Too busy being human this week for a regular interview. But I recently had a live conversation with the extraordinary Heather Cox Richardson, which I’m reposting from my YouTube channel. (Working on plans to make that channel a supplemental communication medium.) I’ve also provided a transcript, for those (like me) who don’t have time to listen to everything we’d like.

TRANSCRIPT

HCR I want to welcome everybody for being here today where I have the extraordinary opportunity to talk to Dr. Paul Krugman which is an incredible honor. Thank you so much for being here and let’s see what trouble we can get into.

PK Thanks for having me on. I mean you’re a legend in this Substack world and it’s really great to talk to you.

HCR Well, let’s start there because I was actually using you as an example the other day talking to a statistician that when you were a regular columnist for the New York Times, I didn’t read you every day in part because, you know, it it seemed so stripped down. There was so much that I felt I didn’t have access to intellectually behind your arguments. And now that you’re on Substack, you’re my I won’t say my first read of the day because I hate to privilege one person over another, but I never ever miss anything you write. I read it all. And I realized the other day I was four charts deep in something. And it was kind of a light bulb moment for me where I sat there and thought this medium is one that permits really great minds to have the space to do what they couldn’t do in traditional media. Have you felt that it’s different for you writing on Substack?

PK Oh, it’s enormously different. I mean now there’s a peculiar thing which was that economics blogging had a golden age kind of around 2010 to 2013 aftermath of the financial crisis and I was maintaining a blog as well as writing the column and the blog gave me a place to do the stuff I couldn’t do with 800 words and pure text. But the Times killed the blog for reasons I’ve never quite understood. And then I had really no outlet, no place to show you some of the homework. Now, I’m actually thinking of setting up some sort of dedicated super wonky feature on the Substack, which will be stuff that doesn’t go out as an email to everybody where I get to do the stuff that is really incomprehensible. But the ability to show the charts — I mean two or three charts can make all the difference in the world between what is just you know a bunch of words about economics and sort of here’s why I think or why the profession thinks the way we do. So it’s it’s been enormously liberating. And also of course not having anybody you know policing and forcing me to tonewash and all of that.

HCR Well, there is in it as well as I think you alluded to a calmness and uh hey, isn’t this cool feel. I think of it quite like literally being strapped down the way you strap down things on a kayak that that’s how the New York Times always felt that your columns there that you were you nothing could shake loose whereas in the in your Substack you’re much more like hey come on let’s take a look at this and you just feel like you’re inviting readers along for the ride. The reason that interested me and I was talking to it about a statistician who does something fairly similar and but let me tell you I’m virtually innumerate. So the fact that I was talking to a statistician says something right there. It feels to me like we are getting the return of true public intellectuals who are operating at a general level and then really celebrating knowledge as opposed to I’m going to tell you how things are and getting more into hey I love this stuff and I’ll explain it to you if you want to come along for the ride. And that’s what’s got me reading you every day.

PK Well thanks, I mean I read you religiously every morning. I know an awful lot of people who start their day with you. And again, it’s kind of the ability to spread out a bit, the ability to say not that here’s focused 800 words and we try not to offend anybody too much and we also, you know, it’s at some level don’t fully respect our readers because we don’t think that they have the capacity to take on some of the more sophisticated arguments. It’s great to get away from that. Now, discipline is necessary. God knows. I mean, I’ve actually written about this. You know, my wife is my editor and it really helps to have that first draft which tends to have too many charts and and too much everything and have her saying, you know, you’ll lose everybody there. But it is important. We’ll see how this ends. I mean, we’re worried. The word of the year like two years ago was Corey Doctorow’s “enshittification,” and we wonder what will happen to Substack as it grows and does it eventually start turning into Facebook 2.0 but for now it’s a great, tremendous communications medium.

HCR Yeah. Well, tools change over time for sure, but but let’s go then into the actual material because again, one of the things I saw right away when you started writing on Substack was your extraordinary growth um right out of the box and that I think reflects something about your discipline and about the way you approach your discipline — meaning the discipline of economics not your work discipline — and that is that you really are out there in public as I say quite calmly and with a sense of humor sort of saying, “Hey, listen. The kind of economics that I champion actually works.” And let’s get a little bit into that in this moment because after 40 to 50 years of supply side economics and the idea that what we really want to do is cut regulations and cut taxes, it feels like we’re seeing a return to the idea that in fact we should make investments in public infrastructure and we should make sure people carry their weight and we should make sure people have access to resources. Can you walk us through that a little bit?

