give the currency a boost. It will take years, maybe decades, before the impact of the euro really hits home. But then it will rock your world. The euro, you see, isn't mainly about economics. It's a political ploy. If it works, and it might, Europe will finally play the political role it deserves on the world stage. For Europe's economy is as big as America's; Europe's technological sophistication is a match for our own; Europe's population is by and large better-educated. What that means is that soon, for the first time since World War II, we will face a political and economic equal - not an enemy, but another power that offers an alternative model of how a modern society can and should be run. Europe shares many of our values, including a deep commitment to democracy. But it also disagrees with us about some things, including the appropriate level of taxes and social benefits. Until now, we haven't had to take those differences seriously; we were a superpower and they weren't. Now that may change, and I think that's all to the good. I love big, multicultural democracies; I love them so much I want to see two of them, so we can learn from each other. Viva la difference! I'm Paul Krugman.

January 7, 2002

Originally broadcast, 3.12.99