Big spending will have to be paid for with new taxes? E.g. health spending? A healthy population will reduce the deficit, not increase it.
If the left would ensure that their social programs pay for themselves, financing can be done with borrowing. The public would accept that.
It's up to the left to convince the public that their social programs are sound. Green energy can be cheap energy. The sun is free and nobody has to go frack on the sun to extract energy. I don't think anybody is investing in wind power because it is expensive.
How much did it cost to save the ozone? Who's complaining now? I just did a google search on that one - Montreal protocol. Listening to scientists pays off.
It might take some time for a green building to pay back its investment but it does pay in the end - especially in a time of negative interest rates. So why not subsidize it?
I never hear arguments on economic criteria. It's always about "justice" or about "racism" or some vague "morality".
1
The republicans are ok with deficits for wealthy donor tax cuts. But anytime a social program is discussed; it is socialism and going to run up the deficit. I finally figured that out a few years ago. But keep hammering the message home maybe some of these dummies will figure it out.
3
Republicans don't care about the debt. They're leaving America for foreign lands were they exported their businesses and wealth to support them. That's right Democrats, they will be living off the investments you made in the markets that built their foreign businesses. Am I cynical. No, they are sinical.
2
As long as the Military Republicans control the Television Industry, it will always be like this.
If you haven't figured it out yet, the reason the Republicans grow the deficit with reckless abandon is because they are abandoning the nation. The Tory party AKA, Republicans have been exporting wealth and business for decades to live off outside America.
Just like the Russians burned everything as the advancing Nazi's were invading Russia.
I do believe the Republican Revolution is real. The cooperation with Russia is deliberate.
1
wondering... whey are no national econs talking about the wsy japan is reducing its national debt? what, is it a national secret no one should know about? help us out here. another econ nerd...
The GOP does not care about debt when it comes to lowering the taxes for the very rich but an environment overhaul and health care for all is "very bad" debt that would benefit mainly "bad hombres".
1
G.ang O.f P.irates are Hoods Robin' us.
Need I say more?
$22,000,000,000,000.00 that's 22 trillion debt. If that's thinking small. Under what circircumstance will it go away? Just how high can it go? Who is getting rich off it? Both parties failing to control it doesn't make it smart. How high can it go with out it creating a disaster? When climate scientist/economist/bartender AOC says "like the world is going to end in 12 years." should I care?
With the young Democrats rushing to create Scandanavian style ecomomics in America with up to 28% or more of working people not working who's going to pay for it? Not the rich. It just doesn't work that way.
1
Democrats accomplished many great programs to help the nation since Franklin Roosevelt's New Deal and Works projects brought us out of the Republican sparked Great Depression.
What great programs have Republicans accomplished since then? Only the Interstate highway system and a lot of wars.
They are the Hood's Robin' us.
1
Thanks again, Dr K - clear thinking and a good exposition. But I do wish just a few of the confirmed trumpistas would read it, and understand it. We have seen this behavior from the GOP time and time again; and the Democratic donkey comes along behind and dutifully cleans up after the GOP elephant, getting no credit for it at all.
Trump brays about economic success, ignoring the fact that it was his predecessor the hated Obama who built the foundation for it. Where would we be now, if Obama hadn't alleviated the mess the previous administration left for him?
Clean your house, GOP, or become totally irrelevant.
1
Its all a political game to the GOP, bash Democrats for spending and debt, something people think they understand. But of course when the GOP is in power they spend vast sums on the military, give corporate welfare to their rich patrons and reduce taxes for them as well while snookering their voters into receiving nothing for their hard won tax dollars.
Despite propaganda Democrats actually want to help people and watch spending at the same time. Thus under democrats you will see lower debt and a struggle to implement programs that support people and their goals. Its all a political war of illusion to the GOP and democrats need to wake up to GOP tactics or lose every time.
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@just Robert
The main problem here isn't the spending, it's UNPAID for spending.
The GOP systematically spends money (directly, or through lowering taxes) in such a way that its bills are unpaid for. And this kind of spending then cannot but increase the deficit.
Since Bill Clinton, Democrats installed the pay-as-you-go rule, which means that any new bill has to be fully paid for, in other words cannot add a dime to the deficit. THAT is what (outside of emergency situations) responsible spending means.
G.W. Bush then abandoned this rule, Obama reinstalled it, and when the GOP took Congress in 2010, they once again eliminated it.
Conclusion: disagreeing on the policies on which you want to spend taxpayer money on is one thing, refusing to make sure that new spending bills (on no matter what kind of policy) are paid for is something totally different, and THAT is what the GOP is systematically doing and Democrats systematically reject (and then we're not even talking about the fact that SS is already paid for, for at least one more decade, so claiming that we need to end it because we have a high deficit and debt, as the GOP does, means suggesting that it would add to the debt whereas it doesn't ...).
1
I"n an October 16, 2018 interview with Bloomberg News, Mitch McConnell said that the debt was driven by "the three big entitlement programs that are very popular, Medicare, Social Security and Medicaid."He says that, "There's been a bipartisan reluctance to tackle entitlement changes because of the popularity of those programs. Hopefully, at some point here, we'll get serious about this."
https://www.newsweek.com/deficit-budget-tax-plan-social-security-medicaid-medicare-entitlement-1172941
This says it all.
The GOP systematically increases the debt by unpaid for tax cuts for the wealthiest individuals and corporations, all while claiming that it's not their constant attacks on federal tax revenue but the fact that the federal government is spending taxpayer money on social security and healthcare that somehow "causes" the debt.
And of course there is a "reluctance" (although not bipartisan, but only Democratic, as the past decade has once again shown - including Mulvaney's latest budget proposal) to end these "entitlements": the American people, including a clear majority of GOP voters, strongly rejects ending or cutting down those programs, whereas representatives in Congress are there to represent the American people, NOT the special interests that want to end all spending that doesn't immediately increase their own wealth.
And then we're not even talking yet about the fact that SS is entirely solvable until the end of the 2030s, so it does NOT add to the deficit.
2
I'm guessing the Republican leadership basically thinks like this: if go into debt by giving huge tax breaks to the wealthy, then well, as W. said "its your money"--*you* meaning the investor class.
But if the Democrats go into debt by spending on something that helps people, then the Republicans come out with "class warfare" and "redistributing wealth".
And they are completely sure they are right in both cases, so there's basically no arguing with them either way.
But taxes are for things the government needs to do that are not profitable or of little to no interest to the investor class, AND the history of mounting debt in this country is just as much a matter of decades of supply-side tax cutting as it is government programs (NOT entitlements, since we each pay for them) that have been inadequately funded.
What Dems need to do is simply keep making the case that we need certain kinds of government spending, and we CAN afford it if we lay off the endless pursuit of tax cuts. You'll never get the guys on AM radio to agree, but you will be able to reach more and more mainstream Americans if the message is properly explained.
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@Bryan
The key thing here is that billionaires' money is NOT "their" money.
You need a whole system of laws and taxes before stockholders and wealthy CEOs can systematically redistribute profits made by their companies in such a way that they get 90% of it whereas their employees have to get by with the other 10%.
It's because this law system exists that we need new, other laws, that then tax the wealthiest so that a fairer way of distributing the profits produced by hard-working Americans can be obtained, where billionaires still get most of the profits, but where at least their taxes then allow ordinary citizens to have access to decent healthcare and education and solid roads and bridges etc.
That the wealthy are wealthier than ever today isn't the result of some "law of nature", but the direct result of decades of GOP laws.
But that doesn't turn their money into "their" money at all.
3
@Ana Luisa
I agree, completely, but that is the argument Republicans used for years and for the most part its worked for them. So part of this IS changing the laws, you're right.
But: part of it is also changing the mindset of a lot of mainstream Americans that are suspicious about government having more power, but then turn around and think that the "rich getting richer" IS inevitable.
Finding a way to get this message out and keep "corporate Democrats" from sabotaging it has really been the central problem of our times, if you think about it!
1
You imply that medicare for all is not an investment in the future. It should be obvious that it is an investment since the results are clearly an increase in the health and welfare of the citizens and therefore an increase in the economic strength of the country. Indications are that a program that provides a guaranteed health care to all citizens and is paid for by a single agent would result in very substantial savings to the national expenditure on health care. Nickel and diming the program with petty bickering about some paygo nonsense would be very detrimental to such a program.
What about foreign debt, money outside our control? So far, the rest of the world has been happy to take our money as fast as we print it, but some out there would like to overthrow the dollar as the reserve currency. I think we should mind this danger!
You cannot discuss the deficit without also including the income tax system and the Chief Justice John Roberts & four Republican justices decisions in Citizens United & Vote now. The income tax system has always been weighted against the middle class worker & for the very wealthy. Eight years ago in the above two Supreme Court destructive decisions opened the billions of wealth to buy influence in congress and make sure the wealthy never paid their fair cost of government. Briefly, to begin solving the deficit problem we need a simple wealth tax, reverse the two destructive decisions, a limit on contributions to politicians & length of time for campaigns. Remember McCain/Feingold!
"Mick Mulvaney, Trump’s acting chief of staff, explained to G.O.P. members of Congress why debt wouldn’t get a single mention in the SOTU: “Nobody cares.”" To which I reply, yet.
1
What we're seeing here is that the wealthy are financing government by lending rather than by paying the taxes they should have paid. The solution to deficit reduction then is simply to tax those that hold our debt to pay it off.
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Two commentaries on debt by the NYT in one day and neither mention what the USA spends on its military budget.
Telling.
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@Scott B
Is this the first time in American history we didn't raise taxes to fight a war.
@Scott B
That's a good point. Our nation spends as much on Chinese products as we do on our military. No wonder China is building up it's military.
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"Republicans rail against budget deficits when they’re out of power, then drop all their concerns and send the deficit soaring once they are in a position to cut taxes. Then when it’s the Democrats’ turn, they’re expected to clean up the Republicans’ red ink rather than address their own priorities."
It's like a perpetual motion machine, powered by Fox News and stupid old white people (hopefully not a renewable resource).
1
I completely agree!
"...why debt wouldn’t get a single mention in the SOTU: “Nobody cares.”...And you know, he’s kind of right."
Keep that in mind when the Feudalists cry that America can't afford/will be bankrupted by Medicare for all--and its associated bogeyword "Socialism."
Or even when they deny West Virginia teachers a living wage.
One comment said Let them, hold bake sales for corporate subsidies, and borrow if needed for teacher pay. (NYT)
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The republican hypocrisy on deficits has jumped the shark for the last time. They have abjured any pretense to legitimacy and any mention of deficit reduction while democrats are in power will only heap scorn on whoever says it.
Similarly on Taxes. Tax cuts for the wealthy have had one clear effect. The wealthy get wealthier. All boats didn't rise. 50 years of experience with that and the evidence is irrefutable. Tax cuts for the wealthy do just one thing ...make them wealthier.
Increasing taxes on the wealthy has immensely strong bipartisan support of voters. That was brought in by Our Revolution and Justice Democrats. A cold reception by establishment politicians. The meaning of that too will not be lost on voters this time around. In a democracy elected officials are supposed to do the bidding of their constituents. The two party system has now blocked that possibility. Both parties have been corrupted by the financial elite and only put forth policy and candidates supported by the .01%.
Republican politicians are a lost cause for the foreseeable future. The Democratic party could well be turned over to an uncorrupted (by big money) party in 2020 or shortly after. Should that happen voters will flock to it in droves from independents and republicans. Trump and Sanders promised to Drain the Swamp. It is an enormously powerful idea among voters of all stripes. Sanders actually means it, as does Warren. The others? So far, no. If they are New Democrats, definitely NOT.
This is just part of the equation. How about not entirely addressed the issue of selective debt> It's OK to spend zillions on weaponry and war but not on social programs or infrastructure of all sorts including education. (If we had an excellent online program for education/educators for pre-K to post-grad including law school specifying both content and skill sets-- that would be extremely cost-effective immediately!!Automating public transportation (esp. subways) would also lower costs... and in most cases provide greater safety. Oh no, the next hing that's going to be presented is the notion of a guaranteed income -- something the children of the rich already have!!! (Who'd have thunk it?!)
Too much effort IMO goes into supporting the octopus called Wall Street and the banksters-- nothing new here about the characterization.
The gov'ment can always print $$. Frankly, I don't completely understand the notion of debt in economics anymore than I understand the notion of value in semiotics.
Long ago gold was deemed valuable, then paper money, then numbers on banking accounts -- and if we had nothing to eat, then a loaf of bread would be much more valuable than gold. (Reread or read "Utopia" -- a society that despises the trappings of wealth!! but values a certain amount of labor.)
Can we just have lots of facts? truth? which the comments sometimes supply.
When reading this article I was hoping for an explanation why debt is undesirable. I finished it without this explanation; rather, it was just a description of how different political parties insidiously denigrate their opponents when they propose spending more than tax income. I believe the vast majority of Americans don't understand the implications of debt. So be it; I won't be around long enough to say "I told you so".
Listen to people who know what they're talking about. Like Prof. Krugman or Rima Regas from our very own NYTimes comments section.
This double standard will persist as long as the electorate values style over substance. We need smart people running our country like Dr. John Holdren who was Obama's scientific adviser. Not lightweights like Stephen Miller and Trump cabinet hoodlums.
These are the kind of Americans we need today, those who deserve public trust:
William Prager, who went on to become one of Brown University's most renowned faculty. He earned his Ph.D when he was 23. He disagreed with the Nazis during 1930s and had to flee Germany to avoid persecution. Along with his wife and son, he had to travel for nearly six weeks from Istanbul to reach New York because he couldn't travel through German-occupied territory. US accepted him with open arms and his contributions to applied mechanics are revered even today.
His profile: https://library.brown.edu/cds/portraits/display.php?idno=179
Former Sec. of Defense, Harold Brown who was instrumental in guiding US during the Cold War era. He was a prodigy who got his Ph.D in Physics by the age of 21. Also, across his career he was the DIrector of Lawrence Livermore Nat'l lab, President of CalTech and the Sec. of Air Force and one who stood up for his subordinates. Read his obit at https://www.nytimes.com/2019/01/05/obituaries/harold-brown-dead.html
And, who can forget Larry Eisenberg. RIP Larry, you are missed everyday.
To Senators Bernie Sanders, Kamala Harris, Cory Booker, Amy Klobuchar, and Elizabeth Warren, to Howard Schultz, Michael Bloomberg, Beto O'Rourke, and to all other "wannabe" Presidents, and to Madame Speaker Nancy Pelosi, Whip Steny Hoyer, House Minority Leader McCarthy, Senate Majority Leader Mitch McConnell, Minority Leader Charles "Chuck" Schumer, Representatives Ocasio-Cortez, Ilhan Omar and all other members of Congress:: Please respond in writing, under oath, to the following suggestion: "To help low-income workers, save taxpayer $ and virtually eliminate bureaucratic "red tape" and fraud, Congress should "convert and consolidate" ALL federal welfare programs to a single monthly cash stipend paid through their current EBT card. To qualify, each adult U.S. citizen who asks for government assistance---including food stamps/SNAP, TANF, Supplemental Security Income (SSI), public housing/Section 8, WIC, Medicaid, and all other welfare programs, must file an annual income tax return with valid photo ID and register for work at their local or state employment office. Tax $ saved through elimination of current administrative overhead costs will go DIRECTLY to the recipients, cutting out all "middle men." To verify identity, the photo ID must include social security #, residence address, and date of birth. Fraudulent claims will be punished under federal law."
Nice to hear common sense, as always, from Dr. Krugman.
Republicans have always wanted to use the debt they run up to eliminate Social Security and Medicare. They absolutely hate any part of government that helps people. They're fine with B-2 Bombers and a multi-trillion-dollar Iraq war.
1
We should be asking what we get from the debt.
With Republicans, we get tax cuts for the billionaires resulting in greater economic divide for our debt.
Then Republicans say we need to cut Social Security and Medicare.
On any discussion of the problems/merits of the U.S. healthcare system I find it amazing that there is almost never any mention, investigation or consideration of a two tier health care system that in other countries (i.e. U.K., Australia) has proved to work. Yes, there are issues but the systems work side by side keeping each other honest, provide checks and balance, and choice to the public. Born in Canada, I realise universal healthcare limits choice and opportunity to pay for some health services to obtain results more quickly (i.e. MRI, CT scans etc) however, the system is a very good framework from which to build a private/public medical structure. Bottom line, why can't the U.S. get their heads out of the sand and look around the world for examples of viable solutions to this problem ? It's not that hard.
@Diane
I have doctors in the US who tell me that the US system is better.
(Personally, given insurance approvals, co-pays, and unexpected extra bills, I disagree with those doctors.)
But I tell them if someone is getting minimum wage and no health care from their employer, Canada's system looks really good!
1
When there is a pattern in letting the deficit grow when the GOP is in power, then now is the time to stop it. Congress is the owner of the budget on behalf of the American people. It has to make the right choices and it has leverage over the government. There will be plenty of TV-fragments of conservatives claiming thet spending should be cut - under Obama.
Point is: there is a constant battle over who can spend on what and when the GOP is in power they do, and empty the treasury as deep as possible - obviously.
So it is now the defendable responsability and task for the democrats to level the budget with the tax revenues, and they should. Mend your roof when the sun shines and save for the worse.
The deficit is a buffer for bad times. Raise it during a crisis and pay back when the economy is strong. This is exactly what the financially disciplined countries in Europe do, and they benefit from that in the long term.
What your government is doing now wil damage the US severely in the next crisis. There may be a financial war in the coming year and it must be fought.
Why an American capitalist should embrace Medicare for all:
American companies add the cost of employee health insurance to each product they make. GM/Ford/Chrysler add approximately $1500 to each vehicle sold.
German companies don't have to fund employee health care benefits and do not have to figure that cost into their product pricing.
Japanese companies don't have to fund employee health care benefits and do not have to figure that cost into their product pricing.
For many companies employee costs are their largest budget item. NOT having Medicare for all makes domesticly produced goods less competitive in the world markets.
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I wonder if there is any reflection among the Republican base... The tea party seems to be on a siesta... I also won't be fooled by the so-called "liberal" media. They're owned by elites who benefit from big tax cuts - they may be socially liberal, but not when it comes to coverage on economic matters.
2
@Paul: The media is corporations. Corporations only pass on taxes they are obliged to pay to their customers anyway, by raising their prices, when conscripted into tax-collection by the government.
Perhaps the powers that be don't care about deficits and debt, but average Americans do. We wonder how deep into debt we can get without losing our fundamental strength.
It's nothing new: Republicans put us into debt with their tax cuts and Democrats must impose new taxes or reimpose old ones to fix the system. Then Republicans claim Democrats are making government too big and spending too much.
Meanwhile, Republicans don't spend enough where it matters: on climate change, consumer protection and safety net programs, for example.
Just as Roosevelt's New Deal brought hope and sustenance to millions during the Depression, the Green New Deal can steer our country into new jobs, new energy sources and more while saving the environment for our children and grandchildren.
I agree and applaud everything this opinion piece says. But how is that fact that the Medicare for all plan will save money to the consumers about I think 3 trillion over ten years according to the Koch brothers analysis and let us face it, they are not advocating it, how is this factored in.
And I assume that the government can negotiate drug prices or am I wrong. I thought they did that with Medicare right not. And I thought that employers would no longer be responsible for the health care of their employees. Thus freeing job slaves to have more choice where they work and save corporations a lot of money.
Also about the drugs, just a snide and side note. We sell the drugs we make here to Canada and they sell them to their people at a much cheaper rate than we can get them here. Dear old Corey Booker put his foot down on Bernie's plan for us, we the people, to buy the same drugs from Canada to save we the people money. He mumbled that it was a safety issue. Yeah right. Of course he would know since he gets the biggest hand outs from drug companies, or did till he decided to be an honest actor for run for president. If he is elected of course that would change back again, but I angrily digress.
So Medicare for all is a great savings and of course the New Green Deal is a no dream, it is the best investment in our future to come along in a long time for everyone. I am so grateful with all my heart for this possibility. For all of us, for all of us.
1
@cheerful dramatist: When the Congress enacted Medicare Part D, its drug insurance program, it specifically denied Medicare the power to negotiate drug prices.
Krugman is correct. Republicans scream about deficits when they are out of power because they know spending makes you popular. They don't want Democrats to give you healthcare, education, or infrastructure because Democrats would win more elections.
But when they are in power they want both the political boost of tax cuts, plus the political boost of spending, so then they forget all about the debt, and go into a frenzy of tax cutting, borrowing, and spending.
And of course, centrist Democrats play along, dutifully cutting spending and raising taxes (both unpopular) so that when Republicans come back they can cut, borrow, and spend some more.
I find it hard to believe that centrist Democrats don't realize that telling workers "there is no money," without explaining that it is because Republicans cut taxes on the rich again, without boosting the economy, as always. Why do Democratic centrists believe that it is their job to explain to the 60% of the population that works for wages that there is no money to invest in them and their families, when it is the Republicans that cut the taxes? Why do Democratic centrists believe it is their job to protect tax cuts for the rich?
Meanwhile I saw a Fox News Poll last week that said Independents want to raise taxes on the rich. This was on Fox News! The very independents that Democratic centrists keep saying they are aiming their policies at want tax increases on the rich, but Democratic centrists don't want to give it to them?!!!
1
Perhaps I am ignorant and misinformed but for the life of me can someone tell me if the debt will ever have to be paid back? Will the hens ever come home to roost and if/when they do, what does it mean for the average person? Is it really a problem? Or is their a "reset button" and all is forgiven? Unfortunately Mr Krugman did not answer that question and I have yet to see any discussion of what the real consequences would be should we actually be demanded to pay it back and cannot.
1
@Weatherguy: When the Federal Reserve Bank buys the debt, it becomes an asset on its books, and the government then owes the money to itself. I hope this helps you sleep better.
1
@Steve Bolger- So if thew govt owes itself what happens when it doesn't pay itself back? I realize these are dumb questions but apparently i still don't understand what the problem is with debt. I guess what you are saying is that the govt just prints more money (so called quantitative easing, yes). And why can we run up so much debt and a country like Greece cannot? To me it sounds like the game is rigged where the USA need not pay its bills. Again, what is the average person to think about $23T in debt??
The Republicans have lost all credibility. All their talking points about economics need to be fact-checked now. They can no longer be trusted to be honest.
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@William Schmidt
The last Republican President that left office with a "surplus" was Dwight D. Eisenhower so if anyone with any semblance of intelligence connects the word "credibility" to Republicans on this issue, I believe that idea has been put to rest.
I would also submit that for the first time in several decades, Republicans grabbed control of ALL THREE branches of the Executive, however, another truth has prevailed. It is very clear that even with all that power, they cannot govern their way "out of a wet paper bag".
One other very ugly truth however, still remains. There is a significant portion of the electorate that for whatever bizarre reason, continues to support such hypocrisy and incompetence.
2
Using the words "Republican" and "hypocrite" in the same phrase is redundant. If the "Y" key on your computer is not functional, you can get the same meaning as the word "hypocrite" by typing "Republican," no matter if the subject matter is the economy, the debt, abortion, religious freedom, race relations, immigration, environmental change. Try it and see.
2
Fed chair Powell made very clear his concern abut "the fiscal sustainablility of the government," though he also said that it's not really part of the Fed's job, which focusses on the near and middle term. Unsurprisingly, his statement got little attention in the news media, which typically only explore the long term as an extrapolaton of what's happening now, as in climate change and the rise of China.
Republican attitudes toward deficits is no accident: it is an established Republican doctrine invented by Jude Wanniski, who called it the 'two Santa Claus" theory, in 1976 and has been basic Republican doctrine ever since.
Basically, Wanniski pointed out that Democrats won public support by giving away things that people want like, say, Social Security. What he recommended was that Republicans kill the Democrat's Santa Claus by condemning deficits when Democrats were in power. When Republicans were in power, they should ignore deficits and concentrate on tax cuts, the Republican Santa Claus, and then once again complain about the deficit when Democrats took over again to force them to once again concentrate on lowering the deficits that the Republicans ran up.
It is a doctrine that has worked quite well ever since. The new version of the doctrine is that spending causes deficits: not tax cuts that merely return the taxpayer's money to the taxpayer.
2
Paul Krugman starts the article with a striking note, a la Sherlock Holmes, "The dog did not bark at night, and that is the significant thing." But to much of my disappointment, he did not really follow thru with a thorough investigation as why the dog did not bark.
He limited his analysis to how politically it was convenient to trumpet about the deficit back then and how it is not really seen as a priority issue.
Valid points but still he has missed out on his own premise that the complete silence on the debt, in SoU, was significant enough to be noted and the reasons thereof should have been probed better.
@Nirmal
The easy response is that Dr. Krugman has only around 750 words in each column to address an issue, which means that some aspects of any complicated necessarily get short shrift.
I think Mr. Zuckerman, in the next post here, covered a big aspect of what we both find missing. And reading other columns and blog posts from Dr. Krugman also do a lot to fill the gaps.
1
Ask conservatives which president had the last balanced budget and they likely will answer Reagan (their demigod). Ask who was responsible for the ballooning debt and Obama will be blamed. Tough to deal with a problem when too many people don’t understand the issue. People don't “feel” the deficit. With full employment, the deficit should be close to zero….or a surplus for the eventual rainy day and at least try to pay down some debt.
At this point the problem seems insoluble—especially with the US trench wars.. There has to be a time when debt is paid down. The real question is when will a default hit and what will we all do to fix it.
2
Historically there has been little reason to fear Federal debt, but I fear it is fast becoming a looming threat. As recent as the 1990's it was only about 50-60% of GDP. Now it is over 100%, growing at over $1 trillion per year.
With over $21 trillion in debt, a simple increase of 3% in interest rates, not an unlikely possibility - it could increase much more, would jump interest payments by over $600 billion per year, simultaneously shooting up the already huge deficit while accelerating the growth in debt.
Deficit spending is one tool to fight a recession. Debt should then be reduced in good years to enable the tool to be reused in the next recession. What happens if some shock craters the economy and we are already have a huge deficit - such as the record debt we have now?
Of more imminent concern should be our structural issues. It seems the only way to prop up demand and stave off recession is to goose economy with low interest rates and huge deficits. Something is going to break sometime and we won't have fiscal tools to fix it.
Our economy works on the principle that money cycles from producers to consumers (private spending and investment) and back to producers. It seems there is a leak in the process. Too much money is going to those who don't spend, the rich, dragging the economy down and thus requiring large continuing injections from low interest rates and public deficits. Basically the two subsidize a process that funnels ever more money to the rich.
3
@Rocky
At least part of the reasons that enough money has not been cycling enough is that the wealthy have been able to make rent-seeking investments that do not create jobs or even higher-paying jobs because their low taxes give what they do spend on high utility. If their taxes where higher on their top margin income, they would have to invest in ways that were more beneficial to the whole economy, not just their incomes.
