HomeLatest ThreadsGreatest ThreadsForums & GroupsMy SubscriptionsMy Posts
DU Home » Latest Threads » Forums & Groups » Main » General Discussion (Forum) » Krugman: Democrats should...
Introducing Discussionist: A new forum by the creators of DU

Thu Jan 3, 2013, 05:58 PM

Krugman: Democrats should stop obsessing about deficits.

http://krugman.blogs.nytimes.com/2012/12/29/on-the-economics-and-politics-of-deficits/

Evan Soltas of Wonkblog and Joe Weisenthal of Business Insider both make the same point, in more detail, that I tried to make in my series on ONE TRILLION DOLLARS: the current budget deficit is overwhelmingly the result of the depressed economy, and it’s not clear that we have a structural budget problem at all, let alone the fundamental mismatch between what we want and what we’re willing to pay for that people like to claim exists.

SNIP

So, the whole deficit panic is fundamentally misplaced. And it’s especially galling if you look at what many of the same people now opining about the evils of deficits said back when we had a surplus. Remember, George W. Bush campaigned on the basis that the surplus of the late Clinton years meant that we needed to cut taxes — and Alan Greenspan provided crucial support, telling Congress that the biggest danger we faced was that we might pay off our debt too fast. Now Greenspan is helping groups like Fix the Debt.

And as Duncan Black points out, the Bush experience tells us something important about fiscal policy: namely, that when Democrats get obsessed with deficit reduction, all they do is provide a pot of money that Republicans will squander on more tax breaks for the wealthy as soon as they get a chance. Suppose Romney had won; do you have even a bit of doubt that all the supposed deficit hawks of the GOP would suddenly have discovered that unfunded tax cuts and military spending are perfectly fine?

13 replies, 1010 views

Reply to this thread

Back to top Alert abuse

Always highlight: 10 newest replies | Replies posted after I mark a forum
Replies to this discussion thread

Response to pnwmom (Original post)

Thu Jan 3, 2013, 06:03 PM

1. Then why raise taxes at all? Or try to cut any spending? Apparently it's alllll gooooood.

 

Print print print our debts away. Yay!!!!!!!

Reply to this post

Back to top Alert abuse Link here Permalink


Response to dkf (Reply #1)

Thu Jan 3, 2013, 06:45 PM

4. Because otherwise inflation will run too high. nt

Reply to this post

Back to top Alert abuse Link here Permalink


Response to dkf (Reply #1)

Thu Jan 3, 2013, 07:04 PM

5. He thinks over the long run we should deal with the moderate structural deficit that we have,

but in the short run we should worry much more about stimulating the economy to achieve the growth that will take care of the non-structural deficit.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to pnwmom (Reply #5)

Fri Jan 4, 2013, 11:43 AM

7. So Krugman of all people thinks the Bush cuts created only a moderate structural deficit?

 

Wow just wow.

I really don't know why we spent all those years hating the Bush cuts then. The world sure seems topsy turvy.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to dkf (Reply #7)

Fri Jan 4, 2013, 11:45 AM

8. You're forgetting about the intervening four years in which Obama has brought

the spending curve way down.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to pnwmom (Reply #8)

Fri Jan 4, 2013, 11:58 AM

9. I've been examining the numbers and have seen a modest but still unsustainable trajectory

 

For Medicare. Beyond that not much.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to dkf (Reply #9)

Fri Jan 4, 2013, 12:08 PM

10. Another link:

http://www.forbes.com/sites/rickungar/2012/05/24/who-is-the-smallest-government-spender-since-eisenhower-would-you-believe-its-barack-obama/

Amidst all the cries of Barack Obama being the most prolific big government spender the nation has ever suffered, Marketwatch is reporting that our president has actually been tighter with a buck than any United States president since Dwight D. Eisenhower.

Who knew?

So, how have the Republicans managed to persuade Americans to buy into the whole “Obama as big spender” narrative?

It might have something to do with the first year of the Obama presidency where the federal budget increased a whopping 17.9% —going from $2.98 trillion to $3.52 trillion. I’ll bet you think that this is the result of the Obama sponsored stimulus plan that is so frequently vilified by the conservatives…but you would be wrong.

The first year of any incoming president term is saddled—for better or for worse—with the budget set by the president whom immediately precedes the new occupant of the White House. Indeed, not only was the 2009 budget the property of George W. Bush—and passed by the 2008 Congress—it was in effect four months before Barack Obama took the oath of office.