PK Yeah. So I think of it kind of at a meta grand level as question of incentives versus resources. I mean ever since Reagan it’s been all about we have to give people incentives. We have to give rich people low tax rates so that they will go out there and do whatever wonderful things rich people do. And we have to make life tough for the poor so that they have an incentive to not be poor or whatever. Look, and incentives matter. There was a point when some people in in Sweden faced a 101% marginal tax rate — the more you earned the less you got and that was clearly too high even for a center-left guy like me. So incentives matter but they matter a lot less than legend would have it. And then there’s resources and there’s all kinds of levels of resource. I mean, one of the things that we really know because we happen to have kind of natural experiments from the roll out of public programs like Medicare or Medicaid and food stamps. We talk about what are the incentives for people to pull themselves up by their bootstraps. What about having the resources to make sure that their children have adequate healthcare and nutrition? And it turns out that there’s solid evidence that the returns just in terms of GDP, the returns of actually doing that are enormous. We spend way too little on children and if we spent more, we would get it all back and then some because it would be for the benefit of the whole economy. So that’s one thing. You can think of this as investing in human capital. I hate that phrase you know we we are not machines but healthcare nutrition but also steel and mortar are really really important. I mean America became America among other things because we were willing, we led the way in public education and we led the way in things like canals and railroads all of which was done by the public.

HCR I’m going to chase that down. I do want to tell you I promised a class of students once that the day would come that I would write a history of the transatlantic cable because that transatlantic cable becomes huge in the 1860s in terms of both domestic and foreign politics and the stories because it was such a big deal. The stories are great. So maybe someday you and I can collaborate at least on a letter about the transatlantic cable. I just I can’t tell you all the great stories about that, but what you’re saying here um is fascinating and I want to grab that material, but I also want to start with why don’t people get that? Why is there still this legend that somehow cutting taxes and cutting regulation as the Republicans have tended to do now for almost 50 years is the right way to run a country when in fact we can see, those of us who are older can see, our infrastructure degrading, really rigid class lines forming, trillions of dollars moving from the bottom 90% up to the top 1% why does that still persist?

PK OK, this is one of those things where the cynical explanation in terms of monetary interest holds. This is Upton Sinclair. “It’s difficult to get a man to understand something when his salary depends on his not understanding it.” Look at the budget that the Heritage Foundation has to promote this stuff compared with the budget that say the Economic Policy Institute, which is a left-leaning but scrupulously honest (which Heritage is very much not) think tank has. I mean there’s a lot of money that goes into promoting this stuff. There’s media organizations. If you think about who gets the benefit from this ideology that explains a lot of what goes on. Also if I can say, if there’s a public investment that goes bad then we have months and months of congressional hearings and scandal. I don’t know if people remember Solyndra, you know, the solar energy misfire which was maybe $500 million. That’s actually a drop in the bucket, you know, in the US economy. And Mark Zuckerberg has just given up on the metaverse. And it appears that Meta, the company formerly known as Facebook, just lit 77 billion on fire with this completely dumb concept. And we said, well, okay, you know, people make investment mistakes, but if the government had wasted $77 billion, we would never hear the end of it.

HCR Well, except in in in this moment, and maybe this speaks to what I was asking, in fact, the government is setting money on fire right and left, and it’s getting virtually no coverage at all.

PK Um, yeah, it’s setting money on fire, but in ways that that are sort of handing money over to private individuals as opposed to building stuff, right? Now, we haven’t actually given Argentina 40 billion, but we essentially put $40 billion of taxpayer money on the line and well, yeah, it’s not getting as many headlines as it should because, you know, considering all the other things we’re neglecting, considering the disaster relief that we’re not supplying to throw that money at a country in which really seriously ­— I’m a one world kind of guy, but we do not have a strategic interest in Argentina.

HCR So, let’s go into where you were, the argument that it makes sense for this country to invest in human capital, again, a phrase you don’t like, and also in infrastructure. And one of the places I’d like to start was with your emphasis there on children because one of the things that the governor of New Mexico has recently done was well, you can why don’t you walk us through this?

