By Simon Johnson
The president should nominate Paul Krugman to replace Peter Orszag as director of the Office of Management and Budget (OMB). (Orszag resignation details are here.)
We have previously reviewed Krugman’s outstanding qualifications for this (or any other top level) job (link to details). The main reason Krugman himself has been reluctant in the past relates to a potentially difficult Senate confirmation hearing – for example, if Krugman had been put forward to replace Ben Bernanke.
But for the OMB position, the dynamic of a hearing would be terrific for the president’s specific agenda and broader messages. Krugman, of course, is the leading advocate for continued (or increased) fiscal stimulus. This is exactly President Obama’s message to the G20 this weekend.
Plus, when Republicans push back against Krugman on this issue, he will let them have it full blast on fiscal policy during the Bush administration. Krugman has, again and again, been an outspoken critic of the Bush era fiscal policy. He has precise chapter and verse on where the Bush team went off the deep fiscal edge.
Krugman also stands for responsible medium-term fiscal policy – he wrote the original definitive work, after all, on balance of payments crises. But the point is not to engage in precipitate and panicky fiscal austerity (as announced in the UK today), but rather to put the overall debt onto a sustainable path. It is very hard to do that when the people claiming the represent “fiscal prudence” are actually the ones who created this massive mess in the first place. Krugman can set the public record straight on this – it would be great television and very good economics.
This is exactly what the debate on our current deficit and future debt path needs. The Obama administration lost the narrative on this point also (as well as on banking and much more). Paul Krugman can get them back on track.