Dr. Krugman explained that in a blog, but I can't find the link to it right now.
@Rocky I thought your point on "there is a leak in the process" was brilliant. But I either missed out on the rationale behind your subsequent reasoning as to "much money is going to..." or maybe you need to really figure out the 'leak'... and if you do, please let us know ...
@Nirmal The leaks are many.
The rich spend a lower percentage of income and now more goes to them.
From 1950 to 1970 workers shared in the increased GDP resulting from increased productivity. While GDP more than doubled since 1970, the real average wage is only marginally higher - businesses and investors get most of the increase.
Wages were kept down by the stronger bargaining power of business. Economic downturns and job losses make wage and salaried works less likely to push for higher wages or chance switching jobs. Bargaining power was further reduced by the drop in the number of unionized workers.
The real (inflation adjusted) Federal minimum wage today is much lower than in the 1960’s and early 1970’s. If we adjusted the minimum wage just for inflation, it would be over $15 today, not $7.25 as it is now. If we adjusted it for the productivity increase it would be over $18.
While the average wage has grown little, executive pay skyrocketed.
The top marginal tax rate for individuals decreased from over 90% in the 1950's - a time of great economic expansion and growth – to 35% today.
The capital gains tax on passive investment income is about half the top rate for earned income.
Corporate statutory tax rates are now half of former rates. Credits and deductions further reduce the effective tax rates.
Corporations shift profits to foreign subsidiaries, reducing corporate taxes and government tax revenues billions of dollars per year.
The leaks are many.
Ask Venezuelans if debt doesn't matter.
3
Investments for infrastructure make sense. Something of value exist after the expenditure that can justify the investment. The GND is a joke. First, the planet will be dead before the needed permits could be issued, and imminent domain cases get through the courts. Cortez says we got 10 or 12 years, remember? Second, any new power grid that could store the required energy could not be designed, let alone built before the planet dies. Third, Obama promised a trillion dollars for shovel ready projects. Less than 10% of the money was spent on those jobs the following 8 years. The planet will die before any jobs will be created by the GND. What will happen if, if, if everything being promised really happened? China and India would not only be the largest polluters in the world, they would also have the best economies and standards of living while we pay for the infrastructure and astronomical energy cost. By then, all of our electric autos will be made in other countries.
@Jay
The Green New Deal is more than just a list of projects; it lays out areas that need to be developed or changed. Most of them do not need radically new permits (many of the new things are already being built, just not as widely and in the volume needed) and as the catastrophe of climate change becomes more apparent, those items that do need eminent domain, such as electric grid modernization, will get lower opposition.
Remember, the American Recovery and Reinvestment Act (ARRA) was just under $800 billion, and only became law because Senator Arlen Spector (R, PA) was able to get the two Maine Republican Senators, Olympia Snow and Susan Collins, to join him as the Democrats only had 59 votes at that critical point to shut down the Republican filibuster. Note that Majority Leader Mitch McConnell punished Senator Spector so thoroughly that he later switched parties.
The price of the Maine Senators was that the ARRA now had more than $400 billion in tax cuts in areas that did little to stimulate the economy, rather than $50 billion less than that. Not that even that would have been perfect, but it was all that President Obama could get even Democrats to agree to. Note that the full extent of the stimulus needed, to partially restore something over $2 trillion in lost GDP because of the financial crisis and the housing/mortgage bubbles breaking. It was enough to bring the collapse in full throat as President Obama took office, but not enough to push restoration.
The Trump economic policy, if you can call it that, is not about investment in the future, it's about giveaways to the rich, or the "takers" so they can lock in what they have already gained. What Progressive Democrats want to do is invest in science, education, health care and security issues like mitigating the effects of global warming by weaning us off of fossil fuels. These investments will bring new jobs and business opportunities and put us back on the path as a global leader equipped to meet the challenges of the future. Yes, it will cost money, but I prefer to pay a little now than a lot later. That is what investment is all about.
1
Professor Krugman, I have long hoped that you would address the circumstances in which deficit spending is a good thing—and when it is not—so thank you for this column. I also appreciate your criticism of those who profess to be forward thinkers but fail to go beneath the surface—and in some cases ignore forward thinking initiatives. Case in point is the Obama stimulus of 2009. At the time I was very disheartened not to hear much in the way of advocacy for this program and in particular, by the lack of attention (barely a review) given to “The New New Deal” by Michael Grunwald which outlines the host of worthy initiatives included in the stimulus. There was even a Recovery Accountability and Transparency Board where progress on every project was tracked on an independent Website. Contrast this with the Republican tax legislation where the stated objective was to spur corporate investment, but to my knowledge, contained no measures to determine whether that investment actually happened.
We need those who comment on matters of civic importance to put in the time to truly understand the implications of proposed legislation and other public policy initiatives. Thank you Professor Krugman for taking that time.
3
@Susan Rothschild
You are correct on all counts; the press has been proven to favor Republicans by its inability, through laziness or incompetence, and probably both, in providing the knowledge necessary for voters to make good decisions.
But it is also the voters failure to demand that the press does its job. I remember some decades ago when some commentators were deriding the rise of celebrity in the popular press, rather than learning and discussion of issues that impact peoples's lives and how the country would rue that development.
If the country does not learn from the rise of Donald Trump, it really will have a lot to rue.
The democrats gave up attempting to defend program spending and public investments in the face of the low tax and now recognizably ludicrous rhetoric of the GOP. Well, we've had two generations to check out well that worked and it didn't work at all in the way described by the sophists of swank. Democrats now should provide a history lesson for the country and remind everyone what really built the nation we have let come to crumble. Conservatives always like to bring up common sense and "rational" thinking. The thing is, neither one of those is characterized by the something for nothing basis of supply side, that great public investments will arise from huge wealth subsidies. "Don't coddle the poor", they'd say, while they demanded we flush and rub the wealthy, and for our own good no less. Bring the humor and the realistic critique, y'all, because truly, at this point for anyone to believe or trust conservatism and the GOP, is about as funny as all that money they were gonna put in the public coffers, again and again and again. Republicans and their policies and programs own 2/3 of our national debt, let the fake bucks stop here and lets start spending on some things that our grand kids can actually use to help themselves rather than just more debt to grind them down.
1
The Republican game plan has been pretty obvious since 2001: Run up big deficits and blame Democrats, then argue for cutting all the programs Democrats care about - social security, medicare, environmental protection, infrastructure, public health and education. It's worked like a charm.
5
Regan ran against an $890 billion national debt. After the Republican Reagan, Bush I , Bush II and Trump tax giveaways to billionaires and corporations, we have a Republican national debt of some $22 TRILLION!
Obviously so-called "trickle down" is a Republican scam to hide more and bigger tax giveaways to the already-too-rich. One of the biggest of the scams was when Reagan repealed a Depression Era law that rightly prohibited public companies from buying back their own stock as "manipulation." Since the repeal of that self-dealing law, US corporations have bought back some $22 TRILLION in their own stocks!
Companies did not build new plants, hire new workers, create new inventories or increase wages with all the Republican largess. Management compensation skyrocketed by many hundreds of percent and workers' wages remained flat (unadjusted for inflation which actually LOWERED wages!) and at their lowest percentage of GDP since we started keeping such statistics in 1947.
It's time to again outlaw stock repurchases by companies as manipulative and an illegal form of self-dealing by management. Manipulated stock price increases increase corporate management compensation, most of which is unfairly tied to stock performance, add nothing to the growth of the national economy and, surcharge the tax burdens of the Middle Class and working poor to sop the already-too-rich.
5
The wealthy donors to the Republican Party are driving all of this. Add the Trump social antagonism, and you have the full formula for Republicans staying in power.
Besides the two faced hypocrisy, the harvesting of all classes of the American public will/has impacted demand by constantly reducing disposable income for most folks. Higher costs and stagnant wages.
So, Democrats should move forward on their own programs, including clawing back taxes from the 30 years of Reaganism. They can sell this to some Business leaders that reminding them that the American consumer - the Golden Goose - has been overly harvested. More money in the public's pockets means increased buying. And INVESTMENT in children and infrastructure is an investment - vs. a give away to those that pull the strings.
2
Before the economists and the politicians get the bright idea of increasing taxes lets take a look at what isn't being collected.
An enormous amount of tax revenue in this country goes untaxed because of "cash." A steady move away from cash and towards debit transactions would increase tax collections.
Every time someone pays cash for a service that's a chance for all or some of those, "earnings," to go unreported.
Let's pick on a house painter who has a kid entering college.
Why would he report he made $3000 to paint a house when he can say he only made $1500 and pay less tax, and have more left over to support his kids college education.
Examples like this abound and add up to billions in uncollected tax revenue.
For as long as the face of all things “Conservative” is Donald Trump, Democrats have been afforded a magnificent opportunity to demonstrate just how far to the ‘right’ our national politics have shifted.
And just as Elizabeth Warren stated, Donald Trump is a symptom of the problem. Greed is not a desirable character trait, it is the mark of an empty vessel. Now is not the time for Democrats to cower in the face of unapologetic covetousness.
3
Is it still even interesting to point out Republican hypocrisy on the deficit, taxes, and debt? Personally I find it much more meaningful when I talk to conservatives to point out to them that China is NOT paying the billions in tariffs Trump is always talking about. Americans are paying them!! And do you know why? To make up the shortfall from the 40% corporate tax cut! If you think the deficit shot up after the tax cut, just wait until the so-called "trade war" stops. Then you'll see the real damage.
Conservatives are unconcerned about liars and hypocrisy, because they're so desperate only the economy counts for them. But show them that they're being taken for suckers and paying more taxes — tariffs are a tax Americans consumers pay on imported goods — because corporations got a break, and you may have a chance to break through with them.
And if you don't break through, you can always smile and say, Hey, well thank you for no longer opposing tax increases!! We'll just call them a tariff from now on and lie about who is paying for them!! Let's pass some tariffs on imported oil! The Middle East will pay for it! Ha!
2
Thanks, Dr. Krugman, for again pointing out the hypocrisy in Republicans' concern [or lack of it!] about the spiraling national debt.
Mulvaney is merely repeating what Dick Cheney famously said January 2004: "Deficits don't matter."
Well, eventually they DO matter. And it's said that the Dems always seem to have to play the role of bad cop by injecting responsible, adult behavior into budget discussions.....like, having the courage to raise revenue by seeing the need to raise taxes that were recklessly slashed by Republican office-holders.
Unfortunately, the pattern will repeat, and the Dems end up depicted as the bad guys.
1
Tax the Rich
Take away their homes
Eliminate their healthcare
Flatten their car tires
you get the idea...
3
The hypocrisy of the GOP to rail against the new Green Deal while lathering corporations and the 1% with a tax cut handout the likes of which the US hasn't seen before. If we can afford to give the 1% huge amounts of cash we can afford a new Green Deal.
3
The present era of political and social turmoil we are living through makes the distinctions between Republicans and Democrats crystal clear. Democrats and their ilk value truth, tolerance, justice, peace, generosity, and the welfare our land. Republicans and their ilk, on the other hand, value dogma, intolerance, conflict, selfishness, vengeance, and, perhaps above all, monetary wealth. These contrasts underscore the irreconcilability of our differences. We need leaders who can show us the way out of this dilemma. None is in sight.
1
you can see that these defining factors are basically religious issues. in starkest terms, Republicans are authoritarian Calvinists, demanding you sacrifice your life to hard work to justify your existence; Democrats are at most agnostics with traces of empathy pinking up the edges.
Paul O"Neill, treasury secretary in GeorgeW Bush Admn, wrote in his book with Russ Suskind, that he and Alan Geenspan,Chairman of Fed, were concerned about deficit and planned tax cut, went to see Dick Cheney to express their concern.Mr. Cheney dismissed it by pointing out that president Reagan has proved deficit doesn't matter. This is true Republican view on deficit. They use it as a cover to stymie Democrats program particularly president Obama's. His success was truly frightening to them.
Paul O'Neill was dismissed because he
opposed president Bush's tax cut.
6
Perhaps I am stuck in the past. This getting old thing is a pain. I do realize that when interest rates are low, it is the time to do infrastructure. Lock in low rates when you can. I also remember when interest rates were 15%, or so. Rightly or wrongly, I do not think you should get revenues and spending too far out of whack because high interest rates on 21 trillion of debt would be a bad thing. I was against the individual tax cuts for this reason. So, yes it is true that Republicans are not honest about deficits because they always choose tax cuts over deficits. But, this bad behavior should not empower Democrats to increase spending without being honest about to what extent this spending needs to be funded. Remember, the Democrats bashed the tax bill in part on deficit concerns, so, if they were being honest, they do believe that to some extent they think deficits do matter.
3
It's not enough to claim that you care about something, as politicians, you also need to do something about it, and the only way to do something about it is to propose evidence-based policies.
And today, only Democrats do so.
They do so on strengthening the southern border (see Obama's 2013 S.744 bill, which passed the Senate with 68 votes but that the GOP House has always refused to allow a vote on), and they do so when it comes to deficits.
The 2009 Recovery Act (which contained 50% well-designed tax cuts for small businesses (= who create most jobs in the US) and families, and 50% subsidies) was written in collaboration with the non-partisan CBO, and designed to turn around a -8% GDP that was spiraling down month after month, and to turn 700,000 jobs lost each month into a steady, decade-long job growth (which would have been sped up by the second Stimulus, which the GOP blocked).
It was a $800 billion momentary deficit increase ... knowing that without it, the deficit would increase even more, because of lost federal revenue caused by the Great Recession (which would have become a Depression (GDP of -10%)).
And then Democrats reinstalled the pay-as-you-go rule, which makes it impossible for Congress to pass bills that aren't paid for, and as a consequence would increase the deficit. Clinton installed that rule, G.W. Bush eliminated it, Obama reinstalled it, and in 2010 the GOP Congress eliminated it again.
In the meanwhile, Obama cut Bush's deficit by 2/3...
3
Dear Paul,
Please write a column on how much revenue could be raised for Social Security and Medicare if the cap on FICA tax is eliminated. The GOP has always pushed for a "flat tax", as opposed to a progressive tax rate, but the cap imposes a negative progressive rate, with the ultra rich paying an infinitesimal percentage of their income while the poorest pay the highest percentage. A flat tax on FICA should be acceptable even to the GOP. Please use your great knowledge to calculate how much revenue could be raised to fund these much needed programs, and how they could be expanded to include greater benefits and protect a larger part of our population. Health care for all is a possibility with expanded revenues. Removing the cap on the FICA tax would be a good beginning. Thank you.
6
@Richard N I believe that eliminating the cap would go a long way to securing SS's future, but it would still require a tweak or two...of course, if it were done a decade or two ago that alone would have been enough...
4
Re deficit scolds during the Obama presidency I suspect there were more that went on because it was a Democratic administration but because it was headed by a black man, or at least not a white guy from the "good old days".
Face it, most, even if not all, the Republicans are racists.
1
One might be so irrational to think that the American People might be able to understand that health care systems which cost half as much as ours with better outcomes than ours (pretty much the rest of the industrialized world) might actually be worth looking at seriously, eh? And another small Republican idiocy: the fact is that the Affordable Care Act, down to most of its details, was designed by the Heritage Foundation, by and for the Republican Party. It was the Republican Party's solution, that is, until that uppity black man became president.
5
Exactly. The Republicans lack credibility on all accounts. Kind of pathetic in a way that there is no real effort to expose them, along with business in general.
They have basically used the Federal Government as their piggy bank, and the country has gone along with it, mainly because they are ill informed, ignorant on most accounts having to do with economics, and sad to say, they probably don't care, unless the debt dropped on their house. America is there for the taking, and the rules are written in such a way to make it incredibly easy.
There is no real climbing out of this delusion, even if the Democrats are elected over and over, one election after another, unless, of course, they are the 2/3rds majority in both the Senate and the House, along with a Democratic President. Even then, I would question whether or not they could accomplish anything, as Obama's Administration proved only too well.
The major problem is that the house in on fire and people are bringing weiners, like it's a party, or something. But then look at the people in the country. These are not good people. They are morons, without a clue, and the emotional maturity of an 8 year old. They have never been anywhere, never did anything, don't know the difference between differences, and if asked to discern the pattern, they will think you are talking about clothing. As a country we are not going anywhere. We were once better than we are now, and we will never be great again without education.
1
Mr. Krugman's advice to the Dems: "Don’t let the deficit scolds scare you into thinking small."
Not so long ago, Dick Cheney's advice to the GOP: "Don’t let the deficit scolds scare you into thinking small." or something very close to that.
Just check in with our grandkids in 20 years and ask what they think.
As another, wiser man stated: "Stupid is as stupid does."
1
@Lake Woebegoner
Cheney said "deficits don't matter".
Krugman says: deficits matter, but certain policies, which only increase them temporarily and do so in order to invest in the American people in such a way that over time, the federal government ends up with more rather than less money, shouldn't be abandoned just because you care about deficits.
Obamacare, for instance, curbed federal healthcare spending increases. So it's cheaper than the previous system. All while saving an additional 500,000 American lives a decade. So this is "good governance".
An unpaid for, gigantic tax cut for the wealthiest, which doesn't result in any cost reduction for the federal government nor GDP growth, is NOT good governance, but rather a totally irresponsible way of dealing with deficits.
THAT is what Krugman is saying here.
Any comments on substance?
5
@Ana Luisa - Your substance is substantial, and I thank you for it. One problem with history is that it suggests what worked before in a single instance. Even the best researched economic hypotheses may not transfer from A to B, as A is different from B.
I prefer to call federal healthcare ACA instead of Obamacare as some folks aren't sure that he really does care about prudence. Funding is fine if one can find an endless supply.
But we don't know what the future holds for us beyond the $21T we already owe tomorrow. When will our foreign lenders, take China for example, stop investing their profits here. We're not sure if Sears is done growing, or store fronts soon gone, and Bezos will rule the world.
But we do know all good things eventually come to an end sooner if one's head is stuck in an ostrich hole. And even sooner if someone's pockets are being picked by tomorrow's debtors.
THAT is what I learned from Ben Franklin: A penny short at the end of the month is misery. That's a lot of pennies!
1
@Lake Woebegoner
Economics is part of human sciences. That means that certain things can be proven with 100% certainty, whereas many others can only be proven or predicted in terms of probability.
That still IS the best possible evidence we have, though, so to systematically reject and ignore it, as the GOP does, is THE best way to end up with a huge deficit and debt.
1
Even if Dick Cheney reversed himself & said deficits DO matter, we've always got fiat currency, billion dollar coins & electronic banking to negate the return of notgeld & wheelbarrows instead of wallets. No worries.
I believe we are still paying for the recent Iraq war which we dove into without a fiscal thought.
2
@Rebecca we'll be paying for that for decades to come...little known fact: a few Civil War widows were still getting their husbands Civil War pensions in the 1990s! (very elderly men marrying very young women in nineteen teens and early twenties...the women for the pension and other monetary reasons, the men for the comfort I suppose)...
1
Only those who are Republicans in Dem Clothing will scold about the cost of programs that are meant to lift up the 99%, and restore the wealth stolen from them for decades by the 1%.
As they warn about the dangers of deficits caused by socially beneficial programs, they are hypocritically silent about the deficits run up by tax cuts for the wealthy, hiding of wealth offshore, and corporate welfare. They are to be ignored. They are at best ignorant about how an economy should run to serve the most, or liars serving their own interests and the interests of the 1%.
1
Dictionary definitions of hypocrisy should be amended to lead with “Republican”.
1
Oh, but have faith! Of course the GOP will again loudly proclaim any Dem program aimed at benefitting ordinary citizens: health care, affordable education, sensible gun control, less warmongering foreign policy......all in the name of fiscal responsibility.
The GOP only has two ideas: tax cuts for the highest incomes and corporations (disproved supply side voodoo), anything such as universal healthcare or accessible college, protecting the environment is socialism and anticapitalist...the REAL GOP religion.
Krugman's column is a crushingly effective rebuttal to David Brooks' column in this same issue titled "How the Left Embraced Elitism".
Remember Obama's Jobs bill? Or remember almost anything that had any relationship to Obama, like health care, common sense gun laws, environmental protection (auto gas regs), Iran deal, dreamers and path to citizenship? And on and on. And what has been done in the last two years? What are the accomplishments? Conservative judges, tax reform to benefit rich (look at your return if you are middle to upper middle class), and a bipartisan attempt to stem opioid use. But...the debt, the national debt, the scourge of liberal spending and waste. Uhhhhh, now, nobody cares. Really. Ok. Now what?
1
There is not enough value in the entire world for the governments to do everything they can dream up.
I think you have lost touch with just how much a trillion is.
All of you have been educated beyond your natural minds.
Of course all debt has to eventually be paid back.
But that is not what you are counting on.
You know the next big crash is coming and you are planning how to weather that storm.
But you won't, because the next crash will result in all that imaginary money (stocks, bonds) just simply disappearing.
The ordinary man will muddle along as always, with or without you.....and they will rise up...every man wants freedom before security...
1
People need to wake up to the reality that voting Republican is acting against America. Voting Democratic is acting in America's best interests.
If you hate America, vote Republican. If you love America, vote Democratic.
2
In the past, each time when Republicans start to scream about deficits, they meant only one thing: they blindly believe that investing in the American people will hurt the economy, whereas investing in the wealthiest Americans, Wall Street and big corporations will help the economy.
Everything changed after the SC Citizens' United ruling, however, as those wealthiest Americans, WS and big corporations can now literally buy politicians and new laws.
So now, even their own deficit doctrine doesn't matter to Republicans anymore, as they can do no matter what they want in DC: as long as they please their wealthiest donors, those donors will make sure that Fox News spreads all the fake news needed to fire up the GOP base anyhow.
And that's when deficit debates have to be taken to a whole new level, IF we want to deal with the tremendous amount of threats that having one of America's two biggest parties becoming entirely corrupt poses to the entire country.
Dr. Krugman is asking Republicans to be honest. That will not happen anytime soon. Dems are not without fault, but they generally rely on actual evidence and not fear tactics.
1
Before leaving with a record and structural (= which can not be eliminated in one decade) $1.4 trillion deficit, Cheney famously claimed that "deficits don't matter".
And indeed, the GOP systematically refused to rescue the economy (and US auto industry) in 2009, claiming that no matter what investment that even just temporarily increases the deficit (through loans, for instance) would destroy the economy. Fortunately, Democrats by definition defend science-based policy, so they passed a Stimulus anyhow, and Cheney's -8% GDP and 700,000 jobs shed each month economy turned into the longest period of consecutive job creation and GDP growth in decades - as the non-partisan CBO at the time had calculated would happen.
And the exact same, uninformed approach to policy-making is now at the basis of the GOP's border security "ideas".
Don't forget, it's not just debt, but also a conveniently troublesome foreign adversary, that serves as the du jour republican bugaboo when the democrats are in power.
Presently, however, both debt and Russia are a tad inconvenient to mention, so "nobody cares" is the expected republican-crafted quip with a January 2021 expiry.
1
The time has come for Prof. Krugman to address the issue Modern Monetary Theory head-on, rather than skirting ever closer as he did here.
It is time for an intelligent debate in this country regarding role deficits play in the sound fiscal management of the federal government, what risks they pose and benefits they provide.
MMT is built upon a foundation of rational observation of how government finances actually work, not some political/economic mumbo-jumbo designed to benefit one interest group or another.
Paul Krugman is in a unique position to begin that debate.
It's time.
1
This improper use of debt is acceptable to almost every group in DC except for the CPAs. They know that we can continue to borrow this money via bond sales as long as the rest of the world will loan us this money. However, they also know that if you study history you will see that every nation which borrowed more, or like Venezuela today prints more resulting in inflation, than they could afford eventually goes bankrupt. Also, Krugman misses the point that a fundamental requirement for workable debt increases is not repairing the infrastructure but a steady increase in population where it doubles every 20 years or so thereby lowering the per-capita exposure the nation will face. However, it does not look like we are taking the right approaches to government borrowing today and the next generation is really going to have to pay for our mistakes.
Thank you Dr. Krugman! With respect I believe the alarms about the debt can be distilled down to two simple rules.
1. The national debt is a “very serious danger” only when a Democrat is in the White House.
2. The “beast” in “Starve the beast” refers only to our slim social safety net. It does not include the military, tax breaks for the wealthy, support for oil companies and other giant businesses, the carried interest rule and the like. It means the poor, the disabled, the hungry, black and brown people, education, you name it —basically anybody benefitting from the social safety net or getting help to climb out of poverty.
2
In other words, neither party likes to talk about how we're going to pay for their proposed plans. Wow. So what else is new?
2
I think part of it is the he said/she said approach of most commentary. When the GOP attacked Obama as a big spender the deficit/debt becomes an issue. When Republicans are in power Democrats tend not to focus on spending issues so the media doesn't cover it. The Mulvaney quote was revealing, but I would love for someone in the media to challenge a leader of one of the Tea Party groups to explain how their campaign for limited, constitutional government under Obama jibes with their embrace of Trump, who has dramatically increased federal spending.
137
@PeteM
They'll tell you it's not Trump who increased spending, but Congress that did. Despite the fact that they ignored this When Obama, a Black man, was President.
9
@PeteM: I agree about the media actually doing their jobs like back in the day - ask tough questions, don't allow politicians to drive the narrative, and keep asking the same questions until they get a satisfactory response. I miss the days of Mike Wallace and his type.
6
@PeteM
The media has a big role in not representing facts, and letting Republican propaganda stand.
I remember back in the Fall of 2015, when Republican candidates put out drastic tax-cut proposals, bringing forth deeper & deeper tax-cuts, two popular journalists, came on Bloomberg radio, saying, with their implicit commentary, the candidates were putting forth, "something FOR everyone," in the Republican candidates' drastic tax-cuts. They could have added some facts by saying that how the Republicans attacked Obama for spending money we didn't have, & racking up deficit & debt. Now if the Republicans cut taxes so much wouldn't they further aggravate the deficit situation? No. That's too much trouble. But they still didn't refrain from adding their comments. The media personalities have been irresponsible. No wonder why they're so unpopular.
Now since it's entertaining they sit & relax & keep on ridiculing Trump, and take their money & leave to return, again & again to resume their entertaining endeavor.
7
I am still completely blown away by how the same people who told me the programs Bernie proposed in 2016 were impractical, were hard pressed to really pay much attention to the recent Republican tax breaks at all. I hate to be cynical, but sometimes it really does feel like a huge force in politics and life in general is a tendency in people just keep on repeating opinions that they're used to hearing. The more they hear it, the more difficult they will be to sway, no matter what your specific argument is.
260
@Independent I feel the exact same way. The estimted price tag for Bernie's free college proposal was approximately $47 billion per year, which was met with a chorus of wailing "How could we possibly afford this?"
