September 19, 2001
What to Do
By PAUL KRUGMAN
s everything different now? Yes and no. Last week's atrocity has shaken us and realigned our priorities. But many things remain the same. Among them is the basic quandary of U.S. economic policy, which has by no means gone away. It has simply become more fraught.
And if our leaders ignore that quandary — or worse yet, if they seem in retrospect to have taken political advantage of our national trauma — we will pay a large price, not only economically but in terms of national unity.
The terrorist attack has temporarily suspended the budget debate that dominated politics only 10 days ago. Nobody now thinks that we should worry about balancing the non-Social Security budget this year or next.
But the real concern in the days before the attack wasn't this year's or next year's budget. It was the truth — which had finally become almost impossible to deny, though some tried — that the tax cut had wreaked havoc with our long-run fiscal prospects. It was becoming clear that we could not pay for essential government programs and simultaneously build up the financial reserves needed to pay benefits to future retirees.
And the attack has not changed that truth. Indeed, the long-run fiscal prospect now looks far worse than before — a point not missed by bond markets, which have driven up long-run interest rates sharply since the attack. War, whatever form it takes, is a