US a banana republic?
Paul Krugman was interviewed by Reuters earlier this week. He explicitly compared the US to a banana republic [via Dave Farber's IP list]:
Krugman... said he was concerned that Bush's electoral victory over Sen. John Kerry earlier this month would only reinforce the administration's unwillingness to listen to dissenting opinions.
That, in turn, could spell serious trouble for the U.S. economy, which under Bush's first term was plagued by soaring deficits, waning investor confidence and anemic job creation.
"This is a group of people who don't believe that any of the rules really apply, said Krugman. "They are utterly irresponsible."...
In the meantime, however, he worries the Bush administration's fiscal policies are going to push the world's largest economy into a rut.
The most immediate worry for Krugman is that Bush will simultaneously push through more tax cuts and try to privatize social security, ignoring a chorus of economic thinkers who caution against such measures.
"If you go back and you look at the sources of the blow-up of Argentine debt during the 1990s, one little-appreciated thing is that social security privatization was a important source of that expansion of debt," said Krugman.
In 2001, Argentina finally defaulted on an estimated $100 billion in debt, the largest such event in modern economic history.
"So if you ask the question do we look like Argentina, the answer is a whole lot more than anyone is quite willing to admit at this point. We've become a banana republic."
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