SNIP


____________________________

http://articles.marketwatch.com/2012-05-22/commentary/31802270_1_spending-federal-budget-drunken-sailor

WASHINGTON (MarketWatch) — Of all the falsehoods told about President Barack Obama, the biggest whopper is the one about his reckless spending spree.

As would-be president Mitt Romney tells it: “I will lead us out of this debt and spending inferno.”

Almost everyone believes that Obama has presided over a massive increase in federal spending, an “inferno” of spending that threatens our jobs, our businesses and our children’s future. Even Democrats seem to think it’s true.

But it didn’t happen. Although there was a big stimulus bill under Obama, federal spending is rising at the slowest pace since Dwight Eisenhower brought the Korean War to an end in the 1950s.

SNIP

Reply to this post

Back to top Alert abuse Link here Permalink


Response to pnwmom (Reply #10)

Fri Jan 4, 2013, 12:58 PM

11. A decline in the rate of increase is not a cut

 

Reply to this post

Back to top Alert abuse Link here Permalink


Response to dkf (Reply #11)

Fri Jan 4, 2013, 04:13 PM

12. True. But the decline has meant that the structural deficit is now a small

fraction of the GNP.

By the way, Krugman isn't just some NYTimes columnist, nor is he just some Princeton University professor. He's a Princeton professor who won the Nobel Prize in economics. Even if his arguments seem wrong to you, on the surface, maybe you should at least give them serious consideration. If you go the NYTimes site and search for his columns on the deficit there, you could find many more columns written about this with more statistics to back up his arguments.

From the link at the OP:
"It’s hard to look at that chart and not conclude that the slump is the principal cause of the deficit. Soltas suggests, based on a more careful statistical analysis, that the structural budget deficit, including interest, is 2 percent of GDP or less. He also makes an interesting observation: the deficit has become more cyclically sensitive over time thanks to rising inequality. How so? More revenue comes from the wealthy — even though their tax rates have fallen — and their income is more volatile than that of ordinary workers.

"So, the whole deficit panic is fundamentally misplaced. And it’s especially galling if you look at what many of the same people now opining about the evils of deficits said back when we had a surplus. Remember, George W. Bush campaigned on the basis that the surplus of the late Clinton years meant that we needed to cut taxes — and Alan Greenspan provided crucial support, telling Congress that the biggest danger we faced was that we might pay off our debt too fast. Now Greenspan is helping groups like Fix the Debt.

"And as Duncan Black points out, the Bush experience tells us something important about fiscal policy: namely, that when Democrats get obsessed with deficit reduction, all they do is provide a pot of money that Republicans will squander on more tax breaks for the wealthy as soon as they get a chance. Suppose Romney had won; do you have even a bit of doubt that all the supposed deficit hawks of the GOP would suddenly have discovered that unfunded tax cuts and military spending are perfectly fine?"

Reply to this post

Back to top Alert abuse Link here Permalink


Response to pnwmom (Original post)

Thu Jan 3, 2013, 06:30 PM

2. We should but there is no will in DC to actually solve anything. It is much more useful to

 

create false crisis and terrify the dim bulbs into begging for "The Cure*". Just let them keep their drug of choice and their TV and they'll let anything slide.



*Whatever theft the owners decide on at any given moment

Reply to this post

Back to top Alert abuse Link here Permalink


Response to pnwmom (Original post)

Thu Jan 3, 2013, 06:39 PM

3. While dkf is at least consistent in his conservative deficit hawking, this column is probably

useful for some of our suddenly all deficit-hawking progressive friends.

Cheney said deficits didn't matter in an up economy! But we have progressive Keynesians pulling out the sack cloth in a down economy? Krugman is right on here: we don't have a structural budget problem. We have a consumer demand problem, which is why raising middle class taxes and cutting every program to the bone behind deficit fanaticism is as silly economically as it is regressive politically. Oh, rest assured, the various "charts" are on their way in reply. One thousand billion per annum, they declare! Meh.

Reply to this post

Back to top Alert abuse Link here Permalink


Response to alcibiades_mystery (Reply #3)

Thu Jan 3, 2013, 09:23 PM

6. They went the other way this time. Ignore it, it's economics and it will sink like a rock. n/t

 

Reply to this post

Back to top Alert abuse Link here Permalink


Response to pnwmom (Original post)

Fri Jan 4, 2013, 04:27 PM

13. No one on TV seems to talk about employment or jobs anymore.

They all act like the recession is over because their jobs are safe or because the economy reaches some technical milestone.

The real problem is not enough jobs that pay decently.

Krugman's the only prominent media personality who has been talking about jobs and the lousy economy.

Reply to this post

Back to top Alert abuse Link here Permalink

Reply to this thread