An ongoing feud between Ferguson, the Harvard finance historian who writes at length about the rise and fall of empires, and Krugman, the Nobel-prize winning economist from Princeton, goes back to a fundamental disagreement between the two on how to fix a faltering economy.
To put it simply: according to Ferguson, you pull an economy out of recession by saving money; you cut services and increase taxes, thereby decreasing any deficit. According to Krugman, you use government spending to grow the GDP and get the economy moving again.
On Tuesday, Ferguson told Tom Ashbrook that Krugman's model could put the United States into a "death spiral."
The more a country borrows to finance deficit spending, Ferguson said, the greater chance it has that its lenders will increase their interest rates — especially after those lenders have watched the economy of Greece collapse, with those of Spain and Portugal becoming increasingly unstable.
"You begin to go into a tailspin in which your borrowing costs rise, and as they rise you end up having to borrow more money just to pay the interest on the money you already had," explained Ferguson.
Should that happen, Ferguson says there comes a point when the fiscal policy of the U.S. — and its overall ability to strategize as a great power — is called into question.
"It usually is a kind of harbinger of major crisis ahead — that was the case in 18th century France, Britain after World War II," Ferguson said.
Ultimately, Ferguson says his view on the soundness of deficit spending differs from Krugman's because they are scholars of different disciplines.
Krugman, he says, "as an economist and a Keynesian, is focused on this year's domestic product number and wants to see GDP growth that is strongly positive in order to get us out of recession."
Ferguson says he's taking a long, historical view to the matter. "At some point, [deficit spending's] costs begin to outweigh its benefits," Ferguson said.
Ferguson argues that to stave off economic collapse, at-risk countries need to decrease their deficits while introducing reforms that stimulate business confidence.
"Tighten and stimulate economic growth," he prescribed, "and reduced the worries people have."
This program aired on June 22, 2010. The audio for this program is not available.