Trump and Congress increased the military budget by $60 billion year, with nary a peep. We could have easily implemented free college tuition AND spent $13 billion less than we are currently spending.
47
@Independent
There is so much scary complexity in life that I think there is a tendency to grab truthy-like statements, simplistic conclusions and appealing narratives -- just to feel a bit more secure in a wobbling world. Which means the snake oil salesmen (advertisers in general and others with agendas) have an advantage over people who actually do attempt to tell it like it is.
57
@Independent
You are so right.
I would blame left-leaning journalists for not explaining to the public what it all means when someone put forth a tax-cut or tax-hike proposal. The public are looking for being enlightened by journalist commentators. Instead they are for entertainment. Now the main role of left-leaning journalist is ridiculing Trump. That's what Stephen Colbert is doing. Isn't that enough?
As for Bernie Sanders's tax plan, it was the most sensible so far I have seen. It could be tweaked a bit to be passable by Congress. The top rate was only 54.4% on over $10million, not 70% over $10M. If 54.% is too high we could have it at 45%. Very few would object that. It's practical.
The wealth tax of Elizabeth Warren could be 1% on over $100M, and a 2% on over $5billion or so, annually. Also suggest to eliminate Estate tax, which would be a big sweetener for the rich.
From a low tax climate, if you propose too high taxes, there would be too much resistance.
Let us phase it. Rich are rich largely, not entirely, because they're smart. They have ways to fight these things, which're unbeknownst to you.
5
"Really big spending plans, especially if they don’t clearly involve investment — for example, a major expansion of federal health spending — will have to be paid for with new taxes. "
Surely expanded health care is an investment in the well-being of the nation if only as employees. Healthcare for all will pay for itself by reducing lost work across the nation.
https://www.cdcfoundation.org/pr/2015/worker-illness-and-injury-costs-us-employers-225-billion-annually
Remember the 50's? We have to get over this addiction to low taxes on the rich. Norway has universal health care and free college. And a trillion dollar sovereign wealth fund. Their future looks pretty rosy. And talking about a green new deal, Norway burns so much garbage to produce energy that they have to import it from other countries. Tell me again which country is exceptional.
https://www.theguardian.com/environment/2013/jun/14/norway-waste-energy
The first order of business has to be on raising taxes on the rich, the corporations, and the near rich. This would include folks in Paul Krugman's bracket.
@John Engelman
And I'm sure Paul Krugman wouldn't object.
2
The website “usdebtclock.org” lists our Federal debt at $21.97 trillion. Our current population is 325.7 million. That’s $67,455 of Federal debt for every American, or $269,820 for a family of four.
By all means, Congress, just keep adding to that debt - and while you're at it, give the obscenely wealthy another well-deserved tax cut. I'm being sarcastic - this debt problem is obscene, and I cringe thinking of what we're leaving to our posterity.
With Krugman's astute remarks in mind, it's striking to see the companion piece by Steven Rattner (https://www.nytimes.com/2019/02/11/opinion/debt-tax-democrats-presidential-elections.html?action=click&module=Opinion&pgtype=Homepage) arguing that our national debt is a huge big deal.
Rattner, a long-time Republican, argues that now, all of a sudden, we cannot afford to invest in big initiatives. Because, of course, all the previous money was spent on stock buybacks and manufacturing automation to put more human beings out of productive employment.
By the way, Rattner was an advisor to the Treasury during Obama's administration. Obama was really a centrist Republican in his economics.
Krugman is right, of course. We have the means to initiate an economic recovery that would put millions to work, reinvigorate domestic industry, and green the economy.
But the economic currents continue to flow in the direction of big capital, quarterly thinking, and making humans obsolete.
Rattner is a shill for Mnuchin; it's not about the debt and it's never been about the debt. Except when Republicans can claim that one or another actually useful projects is impractical. Because, you know, the debt.
But, with so many ordinary Americans deep in debt, I can see how complaining about the debt would resonate with the a segment of the public; they actually feel the pain of debt. They just don't see how they have been double-crossed by prior Republican actions.
1
Paul, not to worry, the Administration may appear carelessly indifferent but it is at least clearly concerned about the impact on costs and revenues of all its executive orders, as it publishes a frequently updated series of reports, freely available on the Office of Management and Budget website here: https://www.whitehouse.gov/omb/information-for-agencies/executive-order-budgetary-impact-statements/
See how it gets assiduously updated at least once a month?
Oh wait, the last update was in October?
2017??
1
Tax cuts have led to more revenue. in the 1980's, Federal revenues increased by almost half a trillion dollars. But, deficit spending outpaced increased revenues. Spending was the problem then and is the problem now. No matter the tax level, it is immoral to add debt to generations unborn. Future generations are being taxed without representation. We have to be the shortest-sighted people on Earth. And the most selfish. It is a stain on both parties, and always will be. When the bill comes due, it won't be a political problem or a class problem. All will suffer.
1
Spending or deficits only matter when the rich are not the first at the trough.
Nobody whines about giveaways to Billionaire team owners or corporations like Apple and Amazon that have money to burn. Nobody much whined when the Fed created $16 trillion out of thin air and loaned it for essentially free to banks here and abroad without the consent of Congress or the President- you can read the list in the GAO's Fed Audit. Nobody whined when we bailed out General Motors, General Electric, AIG and a list of other longtime contributors to politicians fighting any help for working people.
But we are supposedly a capitalistic society? Right? I guess that is why the Yankees & Mets could not afford to build their own stadiums...
http://www.fieldofschemes.com/documents/Yanks-Mets-costs.pdf
The scam is socialize the costs and privatize the profit.
We can afford the Green New Deal. Not sure we can continue to subsidize the idle rich.
1
Bravo, yes, absolutely right.
Democrats should clean up the debt through investments that provide jobs which will then help spur the economy. We are squarely in a new "Gilded Age" and a correction must come.
I truly hope the Dems do not feel they should clean up the Republicans mess this time around. Be bold and a truly humming economy will do that work for you.
1
Again, not a peep from Krugman about using the trillions in U.S. land values to build infrastructure and other big ticket items in the Dem's green new deal. It's OUR money and we let it go as if it were so much hot air. It's the opposite of debt.
Well, here is the difference. For Republicans, their rationale, as Paul Ryan always told them, is that it is their own money that the government is letting them keep with a tax cut. If deficits are run up, so what, wealthy Republicans are not on the receiving end of benefits from Government Programs. And the government can keep its hands off of my Medicare. The rationale also ignores the text of the 16h Amendment: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived".
For Democrats, they would spend the tax dollars on constituencies and this is considered bad form to run up a deficit spending some one's money on someone else. Redistributive Democracy they call it.
The wealthy Republicans, which is by no means a tiny minority of them, are however, very short sighted with this. They cannot long be secure in their wealth by bamboozling the poor Republicans into opposing the poor Democrats. Sooner or later they will all figure they are poor together and come after the tiny minority of the well off.
The best security is the old security for American wealthy people. It is to use their wealth to promote a strong middle class, something to which the poor can access and something from which a person can become wealthy. Economic mobility. The 99% will buy into a system that works for everyone, not just the top 1%, and they will not buy in to a system that leaves them on the other side of a wall of privilege.
It seems in 2019 many of the people we used to call conservatives are no such thing. They're just right wing.
1
As I read the comments here, many of which I agree with, I wish Dr. Krugman or some other policy wonk would simplify the medical coverage debate by doing the research and comparing two numbers: 1) what is paid into the pot now through Medicare, Medicaid, what employers pay for premiums and private parties pay in premiums and anything else I have forgotten, and compare that to 2) what the research says we would pay for Medicare for all. If that is oversimplifying so be it. The American electorate needs simple, especially Trump supporters
@sierrastrings
Agree, that data is essential to the debate, but it far from ends it. I shudder at the thought of giving government control over something as big and important as our entire healthcare system. Our government is a terribly inefficient manager AND is heavily influenced by politics. That means whatever we get from healthcare today, we will get less of it at a higher expense if the government runs it.
The truth is, we spend far too much on healthcare today as a society. And there are only two solutions: (1) rationing (whether forced by gov't or by personal spending constraints); and (2) major technology and efficiency advances.
Obviously, I want as much of option (2) and as little of option (1) as possible. And the only way I see us achieving (2) is through market-based competition and innovation.
1
@sierrastrings There are may ways to look at this.
However, the Federal government already pays for about 60% of all US health spending through Medicare (old folk have higher medical costs; when renal dialysis threatened to break the private insurance bank, MCR took it over) Medicaid (70-80% of Medicaid $$ goes to pay for old, sick people in nursing homes, only a small amount for poor young people) and tax deductions for employer-paid health benefits.
Canada, the UK, Australia, France, Germany, Norway, etc., pay the *entire* cost of health care for their entire populations-no copays, no deductibles, better results- for 50-60% of what we pay. We could completely replace our current system with no new taxes, eliminating all current private premiums.
Of course this would create massive disruption in the insurance, drug and big health 'system' industry, who have raised extracting profits to a high art. They don't want to lose their profits. It might be easiest to buy all the insurance, drug, and hospital companies.
About 30-50% of what we pay now goes for billing overhead waste: 30% in hospitals, ~50% in primary care, ~40% in high-paid specialties, plus ~10-20% on the insurance side, plus unnecessary care.
With the money OECD countries save on medical spending, they finance a comprehensive social network that means no one has to go hungry or live under bridges. It's cheaper to do what's good for all.
The money is there. What's lacking is the will.
@sierrastrings
Medicare is a bureaucratic costly mess. It is run by the same low education "can't be fired" government employees that bloat up and make most of government costly and inefficient. There are endless instances of normal, sane and healthy Americans who at age 65 were required to sign up and buy Medicare but whose health and finances then suffered - along with their sanity in having to battle Medicare. It is a consumer nightmare. Most Americans are not prepared for how awful it is until a government gun is stuck in their ribs, forcing them into that tunnel with no escape but death.
The GOP's philosophy continues to be - to explode the debt so that Social Security, Medicare, Medicaid will be eliminated. Their chants of fiscal conservatism are a cover for the achievement of their goals. That they misrepresent themselves, telling us what they know to be false, in order to reach their goals, is the one consistent characteristic of the GOP. It is why Trump joined their bandwagon, he also will say anything-no matter how false- to get what he wants. The ends justify the means.
1
The whole 'govt. revenue' side is anti-GOP, they would rather pay less taxes and pay more to private insurance companies for example. They believe private insurance companies would create more competition. The democrats need to address this. (just expand Obamacare which is already the answer)
Your last paragraph says the Democrats should be more ambitious. How can they do that if the Republicans have already run the deficit over a trillion? The Dems then have to work on reducing the deficit to reasonable numbers. The double jeopardy is if the economy is also in recession. Then the Republicans say to cut social programs more, right?
There are many Republicans who care about deficits, regardless of which party holds the presidency, but not nearly enough of them with the courage of their convictions. I believe that Paul Ryan's inability to get deficit cutting measures passed was one of the main frustrations that led to his leaving Congress. Expanding deficits will come back to bite us, whether it comes from tax cuts or excessive expenditures. At the very least it limits our options to respond to a financial crisis and saddles the country with unproductive debt service obligations. At worst, it could lead to economic stagnation (Greece) and runaway inflation (Venezuela). Just as we are doing with our abuse of earth's climate and resources, we are robbing the future for the sake of our comfort today.
@PWR Hard to believe Ryan was a true deficit opponent when he pushed the GOP tax cut!
It's hard to believe Mr. Krugman actually wrote this article - he could care less about our children's future.
He basically said, because Republicans don't care about the deficit, the Democrats shouldn't.
I still can't believe it.
The U.S. debt stood at approximately $11 trillion when Obama took office - when he left office, it was just over $20 trillion - it had doubled in 8 years.
We now have a $965 billion dollar deficit this year - and projected deficits for years to come.
Why doesn't Congress care about the deficit - or the approximately $340 million in interest our tax dollars will spend this year to service that debt? Because there's nothing they can do.
To balance our budget would require massive cuts to our military and other departments - mostly the military -which actually, is desperately needed.
However, no politician, none, will campaign on cutting expenses and balancing a budget - it means cutting jobs.
We're on a road to a monetary and financial crisis as US debt now exceeds our GDP - in addition, we have hundreds of trillions of unfunded pension liabilities....no one's talking about....
..but Mr. Krugman says, toss it to the wind - who cares
I care - my children will someday be living in a Country which has borrowed beyond its means - the cost and consequences of which, are yet to be seen.
It doesn't get easier to stop the spending or the balance a budget - it's gets harder and harder.
I despise the author for trivializing this subject.
2
I am not sure the "new taxes" trope applies to some big ideas like Medicare for all and free education. It is simply the transfer of our money from private enterprises that fatten their bottom lines and pay millions of bonuses to CEOs to where it can really make a difference helping people with problems and benefiting all of us.
1
A few days ago I went to the drugstore to refill a prescription. Instead of the usual $4 charge, I was presented with one of $204. What happened? Well, with the new year I'd been shifted to a new coverage card (I'm 78) not yet entered in the drugstore's computer. After a few minutes' wait, my account was updated, and I paid my usual fee. But what I realized in the interim was that the government was paying hundreds of dollars for my potassium supplement, and probably the same tremendous markup on two other medicines my pill-happy doctor routinely prescribes.
I pay over $20,000 in state and federal taxes, but a good deal of it is going right into the pockets of the drug companies. I'm glad not to have to pay it - and feel sorry for those who are not covered by Medicare prescription insurance - but this is an enormous swindle by the drug companies, and there are far worse examples than mine. Get capitalism out of the health industries, I say, or at least control their profiteering and downright greed.
1
@Robert Crosman, that must be some fancy potassium supplement! Why would potassium be prescribed? So you can save the $12 for drugstore potassium? I don't get it.
@Robert Crosman
Robert, respectfully, I take the opposite lesson from your experience. The market is prevented from driving efficiencies in healthcare because of the lack of price visibility and individual control. I doubt anyone pays $204 for your drug, including Medicare, because Medicare and all the insurance companies negotiate lower prices.
But that's the problem, it is impossible to determine the real price or cost of anything if you are an individual. We need MORE market forces, not less. I think if we can continue to go more towards high deductible coverages, with more money put into health savings accounts, that will drive us toward more individual control, more market competition, and more efficiencies.
If, on the other hand, we give the government control over everything, we'll never get a more efficient allocation of healthcare resources.
@deb
OTC slow release potassium used to be a prescription drug, but was taken off the market because it made holes in peoples' small bowels ('bowel perforation.') The same pill was reintroduced as an OTC.
And 1 of every 30,000 people taking Valerian develop fulminant liver failure and would die without a liver transplant and lifelong immune suppression.
OTC or herbal does not mean, "safe."
Politicians have decried deficits as long as I can remember. Even Krugman uses that issue when he doesn't like some policy such as Trump's tax cut. If the Democrats were to endorse a tax cut for the middle classes that doubles the deficit, does anyone doubt Krugman would praise it? Or a "negative income tax" to lift up the poorest and quadruples the national debt?
The national debt is a political football, with little to do with the lives of average Americans. Politicians who increase the deficits to help their own contributors stand to win. Thus, we can safely predict the ever increasing national debt -- it's a bipartisan issue.
7
Don't overthink it, Prof. K. The scolds are operating based on this simple principle: deficits and taxes are bad, so we must cut taxes and not waste spending on the 99%. The poor and middle class are not entitled to their entitlements, that money is for reducing deficits and thus taxes.
1
“Scary brown people” is a psychosis that lives in the minds of about two thirds of non-Hispanic whites. As a Latino, I’m actually twice as likely to be victimized by a non-Hispanic white than the other way around. The facts have to get out there so that we live in reality, not make-believe land.
2
At least he doesn't restate his view the all economic conservatives are racists.
1
@john fisher, well, kind of. An 'economic conservative', implies frugality. This is the term you choose for yourself, and you like how it sounds. IF it were really true, however, you'd have something to argue other than insults. There used to be fiscal conservatives; my dad was one. But never, never, never would my dad talk about imaginary brown hordes at the border to make a case for fiscal decisions. Soooo, yes, current republican case for WALL is racist.
You like your labels, but never think you have to explain what they actually stand for. If you did, you'd end up in the corner, wailing about "them" taking your stuff.
I predict, that the National Debt [“ND”] will keep rising, and rising, and rising...
—
Until?
—
Financial Doomsday—
...That is, until those other nations who are, donating cash of their own, to “finance,” our debt [ *adding* to the total(!)] decide that they've had enough...
—
And when they’ve had enough? “We, the People,” will be left *alone*:
1. Buried under a *mountain range* of debt,
2. With absolutely no means of paying it off [read, “reducing it, bit by bit”], or even paying the annual interest charges, and nothing else,
3. And not a “financial friend” in the World!
***
Now, let me ask, “When was the last time, that the current year’s ND was less than the previous year’s ND?” [Answer: At or near the end of the Clinton Administration.]
—
...That’s not a good sign...!
—
So you see, “that relentlessly increasing total,” can only indicate that we’re already in my opinion, past the point of no return—
...And that it’s only a matter of time…
***
Don’t shoot the messenger.
We could begin to lower the deficit by restoring the tax rates to those of the Clinton presidency and punish the corporate off-shoring to avoid taxes. Then we could enact good tax legislation that benefits the entire populace.
1
The media has the brains and attention span of a puppy.
1
Please have a word with your colleague ... Steven Rattner’s NYT Op-Ed … Your Grandchildren Are Already in Debt … “It’s irresponsible to pretend that America can add splashy new social programs without finding a way to pay for them.” ... a former Obama treasury advisor, no less.
The earth is not flat ... how many more years do we have to be subjected to this idiocy? When will this "received wisdom" be exposed for lacking real wisdom, besides being dishonestly used in policy discussions.
How about a debate with him!?
1
Give away everything to all!
1
You are very funny man - AOC hits all the right buttons. A scary brown person who is also a Socialist. Oh yeah, also a woman. Triple Crown!
the reason debt was not mentioned at SUTO is because the repugnicans want to reduce the debt on the backs of people who needs social programs...or who want government services that improve the environment, prevent disease, rebuild infrastructure...the tax breaks are "never" the cause for increased national debt.
And how much was this year's military budget - about 700 billion, that's billions. We spend more than, what the next seven countries combined, and still it sucks and sucks out of our economy. For what? Producing even more nuclear weapons even though we have enough to destroy the earth a thousand times over. I know, this is old news, but as a former Marine combat vet, I can tell you that the military is designed to waste money, your tax money. Cut it in half and we would not be arguing about Social Security and Medicare. Didn't the angry white voters new god Trump want to bring the troops home anyway. Just saying...
1
Republicans are illogical, immoral, and unAmerican.
Stop looking for them to do anything good for this country.
2
First off a major investment in government sponsored health care will be met with a sizable decrease in health insurance premiums, which I think of as "taxation without representation". (That meme had some traction some time ago.) Of course that is going to mean a decrease in the huge salaries and bonuses of health insurance executives.
republicans have mastered the act of wagging their little fingers when Democrats are in power because if the policies put forth by Democrats are seen to be benefiting the Nation the republicans will never again see the seats (thrones) of power.
They couldn't allow Obama any victories (he got them on his own) because then he would get the credit. So they obstructed him every step of the way. And by so doing, they obstructed the United States of America from going forward and digging out of the hole republicans put US in.
2
In the case of Republicans, much like their history, their "alleged" policies and ideals have essentially been an unmitigated fraud and the idea of balanced budgets, debt and law and order are at the top of the list. If you want to debate a Republican about debt, just remind them that the LAST Republican President to leave office with a surplus was Dwight D. Eisenhower.
1
We need to simplify this conversation: When any Republican raises the issue of paying for Democrats' programs, the only reasonable answer is, "Oh, shut up!"
3
Higher taxes for everyone now!
1
Thank you Dr Krugman, you rock.
1
While Republican deficit hawks have gone strangely quiet since Trump's tax cuts, some deficit scolds have emerged on the other side. Presidential hopefuls like Bloomberg and Schultz, along with some "moderate" Democrats, keep saying our country can't afford "pie in the sky" ideas like Medicare for all, cheaper college or the Geen New Deal. And I say hogwash. If other countries can provide universal health care without breaking the bank so can we, with a modest increase in Medicare taxes offset by huge savings in private insurance premiums and elimination of all the middlemen that make health care a business. Same goes for college tuition. And I'm all in favor of a wealth tax. Socialism is not communism; a social safety net is simply the responsibility of good government and all those boobs who believe Trump's bloviating about the red scare should remember that Social Security, Medicare, Medicaid, disability payments, Food Stamps etc all amount to democratic socialism, without any commissars seizing private property or the means of production.
2
@Christy
"Pie in the sky"?
As usual, the wealthy don't seem to want to ask the question as to why aren't TRILLION AND A HALF DOLLAR tax cuts mainly aimed towards corporations and the wealthy, HUNDREDS OF BILLIONS to an already bloated military/industrial complex(just ask the Pentagon) are not "pie in the sky".
I think it is pretty clear, if America wants REAL CHANGE in the coming years, people like Bloomberg and Schultz are not even on the list of candidates for consideration.
Thank you, Paul, for doing what we need our economist to do - talk to the people.
I have my suppositions. And my soap boxes. I've been advocating returning to the progressive taxes of old - when America was great - and before Ronald Reagan.
But, I'm not an economist. I was at odds with the Chicago School of Economics when not so many were disagreeing with them. But, I was right, and they were wrong about 'trickle down" Reaganomics.
1
Thanks again Dr. Krugman for making the arguments clear and concise. Enough already indeed. The latest tax cut by Trump and then the shut down of the government by he and his party's refusal to compromise over the money for a wall is a reflection of course of the government by bullying, not governing. Not in our system of government. I never watched, never liked The Apprentice. That's how Trump governs: not by working together toward the common good, but by running things as he wants them. Does he know enough? No one does; he certainly does not as proven time and time again. No one need be silent, awed, or feel calm in his presence with a secure idea that a very good man is taking care of things. We are now approaching $1 trillion in our debt. Dr. Krugman says don't think small, which seems rather the opposite, if and when Democrats are able again. The message is somewhat muddied.
In the Eisenhower era the wealthy were taxed at rates commensurate with their income. America prospered and the infrastructure was improved. Under Nixon the EPA was established and he endorsed Planned Parenthood. Ronald Reagan sought to tear down a wall which divided. Under the Republican leadership of today the Middle Class and poor shoulder the burden of taxes, the infrastructure is not being addressed, environmental protections are being deregulated, Planned Parenthood is reviled, and the president shut down the government in a demand for funding to build a wall between this country and Mexico. Today's Republicans have no moral conscience and no social conscience. Mitch McConnell is chafing at the bit to cut Social Security and Medicare benefits to pay for the tax cut for the wealthy.
The Democrats and Republicans have diametrically opposed points of view about this country. Those who embrace the Green New Deal are looking for social fairness such as universal healthcare, which is absolutely affordable, and addressing climate change which is urgent. The Republicans are now conjuring up fear of socialism as the next big scare to rally their base. They deny climate change in order to accommodate businesses by stripping regulations which pollute our environment. Debt is passe except when it comes to cutting social programs.
There is a model in which both capitalism and socialism co-exist peacefully. The Nordic countries have embraced it, prospered, and all have benefitted
I've seen numerous posts that claim that the Republican leadership doesn't understand what it is doing to the economy or the environment, and I disagree with all of them. I believe that the Republican leadership knows exactly what it is doing; transferring the commons and the future prosperity of America to themselves and their wealthy sponsors. They are not incompetent, they are mendacious.
3
Thank you, Paul Krugman. Steven Rattner has a column in the NYT today - a deficit-scold column -- headlined something about we are putting our grandchildren in debt. For some reason, the NYT did not permit any comments on that column so I couldn't make the obvious points you are making here. Thank you. We need you -- especially on days when Rattner is playing the debt card.
1
"...a “Green New Deal” to acknowledge that it’s very much an investment program, not a mere giveaway...
So, which was Solyndra...
Battery in my AI bot's run down again – you're my plan B for these deep economic questions...
Actually – in a last-ditch move – poured some cheap P80 vodkanol down its fake throat...
You’d think it was rocket fuel – it’s now reciting pi, from the last digit back...
Thank you Great American corn-growing belt...
Only downside to that Amazon-scale public-sector investment – the unintended consequent shortage of cinema popcorn...
Price is through the roof – though neither popcorn nor pharma likely included in your inflation calculation...
Just wait. The massive debt, with the recent big boost from Trump and Republicans, will become news yet again. The right will say the cause is entitlements like welfare, social security, Obamacare, anything that is a safety net.
Their mantra, ”Starve the Beast”, will be the call to reduce payments to those programs.
This is all blatant, reckless self interest on behalf of those who now have wealth. If they were truly thoughtful and informed they would invest in programs that create jobs with pay rates that would enable the poor to emerge from poverty and the lower middle class to thrive. Those groups would then spend more to the financial benefit of those who are now wealthy.
And those programs could be ones that protect our future. Infrastructure and renewable energy come to mind. If the economics are viable, why not employ millions in building wind turbines, or solar panels or whatever gives the biggest return on mitigating climate change?
Instead we have class warfare, the haves vs the have nots and vs even those that don’t have as much.
How fundamentally stupid!
1
Don't forget the Republican mantra, "starve the beast".
The good old fall back position that deficit spending on a massive shock-and-awe scale can bring the government to an economic emergency. (A new nuclear arms race?)
It is then that the wise heads point out the "unaffordable" social programs and "necessary" cutbacks.
This time the pigs decided to fill their own trough directly with the "trump family tax cuts".
Champaign all around!
1
I take issue with the entire premise of Mr. Krugman; namely, that because the Republican party is a bunch of hypocrites (which they certainly are, and that's why they were all against the President before they were all for Him), the Democrat party should be the same. Deficits Do matter. They will undermine the world's trust in our currency as that carrying reserve value. The medicare for all IS a horrid idea (if not for fiscal, than for moral and standard of care reasons - just ask any European who was TRULY sick under their motherlands' system; heck, just ask any women who underwent pregnancy and delivery in England, France, Poland, Spain, Danmark). Krugman somehow, as of late, has become this soundbite guru who throws on the table whatever the extremist liberal wing of the party of the Coastal mandarins (aka the Democrat party) seems to be touting currently. You can do better, Dr. Krugman.
1
I don’t read Krugman as urging the Democratic party to join in Republican hypocrisy.
Note: Unless you mean it as an insult, the name of the party to which Americans who are Democrats belong is the Democratic party. Democratic is an adjective, whether the subject is the Democratic Party or democratic government here or abroad. For example I expect people in Canada, England, and other English-speaking democracies would either wonder what you were talking about or question your command of English if you said they have democrat governments. Ours is supposed to be a democratic government regardless of who is in the White House or Congress. But call it a democrat government, especially with the last and the current Congress, and people would think you lost your marbles. That is, unless you can blame Autocorrect.
