Krugman, who must have been reading this column, pointed out that Ireland was in such a bind that it "is being forced to raise taxes and slash government spending in the face of an economic slump -- policies that will further deepen the slump."
Which is exactly the dilemma we were talking about on this page a few weeks ago. As I said then, we're doing it not because we're stupid, but because we have no other option. The cutbacks are being dictated by the international lenders who are becoming less willing to give us billions and billions to blow on current spending.
Which is why it is so important for us to cut day to day state spending here and get it back to a level that starts to match our tax revenues. It's okay for us to borrow to spend on capital projects that create employment and improve the country's infrastructure, which is the core of the Obama plan in the U.S., although Krugman is not too happy with him either. But our problem is that almost all our borrowing is going into the day to day stuff.
Critics of the cutbacks that are necessary here say that this would mean slashing spending on hospitals and schools, for example, hitting the sick and the young. But that ignores the huge savings that can be made in the enormous pay bill for state workers, and all the savings that can be made by cutting back on the number of the extended and additional state and semi-state agencies and programs that mushroomed into life during the boom and which we cannot pay for now.
And then there's the Houston comparison and all the savings that could bring. As they used to say, Houston, we've got a problem.