PK Well, I haven’t done enough homework on it, but we are getting basically universal pre-K and child care in New Mexico as I understand it.

HCR Right. And when she did that for children three and up, which got a huge amount of push back because New Mexico is one of the poorer states in the country, it lifted 120,000 children out of poverty.

PK Yeah, that’s one of those things: there are multiple reasons to invest in children and the most important is that’s a really critical stage. So making sure that they have adequate resources which you can’t do without making sure that their parents also have adequate resources but also children are cheap. I mean when we talk about health care I mean, people my age are really expensive. I’m okay but taking care of Americans in their 70s and 80s is extremely expensive and yet somehow or other we have a government program, Medicare which bears almost all of that expense. Um but children — a few thousand dollars spent on a child can make literally life-saving difference in their lives and then huge impact on who they are as adults. Investing in children is both, you know, the right thing to do and also an extremely cost-effective investment because taking care of kids is so cheap.

HCR So if it makes economic sense to be investing in children and investing in infrastructure, which we haven’t hit as much as I would like to, and maybe you can talk a little bit about Eisenhower if you would, but if that’s the case, one of the things that it seems to me fits into your um discussion of incentives and resources. You’ve also got the issue of ideology and perhaps morality because there are a number of places in which it makes sense for the United States to be investing that the radical right says we’re not going to do that because that’s rewarding behavior that we object to morally. Um you want to comment on that because I’m going somewhere with it.

PK Okay. So, first of all, most of the moral issues are fictions, right? There’s nobody in America sloughing off and living off welfare. That hasn’t been a possibility in America for decades now. It was never nearly as big a problem as people thought, but now that kind of welfare doesn’t exist. Everything we have now is is way short of allowing people to just be lazy. But the myth persists and just this general notion that why should I be taxed to take care of other people? Am I my brother’s keeper is a very strong one in America.

And maybe I’ll take this in another direction. Think about how America has a history of really ambitious grand public infrastructure projects. I mean 200 years ago the Eerie Canal was completed. I was doing the numbers: the Erie Canal was about $7 million which doesn’t sound like much but you have to bear in mind you know that was dollars then and it turns out to have been on the order of 1% of US GDP. So it was a big infrastructure project, roughly comparable to the interstate highway system, roughly comparable to Biden’s attempted green energy policies. We had the Panama Canal which wasn’t in the United States but was clearly for us. We had the interstate highway system. The thing that strikes me when I look at that is nobody on any of those occasions seems to have said oh is this an appropriate role for government or if we’re going to do this surely it must be a public private partnership. It must be a private corporation. Somehow or other the um the capitalists have to be in on this and it must end up in private ownership. We just went ahead and built the stuff and that seems to be something we can’t do anymore.

HCR Well, can’t, that’s an important word right there because in fact when Abraham Lincoln is trying to figure out what the role of the government is. Um because of course actually the Erie Canal was a state project rather than a federal project because of the opposition to it. But one of the things it did, of course, is without that Erie Canal connecting the Midwest to the Atlantic through the United States through New York is essentially the middle of the country would almost certainly have broken off and joined Canada because it was using the St. Lawrence River to get to the Atlantic.

So the Erie Canal gave us New York, gave us New York City. It also retained the middle of the country which probably would have gone all the way down to Louisiana and created an entirely different southern uh I’m sorry western part of the country. It also gave us all kinds of new technology because when they started that Erie canal they literally used shovels and they had to figure out how to use new scrapers and all kinds of things to build the thing. But Abraham Lincoln takes a look at the role of government because it’s a real question at the time when the elite southern enslavers are saying the government can do nothing but protect property. And what he says after watching his own town be destroyed because they couldn’t dredge the Sangaman River is he says you know the government’s role is to do for people what they cannot do for themselves and need to do to develop the economy and live uh a productive life. And that’s something that Americans have embraced right up until the 1980s. And that’s why I’m interested in ideology.

