Iiiiiiiiit's - Krugman Monday!

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Dwindling Deficit Disorder


By PAUL KRUGMAN

For three years and more, policy debate in Washington has been dominated by warnings about the dangers of budget deficits. A few lonely economists have tried from the beginning to point out that this fixation is all wrong, that deficit spending is actually appropriate in a depressed economy. But even though the deficit scolds have been wrong about everything so far — where are the soaring interest rates we were promised? — protests that we are having the wrong conversation have consistently fallen on deaf ears.

What’s really remarkable at this point, however, is the persistence of the deficit fixation in the face of rapidly changing facts. People still talk as if the deficit were exploding, as if the United States budget were on an unsustainable path; in fact, the deficit is falling more rapidly than it has for generations, it is already down to sustainable levels, and it is too small given the state of the economy.

Start with the raw numbers. America’s budget deficit soared after the 2008 financial crisis and the recession that went with it, as revenue plunged and spending on unemployment benefits and other safety-net programs rose. And this rise in the deficit was a good thing! Federal spending helped sustain the economy at a time when the private sector was in panicked retreat; arguably, the stabilizing role of a large government was the main reason the Great Recession didn’t turn into a full replay of the Great Depression.

But after peaking in 2009 at $1.4 trillion, the deficit began coming down. The Congressional Budget Office expects the deficit for fiscal 2013 (which began in October and is almost half over) to be $845 billion. That may still sound like a big number, but given the state of the economy it really isn’t.

Bear in mind that the budget doesn’t have to be balanced to put us on a fiscally sustainable path; all we need is a deficit small enough that debt grows more slowly than the economy. To take the classic example, America never did pay off the debt from World War II — in fact, our debt doubled in the 30 years that followed the war. But debt as a percentage of G.D.P. fell by three-quarters over the same period.

Right now, a sustainable deficit would be around $460 billion. The actual deficit is bigger than that. But according to new estimates by the budget office, half of our current deficit reflects the effects of a still-depressed economy. The “cyclically adjusted” deficit — what the deficit would be if we were near full employment — is only about $423 billion, which puts it in the sustainable range; next year the budget office expects that number to fall to just $172 billion. And that’s why budget office projections show the nation’s debt position more or less stable over the next decade.

So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.

There are, of course, longer-term fiscal issues: rising health costs and an aging population will put the budget under growing pressure over the course of the 2020s. But I have yet to see any coherent explanation of why these longer-run concerns should determine budget policy right now. And as I said, given the needs of the economy, the deficit is currently too small.

Put it this way: Smart fiscal policy involves having the government spend when the private sector won’t, supporting the economy when it is weak and reducing debt only when it is strong. Yet the cyclically adjusted deficit as a share of G.D.P. is currently about what it was in 2006, at the height of the housing boom — and it is headed down.

Yes, we’ll want to reduce deficits once the economy recovers, and there are gratifying signs that a solid recovery is finally under way. But unemployment, especially long-term unemployment, is still unacceptably high. “The boom, not the slump, is the time for austerity,” John Maynard Keynes declared many years ago. He was right — all you have to do is look at Europe to see the disastrous effects of austerity on weak economies. And this is still nothing like a boom.

Now, I’m aware that the facts about our dwindling deficit are unwelcome in many quarters. Fiscal fearmongering is a major industry inside the Beltway, especially among those looking for excuses to do what they really want, namely dismantle Medicare, Medicaid and Social Security. People whose careers are heavily invested in the deficit-scold industry don’t want to let evidence undermine their scare tactics; as the deficit dwindles, we’re sure to encounter a blizzard of bogus numbers purporting to show that we’re still in some kind of fiscal crisis.

But we aren’t. The deficit is indeed dwindling, and the case for making the deficit a central policy concern, which was never very strong given low borrowing costs and high unemployment, has now completely vanished.
http://www.nytimes.com/2013/03/11/o...eficit-disorder.html?hp&_r=0&pagewanted=print
 
Here's something really amusing about how hated Krugman is in right wing bloviator circles.

Breitbarted

"OK, I’m an evil person — and my scheming has paid off.

On Friday I started hearing from friends about a fake story making the rounds about my allegedly filing for personal bankruptcy; I even got asked about the story by a reporter from Russian television, who was very embarrassed when I told him it was fake. But I decided not to post anything about it; instead, I wanted to wait and see which right-wing media outlets would fall for the hoax.

