This week New York Times published two great columns from Nobel prize winning economist Paul Krugman. The first column deals with the impact the recession has had on Spain. Spain has developed a massive amount of debt, despite having budget surpluses in 2007, due to the economic recession. Krugman argues that the change to the euro is largely responsible for this mess. The following is an excerpt:
And there’s not much that Spain’s government can do to make things better. The nation’s core economic problem is that costs and prices have gotten out of line with those in the rest of Europe. If Spain still had its old currency, the peseta, it could remedy that problem quickly through devaluation — by, say, reducing the value of a peseta by 20 percent against other European currencies. But Spain no longer has its own money, which means that it can regain competitiveness only through a slow, grinding process of deflation.
The second column by Krugman concerns the soaring health insurance premiums Californians are facing. These premiums are rising because too many healthy people have decided to not buy health insurance. This dilutes the risk pool and forces insurers to raise premiums. Krugman argues that the only way to stop these health insurance premiums from rising is to pass comprehensive healthcare reform. The following is an excerpt:
But the main point is this: California’s death spiral is a reminder that our health care system is unraveling, and that inaction isn’t an option. Congress and the president need to make reform happen — now.