Skip to comments.Paul Krugman: Yes, We Have To Fix The Deficit Eventually–But Not Now
Posted on 01/29/2013 11:12:09 AM PST by SeekAndFind
Nobel Prize-winning economist Paul Krugman has argued clearly and consistently over the past five years that U.S. government spending is critical to our economic recovery and that cutting spending now to reduce the deficit would be a disastrous mistake.
For taking this position, Krugman has been castigated by those who blame the depression on fiscal irresponsibility and runaway government spending. The way to fix the economy, those folks argue, is to immediately slash government spending, reduce the deficit, and restore "confidence" among the country's business leaders.
In the early years of the recovery, there was widespread support for the latter view. But in the past few years, as countries like the UK and Greece have tried the "austerity" remedy, it has become clear that this only compounds the problem. By reducing government spending, country's reduce employment and GDP. And by reducing employment and GDP, they also reduce tax revenue, which increases the deficit. So they have to cut more spending. And so on.
Meanwhile, the outcome that such "deficit hawks" keep worrying about--skyrocketing interest rates as our creditors conclude that our spending is out of control--has yet to materialize. We continue to be able to borrow at extraordinarily low rates of interest. And our government spending, though considerably higher than our government tax revenue (thus the budget deficit), is still relatively low as a percent of GDP when compared to that of other developed countries.
Importantly, Paul Krugman does not think we can ignore our budget deficit forever. He agrees that the so-called "entitlement" programs--especially Medicare and Medicaid--are on a growth path that will eventually cause serious problems if they are left unaddressed.
But serious problems in the future are not serious problems today.
(Excerpt) Read more at finance.yahoo.com ...
Well of course not. The deficit is only an issue when Ronald Reagan was president. Or when either of the George Bush’s were president. When a republican is president the fiscal irresponsibilty just will not stand.
But not when a democrat is president. For when a democrat is president, the problem can be delayed until...another republican is president!
The only reason that interest rates haven't skyrocketed is because the Fed is buying debt other creditors won't touch. The only thing is that they create money out of thin air to buy the debt. This, of course, is not a cause for concern in Krugmanland.
I have a neighbor who is shockingly deep in debt (Income of more than $500k a year and two years of income in debt). He finally decided to tighten his belt and cut spending - so the family is taking a six week round-the-world vacation this summer as a final celebration before they cut back. I imagine my neighbor and Krugman would get along quite well.
Sure, Obama ran the national debt from around $10 trillion to $16 trillion, and it'll be so much easier to deal with in 2017 after he's run it up to $21 or $22 trillion.
Why does anybody listen to this shithead?
RE; Why does anybody listen to this shithead?
I can think of several reasons (all bad ones):
1) He is a Princeton Economics Professor
2) he won a Nobel Prize for Economics
3) He is given a huge platform to peddle his policies by none other than the “Paper of Record” — The New York Times.
“but not now...”
No, not until a Republican is in office; then it’ll of course be absolutely urgent....