The worst offenders are the far right wing of the Republican Congress.
It was pretty clear that Speaker Boehner and President Obama had a long term budget deal worked out that was killed by the Liberty caucus.
Ryan was the worst offender of the double standard. He harped on fiscal responsibility and balanced budgets and was a lap dog to the spend and don't tax wing of the Republican Party.
I disagree that Democrats should abandon fiscal responsibility. One of the reasons there was a blue wave is elderly voters, who are reliable voters, have trended Republican because of a natural fear of deficits are now likely to trend toward the Democrats.
Deficits don't matter until they do. Once confidence is lost the gene can't be put back in the bottle without a huge amount of pain.
Issue government bonds to fund revitalization of infrastructure, develop a comprehensive system of regional light rail and advanced high speed interstate rail. Eliminate the ceiling on Social Security taxes and apply the tax to all sources of income to include capital gains and raise other taxes particularly on the 1% to help fund Medicare care for all, provide college tuition assistance and child care assistance. In other words use bonds for brick and mortar and taxing for social programs. While we are at it, put an excise tax on stock repurchases with a provision to apply it retroactively to cover the period since the idiotic GOP tax cut was implemented.
For the hypocrisy on debt, that was already shown under Bush. Crush the deficit under Clinton, go wild under Bush. There was no reason to take the Republicans seriously about debt and spending _before_ Obama took office. I could never understand why McConnell, Ryan, and the Tea Party weren't just roundly ridiculed every time they talked about it during Obama's terms. But they weren't, which was the same as the media and the public wearing signs saying 'Kick me'. Then Trump came along and gave us what we were asking for.
Dear Paul,
You're absolutely correct. Republicans only care about the debt when they're not in power. No revelation there. Double standards abound.
"You don’t have to agree with everything in proposals for a “Green New Deal” to acknowledge that it’s very much an investment program, not a mere giveaway."
"Investment" means "spending", Paul. You're a Nobel Prize winning economist who has a huge interest in climate change. But you haven't written anything to show us how this "New Green Deal" would work. Your silence thus far is revealing.
Enough!
We should refer to the parties in different ways: "the way they are": The Republicans like the "Hypocrites"; and the Democrats as the "Janitors", because after the financial mess and debt in what the Republicans incur under the flag "of reducing the debt, like Reagan, they increase it substantially
Clinton reduced the debt produced by Reagan and Bush Sr. and produced surplus in the budget; destroyed later by Bush Junior and producing the "Great Recession ": then Obama came and fixed it. Clearly Democrats are the "Janitors", cleaning Republican messes in their administrations.
Now Trump, following the best tradition of the "hypocrites", has again increased the debt by trillions, benefiting only the 1 %. This guy is going to inherit a financial debacle in 2020... if he lasts that long in the presidency.
It seems that the marching Republican song is "Borrow, borrow, the Chinese are ready, awash in dollars."
1
Fool me once, shame on you. But fool me twice, shame on me. For the past 40 years Democrats have allowed themselves to be tricked by Republicans. As Paul Krugman correctly says, Republicans have ranted and railed against huge deficits whenever Democrats were in power. But as soon as Republicans took over they ramped up the deficit. Then the Democrats, always trying to show how they are good citizens, would transform the Republican deficit to a surplus.
Let us hope that Democrats have finally learned that lesson and not allow Republicans to trick them into scaling back their bold and progressive plans. Because unlike the Republican tax cut, the Green New Deal will help everybody.
1
Inflation is under control, there is no danger in having gone off the gold standard, we can just keep on printing money...BTW in 1971 I purchased my first car a brand new camaro..price $4449...and went off to a NYU...tuition $ 8,500 per year. ..Inflation is under control, there is no danger in having gone off the gold standard, we can just keep on printing money
1
This and every other column I have read on the subject soft pedals the reality of the early Obama years and his tackling the Great Recession. It had nothing to do with abhorrence over deficit spending and everything to do with "that black guy is going to steal your money!" If we do not deal with that -- and significant portions of the Republican base view liberals in general and the Democratic Party specifically as "the party that serves black folks" -- then this stuff never ends.
1
I think the Libertarians should move out to the Libertarian utopia: Somalia. There, they can enjoy the wonders of laissez faire, where piracy and sacking are the rule, the whole thing resembling more a Pirates of the Caribbean movie than a real country.
2
"Kenneth C. Griffin, a hedge fund billionaire with an estimated net worth of $10 billion, added to his personal real estate portfolio last month by closing on a $238 million apartment on Central Park South. " How many homeless people could be housed for a lifetime, with this obscene supposed home purchase? No one, no one should feel normal spending this amount of money on oneself. This Mr. Griffin is a major reason why the polar bears are struggling to survive. Mr. Griffin is why so many black men are incarcerated. Mr. Griffin is why global warming is devouring the earth. We need to move against the Mr. and Mrs. Griffins of the world, fast and hard before we have nothing left to provide the basics for our selves and families.
The matter of debt is the same whether it is the government or an individual.
It is okay to have debt to purchase a house which you will live in for 30 years and is an asset to sell for equity or to pass along to your children.
In the same vein, it is fine to run up debt and to pass it through the years to build roads and bridges that future generations will also be using.
It is unwise to run up credit card debt to buy disposable items and clothes like it is folly to deficit finance tax cuts for the wealthy to buy yachts and “Costco membership” (with a nod to the craven, hypocritical former Speaker of the House) for the Middle Class.
You don’t have to be a Nobel Prize winning Economist like Mr. Krugman to understand those concepts and it only proves how hypocritical the Vichy GOP are when they are shocked, SHOCKED at deficits when Democrats are in power.
No wonder Trump appeals to Republicans. He prides himself on being the king of debt, and tough luck for any suckers who lose out.
Clinton cleans up after H.W.
Obama cleans up after "W'.
And some poor democrat will clean up after stupid.
It took Reagan/Bush 12 years to foul it up, remember the S&L crisis. "W" did a magnificent job in just 8 years with the Great Recession, a real chip off the old block. Now Spanky will complete the job in four years. You got to admit they are becoming more efficient.
Its amazing that when you elect people who are hostile to the concept of government, stuff starts to fall apart. Its kind of like not believing in oil changes for your car and wondering why it dies before 100K miles.
There is no better way to ruin peoples faith in government then to hopelessly foul it up.
It was a good article Mr. Krugman, but you were not expecting rationality from this party, its like blood from a stone
1
Betcha Mick Mulvaney would really care about the deficit if he had to make the payments.
By the bye, isn't he a founding member of a GOP caucus that swore to "starve the beast" and cut the federal deficit?
Guess his fiscal beliefs changed when he become part of the beast.
@CA Native Mulvaney is from SC where we are at the top of every bad list and the bottom of every good list. I don't think Mulvaney gives a flip, just like all the rest of the orange man followers.
Ok, blame Republican hypocrisy, blame media incompetence and hypocrisy - but can't we save a large portion of blame for our large population of credulous and under-educated (by choice) Trumpistas?
“Doctor” Krugman - your opinion on economic matters, for which you have of course trained over several decades, become diminished when you offer paragraphs of hyper-political preamble. I wonder if I will ever read a column of yours which actually focuses on economic issues without hyper-partisan undertones.
3
In a moment of honesty, Dick Cheney said "deficits don't matter. Reagan proved that". People think it started as a Democrat problem, but Reagan was the first one to blow the deficit up.
1
This brings to mind the old rule that the most important guy at the circus (the classic circus with animals) was the guy with a shovel who followed the elephants around to clean up the messes they left behind.
Correct me if I am wrong: didn’t the national debt almost double during O Bama’s 8 year regime? If that is a fact why do the left blame the cons for spending like drunken sailors on shore leave?
1
Maybe you should look at the conditions when Obama took office to find the answer to your patently partisan question. Or perhaps pay more attention to what was said in the column you are commenting on if you are sincerely trying to understand.
Paul, make sure that the large parts of the democratic base and congresspeople learn the insights about debt that you have. Definitely let Steve Rattner know.
This is not just a GOP problem.
declaring bankruptcy 4 times
socializes your losses
Two words:
Gold Standard
@Matt
That would limit our ability to fight a recession, because money in circulation would be limited by how much gold we had in reserve.
Bad idea.
Donald Trump: "We’ve got to get rid of the $19 trillion in debt. ... Well, I would say over a period of eight years. And I’ll tell you why.”
Source: March 2016 remarks during a Washington Post interview
Let’s face it, then we can correct it.......
1) Clinton gave us a surplus, and we would have zeroed out the national debt by now had we just kept daddy Bush’s and Clinton’s tax rates...
Instead we listened to an old goat with his Randian nonsense (Greenspan) and let the GOP dog walk us into their deficit trap with its Dick Cheney economic school of “deficits don’t matter”. This is appearntly shared by Dr K.
2) Even if it is true economically, which l don’t buy, but since I’m not an economist in the sprit of Socrates, l know nothing.
But let’s watch how the GOP politically tears apart these called for social programs in the coming months. They will use the deficit and debt to convince joe six pack we can’t afford his medical care etc.... and joe is going to buy it too.
Our national debt has long passed the point that it could ever be paid down. The only way out is to inflate (Piketty), but besides your own experience at the grocery store “ there is no or low inflation”
This is exactly why the GOP runs deficits. The last thing the GOP wants is a bunch of extra cash laying around that could be used for govt programs. They rather let their cronies loot the treasury
So deficits and debt matter, if not economically then politically
1
For Krugman this is a major step away from the Pelosi and Hillary borgs.
He is cutting that heart on her sleeve “AC” some slack. Could it be because she is cute? Who knows. But he is cutting same slack he should have cut Bernie. And didn’t. And I’d have no use for socialists. But a little good faith to the sincere with their hearts in the right places goes a long way to ending “polarization.”
2
When I read Rattner's piece yesterday, my first thought was that Professor Krugman was going to tear it shreds. Thanks for following through.
The Trump administration rammed through the tax cuts, which as expected benefit primarily the 1-percenters and their $200 million Manhattan apartments, along with corporations, the latter of which used most of it to buy back stock and inflate share prices. When both the right and the left agree that the deficit doesn't matter, that's the time to worry. And now not only is the Fed is afraid to raise rates for fear of more Twitter scolds from Trump, every quarter-point raise will increase the costs to service our spiraling debt by at least $50 billion a year. That's 10 Trump walls!
Even Trump agrees that medicare should be able to negotiate drug prices. If we have medicare for all, then medicare will be able to negotiate for ALL healthcare costs. Imagine that. When you put a 20% cost savings - a conservative estimate from the cheaper prices Europeans pay - you might end up with medicare for all that doesn't cost anything more than it does now. The losers would be the management of healthcare companies and insurance providers who will not do well at all. Sadly, they will have to find a way got get by on their tens of millions they've already banked.
You might get bunnies and candy hearts all round, too.
@Robert - I have new for you: It is going to happen.
There will also be lots of harping on the inefficiency and (blown out of proportion) ineffective sprigs here and there, the “waste, fraud, and abuse,” in all the liberal programs like a green new deal or education programs. There is nothing wrong with wanting the government to be more efficient, but you don’t do it by just cutting the budget. I won’t ever be willing to listen to a conservative harping on the inefficiency and waste in a liberal program until they hold the military to the same standard. Military programs are just as fraught with the “waste, fraud, and abuse,” of any other kind of government funded program. Just like the deficit, Republicans love to focus microscopically on every foible of programs they don’t support and make lots of noise about it. But the ones they like, like the military industrial complex, get a free pass. We aren’t going to cut the military and expect it to magically get more efficient and still produce the great military things it produces. The same should go for other programs. If you want efficiency, you actually have to pay for it, with oversight. So you have to weigh that cost. Like a credit card company that has to be willing to put up with some amount of bad credit because making it too restrictive will actually reduce their profit.
1
Raise Social Security and Medicare contributions 1% and take off the income caps to stabilize both programs. Raise business taxes from 21% to 25%, tax capital gains and stock options at regular income tax rates, raise income taxes across the board 3% except for the top rate -- which should be set at 40%. There's your money to pay for infrastructure, reduce college costs, fund the military, finance government spending and, one would think, reduce the debt. You're welcome.
1
Where was this "let's not get bogged down in details" mentality from Dr. Krugman when he was slamming Bernie Sanders for thinking big in 2016? To be fair, Sanders had some real flaws and was far from a perfect messenger. Clinton was more qualified, smarter, and would have been a better president. But why not just say that? Why did the left's intellectual gatekeepers have to slam on Bernie because he dared to actually campaign on big ticket items like public health care? As Dr. Krugman has returned to informing us, many countries have some form of socialized health care, so it's not exactly a pie-in-the-sky proposal. It's great to have the professor back on team big ideas, but I want to know what motivated the about flip.
1
I hadn’t known that “slam on Bernie,” was the same thing as asking, “Okay, so what benefits will you offer, and how do you plan to pay for them?” Nobody even asked, “So you really think that the half of Americans who get employer bennies’ll really just give them up in exchange for much higher taxes?”
I agree that Republicans have been hypocritical on spending and debt. BUT, even Krugman should know that not all debt is created equal. The debt is a bigger deal in a stagnant economy than a growing one ... which is why economists always portray our deficits as a percentage of GDP. And so as much as I agree that Republicans have been irresponsible in enacting tax cuts without offsetting spending cuts, the tax reform and deregulation has unquestionably led to faster economic growth.
In an effort to provide an unpopular opinion (on these pages at least), I am not ashamed to say that I believe, in general, that lower taxes and less regulations are worth making responsible cuts to social spending programs. It is not because I am rich (I am not) or care about protecting the rich, and it not because I am uncaring for the poor and needy (I care very deeply).
It is because I believe that a healthy private economy provides more opportunities to more people in the way of jobs, economic mobility, innovation, etc. than government programs do; and I have witnessed too many examples where government spending and taxation have led to economic stagnation, high unemployment, and less economic opportunity. Many of the great European states are perfect examples. Spain's unemployment rate is above 15%, France's and Italy's are both above 9%, and all of those are at least 5 year lows.
1
No....I think we learned our lesson about pushing through major policy changes without knowing the details after the roll out of Obamacare. While I'm a huge supporter of the Affordable Care Act, it is filled with flaws that make it not affordable to people who don't get large premium subsidies. Congress has access to what people earn,,,they get the statistics from our income tax returns. And yet they decided that these high deductible health insurance plans, with very pricey premiums were "affordable", when in fact people are struggling with the cost of family policies and co-pays and deductibles. So I cannot agree that the voters should blindly accept these new programs. Show us the details. Show us the costs. Otherwise, no. We won't vote for this.
There are two types of HDHPs: “catastrophic,” plans meant for younger people in excellent health who just need a backup, and those that come with an HSA allowing you to save the deductible if you don’t use it.
Which do you mean?
The maximum deductible was around $5,000; then it jumped to over $6,000 and then it jumped to over $7,000. When you make $40,000 per year, the $600 per month premiums plus your co-pays and deductibles if something serious occurs can be financial disaster. I know 2 people who became seriously ill in December, and reached their 2015 deductible; and then reached their 2016 deductible in January. They had to make monthly payments to the hospital.
I have to wonder why employers are paying for health care. These are people who shed excess expenses whenever they can, and who are famously good at getting the government to do their bidding. You'd think their lobbyists would be tripping over each other to push legislation to get this expense off of their books. But they aren't.
Could it be that they value the control it gives them over their employees even more than the money they spend? Think of how many people have stayed in their current job instead of striking out on their own, just to secure medical care for their family.
Corporations must be getting something that they value for all that money they're pumping into the medical economy. Otherwise they would have quit doing it decades ago.
3
Another good, insightful column from Paul Krugman. When Obama was elected for the first time I though "will he appoint Krugman and Stieglitz to top economics positions?" That will probably tell the tale of his presidency. Disagreeing with a knowledgeable authority like Paul Krugman can be a learning experience. Spending on health care in a Medicare for All program also means controlling bloated health costs, one of the warping influences on our economy. That would set us on the path to a balanced health care system, and that is one of the things we desperately need. So I'm with Bernie on this one.
3
Stock market trading with the sole aim of making money and holding it or using it to trade up for more money is not investing in the sense that Krugman is using it here. The media attention to the stock exchanges, the DOW, S&P, etc. elevates their value to the real economy and has little to do with economic growth that is of benefit to most of us. Investing for the betterment of the future for all involved is the real source of strength and growth. If we need to borrow in order to make real investments, we should.
2
Republicans are only concerned about spending and deficits when Democrats are in charge.
1
"And many centrists have turned out to have a double standard, reserving passionate concern about debt for times when Democrats hold power."
See, for example, Steve Rattner's opinion piece the other day.
Traditional fiscal conservatives believe that government interferes with the private economy and free enterprise in mostly unproductive ways, and so they prefer smaller government and less taxes and regulations. Traditional liberals believe that government is necessary to support the needy, provide public benefits, and promote equality in society.
Both ideological perspectives are rooted in good faith beliefs in what is best for our country, AND 99% of Americans believe a little bit of both.
THE PROBLEM is that modern Republican politicians seek lower taxes and less regulations without requiring any sacrifices in government benefits or spending. And modern Democratic politicians seek greater government benefits and control without actually requiring the higher broad-based taxes required to pay for them (sorry, just taxing the rich won't pay for the programs that are already underfunded).
Both parties are full of massive hypocrites. For once, I am open to a third party solution. I almost hope that Republicans go with Trump again and Democrats go with Warren or Sanders and there is a genuine opening for someone like Howard Schultz. At least he seems intellectually honest, which is more than I can say for most politicians (or opinion columnists).
1
@Econ101
In my opinion, your viewpoint is in the same category as both ideological perspectives that you deplore. The right answer is almost never in the middle. There are some things we should leave to or encourage in the private sector and other things that must be done by the public sector. Ideological blinkers, including "centrist" ones never help to resolve these practical problems.
1
@JMcF
Don't get me wrong, I am not a centrist. I fall squarely on the free enterprise, smaller government side of the ideological spectrum.
BUT, I am not a purist thinks government has no role to play. I think most of the New Deal programs and Civil Rights legislation were necessary and should be preserved. In many cases (overtime rules, child labor laws, Social Security, collective bargaining laws, anti-discrimination laws, etc.), I think the government helped to preserve and advance our free market economic system.
So in that sense, I am somewhere in the middle between the two extremes (as is just about everyone else), though I am definitely more wary of government crowding out free enterprise and economic opportunity than I am of capitalism disadvantaging the poor.
BUT I also try to be intellectually honest about the trade offs and about the motives and intentions of those who disagree with me ... which I don't see enough other people doing today, on either side.
1
How about Republicans, Debt and Double Standards? That would have been a far more appropriate and on-point headline.
The GOP has long used the boogey man of excessive debt as a back door way of forcing spending cuts to social safety net programs, while preserving rate reductions for corporations and the wealthy in return for campaign contributions. Trump's tax "cuts" are merely the most recent example of this.
So many issues latched on to by politicians of all stripes are cynically exploited in the extreme simply to stay in office. Deficit spending is only one of those, albeit having been relatively salient for a good number of years.
It's little wonder that so many Americans feel alienated from their government and its leadership, which goes a long way to explaining the popularity of Donald Trump and, yes, Bernie Sanders, even though they seemed to be at opposite ends of the policy spectrum.
If, and when, politics stops being a game of three-card Monte, we might see responsible governance. My guess, however, is that expecting that to happen is like waiting for Godot. Samuel Beckett would be proud.
America has always had its finest moments when it dreamed big and acted boldly and ambitiously. Would cautious bankers or accountants have backed the Revolution, the abolition of slavery, the transcontinental railroads, the New Deal, World War II, the interstate highway system, or the Apollo program? Yet each of these extraordinarily costly and uncertain events and programs generated far more revenue than they cost in the long run - often mostly through unanticipated at the time peripheral benefits and consequences. History shows that, more often than not, dynamic forward looking and forward moving countries create the wealth to finance their projects while timid and reactionary societies fail to even survive. Let's be optimistic and invest in health care, infrastructure, education, science and other audacious goals that have the prospect at least of big long term payoffs for the American people. Or we can just continue to squabble over who gets which piece of the existing pie as we have for the past 30 years or more.
3
I care very much about environment but you really lost me here if your idea of of a good plan is the no-plan green initiative, just a declaration of the intention to solve any imaginable problem from the top down.
2
For once, I agree with Krugman. Republicans have been deathly silent on the debt since Trump took office, and I find it disgusting.
I am pleased with the performance of the economy the last couple of years, and contrary to Krugman's assertion, there has been a significant increase in business investment. Wages have also finally ticked up, with real above-inflation gains, while unemployment remains very low. It would be intellectually dishonest not to credit the tax cuts and the de-regulatory efforts for much of that.
So the question is now ... what next? After the last major tax restructuring under Reagan, Bush 41 and the Democratic Congress brokered a deficit reduction budget deal (including tax increases and spending cuts) that paved the way for an essentially balanced budget under Clinton. I would love to see that again.
I would also love to see the Democratic party shift its focus toward improving the existing social programs, making them more efficient and effective, and improving their balance sheets so they remain viable for generations to come. Most Americans don't want another, even bigger, restructuring of our healthcare system (despite what the insta-polls may say), or a Green New Deal, or free college for everyone ... especially when we see our current programs running so heavily into the red.
Give me Howard Schultz and the promise of some bipartisan efforts at responsible governance for a change.
2
@Econ101, you had me till Howard Schultz. The last thing we need is another businessman with no political/government experience to take on the highest office in our fragile country. Also, let's be honest-- Howard for all his smarts and skill is greedy. That tiny number of people who have amassed most of the wealth in the last 40 years are voracious in their desire for more. We really need either an FDR style rich person who understands that spreading the wealth helps us all, or a not-rich guy like Eisenhower who understands the power of government to do really great things, and "gets" who should contribute the most to make those things happen.
1
@Karen
I haven't heard enough from Schultz to have a firm opinion on him yet. But I like his personal story a lot, having grown up in the NY projects, worked hard for a good education, and then grew one of the most successful companies in the world. And I like the common sense he has been talking.
I don't see how he has been especially greedy. I think most of his wealth is in Starbucks stock, so his wealth came as his company succeeded. And he was a more than responsible employer, with generally very happy employees.
I also fail to see his business success as a disadvantage. The similarities between Trump and Schultz pretty much end at their net worths. What we need is a leader, and I think we're more likely to get that from someone who ran a successful business than from a career law professor (Warren) or a career politician. A good chief of staff can solve every political shortcoming that a non-insider president might have.
Well, if one thinks that creating social equality should be the main goal of any government, he or she finds the way to get it done, including the use of deficits along the road.
3
" But interest rates are still very low by historical standards — less than 1 percent after adjusting for inflation. This is so low that we needn’t fear that debt will snowball, with interest payments blowing up the deficit."
Call me skeptical on this. Trump just beat down the Fed chairs to keep them from raising the interest rate a quarter point.
If/when interest rates return to historic norms the interest on the debt will start to increase a lot. And it is already on track to eat up $800 billion annually in just a few years.
Add ten years of new trillion dollar deficits to the debt heap along with higher rates and what? Bob's your uncle?
We need at least a two party system. There's no question about that. But both parties have to be "working". One of the obvious ways we can see this is through the ongoing debate about taxation.
While I definitely agree that the billionaires and multi-millionaires need to be taxed at a much higher rate, taxation in and of itself needs severe critique - all the time. The government must be held under the microscope. The problem is that, yes, Republicans have collapsed fully into the party of the very rich and the conned. There's no middle ground.
The Democrats have the right policies, the right attitudes, and the right programs to build the country while lowering the debt. Its been proven without doubt over the last 35 years or so.
Who is taxed, how much, and how that collected money is spent remains the single biggest problem in the United States. The Republican Party in its current form is fully incompetent at handling that awesome responsibility.
1
@David Kesler: I agree with most of what you say, but I cringe when I hear people say that the Republican leadership is incompetent. They are not incompetent, they are mendacious. They know exactly what they are doing. They are transferring the common wealth of the United States to themselves and their rich sponsors with the full knowledge that they are sacrificing the future for everyone else. They care more about themselves and their wealth than they care about us or the environment.
1
Paul, we do need a green new deal, and fourth-generation advanced nuclear reactors should have a big role in it.
Our government, undoubtedly coerced by the fossil fuel industry, has buried promising advanced reactors like GE-Hitachi's PRISM reactor can CONSUME and DESTROY nuclear wastes rather than PRODUCING nuclear waste.
PRISM is the perfect waste-to-energy system that can produce the massive amounts of safe, clean affordable electricity we will need to effectively combat Climate Change. Check it out. Google and see for yourself.
PRISM is the most promising solution to Climate Change that exists today. It needs government funding to get the first commercial-scale PRISM plant up and operating. From there, I am confident it will sell itself to utility companies around the country.
2
@Bobcb
Nuclear power cannot exist in a market economy because it is an uninsurable risk. The damages from the Fukushima disaster so far are estimated at $172 billion. The cost just to the government of Belarus over 30 years from Chernobyl (which is in Ukraine) totaled $351 billion in 2017 dollars and . The cleanup cost at Three Mile Island totaled $2.84 billion in 2017 dollars. The Price-Anderson act limits the total insurance protection to $375 million plus $111.9 million for each operational reactor, which currently comes to a little over $12 billion.
Aside from the possible immediate damages, the other problem is the cost of storage and supervision of nuclear waste. Pu-239 has a half-life of about 24,100 years so need for the containment and protection of this most dangerous of the waste products will continue for hundreds of thousands of years. Recycling spent fuel from Uranium reactors into MOX and using it to fuel thermal reactors, as they do in France, does not reduce the Pu-239 since as much is created from the Uranium component of MOX as is consumed from the Plutonium component. In addition only one-third of the fuel is MOX and additional Pu-239 is created from the other two-thirds of the fuel.
A strong enough victory by Democrats in 2020 would make it possible to rollback the Trump and Bush taxcuts, which would primarily affect the top 1% of the population and go a long way to paying for the Green New Deal and single payer healthcare, which would affect the vast majority of the population.
1
The amount of interest paid yearly to maintain the Federal debt is projected to touch almost $400 billion in fiscal year 2019. This amount will climb annually as deficit spending continues and interest rates rise. If current trends continue, annual interest payments are projected to reach $900 billion by 2028. That is more than what we pay for the military now (which is more than the rest of our five largest competitors combined). We can speak in visionary terms about what is affordable and what is not - The Green Plan, universal free health care, free college education, or a living wage for all (working or not) - but the whole topic will be moot because of the interest monster in the room. This problem is hiding in plain site, and if we don't get a handle on this soon, we won't have money left for pretty much anything progressive, whether it is an 'investment' or not. Mr. Krugman can sprout all the theories he wants, he is entitled to, and the hypocrisy he cites about the Republicans is real. But $900 billion a year? Now thats real money.