And Breitbart.com came through!

Now, if you’ll excuse me, I have to go give a lavishly paid speech to Friends of Hamas."

There is an entire industry devoted to Krugman. It's hilarious. They never tell the truth, but then again, what do they tell the truth about?

http://krugman.blogs.nytimes.com/
 
In general, I don't think people are that concerned about our own budget deficit. They're more concerned about the debt.

I'd be interested to read what Krugman says about the debt. Maybe next Monday...
 
In general, I don't think people are that concerned about our own budget deficit. They're more concerned about the debt.

I'd be interested to read what Krugman says about the debt. Maybe next Monday...

Really, what is the debt other than accumulated deficits? And why do they call themselves deficit hawks if they're not concerned about the deficit?

I am sure Krugman has written on this, but I am going to email him your comment any way, you never know Onceler! I am going to do it right now.
 
Here you go Onceler, this is from January of 2012 and I think it is what you are looking for:

http://www.nytimes.com/2012/01/02/opinion/krugman-nobody-understands-debt.html?pagewanted=print

Thanks for finding that! It's an interesting take, and one I've not heard. I'd love to just let go of reason & be completely reassured by that, and maybe I should, because he is the expert & all that.

But to me, that article just seems like he's paying some lip service to a concept he doesn't like to think about too much, like it's inconvenient to the recommendations he's making. Just a first take. I think the debt is more serious than he lets on.
 
Thanks for finding that! It's an interesting take, and one I've not heard. I'd love to just let go of reason & be completely reassured by that, and maybe I should, because he is the expert & all that.

But to me, that article just seems like he's paying some lip service to a concept he doesn't like to think about too much, like it's inconvenient to the recommendations he's making. Just a first take. I think the debt is more serious than he lets on.

LOL I see so I have let go of all reason to find comfort in the incoherent arms of Paul Krugman. Okay Onceler! I could be insulted but I'm not. :)
 
LOL I see so I have let go of all reason to find comfort in the incoherent arms of Paul Krugman. Okay Onceler! I could be insulted but I'm not. :)

Hey, I didn't mean it that way! I didn't see you as advocating what he was saying. I just think his views, at least in that article, seemed to gloss over some of the more troubling aspects of the debt.
 
Krugman hit the nail right on the head. Austerity is guise used by right wingers as an attempt to dismantle medicare, medicaide and Social Security.
 
Sequester is the guise used by the banker class to make the people fall for cuts in services while special interests continue to get more.

Both fucking parties. Open your eyes, ignorant partisans
 
Here's something really amusing about how hated Krugman is in right wing bloviator circles.

Breitbarted

"OK, I’m an evil person — and my scheming has paid off.

On Friday I started hearing from friends about a fake story making the rounds about my allegedly filing for personal bankruptcy; I even got asked about the story by a reporter from Russian television, who was very embarrassed when I told him it was fake. But I decided not to post anything about it; instead, I wanted to wait and see which right-wing media outlets would fall for the hoax.

And Breitbart.com came through!

Now, if you’ll excuse me, I have to go give a lavishly paid speech to Friends of Hamas."

There is an entire industry devoted to Krugman. It's hilarious. They never tell the truth, but then again, what do they tell the truth about?

http://krugman.blogs.nytimes.com/



:rofl2:

Hey, you forgot to list the Boston Globe as being suckered into that, its funny since the NY Times owns the Boston Globe.


Another prominent news organization has been duped by The Daily Currant, a satirical news site similar to the Onion. Boston.com, a site associated with the Boston Globe, reported this morning that Nobel Prize–winning economist Paul Krugman had filed for personal bankruptcy. From Boston.com:
 
Krugman is in denial....

Funny dude....he says "...and the people who talk the most understand the least ", then, like the hack he is, goes on the write an over long, boring article...
 
Krugman is in denial....

Funny dude....he says "...and the people who talk the most understand the least ", then, like the hack he is, goes on the write an over long, boring article...
Krugman isn't a hack. He's a Keynesian and that's the biggest lie the right has is that Keynesian economics is socialism. It's bullshit.
 
Krugman isn't a hack.

Dude, Krugman is one of the biggest hacks out there. Being a Keynesian doesn't make his a hack. The partisan positions he consistently takes when it's convienient for his argument is what makes him a hack.

UB1eV.gif
 
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