PK Yeah. Well, this question of why that great ideological shift. Um, and I, you know, I am not a historian. But there were a couple of things that happened. One was that, uh, we do need to talk, as with everything in America, race is an issue. Before the Civil Rights Act the Southern United States which was poor, which benefited a lot from public investments —Tennessee Valley Authority, the Army Corps of Engineers — was part of the coalition in favor of public investments as long as they didn’t help black people. With the Civil Rights Act, the South switches sides and so all of a sudden a key part of the New Deal coalition becomes anti-government. So, that’s one thing. Also, the economic troubles of the 70s, the stagflation of the 70s were tremendously mythologized. I mean the 70s were a bad time but actually the aftermath of the great financial crisis was much worse. But the 70s became an object lesson and it was supposed to be that the government was too big and we need we need more conservative ideology. And no doubt other forces out there but what really is remarkable is that the right got smarter. I mean they invested in intellectual infrastructure. This whole network of right-wing, as I say, Potemkin think tanks. They look like think tanks but they’re actually propaganda arms but did a lot to disseminate this ideology.

HCR Oh that’s really interesting thinking of them as an infrastructure system which was of course what the Powell memo set out in 1971 the need for that kind of infrastructure. Can we go back a second to what you just said about the 1970s about which there is still an enormous amount of mythology being not nearly as bad as the aftermath of the financial crisis? Can you walk us through that? Cuz honestly, Dr. Kugman, I’ve never really heard anybody lay that out. Although, of course, I’m very aware of the fact that the Reagan uh rhetoric did not match the reality of what the Carter White House was doing.

PK Yeah. So, you know, when when Reagan asked, you know, are you better off now than you were four years ago, based upon real median family income, the actual answer was yes. You know, the ‘70s was certainly troubled and it certainly was very disorienting to experience the inflation and we did have a very nasty recession in 1975 and then another very nasty recession at the beginning of the 80s basically to wring inflation out of the system. But if you actually look at US economic performance in the 70s, it wasn’t that terrible. It wasn’t great, but it didn’t get actually didn’t get all that much better until the Clinton years. So there’s really the 70s as perceived — in a way the right got to write the history books and sorry, but you know international economics is my thing and one of the things that always has driven me crazy is that in Germany everybody remembers the hyperinflation of 1923 and nobody remembers the extremely terrible German depression of 1930-31 which came about because the German government at the time was obsessed with maintaining the gold standard and they ended up delivering the country over to you know who. So history as remembered can be quite different from what you find if you actually go and look at it. I shouldn’t be telling you that, but ..

HCR Well, but no, but this is exactly I mean, interestingly enough, um you and I have sort of gotten back full circle to where we started, which is how you correct the record in real time when there is, as you say, an infrastructure designed to make sure that record is so distorted that people vote away their own interests. And the overlap there between economics and politics is almost a circle, right? That we know that people care deeply about their economic success or or prosperity or at least their ability to achieve those things. And yet they we also know that certainly through institutions like cable news they are pushed toward ideological positions that actually undermine that economic system. So how do you foresee or do you think about how we course correct in real time now? Um, especially in a time that is so unsettled economically in this country because of Trump and his lackeys putting in place a system that’s tearing up the economy that they went into office enjoying.

PK Yeah. I mean, what I wrote the other day was, you know, Trump would be in way better shape politically if he had just not done much. If he had just continued Biden policies and made a few cosmetic changes and talked about what a great job he was doing instead of imposing massive tariffs and gutting the government with DOGE and all of the things he’s done, probably inflation would be still on a downward trajectory. Probably the job market would be looking substantially better. We did have a burst of inflation in 2021 to 2023 which was a global phenomenon, but you know people blame Biden, and it would be receding into the past now and people would have gotten accustomed to prices around 20 to 25% higher than they were but okay that’s the new normal. Instead Trump just keeps on creating chaos.

On getting the story out. I have to say one of the great frustrations of having turned into — you know I spent the first 25 years of my professional life writing incomprehensible papers for 3,000 readers full of Greek letters and funny diagrams and then got into writing for the general public. And it’s quite humbling because of the difficulty of actually getting stuff across. I mean I hope that I’m a decent writer for an economist but there’s still — I stole the phrase from other people — but zombie ideas out there.

By the way it’s both left and right. I mean it’s the number of people that I encountered who are sure that we’ve had an economic recovery since the pandemic that only benefited the rich. Um, and I’m getting that on, you know, uh, from sort of a left side of my commenters. Which is just not true. The Biden years were actually a very good period for low paid workers in America. But all you can do is keep on hacking away at that coal face. I mean, there are no good, no easy answers.

