Posted on 01/11/2013 8:21:14 AM PST by blam
PAUL KRUGMAN: The Deficit Is Basically Solved
Walter Hickey
Jan. 10, 2013, 4:00 PM
Many people think that fixing the deficit is a painful process that involves deep cuts to crucial programs. Some think the process is too hard, and it's not worth trying yet.
That's not correct, according to a chart from from the Center on Budget and Policy Priorities' Richard Kogan showing just how far the United States has come in the past two years.
We've talked before about how the painless and most effective solution to the deficit is additional growth in GDP. As the recovery progresses and GDP rises, the government will get more revenue from increased productivity. We've also pointed out that — fundamentally — we don't have a spending problem.
CBPP
Paul Krugman made the point that the chart shows how far we've come on the deficit and how easy it will be to solve moving forward.
Richard Kogan points out that the debt to GDP is very important indicator, and can't rise forever. "If it did," he says, "that would shrink the amount of national saving available for private investment, ultimately impairing productivity growth and, in turn, living standards."
In short, seeing what we're seeing is a good thing.
The chart shows the stabilization of the debt to GDP ratio of the United States.
As late as 2011, the U.S. was bound for an unmitigated increase in debt to GDP ratio. Thanks to two bills, the deficit is close to coming under control: The Budget Control Act of 2011 (BCA), which came from the debt ceiling negotiations and mandates $1.2 trillion in cuts. The American Taxpayer Relief Act (ATRA), which was signed two weeks ago to avert the fiscal cliff and raised taxes on high earners.
(snip)
(Excerpt) Read more at businessinsider.com ...
Once you join a cult your thinking tends to get very muddled and confused.
Evidently the GDP ratio grows at astronomical rates until 2014 when a miracle happens and we stop spending like drunken monkeys or the economy starts booming. Gee, What happens in 2014 that causes that to happen? Asteroid? Earthquake? US wins the worldwide lottery? ... (I didn’t read the article at the link but I can still laugh at it)
The article does not mention the implied growth rate in GDP in order for it to be true. My guess is that it’s in the 3%+ range and we are nowhere near that. The CBO estimates have been wildly wrong are far more positive than reality. I do forecasting for a living and it is ALL ABOUT THE ASSUMPTIONS.
... and call anyone who points out the discrepancy a backwards-thinking racist bigot.
The final arrow in the quiver is monetizing the debt. It will come to that. It is what they are already doing to one degree or another and have been doing for a long time. However, this arrow is the one that will lead to hyperinflation. It is not a matter of if. It is a matter of when.
And when it happens, the next phase will be world war.
The graph is misleading as it seems to show a large drop in the budget deficit but in reality it only goes from 82 to 72% of GDP. Still an unsustainable level of spending. It also doesnt show what happens to the National Debt which continues to rise.
The racist/bigot moniker is only applied after the Carneyesque spokesperson declares the questioner isn’t intelligent enough to understand mathematical equations on Johnny’s level.
Agree. I find it interesting that they assume that the $1,2 trillion in BCA cuts will actually be made. They have now been postponed for two months and I would wager that Congress will use some sleight of hand accounting tricks to postpone and deflect the cuts so as to continue to fund defense and the welfare state.
And they assume that raising the taxes on the wealthy under the ATRA will bring in more revenue and not hurt GDP growth. Usually when you tax something more, you get less of it.
And to really get things stablized they are suggesting another $1.4 trillion in combined tax hikes and spending cuts. With the already slow growth in GDP, high unemployment levels and household income declining by close to 10%, any projections on the growth of our GDP are clearly suspect.
The first real indicator will be whether the mandated BCA cuts will really occur. If we can't cut $100 billion a year out of a $3.7 trillion annual budget, then we have a failure of political will to do what is necessary to get us off of this fiscal path of destruction.
And they are only considering the publicly held debt, not the $5 trillion in the various trust funds like SS, HI, federal pensions, etc.
The argument forgets one key fact, no one in the government expects to or wants to pay down the existing federal debt. The ace in the hole is the Federal Reserve. They are the never ending sleight of hand provider of money to the government. Buy the paper, credit the governments bank account and voila!, instant cash to spend. Pretty neat trick, keep borrowing from yourself and pay it back with more paper! Krugman channels Bullwinkle: "Nothing up our sleeves!". I just do not want to be around when the day of reckoning comes.
If you subtract deficit spending from GDP, GDP is contracting every year.
In other words... Forget about the problem, it will go away.
Honest to god, these libs are aliens from another planet.
Nobody will notice Krugman’s platinum coin they’re all hiding their guns
Basically the same thing that Obama told Boehner.
“We don’t have a spending problem. The deficits are caused by out-of-control health care costs....and I fixed that!”
Oh that’s great, so my family, and children and grandchildren’s families aren’t responsible for $350,000 of the Marxist democrat’s debt!!?? Did the Fed just pay off that $5+ trillion we owe to other countries and forgive the $12 trillion we owe ourselves? Garsh this is regular plop plop fizz fizz news....so why did we need to raise taxes?
So, basically this says we have the problem solved if we keep in place the BCA cuts of sequestration (which nobody wants) AND add another $1.4T in cuts over the next ten years ($140B/year).
That is probably true, but the BCA cuts were designed as a draconian penalty to motivate more carefully designed cuts. If congress can agree to replace the BCA with something better, it will certainly not be more severe cuts and they certainly won’t cut another $140B/year on top of that.
This is like saying that if we just cut spending enough we won’t have to worry about deficits. DOH!
Could we PLEASE give Paul Krugman to the Red Chinese to pay off all our debt to them?
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