2
If you track the causes of US deficits and debt, you find the footprints lead to a giant red elephant in the room: the US military industrial complex spending which dwarfs not just all other US government spending, but half the earth's government spending on human needs.
It is a dangerous world. We do need a military to DEFEND us, but we don't have to have a military to rule the planet as Republicans have chosen to deficit spend.
Reagan decided that we would spend hundreds of billions on space war technology and that we could not afford to provide real vegetables in school lunches. Thus ketchup was called a vegetable and working class Americans' education and economic security were traded for the latest military trinkets sold to the government at a thousand times their actual costs by CEO's who understood Republicans wanted America to be omnipotent.
Fast forward to today. The US has the most powerful military the earth has ever witnessed. Our standard of living has declined. Worker security and earnings have declined relative to the late 1970's. Our life expectancy has fallen below numerous other developed nations. Our children cannot make a living in a world driven by technology without advanced education, but we cannot afford such education. For that matter, even our public schools cannot be funded to adequately educate our children.
We have sold our lives for military might. And it is only getting worse.
3
There are at least three structural problems with economics discourse that work against Democrats. First, the elites don't have a sophisticated understanding of macroeconomics and, therefore, peddle outright falsehoods based on their tribe's consensus view of how the economy works (Simpson-Bowles). If elites don't understand economics, imagine how little ordinary Americans grasp basic economic concepts. People either parrot the views of their tribe or erroneously draw parallels to their family budget. I have a lot of credit card debt. Bad. Therefore, public debt is bad! Journalists, with the exception of course of Krugman, fall back on the lazy he said/she said formula that gives legitimacy over time to zombie ideas. Second, major corporations own most media, which try to heighten the scare factor of economic conditions in order to get your attention -- the pursuit of truth being secondary -- and also happen to benefit from those corporate tax cuts. Third, there's no societal institution beyond graduate schools or think tanks, as far as I can see, dedicated to economics education for the American public. We live in an age of anti-intellectualism in which the pursuit of knowledge, intellectual curiosity and the very notion of truth are suspect, making it hard to have rational discussions about economic policy. All of this produces a fundamentally irrational dialogue. I don't understand really how intellectuals, like Paul Krugman, can take it.
3
Republicans are about me Democrats are about we. This pretty much sums up all their respective policies and plans for the future of America.
1
Ha, ha, ha...Doc the rich don't care about Public Debt, they have no reason to wring their hands over something that doesn't interrupt their partying. They don't even seem to care about Private Debt, as in skyrocketing Corporate Debt. No, it's simply this: Tax & Spend Democrats versus Spend & Borrow Republicans. Only the poor and unprivileged bear the burden of this hypocrisy.
1
And now on the same day, we have Steven Rattner "scolding" us, as usual, on how we're saddling future generations with unmanageable debt, and telling us to take "a hard look" at "entitlement programs" by perhaps raising the retirement age. Prefer Krugman's emphasis.
3
If you can't buy "stuff" because you (the 90%ers) are broke, no one is going to make that "stuff"; hence "chronic weakness in private investment demand"
And who holds the majority of our debt? Why, China of course!
It's a political hot potato created by the Republicans who are pawning it off on Democrats.
Doesn't that say volumes about the Republican geopolitics?
The fools shipped our wealth and manufacturing over to China. I guess we could worry about them as collateral.
Now all that business leaving to China looks pretty stupid, doesn't it Republicans?
1
For any individual American, which is more likely - cancer or Vladimir Putin knocking on your door? Which will help the American economy maintain (or regain) its competitiveness - roads, bridges and airports that aren't crumbling or a bunch of billionaires able to paint the bottom of their swimming pools with gold leaf? Which will keep (return) America to being the source of invention - a broad, well educated work force or 1% of the population being able to send their children to Ivy league schools?
Government's function is to organize the resources and efforts of citizens to permit "life, liberty and the pursuit of happiness" for all, not just those who can afford campaign contributions.
2
Perhaps Professor Krugman would like to hold some PBS
seminars on debt issues.
The general public needs to understand how our government
can improve economically...and The New York Times should
have a PBS seminars or Q&A...before the next election.
We might just end up with a counter to the mess that Trump
has put us in ...if public television played a role in open
discussions ….from ALL political points of view ...
2
Here, here! The hypocrisy of the right has never been so fully embraced. Their president they support at all costs, and there are all kinds of costs involved, is the biggest hypocrite and liar the country has ever seen. Tiny hands down.
"Hardest working," "knows everything about technology," "knows more than his generals," "he alone can fix it," "knows about walls, more than anyone else." The list is long just on a daily basis. He must go.
2
GOP Rule Number ONE : There ARE no rules, for Republicans.
“ the rules are whatever we SAY they are “.
Period.
1
Sure. Everyone knows if you have no debt you’re just as likely to get in a jam as if you have a load of it. Nothing to worry about. Standard economic theory.
You are right republicans never did have the question if how they were going to pay for their tax cut they just did it. I am sick of cleaning up republicans messes also. Lets do what we want and ignore their screams of socialism. For once lets do something for Americans.
1
The debt outrage was the blunt object that the right wing in America used in its Obama-era attempt to beat safety net programs to death once and for all.
For reasons both philosophical (remember Ayn Rand minion Paul Ryan?) and economic (take social security money and give it to private sector, i.e. the wealthy in the form of tax breaks and vouchers), the right is pro life only when it comes to fetuses.
Living old people? Living sick people? Living impoverished people? Crawl off and die -- but not where people living the good life will have to look at it.
1
By happy coincidence, one of your OpEd colleagues (Steven Rattner, presumably a "rational centrist") has a piece on the very same day entitled "Your Grandchildren Are Already in Debt" decrying the horrible debt situation and how we'll never get out of it if we keep feeding social programs. Tax cuts for the rich were mentioned, but not with the implication that they're as big a problem as "entitlements" for the middle and lower classes. Perhaps he's bucking for a Nobel. Unfortunately, his column doesn't offer the chance to leave comments, so nobody can point him to your column. Some things never change.
2
It's funny how nobody ever seems to think about asking what you are borrowing the money for when they talk about the federal budget. In this case, we borrowed more money so that the rich and corporations could have more. Does anybody really think that's the problem with our economy? That the rich aren't rich enough and corporations need more cash? When you can borrow at rates as low as we can, there are a ton of good investments you can make. Education and infrastructure are two of the most obvious. You almost can't fail to deliver value for the nation. Instead we give money to people who have enough. It's almost like the president is a stupid businessman!!!
1
Like AMIs attorney stating that there was no extortion or blackmail threatened against Bezos, Republican threats and statements on any topic has no credibility or consequence. They are the opponents of democracy and the champions of aristocracy, greed, hatred and racism.
1
"Socialism for the rich [and corporations], capitalism for the rest of us."
Why worry about the debt and deficits? The canaille will pay down the debt while the rich and corporations run up the both
1
Sigh. A couple years ago, Republicans agonized that we were stealing from our grandchildren. Saddling them with debt they could never pay. Mortgaging their future!
But now that's ok.
1
The Washington Post is reporting that individual tax refunds are coming back 8-percent smaller than last year. So the Republicans were paying for their corporate and high income give away on the backs of the little guy! This should hurt his “tribe” in two ways, one - being lie to, and two - reducing their much needed money. The deficit matters to Republicans but who pays for it matters more! Happy election season.
1
@Cooper Freeman All they see is the smaller return, not the overall benefit.
I'll refine my prior remarks;
As you know, China holds most of our debt and through the Decades, the Republican captains of industry, financed by the Republican finance industry, left America to make more money by manufacturing in China.
You should know Republicans that you could lose your businesses in China if the Chinese confiscated them as collateral on any default by our government.
So, now you know it was a really bad idea to abandon America and my advice to you is to return here before you lose your foreign wealth.
They never seem to have to explain how they'll pay for military budget expansions, or indeed wars, either.
I've never heard it come up save for Iraq and Wolfowitz claiming it would pay for itself, without any significant questioning or mockery of it. Wolfowitz paid nothing for this extraordinary lie, nor did journalists who failed to question it.
1
"Look, we've seen this over and over again . . . ." Indeed, we have! And the electorate falls for the Republican lies and hypocrisy every single time! Rather than focus on the lies about the National debt from GOP politicians, let's focus on the gullibility of Republican voters. They submit to this stupid garbage every time. It is soul-destroying to see our fellow citizens so cruelly deceived repeatedly. Civic education has atrophied to the point of abject public stupidity, and Republicans exploit that stupidity shamelessly and repeatedly, because the public allows itself to be hoodwinked.
At first I was excited. Paul Krugman is making another move toward the rational side, but then, I was crushed when I read this:
"Really big spending plans, especially if they don’t clearly involve investment—for example, a major expansion of federal health spending — will have to be paid for with new taxes."
What is wrong with you Lords of the Economic Universe? Your sentence just sets up more columns, TV guest spots, expense account dinners. If you really believe the stories you tell, you will sit down and design a plan for us to get where we need to go. You have all the economic answers, right? And identifying the real rubber-hits-road projects is as simple as asking the engineers who already have identified and quantified them. They will gladly give you the data because they, constantly and universally, work for the common good. So, then you and your brothers in pseudo-science can apply your ironclad, always-right-no-matter-the-situation economic theories and America will be saved. You can say, soberly and earnestly, on TV, that these projects will not increase the debt in a bad way but in a good way. And you should be thrilled, because the debt, which your profession created and has nourished for centuries, and which has always been a big fat lie, will fade away, and you will finally be off the hook.
But you will always have to live with this: “health spending is not an investment.” According to your pseudo-science, investment in people is a bad investment.
The audacity of debt.
So Mr. K., what about the impending recession you spoke about with Bloomberg News in Dubai over the weekend?
1
“Nobody cares,” so says Mick Mulvaney now, about the national debt!
While Obama was president, that was their principal concern. Republican leaning voters along with far too many in the public, were brainwashed by Mulvaney's compatriots about the scourge of burgeoning debt, to resist govt. spending on anything during the Great Recession. Obama still managed to have some spending. Gradually unemployment dropped, economy grew & Obama was reelected.
Now the Spending on a Green New Deal ought to be pushed, regardless of when it would materialize. The public should be aware of it. Besides, polls show even Republican votes are for substantial spending on fighting the climate change.
The low gasoline price is a horrible retardant to actions against climate change. This is a good time to have $1 federal gas to start with & raise at least by $.1 annually until it reaches European level.
Auto-companies are phasing out sedans and producing giant SUVs & heavy-duty pickups. They are a menace. This tendency may not be as bad as when the auto-Cos. colluded with petroleum companies & tire manufacturers to decimate street car-tracts in various towns, to sell their products, back in the 1930s.
This SUV craze must be resisted with high taxation for heavier vehicles to the point that non-rich people couldn't afford them. Only a fraction of the pickups are used for the owners work, to haul materials. Nobody says anything about the phasing out of sedans & small cars.
2
What a cop out. Alexandra Ocasio-Palin’s blithe disregard for detail and/or facts and willful predilection for magical thinking gets a pass from Mr. Krugman. The Green New Deal is notable only for finally whisking aside the curtain on the true agenda of the extreme left: equal outcomes. And Mr. Krugman’s support of its broad goals shows that he shares that agenda.
Mr. Krugman routinely accuses Republicans of lying about their agenda. He is right. But his response to The Green Dream (Nancy Pelosi’s term) is in same vein.
4
Paul: Are you saying that Republicans have been hypocrites about the deficit? I'm shocked .... shocked!
A Great column from one of America's great thinkers.
I would add that If we are to be honest with ourselves, most of the GOP policies the last 40 years have been based on either the idea that the .01 percent should rule America for themselves and their heirs or simple racism. These are the two glorious, steadfast pillars of modern GOP ideology. To get and maintain political power, the only real question for the GOP has been, how to put a secret sauce on this and sell it to the lowest white man and his knuckle-dragging kin. Often to whip up their base, the GOP used the topics of fiscal responsibility, guns, religion, abortion and race, but anti-intellectual, anti-environment, anti-science, anti-facts were used too.
Using these tactics the GOP and sold America the oil wars and the awful social policies under Reagan and the Bushes. However, the GOP could not have anticipated a greater champion of their ideology than the grand wizard himself, Donald J. Trump. If the rule of law is ever applied to this grifter and his halfwit children, the American public may yet understand what the GOP has inflicted on America these last 40 years.
2
It's impractical not to address climate change and income inequality. Climate change catastrophe is a fast approaching cliff we do not want to plunge over. Absolutely -Democrats must be bold and ambitious--it's our only hope.......
The media has learned nothing. Deficits only matter
when there is a Dem in the White HOuse. The Repubs
run up the debt and leave it to Dems to clean up their
mess. Then they howl about the deficits they run up.
Supply side is bunk.. It has never worked and will never
work.
Word
Hey Kids, Talk all you want, but abortion rights are going to decide the next election.
The GOP "pays" for their tax cuts by expecting Democrats to "come to the table" on benefit cuts.
So Democrats should pass their benefit plans, and invite the Republicans to "come to the table" on tax increases on the wealthy. It's what centrist would want, right?
1
This article is good in tying the deficit discussion to how the money is used. For that reason the primary responsibility of the Green New Deal people is to present a clear plan for how they’re going to address climate change and move the country forward. That is a non-trivial task and an opportunity for the Democrats to show the country that they know what it means to govern.
On the subject of governance I’d say this article is rather mild on the Republican Party. The Republican debt rhetoric following 2010 was not just garden variety politics. They deliberately impeded recovery from the 2008 crash to sow discontent for subsequent elections. The hypocritical “balanced budget amendment” was a tool to keep the country poor.
2
We all care about our personal debt, our mortgages and credit cards. But most people don't seem to care about the federal debt. The empirical data proves it, and that is probably why our politicians don’t talk about it much. That's the "double standard."
Maybe it is because each of us thinks the federal debt is someone else's problem. Or maybe because economists are constantly suggesting that having federal debt is okay.
But at what point do we all have to admit, including our most eminent economists, that the federal debt is “our” debt and that “we” have too much of it? Our debt exceeds 100% of GDP, can we go to 200% of GDP? We pay $300 Billion annually for interest alone, can we afford $1 Trillion?
Please Dr. Krugman, let us know our credit limit.
I’m not afraid of “scary brown people”, I’m afraid we are spending more money than we can afford. I am afraid of what will happen when our credit limit runs out.
"Was there the same pushback against Republican tax cuts? No."
Yes, there was! But the Republicans controlled the Congress and the White House and pushback did not matter.
1
@Cemal Ekin Reading this contextually, I believe he's referencing a pushback specifically from the deficit hawks he is addressing in the article. The folks who pushed back against the Republican tax cut weren't the same people yelling about debt and deficit under Obama.
@clinthom
I understand, but he also uses that, linked to the current proposals and related spending. There is no pushback against that from the same people who pushed back against the tax cuts.
I agree - I wish the MSM would at least ask questions about what these new proposals like the Green New Deal and Medicare for All would do before jumping on the "how much will it cost" Republican talking point. Because I agree they never really ask Republicans how much tax cuts cost - or they accept the non-answer of "tax cuts pay for themselves" or a lie like "the Congressional Budget Office has wrong projections, etc."
Hopefully Democrats will take a page from Republicans and use these same tactics - plus they need to find an earnest looking "policy guy" from the mid-west like Paul Ryan to stand in front of a podium with a navy blue binder and claim he's done the numbers and the Green New Deal will pay for itself, yada, yada, yada - "serious" deficit scolds love people like that
4
There are a lot of people here arguing for Medicare for all. I think the people here need to get out of their echo chamber. I have private insurance, and it is fantastic. I never get denied anything, co-pays are immaterial, at most $20-$40, and prescriptions are include. I do not under any circumstances want to give that up for some experiment of universal healthcare. And half or more of the country agrees with me, not you.
2
@DRS
In other words, I'm all right Jack!
#1. #ThanksObamacare
#2. Might be more like 30% agreeing with you. Medicare is VERY popular: "A vast majority — 70 percent — of Americans in a new poll supports "Medicare for all," also known as a single-payer health-care system." https://thehill.com/policy/healthcare/403248-poll-seventy-percent-of-americans-support-medicare-for-all
Yes, Democrats should increase the debt to spend as an investment. We all do that borrowing for education, home buying, etc. But, we should also budget our expenses to pay for the cost of borrowing. Just because Republicans wants to burn the house doesn’t mean democrats should pour gasoline on it. Some one should be an adult to spank the children, like Nancy Pelosi does.
every one of your articles is pure gold. Keep fighting the good fight!
3
@nickgregor Oh, yes! "Pure gold" And Paul Krugman creates a discussion and it needs to be discussed in a time when our country is at a crossroads. And he will continue to fight the "good fight".
1
If politicians didn't have double standards, they would have no standards at all. We the public should not let ourselves be distracted from the underlying substantial questions by the ubiquitous vice of politicians of all stripes. We should work through them, not let them work us.
'The Green New Deal is completely impractical and irrational for a number of reasons besides questions of cost. Unemployment is 3% now, probably an unsustainably low number by historical standards, yet they propose a program that would indeed create millions and likely many tens of millions of new jobs. Remodeling or rebuilding every home in America? Many millions of construction laborers. Universal child care? Millions of daycare workers, who themselves have children who will be watched by another employee.
Where are these workers going to be found? Who is going to do all this work. Are we going to import entire nations and explode the American population by 100 million new immigrants in just a few years? It would be the largest population transfer in history! All of the new works would themselves need housing and daycare and healthcare services etc and so would multiple on itself. It would be an entirely different nation. The civic culture that sustains it would likely collapse here and other nations would be destroyed as if struck by a massive die-off as labor leaves.
The environmental impact would be anything but green. Construction debris alone....
2
It's the same old story: Republicans pass tax cuts for their 1% overlords, run up deficits, suggest that deficits don't matter, and leave an economic and financial mess for the next Democratic president. They will then blame the Democrat and sound alarm bells about the fiscal cliff and that deficits are scary things.
Truth is, the GOP has never cared about deficits and have been craftier at blaming the other side while swindling the American public into believing tax cuts will pay for themselves (same old trickle down nonsense).
I do believe this time is different however, because a vast majority of the American people believe that the wealthiest among us should pay more in taxes as the 1% have taken most of the economic gains since the aftermath of the Great Recession. And if Democrats can succeed at the polls in 2020, they will have that much more momentum to level the playing field in a way we haven't seen in decades. We must vote Democrat
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@Adam
Sure, we must vote Democrat. But our fiscal mess can’t be sorted out by simply taxing the rich more. It might feel good in attempting to level the playing field but other means have to be found, such as a serious look at a national sales tax, curtailing military spending, perhaps a fuel tax. And we’re not even talking about medicare for all, or free university. Or yearly interest on the debt. A complete rethink on how we fund our government is required, as well as how we spend the revenue. Don’t count on only the Dems to figure that out.
4
@Adam The GOP overplayed their hand. They have pushed the pendulum so very far, that it will swing back faster, and further, in the other direction now.
11
@Rick Morris
Well, unfortunately the Democrats are the only folks that have been even minutely close to thinking about the problem and acting on it since Reagan, although GWH Bush did try a tiny bit, because he actually identified voodoo economics as a problem.
So that'w what we are left with: Democrats
1
Debt still does matter. Right now, rich people around the world are parking their $ Trillions in US Government bonds. For whatever reason, rich people think handing their money over to the US Government for safekeeping is a good idea, as long as its not called a 'tax.' Some day, though, they'll want to do more than park that money, and we'll either be paying more than 1% interest, or defaulting.
The 3 problems are:
1. The US Government needs much more than its share of the world's wealth to operate. So it needs to borrow money from wealthy people.
2. A huge fraction of America's wealth is not taxed. This means the wealth not taxed must be borrowed instead.
3. The US Government has been 'borrowing' from the Social Security Trust Fund. It doesn't appear that the US Government has any intention to repay this money.
We criticize Republicans for changing their positions, depending on who's in power. Democrats shouldn't start doing that as well.
2
I never understood how "tax and spend" became this negative label for the Democratic party back in the day. Isn't the point of taxation to spend money on needed services? "Tax cut and spend" was always the mantra that never made any sense.
11
Every time proposals to expand Medicare meet with the knee-jerk response that we can't afford it, it will create huge deficits, I want to scream. Most of us, or our employers, are already paying huge sums for our health insurance. So, instead of paying a profit-driven corporation that has a vested interest in denying us health care (since the less they provide, the more profit they make), we would pay the same or less in taxes and get more for our money. More choices of provider, for example, since if Medicare gets expanded to cover at least half of the adult population, very few providers would be able to refuse to accept it. More clarity regarding what is covered and what isn't, at what rate. If Medicare were allowed to negotiate drug prices (something even Trump proposes it should be able to do), we will get substantial savings, too. Expanding Medicare need not blow up the deficit, and taxes to fund it need not be more than we're paying in premiums right now.
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@Nikki
Agree with this. In addition to the costs of private insurance, add in the costs of auto insurance and workers compensation. No fault with its rules so in favor of the "medical care" provider (and I am not speaking of hospitals but the no fault mill operations/physical therapy/chiropractic facilities that send folks for MRIs a week after the accident, psychological reviews, acupuncture and massage therapy). The outright fraud in No fault in NY is well known as is the fraud in workers comp claims. Imagine if payment for medical after an accident was covered not by No Fault or comp but by Medicare for all or a single payer, the savings would be dramatic on both auto and comp insurance.
30
@Nikki;"Expanding Medicare need not blow up the deficit, and taxes to fund it need not be more than we're paying in premiums right now."
Please be honest about what we know and don't know. There will be a hit to the economy and to people with any such massive change.
Some folks will end up paying more for the same coverage. Everyone is not going to get a "Cadillac plan", which is what some now have.
When people financially impacted by this write in to complain, the history of the NYT and many on the comment boards is to call them liars and deny they exist.
When those same folks impact elections, the NYT says the election was a Russian plot.
3
@Nikki Agreed. The GOP has had 8 years to work across the aisle on ways to lower costs under the ACA. Instead, they cried repeal and replace. The replacement turned out to be tax cuts for the wealthiest, while stripping millions of coverage. No thanks. Dems played nice and were met with unprecedented obstructionism. The time for Medicare for all has arrived.
48
The math does not have to be less social programs equals less debt. Instead it could be less military adventurism equals less debt. Or less billionaires equal less debt. The Republican party has framed the question to make the voters believe the trade off is debt or things we care about, when in fact it is debt or things that are pretty evil.
459
@Ben
A billionaire will always be a billionaire she will just pay more in taxes. That won't substantially reduce his net worth, just his cash flow.
29
@Ben
(((clapping))) - worthy of a shiny cup.
16
@Ben Yes, thank you!
5
What if economists who think that debt doesn't matter are as wrong about that opinion as they were about the effects of NAFTA and the entry of China into the WTO on rust belt factory workers? The retraining promised to laid off assembly line workers in Michigan and Ohio was in all too many cases ineffective and they were left to fend for themselves. Many of them, if they were lucky, ended up collecting Medicare disability benefits after they used up their unemployment benefits. Thousands ended up drinking or drugging themselves to death.
The Germans in WWI didn't think that debt mattered and when the bond market would no longer buy new government bonds at reasonable interest rates, their central bank just printed up more money to cover the government's expenses and inflation took off. By late 1923, the exchange rate between the German mark and the US dollar had dropped to about 4 trillion marks to the dollar and the savings of average Germans were wiped out. When the Great Depression hit Germany with full force in 1931 and 1932, unemployment rose to 25% and many of those out of work and without savings were willing to support a politician who promised to make Germany great again.
6
The Republican economic doctrine has all the trappings of orthodox religion. It's based entirely upon faith, that tax cuts will increase economic activity and thus pay for themselves, and when confronted with the facts showing that their faith is misplaced, the Republicans revert back to, well, baseless faith in order to promote the policy. Then, when the next election cycle comes around, they'll throw out the usual shiny objects, abortion, racism, and other cultural war nonsense, and the cycle will repeat itself all over again.
4
I would take issue with the last paragraph--re health care spending. Medicare for all would mean an increase in direct payments from the federal government, of course, but this is money which is already being spent--by employers and private citizens in the form of insurance premiums, by private citizens in out of pocket costs, by the federal and state governments through Medicaid, by counties for the care of uninsured indigents, and by hospitals and providers for uncompensated care the cost of which shows up in those insurance premiums and out of pocket costs. Taxes can be raised to cover the cost of Medicare for all and all those who are currently paying for health care will likely see little or no increase in outlay.
To be sure, costs will still need to be contained by eliminating fee for service (doctors, of which I am one will hate the idea until they find out how liberating being on a salary is) , by controlling unnecessary treatments and excessive drug costs, and by providing preventative care to those who cannot currently afford it. Medicare for all does not provide anything that is not already being provided or spend any money that is not already being spent--it simply provides care in a centralized, more comprehensive, and more efficient manner.
544
@Jack Kashtan I couldn’t possibly agree with you more. It is ironic how physicians have evolved from opponents to supporters of single payor health care system in two generations.
123
@Jack Kashtan -- so many Republican critics of "Medicare for All" seem to miss (probably intentionally) the point that most all the spending on that is a replacement for existing spending. People who currently have insurance but shift to "Medicare for All" are not increasing their spending by the entire amount - they may in many situations end up spending less overall on health care than they (and their employers) are now. We see critics of this throwing out the phrase "cost $32 Trillion over the next ten years". But they somehow leave out the fact that we will, over that same ten years, spend $30 Trillion *anyway*, if we don't do "Medicare for All". So the net difference is... about $2 Trillion. Which, interestingly, is very close to recent estimates of the amount of increase in the national debt over the next ten years from Trump's "Tax Reform". Had we not indulged Republican's Trumpian tax folly, we could be net $0 of new spending for "Medicare for All" -- and had better health care coverage for every single American citizen. Everyone. I suppose it is just a question of priorities. No question where Republican's priorities are, is there?
229
@Jack Kashtan
I believe it’s worth remembering and adding to you list of money currently being spent the federal subsidies paid to private companies for their health insurance plans. See NYT article from July 7, 2017; “The Hidden Subsidy That Helps Pay For Health Insurance”.
This is a major expenditure that doesn’t, IMO, receive enough mention.
66
Once more, but this time with numbers and reasoned limits. Thank you.
1
All politics is said to be local, and the politics of deficits is no exception. In locations that have significant deficits to contend with, the fear of rising taxes becomes the political fear to be manipulated.
However if deficits follow tax cuts first there is a euphoria which is also good for political manipulation and then there is the dread that the deficits will have to be paid for by someone, preferably not the rich or corporations according to republicans and according to democrats not the poor or middle class.
