Paul Krugman: Ben Bernanke, Hippie

Will Ben Bernanke help to end "the elite obsession with deficits"?:

Ben Bernanke, Hippie, by Paul Krugman, Commentary, NY Times: We’re just a few weeks away from a milestone...: the start of the Iraq war. What I remember from that time is the utter impenetrability of the elite prowar consensus. If you tried to point out that the Bush administration was obviously cooking up a bogus case for war..., that the risks and likely costs of war were huge; well, you were dismissed as ignorant and irresponsible. ...

And,... remarkably, a very similar story has played out over the past three years, this time about economic policy. Back then, all the important people decided that an unrelated war was an appropriate response to a terrorist attack; three years ago, they all decided that fiscal austerity was the appropriate response to an economic crisis caused by runaway bankers, with the supposedly imminent danger from budget deficits playing the role once played by Saddam’s alleged weapons of mass destruction.

Now, as then, this consensus has seemed impenetrable to counterarguments, no matter how well grounded in evidence. And now, as then, leaders of the consensus continue to be regarded as credible even though they’ve been wrong about everything..., while critics of the consensus are regarded as foolish hippies even though all their predictions — about interest rates, about inflation, about the dire effects of austerity — have come true.

So here’s my question: Will it make any difference that Ben Bernanke has now joined the ranks of the hippies?

Earlier this week, Mr. Bernanke ... spoke more clearly and forcefully on fiscal policy than ever before... First of all, he pointed out that the budget picture just isn’t very scary... He then argued that given the state of the economy, we’re currently spending too little, not too much... Finally, he suggested that austerity in a depressed economy may well be self-defeating...

Regular readers may find these propositions familiar, since they’re pretty much what I and other progressive economists have been saying all along. But we’re irresponsible hippies. Is Ben Bernanke? (Well, he has a beard.)

The point is not that Mr. Bernanke is an unimpeachable source of wisdom..., the point is that Mr. Bernanke’s apostasy may help undermine the argument from authority — nobody who matters disagrees! — that has made the elite obsession with deficits so hard to dislodge.

And an end to deficit obsession can’t come a moment too soon. ... A misguided elite consensus has led us into an economic quagmire, and it’s time for us to get out.