HCR That’s a great it’s a great economic image, hacking away at the coalface.

PK Um, nobody does that any more, by the way. We blow the tops off mountains instead.

HCR But anyway, so the reason I ask that is in part because of, as you say, the zombie ideas that Democrats are bad for the economy, which by the way, I would attribute to the 1860s. You know, the immediate aftermath of the Civil War when the Democrats, especially those in the North, wanted to change the terms of the bonds that the US had issued during the Civil War. And you know, the Republicans jumped all over that and said they’re going to destroy our finances and so on. It’s one of the reasons that’s written into the reconstruction amendments. I mean, it just hasn’t been true uh for the entire 20th century. But the reason I point to those kinds of ideas is because one of the things that I wonder about in this moment that we’re in where all economic bets are off is the degree to which we might be looking like the late uh 1920s when you know in 1928 uh Herbert Hoover romped to a landslide victory and anybody who was looking at the economy and at the country was like the Republicans are going to be in charge forever. And by 32, the entire country has turned on a dime and said, “No, we need investment. We need protection from employers. We need a social safety net.” And that brief burst set the terms of the American economy for the next 75 years.

PK Yeah. And one of the things that when you do look at this, I mean, the history of the New Deal, um, you know, really full-on New Deal policies were not in effect for very long. um and FDR was able to do kind of a second round during the war and the positive shadow of those policies lasted a long time. I mean I grew up in a fairly middle class country. I had always assumed I think that that that we had gradually evolved to that point that we were you know very unequal in the Gilded Age and gradually became a relatively middle class society and that’s not true. The middle class society with relatively decent wages for ordinary workers and relatively high taxes on the rich all happened during about five years uh during World War II and then persisted for about another 30 years. But it was one of those transformative moments. I was kind of hoping that after 2008 that we could have another one but some combination of the oburacy of our political system and if I might say the excessive caution of Barack Obama meant that we kind of missed that moment.

HCR Well, I wonder about that caution now because there are many people for whom, you know, having watched Trump burn down many things that they care deeply about. They’re saying, you know, we why not take out uh, you know, a new system for a spin? And one of the things that institutionalists like me talk about is remembering that we do have those institutions on the books. We just are not honoring them any longer.

PK That’s right. I will offer a positive thought: Actually I was wrong. I thought that between the partisanship of people’s beliefs about the economy and the fact that the inflation spurt was receding into the past that Trump would get kind of a extended honeymoon on economic policy, that people would believe that he was making things better even though he wasn’t. But that honeymoon lasted, you know, like two weeks. It’s just astonishing how quickly people, particularly, you know, a lot of the people who voted in 2024, a lot of Latino voters who basically thought they were voting for lower grocery prices have really said um my god what did we do? And assuming that we hang on to some version of democracy that’s an opportunity.

HCR It is. I can’t tell you how much I’ve enjoyed this and I would love to do it more. Um I I think that one of the things that that I like to do is to demystify politics and I think you are demystifying economics in really important ways. But the thing that jumps out to me after this conversation is uh not so much the 1920s as the 1890s when after the 1880s when there was real power behind the sort of vision that became the robber barons . In about 1889 a number of Americans especially those in the western plains sort of woke up and said you know we got to explain to people how railroad rebates work how taxes work how tariffs work and they made that information easily available to people through newspapers that now don’t exist. I’m sorry to say they were so ephemeral we don’t even have copies of them. But what they did is they informed a lot of Americans about the way the economy worked and therefore about how society worked. And that seems to me to be an important ideological and now as you say infrastructure development in our country that you and I hope I am very much a part of which feels quite old and new at the same time.

PK Yeah, I mean getting the word out there can be enormously important. There’s a reason why samizdat was so important in the late Soviet Union and so is just getting a truth that if you like the oligarchs don’t want you to hear out there. Um there’s no guarantee that it works but it’s the best chance we have.

HCR Well, with that I’m going to let you go. We went a minute over, I guess. So, uh, thank you so much for being here. I hope you have a great holiday season and, um, and I hope to do this again soon. Let’s do it again.

PK Thank you so much. Take care.