The New Green Deal can lead to world class innovations in energy and transportation and actually help the global needs for energy and food . Corporations stand to gain that lead in these innovations that will lead to the industrial jobs of the future, thus politicly both Republicans and Democrats stand to gain as the Green Deal stimulates private sector investment ...this in no way should be thought of as deficit creating but as deficit destroying measures...and very much in the spirit of the good things local politics can do !
1
I'm looking forward to a more in-depth analysis from Dr. Krugman of the Democrats' Green Leap Forward. I would think there's enough material for at least several columns.
4
Student loan crisis is a good example of gross debt problem in a much smaller scale. It sounds good and easy to borrow, but it will be very difficult to pay the principle plus interest when time is due. Personally I doubt that we will ever repay those debts due to our nature of spending and enjoyment. Tomorrow will always be there for us to solve the debt problem. Our government is no different from us in terms of spending and doling out favors.
1
@Usok:" It sounds good and easy to borrow, "
And if the loan money isn't made readily available there will be complaints about preventing folks from achieving their full potential.
We've seen a similar thing occur in the mortgage/HELOC business. The money is difficult to obtain - you're discriminating or rel-lining.
The is easy to obtain, you're practicing predatory lending.
I agree with Mr Krugman. You can borrow money ( when interest rates are low ) to either line the pockets of super rich, or to make solid investments for a better future ( infrastructure, education, greener economy, health). It is no different than an individual using line of credit to either party away or make the necessary purchases ( repair something broken in house, education, buy a treadmill for better health etc).
The issue is not borrowing money - but what is the real purpose behind it. Just as any individual, nations also face choices. And some choices are far better than others .
5
The differences in how Democrats and Republicans generate debt is very interesting to me, and I think says a lot about the fundamental character of the two parties, and their members. It seems that the GOP, when in charge, sets policies that reduce revenue while not making corresponding reductions in spending (especially military). They always make a disingenuous fuss about cutting back social programs but all they really do reduce how much money they collect. Democrats, whether you think their policies are effective or not, maintain, or increase, revenue which they then invest (spend) in programs that, hopefully, benefit the population and strengthen society at large. So maybe they write checks they cannot cash, but at least they are trying to generate something tangible, besides smug self-satisfied millionaires, with the debt they generate.
607
@arusso
I've concluded that Democrats believe in government and the discipline of governing. Republicans, not so much.
107
@arusso
I remember when "tax and spend" was the whip with which conservatives lashed progressives.
I never understood why "tax and spend" was worse than "Don't tax but spend."
55
@arusso In sum:
Republican debt for the wealthy -- good.
Democratic debt for the people -- bad.
At least according the the Republicans.
21
I think a big part of the issue here is that the average person really has no idea how much money is spent on the various government programs and how government debt differs from private debt. It’s easy to sell lies to people when they don’t have a good grasp of the facts. I’d love to see the NYTimes do a series of articles (with lots of useful graphics) on government spending.
707
@E (and there you have it)
The country (and in particular the press) deals on almost all issues, in the abstract. We talk about the costs and so on with slide rules, graphics and the like, but not the nittygritty. (or in particular the cost in human lives)
IF we spend x amount on defense, but then only y on health care, then how many people perish ? (or suffer for that matter)
I think there should be an in depth analysis (line by line) of the massive waste that government (all levels) are incurring, but I am afraid we have to follow (at great length) the latest tweet.
The point really....
69
@E
What we need is a graph comparing government spending on social programs as a percent of GDP with growth in middle class wages and improvements in the GINI coefficient over the past 100 years.
32
@E
What we really need is to re-engineer our K-12 education system to turn out financially literate adults ready to assume their very serious civic responsibility to keep themselves informed in order to vote for political leaders who are QUALIFIED for office.
86
Krugman asserts that with real interest rates so low, the debt is not really a problem. That is true at present, but says nothing about the future impact of high debt. If we continue on the same course, the current (and accumulating) debt will have to be rolled over. most likely at higher interest rates. At some point, that does create a crisis. Is it not prudent to start gradually reducing the debt now (through higher taxes and more carefully targeted investment) than to wait until funding the debt becomes such a problem that drastic steps are required?
2
One way to attack the debt is to apply a tax ‘surcharge’ to high income individuals. This surcharge should be earmarked specifically to paying down the principal on the debt. By paying down the principal we decrease the interest payments that go along with the debt. By decreasing the federal debt and the associated bond market, it could make corporate bonds cheaper also.
1
Trump is the epitome of his party. Never pay taxes, never pay debts, claim debt is good, declare bankruptcy to avoid payment of debt, blame failure on the lenders, make little people bailout debts, claim you're rich and blame the "wretched refuse" for the poverty of the little people.
7
I call this the “Wealth Pump”: the willful use of the Federal Tresury to transfer wealth from the many to the few. When Republicans are in power, they raise the debt by giving tax breaks to their wealthy benefactors which eventually causes the deficit to raise, and government to become ineffective. So Republicans loose elections and Democrats come into power to clean up the mess. They do this by proposing programs that address the problems Republicans created, and then raise taxes to pay for them. But then Republicans rail about budget deficits again, and use non-democratic means to prevent Democrats from spending any money to actually address the problems. Republicans then talk about tax and spend Democrats and how the government didn’t do anything with the money they raised (never mentioning that Republicans were the ones actually responsible for this). So Democrats loose elections and the cycle begins again. But now the Tresury is fattened up with all the money the Democrats raised, so let’s have a tax cut!
5
"Look, we’ve seen this over and over again — three times since 1980. Republicans rail against budget deficits when they’re out of power, then drop all their concerns and send the deficit soaring once they are in a position to cut taxes. Then when it’s the Democrats’ turn, they’re expected to clean up the Republicans’ red ink rather than address their own priorities. Enough already." Bingo!
5
What has always fascinated me about the Republicans is how unwilling they are to work on behalf of the people they say they care about: working Americans, retired Americans who worked hard, and people who are not the economic elites. Yet every time push comes to shove they, even more than the Democrats they accuse of being elitists (See David Brooks column for today) cater to the elites. Whatever a large rich donor asks for when it comes to tax breaks or rolling back regulations they grant it. But when the little people which are 99% of us, ask for something we're told that we can't have it, that we're asking for too much, and that we're lazy.
It's about time people who listen to what the GOP says start to look at what the GOP does. What they say and what they do, at least when it comes to helping the average American who is not rich, favors the richest. In other words, the GOP is a party of, by, and for the economic elite. And they too like to send their children to the Ivy League schools, live in gated communities, and are, in short, not interested in working for us.
11
@hen3ry thank you for using the term "economic elites" to describe the GOP. spot on. What I don't understand is how they can weaponize "intellectual elite" against Dems while enjoying kudos from their base for being economic elites.
1
@hen3ry Oh yes, but for racism, abortion, and now socialism which is how the GOP gathers in the "base".
1
@RMartini I understand how they do it. America has a long tradition of fear when it comes to intelligent people. Fear and loathing to use an overworked phrase. It starts in school when the smartest students are marginalized or mocked if they have a genuine interest in learning. Being smart doesn't pay in America. Being blindly obedient does.
Krugman's right about the deficit.
Can anyone name two important Democrats who ever caught on to what Krugman outlines about the deficit and then proceeded to skewer the Republicans for their hypocrisy as well as conditional wrongness?
There's Alan Simpson, Phil Graham, and Orin hatch hiding in the fiscal bushes as the GOP continues on a deficit binge without reason or precedent.
1
@Stewart bolinger Elizabeth Warren
1
"Republicans rail against budget deficits when they’re out of power, then drop all their concerns and send the deficit soaring once they are in a position to cut taxes. Then when it’s the Democrats’ turn, they’re expected to clean up the Republicans’ red ink rather than address their own priorities."
Well of course -- someone has to restock the piggy bank so that Republicans can reward their patrons.
4
It seems to me that the government of the United States is woefully ignorant when it comes to the relationship between spending and taxation. The Republicans passed a trillion dollar tax cut when the government was already borrowing massive amounts in order to survive. Rather than increasing taxes, the government essentially just prints more money which has no inherent value. It would seem that they are building a house of cards that is likely to just eventually collapse.
2
The 'Green New Deal' sounds more like a starting point in a much needed discussion. Details may seem outrageous but someone had to have the nerve to propose something. One of my favorite columnists Jon Chait, is railing on the New Green Deal as a piece of trash. Disappointed in him.
The climate, the serious inequality, and the health care issues need to be addressed now. Infrastructure is critical as well but too much on our plate at this point will just muddy the water. AOC has started on the climate, Warren on inequality with her wealth tax, and Harris talks about health care for everyone.
Solar energy workers are being laid off due to Trump's tariffs. The reality of the tax cut scam is coming home now as refunds are cut and MC taxes are increasing. Health care problems must be solved immediately as people are dying and going bankrupt. Hopefully the strong women tackling these problems will work as a team.
D's fight for solutions to problems. R's aggravate problems by ignoring them with all their 'free market' nonsense. 2020 is our chance to right this serious dilemma. Ignore the conservative drivel and push on.
3
In the same way the American public has become desensitized to sex scandals (see Jeff Bezos), we are also now numb to the concept of deficits and the national debt. None of us have seen that big digital debt counter move backwards, have we?
Let’s step back and consider the view from the air. How many of us want tremendous amounts of wealth concentrated in the hands of the few? Those who regularly eat caviar and absurdly priced steaks, with countless sports cars parked in their garages, with obscenely priced artwork adorning their walls? Things that just sit in place, things that do not multiply back into the economy. I suspect most of us do not want our society to be focused in this way.
What do We, the People really want for ourselves and for our country? How about robust health care when we are sick? How about modern infrastructure for our future? How about the best public education for our children? How about the dissemination of compassion and peace into the world?
Where have we taken ourselves? And how do we get back to where any rational person would want to be?
Republicans are pervasive liars, and deficits and the debt are certainly not subjects that escape their mendacity. And how about climate change? The GOP doesn’t think it matters. What do you think? We will never regain hope with Republicans in control. We need to take it back for ourselves.
Register Democratic voters and help as many of them to vote as you can. What else really matters?
4
That Republicans have been playing with matches doesn't mean Democrats should burn the house down, Paul. Guaranteed income for people "unwilling to work" would be an order of magnitude more expensive than Trump's ill-advised tax cuts. And the Green New Deal is larded with such waste.
Who are these "deficit scolds" that Krugman is referring to? Yes, I get that Republicans are no longer vocal about deficit spending and yes that is hypocritical. But now is the time for Democrats to point the finger at Republicans and if they aren't, then that's on the Democrats.
1
The Democrats over the last 50 years or so have advocated for a society that offers opportunity for all. The Republicans see spending money on such idealism as a challenge to white supremacy. Hamstringing that Democratic agenda has dictated the Republican motives for decades.
Trump is a succubus. He has become the personification of the Republican soul willing to give up everything for its own pleasures. The US is in a mythic battle for its very existence. Much as I admire Krugman and the rest of the academics trying to rationalize what is happening in Washington and around the country, taxes, deficit spending, concrete spending initiatives is not what is confusing the national intercourse. This is a social issue not an economic philosophical one.
Democrats won't be able to spend the country way out of trouble this time. The party can't keep eating it's own. It must forgive the weak, the blind and unenlightened citizens and celebrate the rebirth of America.
"Look, we've seen this over and over again..."
We certainly have. The hypocrisy and intellectual dishonesty endemic in the contemporary GOP is on blatant display when it comes to the federal debt and fantasy trickle down economics.
I have to hope that the elevation of a shameless, reckless con man to lead the Republicans indicates their destructive dishonesty has reached its natural limits, and enough of the U.S. electorate will finally open their eyes.
It's only a hope. I see no evidence to support it.
3
Brilliant! The hypocrisy of the Republicans reveals the bankruptcy of their policy ideas but also their intent in the future to use their tax cut gifts to the 1 percent and corporations as an excuse to limit the government and reduce spending in social programs.
In their dream state that would allow them to both cut and privatize social security, Medicare, Medicaid, and the welfare state. They would love to spin off that aspect of the Federal Government to state control.
Of course, the Democrats should ignore these fools and frauds. But to do this they need the American people to give them 60 votes in the Senate and control of the House and the Presidency. Otherwise there will be the inevitable Republican obstruction tactic to render our government dysfunctional.
If the electorate gives the Democrats the sweeping mandate Americans deserve, then and only then the Democrats should create and pass sweeping legislation to invest in infrastructure, healthcare, climate and environmental challenges, poverty and social and income inequality. First by investing at low interests in the future and second after the legislative agenda is achieved by reforming the Tax Code to be progressive like in the 1940s and 1950s and to make our ruling elite and corporations pay their fair share to the future of the country they benefit so much from. Then the deficit will be managed fairly and without using it to create a Republican influenced dystopia as we have today!
2
Make sure the little people never get anything and stay that way. This will keep them preoccupied and stupid, looking for the great leader, a right answer, the pill that will cure all their ailments. The big guys just have to get their front men to point at the villains who are claimed to be the cause of all their grief.
The little people have real cause for complaint; this is converted to anger and directed in the proper direction. Little people have need to be recognized and given hope. Make them feel good by telling them how much better they are than those others, those who look different and are "stealing their jobs and opportunities."
So long as they stay poor and desperate this will continue to be an easy sell.
2
There is a way to pay for much of the Democratic wish list without incurring additional debt. Stop going to war for useless causes. We have been at war in the Middle East for over a decade. During that time we have accomplished none of our goals, there has been no nation building, the dictator in Syria is still going strong, Iran is still doing fine, people in the region are still slaughtering each other. In other words we have killed off a whole bunch of our people for nothing.
If we want to make a difference at home, on problems we know how to solve, the way to do that is to cut off all parties in the Middle East, including Israel. Bring our people, our weapons, and our money home. Use that funding to house the homeless, feed the hungry, repair our schools, care for our elderly, fix our roads, rework our immigration system so it actually works. We know how to do all of these things, we have chosen not to because we would rather bomb tribesmen in Syria than fix problems at home.
2
Great point- nobody cares about the debt. Trump's core, for that matter, cares little about economic issues. They support POTUS because of his position on racism, Latino minorities, sexism, abortion, the environment, religion and other social issues. They continually vote against their own self-interest when it comes to economic concerns, particularly taxation. The are easily duped by Republicans who attack Democratic policies on what is really another social issue- socialism. Trump's core voters hold an almost faith type belief that socialism is contrary to Christianity, as twisted an idea as that is to anyone who has studied the life of Christ.
What is the answer? Do Democrats need to become more Trump-like, spinning facts to mislead voters? Or, should the party attempt to retain its integrity, speaking the truth and hoping voters will respond? If we need the former to oust Trump, so be it.
1
Totally agree. One think, Repoubblicans and right political organization in general (see Europe) in spite of apparent differences rise as a pack of dogs attaking the pray. Democrats? they do not even bark.
there are intrinsic reason for this differences but what counts is the the old rule that attack is the best defence.
Nothing new that Republicans are hypocrites, and on more issues than debt. The reason they get away with it is that they have those buzz words that a low information public can latch on to: "liberal Democrats run up too much debt" and "we will cut taxes." It is a lot easier to make these claims than to convince the public with the boring and difficult-to-understand facts that rebut them.
1
Again the deliberate framing of tax cuts as spending. The government does not create wealth. It can only take it once it's created. Tax cuts are taking less of what you have produced.
By your logic if I own a gun and don't kill a person even though I could have they still owe me their life right? The government could confiscate your entire income but they allow you to keep some of it.
Pretty much all political discussion of economic and fiscal issues in the US is bogus largely, I suspect, because all politicians listen to political consultants who assure them that Americans are too stupid to understand such things. The most infuriating canard is the story that taxes in the US are too high when, in fact, the total US tax take as a % of GDP has been amongst the three lowest of all OECD developed countries for the last 45 years, regardless of which party has been in the driver’s seat.
1
Yes, the Republican Party has mastered the art of hypocrisy. They like to crow about "tax and spend liberals" and their flock is all to accepting of the lie. If they ever decided to do their homework, they'd find that Democrats are often put in the position of repairing the countries finances by being responsible after years of Republican irresponsibility. Republicans deserve to live in a country governed by Republicans, but Democrats sure as heck don't.
1
Yes, Dems must be ambitious: they must be ambitious about expelling Trump & his entire criminal syndicate from power in the USA.
It is Trump who has attacked America's inadequate environmental protection standards, rendering them effectively nonexistent. It is Trump who rolled back even mild clean air standards in CA, whereas we need much stricter clear air standards all over the USA & across the planet. It is Trumpism that unwound minimalist efforts in MI to end the abomination of the Flint water scandal.
Since T emerged from the abyss of ignorance, racism, vicious criminality, we have been so preoccupied with his assault on the Constitution, we have hardly considered the specifics of the lasting damage he is doing to everyone's health. David Cay Johnston has, in his book. Most daily news media have not.
Removing T (& Pence) is absolutely the most essential 1st step to upgrading American environmental policy. We won't make any progress to address climate change without it. We have to at least revert to the Obama era status quo ante -- membership in the Paris Accords, a robust EPA, sound initiatives from CA under JBrown -- before anyone can expect improvements.
I read AOC's HR proposal carefully. It is beyond vague. It does the subject matter a disservice by pretending "mobilization" is the answer. The answer is Science. The answer is changing how we live & consume, 1 household at a time. It requires billions of epiphanies. Invest your brains, your passion & courage.
1
Democrats ignore deficits caused by spending, social or other. Republicans ignore deficits caused by tax cuts. Both under the guise of: "they will increase revenue by growing the economy". What is missing in the debate is a non partisan analysis of much much debt is sustainable and when and for what it should be uncured and paid down. Many factors go into that calculation, growth, interest rates, GDP to debt ratios. I don't think the answer is obvious but you have to start by asking the right question.
@Bob
Good post, Bob. Except for the false equivalence in the first sentence.
Another problem is that the notion “sustainable debt” depends entirely on party affiliation and priorities. Objectivity has no chance in that arena in todays day and age, sadly.
Once we get a clean 2019-2020 budget, the "debt limit" will be permanently dropped.*
(* if Republicans can't sabotage it)
The latest estimate is that the wars in the Middle East have cost nearly 6 trillion in the last 8 years. That's almost 3/4 of a trillion/year. One trillion every 1.5 years. And we're no closer to peace, democracy and an end to terrorism than we were when we started.
How can we pay for a few billion in new spending? Looks like a no-brainer to me.
3
Don't you all think that we feel squeezed as a people because the cost of living has spiraled out-of-control? Recently, someone pointed out that all of the "luxuries" in the U.S. have become inexpensive; however, all the necessities have become incredibly expensive (health care, transportation, housing, etc.). When 18% of the GDP is composed of health care spending (in "socialist" Europe it's 50% less), it seems to me that costs are no longer reasonable or logical. What Dems need to do is formulate public policy around spending plans that benefit more than just the military welfare complex and billionaires.
8
1. For a corporation the borrowed capital is called "outside capital", or "loan capital", or "borrowed capital" or similar. The "deficit" is something else. For a state however, the same money is called the "deficit". Why is that? Propaganda reasons?
OK, a state is no corporation, but still: In case the money is spent for a "good reason" as Professor Krugman puts it, i.e. invested it will induce higher income for the state in the future.
2. A state does not borrow the money from the loan shark at the corner, but - to a large degree, at least - from it's own citizens. Hence, the peoples money is kept safe, and the interest will benefit the economy in the long run. Not too bad!
1
@Albert Neunstein When people lose confidence in the ability and willingness of the state to repay its debt and maintain the purchasing value of the country's currency, they stop buying its bonds. Surely you must have studied Germany's financial problems of a century ago when you were in school (if you went to school in Germany).
Republican politicians only care about debt when they've lost power and their donors face (very slightly) higher taxes to clean up the mess they made while in office. So ironic that those donors never have to pony up what they gained while the Republicans were in office, but still fight tooth and nail.
The Dems don't know how to hold the Republicans accountable.
..and the beat goes on.
8
We should pay down the debt simply for the fact that interest on the debt goes to pay rich bond owners instead of paying for social programs.
2
As millions of people have commented previously, the taxes needed to expand social programs could be funded by simply removing the salary cap on Social Security tax together with applying a small but strongly progressive increase in both Social Security and Medicare taxes.
Oh, and it wouldn't hurt if we spent less on war toys.
5
@Duane McPherson
How about closing the tax loopholes so the rich would pay SOME taxes?
3
I still struggle with the Trump tax cut being responsible for "the deficit surging thanks to a huge tax cut for corporations and the rich". The math has been that it will add $1.5T of total debt in 10 years to a currently existing $21T (seems like the deficit has already been created by other reckless spending). Even at $150B a year ($1.5T divided by 10 years), that's insignificant compared to the $4.5T of a total government budget. The reality was the corporate tax rate reduction was needed...a 35% rate was creating inversion opportunities that the government was doing everything to shut down (basically creating a wall preventing companies from leaving). To quote George Soros, we all just need to "move on". The tax cut is just a wedge issue.
2
@manko
I agree with Everett Dirkson, "A billion here, a billion there, pretty soon it adds up to real money". The problem is, as @manko, unintentionally points out, is the unwillingness to pay attention to paying our bills and the creativity with which we dismiss the obligation. Ever consider dedicating that $1.5 trillion tax cut towards debt reduction?
1
People of America, my Countrymen and Women. The cynical obsession with debit as portrayed by Congressional Republicans is all part of a long ranging plan. It's called
"The Two Santa Claus Theory"
One side is following the play book while the other side is (mostly) trying to govern for the people.
2
Paul always ignores the use of debt as a policy tool.
Not sure why, after so many years in the economic field one might expect more consideration of the topic.
We've sold a lot of debt to China, and that China debt is the primary manifestation of the deficit.
Now the economic future of Chiina is dependent on us paying it back.
As John Getty once noted:"If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem."
Rather than fight a war, all we really need to do is run down the value of the dollar to next to nothing, and then repay them.
2
@Objectivist
“...run down the calue of the dollar to next to nothing ...” you write. Based on that thought, clearly MA a legal green state.
Take a look how thats working in Venezuela. Or read a book about the great depression.
@Homer
We did it to the japanese in the 1980's worked well. Borrowed X in buying power, paid back X * 0.5 in buying power...
Mass. ? A leftist disaster populated 66% with socialists, their lemmings, and union hacks.
Can't believe the Revolution actually started here....
I can't understand why major corporations don't want the government to assume responsibility for pensions and health care. This would free them from the legacy of benefits that has provided an advantage to foreign car manufacturers opening plants in the southern US.
Point of fact: every Dem president since Reagan has reduced the deficit and every Republican, especially Reagan, has increased it.
10
@Robert You may want to check your "fact" when ig comes to Obama's years in office. Also, who is paying for pensions and health care when the government assumes that responsibility? My concern has always been the government not being honest in levying the required taxes to cover those costs. If that's what the people want, then the people need to pay for it...not some idealistic story that other people will pay for it. No...be honest, we all need to pay for it, at all levels. Stop with the class warfare before we only have one class...the poor class.
No one disputes the total hypocrisy of the Republican party on the issue of debt. This doesn't alter the fact that it is an issue and that tax receipts need to rise to bring deficits down to manageable proportions of around 2.5% of GDP.
1
The reason the nation's debt/deficit matters little to nearly every ordinary American is because we have so much household and personal debt that does not prevent us from just plodding along with our lives unencumbered and still buying, buying, and buying, spending and spending, because we must.
Debt/deficit does not matter because we find it impossible to increase our incomes and decrease our debts. Someone else controls personal income just as Congress controls the nation's income with tax plans.
1
Since nobody cares, then the contributions that working people and their employers pay for health insurance could be redirected as a tax rather than an insurance premium. With that we could take another step toward providing universal health care and phase out what we now pay for the profits of private industry.
I'm not sure why Krugman could not see this in 2015-16 or why Rattner can't see it now.
4
I agree with Mr. Krugman that as long as interest rates are low that investment in infrastructure is sound economic policy, but that raising the national debt simply to give back monies to corporations and the uber rich is not. That said, I am one of those rare birds, a social liberal and economic conservative. Even in these low interest climates, the payments on our burgeoning national debt still gives one pause, $389 billion per year, estimated to raise to $914 billion by year 2028 (CBO official estimate), which is not just a drop in the bucket. Most projections are based on normal economic times and low unemployment, etc. But given the likelihood of a recession (if you still happen to believe in business cycles), then those figures will be even higher. So spend wisely, on projects that will make our future stronger, not on ones that will make our rich richer.
https://www.pgpf.org/blog/2018/11/we-will-soon-be-spending-more-on-national-debt-interest-than-on-these-vital-programs
2
As AOC inconveniently reminded everyone 'There's always money for tax cuts for the rich and for war, but never money for things that the American people want and need".
Not only the Republicans, but most of the media have ganged up (all taking their talking points from Stuart Varney and Lou Dobbs no doubt) and are alternately condemning and scoffing at the Dems big proposals. I can only think that they are terrified to run against programs that are easy to put on a bumper sticker, easy to explain in a sound bite and have the support of large majorities, including of Republicans.
9
So, giveaways for billionaires, good. Investment in anybody else, bad. Let's just call it what it is. The GOP has been raiding the till for three decades. When the GOP rails about deficits, what they mean is they are afraid there will be less to steal.
21
Mick Mulvaney. Ah, Mick Mulvaney.
As a Congressman from my home state, I remember how he railed against deficit spending saying the debt was becoming an existential threat. He went from that, to "Well, it's still a problem that will have to be addressed" when he campaigned for the tax cut, to "Nobody cares" - all while the debt was ballooning.
Could he have been more dishonest? As a party, could the Republicans have been more deceitful?
The Democrats, for their part, haven't been exactly reassuring. There proposals, slung out there like party beads at Mardi Gra, have the possibility of wrecking their chances in 2020. However, if the adults in the party - Elizabeth Warren, Amy Klobushar, Sherrod Brown just to name a few - can calm such fears and point out that historically, the deficit has gone down under them and risen under Republican rule.
And the most powerful voice in this regard? Barack Obama.
9
The biggest difference between national and personal debt is to whom it’s owed. If I buy a car with a bank loan, I must repay the bank. In many cases the national debt to build the road for that very car is owed to many of us who buy T-bills or savings bonds. We borrow from our future selves and as such repossession is unlikely in the extreme.
2
@Douglas McNeill,
Precisely.
By the time the Trump presidency is over the middle class "tax cut" will have been eliminated bringing their tax burden back to where it was. The wealthy will be so far ahead of the game and they will be screaming and yelling and paying politicians not to raise their taxes. And the politicians will oblige. And the Democrats need to pound away at that over and over. Because at the end of the day Trump and the Republicans will not make the rich pay more in taxes to cut the deficit. They will make the middle class and poor do it. And that will completely wipe out whatever gain in income the middle class and poor will have received in higher wages over that same time. The Democrats need to make it clear in simple, easy to understand language what should be obvious to anyone.
5
As is so much of the issues PK addresses, it is up to the news and politics news media to always clarify what pols are talking about (or refusing to say a word) when deficits and the national debt arise.
The GOP has gotten away with financial chicanery for years by attacking deficits when it suits them, and letting them swell when they are in office, as Krugman explains. But you will never find that bit of information in most news accounts of the issue, and the question is, why not? It's not complicated, so there's no excuse for this journalistic deficit, is there?
12
I see we get to comment on Paul Krugman's moderate take on the US's sovereign debt but Steve Rattner's tax breaks for the rich and austerity for the rest of us goes unchallenged. Is this some of that elitism Brooks is going on about today?
4
Anyone running for President should be compelled to present a 4 year economic plan for the country(before the election) covering all aspects -debt,immigration ,health care ,social security ,the military etc
So the voter can see what they plan to do and what it costs.
Anything less is voting blind which has been happening for years because Politicians only address their hot buttons.
4
Look at the big picture for Health care
Taxes . insurance, and savings are currently paying for some $3t of medical expenditure. No one is suggesting that this amount should be increased .
The suggestion is that by reallocation of taxes etc. the burden will be placed more evenly on those that can best afford them
4
You characterize the Green New Deal as an investment and I suppose it is. But, you miss the point that it is a serious attempt to avoid a catastrophe that will cost much more than the "investment". And, it solves other societal problems along the way. We will spend the money. The GND is a roadmap.
3
Always lost in conversations about the Federal budget is the appalling amount of interest that must be paid on a yearly basis to service the ever increasing Federal debt. Currently up to around $360B (that's B as in BILLIONS) annually and forecast to more than double to some $700B in 10 years. That's your tax dollars at work folks and yet not a hint of outrage from the electorate or from our elected officials...
6
@DonS You do know that this interest is paid with nothing more than keystrokes, the same mechanism Bernanke used to *fund* all those iterations of Quantitative Easing™, i.e. free money for the banks.
The necessary functions of gov't are seen as a luxury. Nihilistic rich folks monopolize the news. Trump mastered the art of ensnaring the news with their desire to market the news profitably. Even Trump haters cannot get enough sludge on the man. The green new deal, health care distribution and other liberal issues are lost. These grass roots issues are being criticized because the GOP always wins the austerity issue. Trump cannot be defeated, it is said, by a major effort to get people involved in governing the country. Taxing the super wealthy and cutting the defense budget just plays into Trump's hand. This year is different than 2008 when Obama ran. Ted Kennedy knew a good thing when he saw one. Now in an era of out of control political nastiness its hard to see the positive force of politics.
2
The national debt in 1913, adjusted in 2018 dollars, was about $74 BILLION. In 2018 the debt came to $21.97 TRILLION. So in 106 years, the national debt increased by a factor of over 280! And yet almost everyone agrees our economy is strong.
During the Obama years the national debt doubled from $10 Trillion to $20 trillion, but the economy roared back because inflation averaged a miniscule 1.45% over those 8 years.
Folks in 1913 would probably have been horrified to learn that 2018's debt would be so high, just as folks today would be horrified if told that the debt in 2125 is likely to be north of $500 trillion.
The books have to balance. If the government runs a deficit, the private sector must run a surplus. The only way we can increase our FINANCIAL wealth (there are other measures, of course--homes, hospitals, schools, motor vehicles, boats. etc.) is for the US Treasury to issue more currency than it claws back in taxes. Deficits make us richer! But this can only be true if inflation doesn't erode the value of the dollar.
So the real enemies are not deficits and debt, but inflation. Keep it under control and, as Dick Cheney supposedly said, "Deficits don't matter."
1
Yes . Debt in global economy is all relative to money, numbers being a game of writing ( "un jeu d'ecriture " in French ) .There have been times when all huge sectors of debt have been erased by banks or nations. After wars for exemple .Banks are just entities that process debt as a capital investment. When that investment does not procure or trigger work : people getting up in the morning to build things ,or grow crops, it shifts to other purposes .Like this you can decide to impoverish whole nations because it procures shifts in populations to create cheap labor where the money is . The wall...?
What is untranslatable debts, unreplaceable debt ,is the state of the planet .The ecological bank.Unfortunately Americans have blind visions for both of these principals. They are enslaved to the idea that debt is serious but the planet is not, because they listen to the people who make money with their credulity .
2
This column made me nostalgic for the halcyon days of 2002 when you and Frank Rich exposed the shady little cabal who were about to raid our coffers to fund an endless war in the Middle East.
Readjust your perspective: For almost 90 years, we've had two parties: the New Deal and the anti-New Deal; the former has tried to regulate the financial pollution that is a known byproduct of free market capitalism, vividly recalling when government and plutocrats combined forces to send thugs against workers who had the temerity to strike, remembering that although capitalists are valued members of our economic system, no sane society would value one person's contribution at $10 billion while American children go hungry.
Centrists are corporatists who firmly believe that corporations, and those who fund corporations, are actually more valid "people" than the citizens who pay to keep the water clean, the roads safe, and the police on the beat. As such, they are firmly anti-New Deal, which produced that bunch of busybodies who passed the Securities Act AND the Securities Exchange Act just to make sure that grifters in thousand dollar suits had to work a little harder to steal.
Charlie Pierce has concluded that the Never Trumpers were always more about saving the GOP than benefiting the nation. Similarly, the self-styled Centrists are more about distracting those carrying pitchforks, pointing those angry people at senior citizens and poor people in need of medical care. Sad.
16
"not let the deficit scolds scare them into thinking small."
The problem with this philosophy, first demonstrated to America by Ronald Reagan who gave away trillions to military contractors on borrowed money is: Eventually, and, nobody knows exactly when, although hypotheses center around the world movement away from the US dollar as the world's reserve currency, eventually the debt interest rate will overshadow all the government spending programs.
When that happens the existing debt payments plus interest, in combination with, say, the renminbi as the world's new reserve currency, will cast the US in the role of Zimbabwe. Printing ever more more money into hyperinflation.
Paul, you are a man of history. You know that there has been no country, ever, over historical timelines, that has dug deep into debt that has NOT experienced hyperinflation as a consequence eventually. Not one.
Since I am sure you know the above provable fact, I think that you may believe that outcome will be OK, or inconsequential. I don't really think so Paul.
But, I understand your frustration with Republicans, beginning with Reagan; busting the budget for military contractors, then, crying when Democrats do the same thing to save the world (like Obama did). It is frustrating to see the cynicism on the Republican side.
6
One more thing. It reveals that the Democrats held out as bipartisan were just sell outs to something even Republicans don't believe when they have power to do what they wish.
Those plans to slash "entitlements" with Democratic connivance were sell outs. They were Republican-Lite in action.
2
The difference between how the Democrats and Gop view debts and investments is like night and day. The Gop likes to invest in the rich and let the trickle down theory work, which doesn`t work. The Dems prefer to invest in everyone, which does work. Think of how the Dems do it as the Pool theory and a pool will have a lot more positive effect on more people and their ideas than a trickle controlled by the very rich. A pool has a very vast eco system. A trickle by comparison has a very small eco system. But back to debts. the Gop see investments as debts and the Dems see debts as investments, but only the Dem Pool waters everyone.
5
Sorry but debt is debt. Living on credit creates a superficial atmosphere that can permeate a country’s moral fiber.
5
@Jo Ann
No one said anything about living on credit. But some investments (infrastructure) require temporary borrowing to fund long term assets and growth. Perhaps if you are born into a family or country that doesn't require such outlays you can avoid borrowing. But not here. As Mr. Krugman notes the Republicans never have trouble passing tax cuts for the ultra rich and for large corporations that stash profits overseas or for committing to extravagant military arms sales (not support of the troops), but since the 1980s it's been on the backs of the middle class and poor. As Paul Ryan tried desperately to do, the Republicans want to starve the government of funds to provide a safety net and true investments in infrastructure, healthcare, education and the environment. I suspect you don't have these problems in Switzerland, a place where our uber wealthy traditionally have stored their winnings.
5
@Bernard Bonn
Of course The Swiss borrow, not everyone is rich here, in fact far from it, but taxes are not altered from one change in government to another so health,education, infrastructure etc. remain affordable. It’s that yo-yo effect that is dangerous.
1
@Jo Ann: Does getting a mortgage constitute "living on credit", providing you with shelter and even luxury entirely with a huge debt?
That's the difference with "investment" that the prof was trying to articulate in the article.
Republicans cut taxes for the wealthy, pour billions into the largest military in the world without accountability and then blame social programs for the resulting debt. We don't have so much a spending problem as we have a revenue problem. It's past time to tax folks who buy $248 million homes for occasional use at a much higher rate.
38
I will have to disagree about the "inconsistency" of deficit hawks. They have been quite consistent. You just need to adjust the definition of "debt."
See, if we define "debt" as "non-defense, non-security governmental spendings," then suddenly GOP position becomes clear. The tax cut is good, because it reduces "debt" in this definition. In fact, if anything, GOP get more consistent with this definition. In the past, some people pointed out that GOP would decry governmental programs, but happily accept the benefits anyway. Well, not anymore. They now are willing to hurt their constituents and refuse benefits (exhibit a: Obamacare).
In fact, this process (redefinition of wordings away from their intuitive English meanings) is pretty much the same for all other Conservative values. "Political correctness"is not about avoidance of difficult conversation, it's just means whatever nonconservatives believe. "Originalism"has nothing to do with any origin, just empathy with certain school of thought. "Family values" simply means whatever certain sects of Evangelical Christianity believe. "Religious freedom"means rights of (conservative) churches.
When you look at the world this way, GOP is under consistent. Of course Obama has less family values than Trump, creates more debts than Trump, suppress religious freedom, and breaks the Constitution. You just need better definition of each of these codewords.
13
@Lam Luu
Then again, if we define government waste as military misadventures over half the globe cutting government waste as republicans so often espouse means nothing less than cutting the bloated military budget.
You can "define" debt anyway you like, but moving the goalposts to score goals is self-serving nonsense. The GOPs SOP.
It's fascinating to watch Prof. Krugman oscillate between decrying the "double standard" of Republican concerns about the national debt and paying lip service to the obvious dangers of endless debt accumulation. Political hypocrisy is, of course, a cherished bipartisan enterprise. More revealing is Prof. Krugman's use of current low interest rates as a rationalization for more debt financing of public "investment". This argument ignores two important facts.
First, so-called discretionary fiscal policy has morphed into perpetual structural deficits that will require continuous re-financing and new borrowing even when (not if) interest rates skyrocket. Second, political vaudevillians of all stripes have learned how to rationalize their waste and corruption by labeling them as "investment". Deficit hawks may be hypocrites, but the dangers they cite are real.
11
Sam, I think what Prof Krugman points out very succinctly is the double standard of the Republicans and their inefficient “investment” scheme of giving tax breaks to business and the wealthy to “invigorate” the economy. Trickle down from Reagan on has not worked. I believe investment in people and infrastructure is much more efficient use of limited govt resources. Your analysis seems to be negative for no reason other than to bash Krugman for stating the obvious.
31
You really do fail to read the big picture about when deficits are, and are not, justified in Krugman world. When you do, you miss the principle.
@David Agreed!
Mr. Krugman - let's see the real statistics on employment. I don't believe what mainstream media report. What about the under employed? what about the number who quit looking? I think the American people are not being told the truth about mainstreet economy.
22
@Gordon Alderink that the economy is humming on the backs of American's debt..LOL.. the backs of Health care debt, college debt, car debt, credit card debt, housing debt. pretty much, not one thing you see in our country is paid for outside of an old monument or two in some small town america. Nevermind we don't ever talk about the state and town and county obligations that are un or underfunded. We are living the biggest lie in the history of the world, thanks baby boomers, next you will want us to finance your retirement.
The primary goal of conservative Republicans has always been to cut and eventually eliminate Social Security, Medicare and other social programs. Their well-worn strategy has been to cut taxes for the rich and deplete the federal treasury ("starve the beast") so they can justify, in their minds, cutting social programs. They do this even though programs like Social Security and Medicare are very popular with most of the public, and, so far, their attempts to cut programs have failed to get needed public support. But, that won't deter Republicans from trying again sometime in the future.
34
There's no double standard here, just a difference in assumptions: your macro is concerned with the economy's resources, their's assumes it's all their own. There is a consistent logical integrity even if there isn't a moral one
2
@JonathanP Yours is the wisest comment of all. Americans have been duped by the right wing.
1
"Was there the same pushback against Republican tax cuts? No."
Wrong. Deficit reduction was built into the GOP plan.
The GOP plan was to cut taxes first, then reduce the resulting deficit by eviscerating the social safety net. It was so much Paul Ryan's dream that he lamented not being able to do it by the time he left the speakership.
13
I'm reminded the last president to offer a balanced budget for at least one fiscal year was named William Jefferson Clinton.
He was impeached by a Republican house of representatives.
29
It is never a question of, "How are you going to pay for it?"; if the plan is coming from the Right. If there is ever a question, they have no problem lying about the answer. Trickle-down economics, the Mexican government promised to pay, etc.
If the plan addresses social or economic inequalities, then the clamoring starts regarding where the money is coming from!
We need people in office who really understand the impact this growth of inequality has on most of us.
Not by reading about it, taking a poll, or describing a conversation they had with a single mother in the Appalachians, but by viscerally knowing the pain and using it to not compromise when it comes to the greater good.
Invest in rebuilding the quality of life for those barely surviving and the program will pay for itself.
16
One can hope that the dramatically increased attention to politics that the Trump circus has brought to the world will also result in many millions of conservative voters realizing for the 1st time in their lives, that the party their Mom & Dad voted for in reality was nothing more than a veiled lie. If the 2 trillion dollar tax cut for the rich didn't wake them up, then surely their reduced or non-existent or actually owing money 2018 tax return numbers hopefully will.
9
This is no accident, this is the Republican Party's political strategy, "starve the beast." Cut taxes on the rich to increase the debt and then argue we can't afford any new spending, in fact we should cut spending on Medicare and Social Security.
They claimed this strategy loud and proud in the 1980's when Grover Norquist was demanding loyalty pledges from every Republican, making them promise to cut taxes and never increase spending if they wanted any funding for their campaigns.
24
@Ronny: What "starve the beast" really means is shackle the citizenry, the common class, in such a way that they pose no threat to Power. This is what starve the beast actually means. The beast, in this logic's view, is the People. Get it?
John~
American Net'Zen
Re: "I’m not saying that Democrats should completely ignore the fiscal implications of their actions. Really big spending plans, especially if they don’t clearly involve investment — for example, a major expansion of federal health spending — will have to be paid for with new taxes. But if and when Democrats are in a position to make policy, they should be ambitious, and not let the deficit scolds scare them into thinking small."
If Democrats are going to be ambitious in making policy they should make it clear to the electorate that government programs (defense, Medicare, etc.) are not free, and that we cannot finance government non-investment/consumption expenditures simply by running up debt.
Pretending that we don't have to raise the taxes needed to finance the government as Clinton did when he attacked Bush for raising taxes is going to lead to the same kind of disaster the Democrats saw in 1994 after Clinton was forced to raise taxes in 1993.
The simple fact is that we cannot solve our fiscal problems and provide the government services people want without raising the taxes needed to stabilize the economy, and the Democrats had better make this clear in their campaign if they want to hold on to power once they achieve it: http://rweconomics.com/Deficit.htm
8
@George H. Blackford
Rescind the Trump tax giveaway - that’s a good place to start to generate revenue for government programs. Reduce the bloated defense budget, tax profits on corporate non-US earnings instead of waiting until they’re repatriated (if ever) and not at a reduced rate, get rid of the obscene carried interest scam that permits, for example, hedge fund owners’ earnings to be taxed as short/long term gains instead of as income as if it’s their own money that’s being invested which of course, it is not. Democrats must play offense to address these inequities so that Warren Buffet’s secretary is no longer taxed at an effective rate higher than his.
3
@George H. Blackford Republicans realize defense spending means rural votes. Today, the only employment avenue for rural youth is the military. The Democrats have to acknowledge this and address it to kill the Republican beast.
So many of the GOP's economic beliefs make sense only if you add the unspoken phrase "(because we don't want to pay more taxes)".
It won't be easy for history books written in several decades to explain Grover Nordquist, his Procrustean no-new-tax-pledge, and most of all why Republicans signed on.
9
Mr Krugman, perhaps a good way to look at debt is the following simple rule
Debt caused by tax breaks for billionaires -> bad
Debt caused by saving the planet, helping people to bring food on the table, have access to affordable health care and earn a decent living -> Let's discuss and choose wisely.
I suspect if the Democrats reverse the decades of Trickle down voodoo "economics" of the GOP we:
1) Won't have to discuss the fear-mongering, baseless, visionless power grabbing politics of the GOP that is used as a sorry excuse to self enrich the top 1%.
2) We can talk about making the USA "great again" with bold visions, positivism, and sane financial backup from a Democratic government.
A win-win.
28
I agree but we need a long term strategy to address our debt now, while interest rates are low. We should retax the rich and corporations and use those tax dollars exclusively to pay down our 21 trillion dollar debt albatross. I’ll settle for 50% rather than 70% as the top tax rate. The rich have benefited from serial tax cuts since Reagan, while out national debt has soared. Why shouldn’t they pay for the debt relief, they promised their trickle down economics would provide since the the 1980s? The republican’s amnesia on debt is fascinating and laughable to anyone who has listened to their fake warnings of fiscal doom under democratic administrations. There are serious national security concerns far greater than illegal immigration from going deeper in debt to our biggest economic and military rival —China. Ironically we are borrowing from China to fund our increases in military spending so we can meet their geopolitical threats. Make the donor class pay their fare share to pay off our debt before it ruins us.
4
And the Democrats, with either Warren's or AOC's tax proposals, at least have ideas how to raise significant revenue.
11
I was just a kid but it got my attention when LBJ went to a “unified budget.” As I understand it that allowed the large surpluses the Social Security Trust Fund ran for many years to mask the large operating deficits for the rest of the government. Masking the size of those deficits seemed like a bad idea to me at the time and during subsequent years.
Decades later I buy that it makes sense to run deficits during wars and recessions and that, while I think state budgets should be balanced, different considerations apply to the federal budget.
But I still like truth in budgeting.
Careful what you wish for, I know. And there are legitimate reasons to want budget flexibility.
But rather than announcing bold plans, details later, I’d rather the Ds: (1) tell us in some detail what infrastructure and basic research (like the research that led to the internet) they intend to fund, estimate the cost, and say they intend to pay for that over time like people do when they buy a house; and (2) announce they intend to put social security and government health care entitlement programs on a sound fiscal basis, and precisely what tax increases will be dedicated to one of those two purposes.
The voters can decide whether the ideas seem fair, make sense, and will probably work. Better learn how to talk to them.
4
@Jack why? Did republicans do this with their tax breaks?
@Jennife
No, and they certainly should have.
@Jack
Well Jennifer, to be fair they did claim early on that the large tax cuts would generate enough economic activity that they would practically pay for themselves. But even though I think we do have to be very careful about how much and what we tax and what we spend the money on, the supply side claims seemed far-fetched and pie-in-the-sky to me. And subsequent events did prove them wrong. Deficits got big under Reagan. Same with W, though that war of choice didn’t help with that.
R ideas about debt, deregulation and the financial sector played a big role in the 2008 financial meltdown so far as I’m concerned, and explain why government revenues plunged while Obama and Congress needed to spend government money to fight the Great Recession and its effects on people, but that’s a different issue for me. Obama did what he had to do and tried to do more, and when I grump about the Ds not doing their job as the center left party I mean stuff like not rallying to effectively defend Obama from canards like Newt Gingrich’s “the food stamp president.” The need for food stamps became dire because of what the financial industry did with their deregulated freedom. Obama responded to the need, he didn’t create it. But you asked about taxes, not deregulation.
While I agree with Mr Krugman most of the time, I very much disagree with this article. I do believe the enormity of our debt matters. Even at incredibly low interest rates, the debt service alone has grown to be a sizable portion of the US budget.
Each year our deficit explodes as Democrats and Republicans point accusatorially at each other. (Like Mr Krugman, I have learned to point at the Republicans). As a nation, we will eventually have to not only “live within our means,” but also pay off our debt (or at least continue to pay the interest). Our grandchildren will inherit our debt, along with an ailing (if not dead) Social Security, and no Defined Benefit retirement. Nice legacy!
5
Exactly right. The deficit hawks will soar again in 2021 when the Democratic president is sworn in. In addition, they will decry executive overreach and refuse to confirm federal judges if they maintain control of the Senate. It’ll be like Groundhog Day.
17
Socialism failed in Eastern Europe because of incompetent management. It hasn't failed in Scandinavia because the Scandos are great managers. Trump is incompetent enough to make free-market capitalism fail in America, the way socialism failed in Eastern Europe. He will do it by piling on the debt and then trying to get 50 cents on the dollar from our creditors, the way they do in Latin America. Good luck with that.
14
Just wait! As soon as the Democrats come back, the Republican wailing about debt will come thundering back.
13
Mulvaney only scratches the surface. Not only does nobody care about debt, nobody cares about economics in general. Philosophy and psychology are the prime movers of government. Money will always be found or withdrawn, depending. Economics might be invoked as a smokescreen, but it’s never the real reason for anything.
5
It's as if Republicans create debt so they can use that as an excuse to cut social programs like Medicare and Social Security.
59
It’s not “as if “. That is exactly why they do it.
6
@Whole Grains 'As if'? That's exactly why.
6
This is clearly a matter of importance to Mr. Krugman because he has written the same column before. And yet again he misses the point. Trump was reckless about the deficit because he believed that his tax reform would expand the economy and reduce the deficit. The point is that Trump was not indifferent about the deficit. Rather, he was wrong about his tax reform.
Bottom line, Mr. Krugman is correct about Trump running up the deficit. But he is wrong about why. And he should tell us that many Republicans have made the same error. Blaming it all on Trump is unfair. Most notably, the same mistake was made by Reagan who Mr. Krugman ignores.
Mr. Krugman has a vendetta against Trump as many of us do. But it isn’t a good reason to ignore the truth.
@michjas Mr. Krugman returns to this theme because the Republicans keep doing the same thing: howling "tax and spend" accusations when a Democrat is in charge, then splurging billions while cutting taxes when a Republican is running things. And their main motive is to have an excuse (because they know there's no "trickle down") to slash hated safety nets like Medicare and SNAP and even social security, which has its own funding system. They're remarkably predictable, if you're paying attention.
23
@michjas It didn't just happen to Reagan. Both Bush 1 and 2 found themselves in the same situation. One mistake is a mistake. Four in a row is policy.
@michjas
What PK is saying is that it is not a good-faith error. History (similar tax cuts enacted by previous Rs) and economic theory (as reflected by many independent forecasts) indicated that these tax cuts would increase the deficit while bringing benefits disproportionately to a few.
Trump might have been wrong, might have not cared, or have been hypocritical, it does not really matter. In any case, wilful ignorance or indifference are not an excuse for a President.
The term debt by itself is nearly meaningless. Just tonight, I told my point of view to an immigrant. Very educated and wanting to learn about out our economy.
Another fellow was sitting at out table. Person "T" is smart reliable and has a decent job. Several tables away was another guy. Person "M" is known for his temper and problems with alcohol.
I said writing a sizable mortgage for "T" was no problem, but I would not recommend loaning ten cents to "M".
I also, mentioned reading about Lehman Brothers and Bear Sterns.
3
The Trump solution, after piling on debt, is to stiff the creditors. It worked for him. Who are our creditors, and what would happen if they were stiffed?
8
Somehow, news media interviewers never ask how large increases in military hardware will be paid for, either.
Every time one of the debt scolds rails about the deficit, Democrats should respond that the wealthy need to contribute their fair share of taxes, and the problem will be solved.
8
Chronic weakness in private investment demand is the other side of chronic overstrength in private investment supply. There are more investors with savings or whatever to invest than there are good investments to be made. When stated like this (which few do), the solution is clear -- there should be less money wanting to be invested and more money wanting to be spent, which can be achieved by adjusting the tax code. The money wanting to be invested when there are few good investments creates scams and bubbles, so that it ends by disappearing without doing anyone any good.
6
Paul Ryan, the wonderkid policy wonk, warned us about the dangers of debt then he supported the most massive tax cut for the rich and debt increase in a decade.
So much for GOP honesty....
54
Econ 101 on Debt (in response to E Chicago)
Debt,
Cost: It requires interest and principal payments
Return : Gains from new enterprises
Example: Your mortgage to build a house costs $ x per month, the rent saved is $ y. When numbers are available - not value judgements - and the situation is clear cut the pro and cons of taking on debt can be worked out fairly objectively
It gets murkier when the situation is more complex as it is usually the case in government: E.g. a new highway will save commuting time ($) but also encourage more traffic and more suburbia - asphalting over nature. Then value judgements enter - i.e. politics
And when it comes to the largest US debt generator, defence, the information to make informed decisions is simply not available to tax paying citizens. Take e.g. largest single expense signed on in the last twenty year, the trillion dollar program to modernize US atomic weapons signed on by President Obama
The President might have had information that made that a prudent decision. But if he had such, the public will not have the information for the next hundred years.
At this point debt becomes pure politics - the art to navigate between different points of view
3
Just because Republicans did the wrong thing doesn’t mean democrats should do the same even for right reasons. Democrats certainly should increase the debt and spend as an investment. But, must have policies how to pay for it such as increase taxes on wealthy and cut the budget. If Republicans behave like children, then democrats must be adults, like Nancy Pelosi.
2
@Kodali
Since the Republican tax cuts have not produce any significant economic growth in investment and new jobs, the simple solution is to undo the tax cuts and target them to the green agenda. while this is only a start on the green agenda, it does undo an economic mistake.
29
If you believe the federal government should focus its efforts on things that only the federal government can do, it takes less federal revenue. If you believe that government should provide services at the lowest level at which they can effectively be supplied, subsidiarity, it costs local and state governments less to satisfy local and state needs.
Blue states have huge overhead costs, because they overpay civil servants and allow massive corruption in contract bidding, union kickbacks and no show jobs. So they raise their cost of living and taxes consumers have to pay in addition to higher housing costs driven by NIMBY rules designed to maintain property values for those who already have theirs. For example, it costs seven times as much to build a mile if subway in NYC than in Paris France.
Because of their corruption and inefficiency, they don't have enough local and state revenue to meet local needs. They therefore put their ands out to the federal taxpayer. Blue state politicians also fabricate a fake bookkeeping that they do not have enough money to address local needs because their residents are subsidizing other states, which justifies their demands for a bigger share of the federal revenue.
The NYS Comptroller put out a schedule around a year ago that itemized the per capita state receipts of federal largesse, and NY receives twice as much per capita as the federal median, and still has the chutzpa to claim it's a donor state.
3
@ebmem It's not Tennessee that's paying for a 700 billion dollar military but rich blue states like California and New York. Look at the states with the highest GDP. With the exception of Texas, they're nearly all blue states.
18
@ebmem
NY is still a donor state and most red states are not, neither were they in the past and nor will be in the future. However, states are not just contiguous land but people who move and enrich the whole country without needing tariffs and visas to go around ... that's the beauty of the US (Europe is struggling to achieve that)
2
@ebmem The bedrock under Manhattan is schist, a very hard metamorphic rock. In contrast, Paris is underlain by sedimentary rocks, like limestone. Don't you think that it might be a bit more expensive to bore a tunnel under Manhattan, than under Paris due simply to the kind of rock that must be traversed?
Mr Krugman, how do you reach the conclusion that “Really big spending plans, especially if they don’t clearly involve investment — for example, a major expansion of federal health spending” does not clearly involve investment?
People who have proper healthcare will contribute more to society. They will have more productive years. And excellent preventative care is one of the best investments we can make.
21
@Judy - Medicare for all will involve likely significant tax increases. But for the average citizen will leave more money in their pocket than paying for insurance from profit seeking entities.
At the lower income end the investment we will make in those unable to pay for healthcare will pay dividends in productivity. As you state, a good investment!
19
The Roman Empire fell when diluting the gold content of her coins
"Printing" money was its downfall
4
@Upstate
If this is indeed a concern, why is the GOP not worried about it?
I think this falls under the part where Prof Krugman says: "I’m not saying that Democrats should completely ignore the fiscal implications of their actions."
3
@Upstate Ummm... actually, the Roman Empire fell because of 1) the ravages of the 2nd Punic War, which replaced Italian freeholding during the Roman Republic with slave-based latifundia during the Roman Empire; 2) the corrupt gold/silver arbitrage system with India that made Roman aristocrats filthy rich, and the creditor-friendly legal system that kept them that way; and 3) the hoarding of gold in the Eastern Empire, which created economically disastrous conditions of deflation in the West.
Debtor-friendly policies and a non-precious metal currency (see Carthage and Sparta) could have made all the difference--but those obviously were not the policies of an Empire...
7
@Upstate
The Roman Empire fell due to the incessant pressure to hold back the barbarian hoards. Empires are costly to maintain.
In my day the macroeconomics textbooks talked about crowding out; perhaps that's not true in the latest editions. (I also recall Krugman railing against deficits in the GW Bush years; apparently he's changed his mind too.
Back in the day there was also no discussion of modern monetary theory, which runs against my own common sense, which is why I wish the NYT's resident economic expert would write more about it. How can you print money and get something for nothing?
There is also the Minsky theory that too much debt (public and private) leads to unproductive investments, which leads to financial instability and contraction, which ultimately leads to recession. How will an amassing of public debt figure into this?
So Krugman, lets hear from you on these and other economics issues.
3
@tanstaafl - One need not look back very far to see how "printing money" not only kept us from depression but returned substantial sums to the treasury. If you don't understand this you haven't been paying attention.
6
@tanstaafl Unless you're an economist with a track record of predicting debt bubbles and recessions, "your commons sense" is not a good guide.
Paul, thus far the tax cut has not lived up to its advertised success but I note that the President and many GOP elected officials are claiming that we have a very strong economy. They define "strong" as very low unemployment rates, historic employment of African-Americans and they are also claiming that wage rates are rising. The only negatives that they are silent about are: the Federal budget deficit and as we enter tax filing season for the first year, the I.R.S. is reporting that tax refunds have been reduced or are nonexistent for the average taxpayer. It is difficult to cut through this rhetoric and see if the economy is strong as they claim.
There is also silence on global warming, climate change, and infrastructure. The evidence says that the cost of climate change is very high. As the urban population increases in we do not appear to be ready to meet the logistics demand that has been projected for the future.
In and around our cities traffic congestion and aging highways are increasingly dangerous and costly. This data is often buried on agency websites.
I also don't believe we are ready to meet the future healthcare demands required by our growing population.
Denial of global warming is a huge mistake. We should mobilize a major research and development effort to be ready as soon as possible to scrub CO2 from the atmosphere, shift to electric mass transit and logistics transport, and develop as many technologies as possible to replace fossil fuels.
16
@james Jordan
Roads are a local, not federal concern.
@ebmem
Except our interstate system, designed to get troops moved in a hurry.
@ebmem
Can you say “Interstate Highway Trust Fund”?
Your Federal Gas Tax Dollars at Work!
Debt and Double Standards: Example Krugman
From the academic economic literature
" When the White House Changes Party, Do Economists Change Their Tune on Budget Deficits?"
A 37 academic paper looked into it
Econ.J. Watch Volume (Issue) 7(2) Pages
119-156 Published May 2010
" When the White House Changes Party, Do Economists Change Their Tune on Budget Deficits?"
"Abstract
Large budget deficits represent a burden on the future, and debt accumulation eventually poses great problems. Economists writing for the public can either highlight such truths, neglect the issue, or try to allay worries or excuse or justify large budget deficits (as anti-recession policy, for example). Economists affiliated or aligned with one of the parties may be suspected of changing their positions on budget deficits to serve their favored party or win favor with its constituency. This paper investigates selected economists, to see whether their tune changes when the party holding the White House changes. Six economists are found to change their tune—Paul Krugman in a significant way, Alan Blinder in a moderate way, and Martin Feldstein, Murray Weidenbaum, Paul Samuelson, and Robert Solow in a minor way—while eleven are found to be fairly consistent."
To simplify academic jargon : Mr. Krugman has little credibility when writing about debt
https://econjwatch.org/articles/when-the-white-house-changes-party-do-economists-change-their-tune-on-budget-deficits
9
@Woof - Interesting cudgel. As I recall Mr Krugman was mostly concerned about taking on debt during a roaring economy for the purpose of fighting an unneeded war. Remember all the pallets of debt financed cash that went missing in Iraq? No economist in their right mind would think that a good use of debt.
16
I would point out that, in my reading of Krugman over the decades, he “changes his tune” only in response to the kind of debt that Republicans tend to rack up compared to Democrats. The Republican tax cut did not spur the economy and create more revenue, it just allowed more sequestration of money in the pockets of the already wealthy, revenue has tanked, and the deficit has exploded—to no good purpose. Democrats tend to spend on things like social services and infrastructure that have real benefits for the majority; in other words, Democrats make investments that pay dividends. He even references this kind of difference in this article. He comes from a consistent point of view and doesn’t change his tune when it comes to fundamentals. Whether deficits are good or bad, in other words, depends on content and context. He has more credibility to my mind than the article you cited.
9
@Woof
Was that "academic paper" the one written by Brett Barkley as his senior year thesis while an undergraduate at George Mason University?
1
Half of all "discretionary" or unencumbered tax revenue goes to the defense budget, some $680 billion this year, more than even the Pentagon requested.
Now that Trump has stepped away from the Intermediate-Range Nuclear Forces Treaty signed by Reagan to build a new generation of nuclear weapons, including new weapons intended for use against China, the defense budget will balloon further, diminishing federal funding of everything else.
As part of any Democratic vision for the future, there needs to be a hard cap put on defense spending. The Pentagon and Homeland Security need to reapportion the $680 billion and instead of buying all the toys on offer they need to live within a set budget.
All wars or US military interventions need to be funded by Congressional authorization, most likely in the form of new US debt, like the $3 trillion Bush/Cheney lie about Iraq, which was funded off-budget.
It's a choice of guns, butter and health but we can't have all three without rendering US currency worthless or being able to attack but with not much left to defend.
By the way, there's no such thing as higher taxes. Just fairer taxes.
27
@Yuri Asian
It's a delight that most spending is non-discretionary for Democrats, in their minds at least. Defense gets 16% of the budget, one of the few Constitutional requirements of the federal government. Interest on the debt gets 6%, which will double if interest rates rise to even modest levels, and the average debt maturity is five years, so it will roll over to higher levels rapidly.
Medicare, Medicaid, and Obamacare consume 30% and Social Security consumes 33%. Other social spending consumes another 8%.
But even try to cut back on federal support for the rural electrification agency, the arts, PBS and Democrats go berserk.
In 2010, Americans spent 18% of GDP on healthcare, between what consumers paid and what the government paid. In 2018, we paid 20% of a larger GDP as a consequence of Obamacare, which added 2% of GDP to the profits of big medicine. There is no justification for medical care to be consuming a bigger piece of GDP except for crony socialism enhanced by the gaming available by the Democrats in exchange for big medicine support of their inefficient and corrupt scheme.
@ebmem
The federal budget FY 2019 is $4.407 trillion. Of that, there's $2.739 trillion in mandatory spending (Social Security, Medicare and Medicaid), $1.305 trillion in discretionary spending (Defense, Education, Energy, etc.), plus $363 billion in interest payment on national debt.
U.S. military spending for FY 2019 as appropriated by Congress is $886 billion, which includes $680 million for the Pentagon and the rest for Homeland Security, Nuclear Weapons (Department of Energy) etc.
$886 billion in military spending comes out of the discretionary budget of $1.3 trillion. That's well over 50%.
Not sure what the gist of your reply is other than Democrats, crony socialism, and big medicine, all bad.
My comment is in response to Krugman's point that GOP/Deficit Hawks sardonically cost out Democratic goals but couldn't be more cavalier about a GOP pork barrel tax holiday for the ultra-rich, which has obvious dismal consequences for the economy and the national purpose.
The obvious evidence is the 10% increase in DISCRETIONARY dollars for Defense, which GOP authorized knowing that the increase comes from a decrease in some other government program, not from earmarked revenue because there isn't any coming as we're running a $1 trillion deficit this year.
Sorry I'm too thick to fathom your point otherwise I'd reply.
5
If the Republicans and the media insist on popular programs being paid for, pay for them by reversals of the grossest aspects of the Republican tax giveaway. That should clarify matters.
12
It’s not surprising that according to an IRS report released today that average tax refunds are down -8.4 % over last year.
As the Democrats innthe House are moving ever closer to a public hearing on Trump’s taxes for the past ten years, it begs the question:
Will a significant number of Trump voters realizing they were bamboozled by a con artist, finally say, “ Why am I paying higher taxes when Trump said his tax plan will bring a great tax cut for the middle class?”
Maybe he could get away with shooting someone on Fifth Avenue but Trump voters when conned by a phony tax cut now benefiting the rich are more likely to reject Trump in 2020 if it hits them in their wallets.
12
A lower tax refund may be the result of more accurate withholding during the year, not higher taxes paid. Here, read this from the WaPo:
"Many Americans may confuse their meager refunds as a sign that they paid more in taxes as a result of the Tax Cuts and Jobs Act. Generally, that is not true.
According to the Tax Policy Center, 80 percent of filers received a tax cut, and about 5 percent wound up paying more in federal income taxes. The tax cuts showed up in fatter weekly or biweekly paychecks for most Americans, but few people noticed, according to polling.
“There’s a difference between taxes and your refund,” said Joseph Rosenberg, a senior research associate at the Urban-Brookings Tax Policy Center at the Urban Institute. “People generally got a piece of their tax cut last year gradually in the form of lower withholding on their paychecks.”
2
@JT FLORIDA
Income rose, which increased individual tax collections. Individuals are getting smaller refunds because they had higher take home pay throughout the year.
There is nothing like Democrats misconstruing the facts.
1
@tanstaafl: deductions were taken away that middle class earners counted on when they filed their taxes. So let’s see what Trump paid in taxes over the past ten years with a highlighter on the current year for comparison. You will find that the phony tax cut favored the wealthy like
Trump and did nothing for the middle class.
2
In Canada we have also the same kind of speeches about deficit and the debt, especially when it come for social program or relief for the people or working class people. Tommy Douglas, MP (social democrat) sum up best the problem in a speech to the House of Commons in 1943, he said:
"In the dark days of the depression, I used to ask the Minister Of Finance why the government couldn't get industry moving again, develop our ressources, provide jobs for the unemployed, and the answer to me was, 'Young man, money doesn't grow on gooseberry bushes. And I used to tell him, that if it was a gooseberry bush or something else, if the government was really concerned with achieving these results, the money problem wouldn't stand in the way. Well -then came the war- and they found the bush!"
And this is still the case, in the USA, the Republican under Obama were opposed to the stimulus program but under Trump they found the bush which allow the tax cut and the feeding of the gargantuan budget of the Pentagone.
12
@Wilbray Thiffault
Well said. I am 70 and don't know whether I will still be around to see the US dollar no longer the world's reserve currency and the sound heard round the world will be when the stuff hits the fan.
We are far too heavily invested in the success of the USA and we are trying to escape its gravity We have tried to keep our interest rates down but the global economy is our food and drink. We have made allegiance to our principles but democracy demands we obey the demands of our citizens.
3
@Wilbray Thiffault
Gee, Obama said the $0.8 trillion was going to fund infrastructure. Instead $0.8 billion went to infrastructure and the rest went to cronies, so we have nothing to show for it. He spent an extra trillion per year to prevent unemployment from going over 8% and it peaked at 10%. How much more should we have squandered?
@ebmem
Might I suggest that Mr Thiffault is too Canadian for you to understand. We in Canada have understood enough arithmetic that the real cost of things like universal healthcare is a negative number and you really do get a lot more for a lot less. Our Provincial government which oversees health education and welfare ran a surplus of 4.4 billion dollars. Aside from the reduction in the cost of healthcare we gain long term productivity and social cohesion. Good education is also expensive but the cost of not providing that education are much more expensive.
Funny thing about unemployment numbers our real unemployment is a negative number as we need new Quebers to fill thee too many jobs yet there is always at least 5% unemployed. Who benefits when unemployment is over counted. I'll give you a hint it ain't the workers.
3
It's possible for the Republicans to be completely wrong while at the same time the Democrats are wrong too. We can't have Medicare for all without new taxes, and they will be taxes on everyone, not just the rich. It'll either be a consumption tax or a big increase in the Medicare payroll tax. There, I've said it. I would be more impressed with some of our Democratic candidates if they admitted the same. They will be forced to do so eventually.
Yes, we can go into debt to invest in infrastructure to tackle global warming, but we will need to raise taxes to pay off that debt, ideally a carbon tax, but that will hurt the poor as well as the rich, just like the taxes we need for Medicare for all.
As Krugman gently reminds us, it shouldn't be the Democrats job to clean up the Republican mess, but it is their job not to make it worse. Big reforms need to be sustainable, or they will not be sustained when the other party comes to power again, as they surely must. We can and should tax the rich to clean up the deficits left by the Republicans, but new Democratic initiatives must be paid for in sustainable ways, which will mean higher taxes for all.
7
Higher taxes, yes, but offset by lower insurance premiums. Somehow that is never mentioned.
3
I'm paying a fortune in insurance premiums now. I'd fare better paying taxes under Medicare for all.
3
@Tom
And what about the billions of dollars that your employer and you no longer pay?
If, as it is in every other country with universal health care, the total costs go down, why do you care what the taxes are?
1
It's frustrating, isn't it. The GOP memory is indeed very short, and nonexistent when confronting one of them with their debt flip-flopping angst.
I must point out, though, that spending on the Peoples' health is an investment in its own right. Given a choice, would you choose a smoother road over an improved quality of life?
8
@CPMariner
If we were operating in a free market, where big medicine cronies were obligated to provide price and quality information instead of pretending they are proprietary secrets, we would be paying 40% less than we are, including covering those in need.
Spending more money on the "People's health" did not make us healthier or make services more available. They made big med richer. Giving even more profits to big medicine is not an investment, it is crony socialism.
@ebmem
You just made the best argument for Medicare for All.Take the rent seekers out of the insurance payers and spread the risk among the young and the healthy.
1
If you ask Republican voters if recent Republican administrations have been fiscally conservative, most of them will say yes, even though the deficit (as a percentage of GDP) went up under Reagan, up under Bush Sr., down sharply under Clinton (under whom we had four years of unified budget surpluses in his last four years in office), up under Bush Jr., who left office with an annual deficit well above $1 trillion, down sharply under Obama and, finally, up again under Trump.
That seems like a pattern, and not one that makes Republicans look fiscally prudent. Quite the opposite. One thing you can say with confidence about Republican voters: They will believe what they're told to believe.
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@Jon
The rate of increase in spending under Clinton took place AFTER Republicans gained a majority in the House for the first time in 40 years. The federal debt increased every year under Clinton; there was never a surplus.
The budget passed for 2009 had a deficit of $0.4 trillion. The Democrats promptly added $0.8 trillion, which brought it to $1.2 trillion. That wasn't the deficit left by Bush. Obama added $10 trillion to the federal debt, and deficits did not begin to return to the Bush levels until after Republicans took control of the Congress.
@ebmem
I've seen your misinformed comments before.
See Historical Table 1.3 of any recent White House budget, which clearly shows actual results for Clinton's last four fiscal years. Unified budget results differ from changes to the national debt, which did nonetheless decline during 2000. The Clinton surpluses were primarily the result of a booming economy and the Deficit Reduction Act of 1993, which not one Republican in Congress voted for.
See the link below for the CBO's estimate showing that the deficit for FY 2009 was projected to be $1.2 trillion. This was released a couple of weeks before Obama took office. It was based on a continuation of Bush policies, since Obama wasn't even president yet. The budget passed for FY 2009 is irrelevant since it was before the financial crisis of late 2008.
https://www.cbo.gov/publication/41753
32
I think “fiscally conservative “ is code for “not spending money on things that might help people of color.”
5
A article that hits the nail on the head. The problem is that our politicians can't seem to see the possibilities of what can make America a country for all. What's necessary???
TERM LIMITS for all politicians and judges.
Two terms for all just like the President.
Of course not two terms for the existing one.
3
Republicans are the masters of double standards. When Obama was trying to respond to the GFC, they opposed most of the stimulatory fiscal spending. Their opposition was political not economic.
Trump added $70 billion to the defence budget, with zero thought of the impact on the budget. Trump further undermined the budget by his unfunded tax cuts, that were skewed to the mega rich. The US now has a structural problem with government revenue, that will keep the budget deficit much higher, unless there are cuts to government spending.
Giving $12 billion to some US farmers hurt by Trump's trade war with China, is a hit to the budget. Having regular golf weekends at his resorts, will not break the budget, but it shows a President who does not care what it costs the public for his leisure.
The last Obama budget deficit in 2016 was $585 billion. Despite low unemployment and moderate economic growth, the 2019 Trump budget deficit is looking closer to $1000 billion.
Republicans are great at talking up their economic credentials, despite the overwhelming evidence to the contrary.
27
@Barry of Nambucca
Obamacare added $150 billion per year in perpetuity and life expectancies declined over the next three years, although the profits for big medicine dramatically improved.
Obama spent $1 million for a date night with Michelle, and Joe Biden charged the Secret Service rent to occupy his guest house while protecting his family.
@Barry of Nambucca
“The Masters of The Double Standard “!
Just one word for you, “Virginia”!
1
Of course Mulvaney is right as those who will be forced to care haven't been born.
I won't live to see it, but it would come as no surprise if the not yet born just turn their backs on the debt and en masse tell those owed the money to go fish.
Wealthy people on both sides of the aisle write the laws and share in the gains. The trillion dollar tax cut was just the latest way they lined their pockets. Expecting the less than wealthy to repay monies they will never see strikes me as a lousy ingredient for the economic stew that is now simmering.
It isn't Democrats or Republicans, it is both and they all know it.
1
On these same pages, Steven Rattner is warning us about the debt. This won’t play well with progressives. Republicans are playing a game and most people know it. Democratic presidents like Clinton or Obama work to reduce the debt and deficit and set the economy in good order. Then Bush and Trump come in and hand out huge tax cuts to the wealthy without a thought about the debt. Next election we hear from responsible adults that we can’t afford Medicare for All, because of the debt. Americans are tired of this game. Most Americans support Medicare for All. We have been waiting decades. Someone needs to make it a reality and break this cycle.
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@Mark
Agreed, and speak honestly about entitlement reform. We'll need to gradually advance the SS benefit eligibility age and start means testing for qualification. Ditto on the means testing for Medicare.
1
@Mark
I was stunned by Rattner’s piece In this opinion section yesterday. I kept hoping the Times would open it to comments, but it didn’t. After their irresponsible tax cuts, Republicans are now unabashedly positioning themselves to be so concerned about debt and fiscally prudent! They have no shame! Perhaps Paul Krugman will address Rattner’s piece directly—or AOC. There are many of us out here that are sick and tired of these games. You’re right, we need Medicare for All and we’re tired of waiting!
And a big NO to means testing, RWCW! Means testing would reduce “earned” benefits to welfare programs that would then be stigmatized and more easily cut. Raise the earned income level already! This is not rocket science.
4
Of course the Republicans are silent about the ballooning deficit. As paid tools of the 1% and their corporations, they did the bidding of their paymasters and provided yet another ruinously expensive tax cut to the rich, based on the mythology of supply side economics (n.b., a rising tide does not lift all boats--it swamps the small ones). They are just loyally following in the footsteps of those other two big fans of rich peoples' tax cuts, the Republican deficit exploders Reagan and Bush. Silence is golden lest the Body Politic wake up to the fiscal looting being administered to them and their descendants, who will be handed the bill. When is the American public going to get rich peoples' hands out of the taxpayers' pockets? Louis XIV was a tax liberal in comparision.
20
Actually, the Debt does Matter. It has created a Government that mandates Medical Safety Laws that are not enforced. Rather, if a Patient dies and Laws were violated, the Government may or may not investigate, may or may not issue a Penalty, and then keep the Money for themselves for a job well done. The penalty does very little to actually protect Patients since most of the time the Penalties are much much smaller than winning in Court and getting a judgement. The Deficit has allowed for this lack of Medical Safety Protection Travesty to go on and on and on.
1
RE: "... will the deficit scolds suddenly get vocal again if and when Democrats regain power?"
Yes.
(That was easy!)
27
What is the public to think? When the Democrats are in power: debt crisis. When the GOP is in power it goes away. This is one of the subtlest political scams in history. Supported and carried out by Fox News, of course, and much of the rest of the media.
38
Republicans belong to the party of the wealthy and take for themselves, as much as they can. Democrats are not perfect, but at least they work to help the rest of us. We have two choices. Any questions?
14
@Blue Moon. The rest of us does not necessarily include Baby Boomers or the Elderly. Progressives have aligned themselves with the deceased they never personally met, and young people, while blaming Baby Boomers and Seniors for the condition the World is in Today.
The national debt becomes a threat during an ’08 type financial because it closes off options of bank bailouts and printing money to stop a chain reaction of bankruptcies of banks too big to fail. But banks and corporations invest their money in stock buybacks, acquisitions and mergers, and speculation instead of the domestic economy, production, and jobs. Tax the banks and corporations and invest the money in a Green New Deal, jobs, and infrastructure.
12
A very unfortunate reason why huge government deficits paid by borrowing are not inflationary when they result from lowering the corporate and top 1% tax rates is that the money given to those entities and people is not used to buy "stuff" or services - it is used for the stock buybacks or invested in the same government or corporate bonds. Money mass may be increasing but its average velocity actually drops. Once the "flip" happens and deficits start coming from working- and middle-class people getting paid with the borrowed money for the GND, infrastructure or whatever work, the velocity of the money will jump from the huge demand increase. Suddenly the multiple of an already huge money mass and velocity will start hopping - very likely creating the price-wage spiral otherwise known as inflation...
A corollary to the above is that if the economy is stuck at zero interest rate and GDP can be barely moved by all the Fed actions (like in 2009-2015), creating deficits by hiring people to do actual work helps much more than lowering the taxes. Not so much today.
3
Democrats could easily offset the cost of the green new deal by raising corporate taxes to their previous level. Of course nothing the Democrats do will pass the senate, but it will easily stop talk of deficits and set the stage for 2020.
16
"You don’t have to agree with everything in proposals for a 'Green New Deal' to acknowledge that it’s very much an investment program, not a mere giveaway. So it has been very dismaying to see how much commentary on these proposals either demands an immediate, detailed explanation of how Democrats would pay for their ideas, or dismisses the whole thing as impractical." -P. Krugman
"To be harsh but accurate: the Sanders health plan looks a little bit like a standard Republican tax-cut plan, which relies on fantasies about huge supply-side effects to make the numbers supposedly add up. Only a little bit: after all, this is a plan seeking to provide health care, not lavish windfalls on the rich — and single-payer really does save money, whereas there’s no evidence that tax cuts deliver growth. Still, it’s not the kind of brave truth-telling the Sanders campaign pitch might have led you to expect." -P. Krugman
"Harsh"? That was a euphemism to excuse yourself; you were vandalizing his campaign. Your factitious objections ran the gamut from a demeaning categorizing of his supporters, to the assertion that his magical thinking was impeaching the reality-based credibility of the Democrat party. Our desperate circumstances were the reality Sanders' recognized; your campaign against Sanders was what was not based in reality. How about one mea culpa, even if niggling, it would mean much even now, or especially now to your readers who shed tears over your mean-spirited columns.
5
@scoter Wow. I witnessed a Bernie Sanders who constantly lied about Hillary Clinton and misled his own supporters over how Caucuses worked and their overall value. Hillary Clinton won the Primaries, which are what matters, 28-12, yet Sander's claimed he could have won the nomination if not for the Super Delegates. Then of course Sanders immediately switched back to being an Independent once the Democrat Race was finally over.
5
You have never learned the lesson that took so many by surprise in 2007, when everything was going along so swimmingly in the financial markets and Greenspan was assuring Congress there was no irrational exuberance in the markets. It is a lesson I learned from The Black Swan, written in 2006. I know you and its author, Nassim Taleb do not get along well. But of this lesson, there is no doubt who is correct. An interest rate or a price is just a number. It has no physical relationship to the natural world. Just as BearStearns stock went from $50 in the morning to $2 the same night, an interest rate can jump from 1% to 4% in a week, even higher in the case of PennCentral which was AAA one day and bankrupt the next. This never happens with physical qualities. You can't lose 50%, 70% or 80% of your weight in one day. So just keep reassuring yourself that as long as interest rates are at 1%, the US does not have to worry about its debt. Just remember that 1% has no physical relationship to the natural world. I hope you get lucky and you are right for all of our sakes. But theoretically Taleb is right and you are wrong as are almost all persons who are economists.
6
Personally, as a trained economist, I think that large deficits when the unemployment rate is very low is a bad idea. For one thing, what will the U.S. do if the unemployment rate goes up and they want to borrow even more? I would also argue that it should not be surprising that someone with a background in real estate development would not appreciate the problems associated with high government debt as high debt is part of their formula for success.
12
I was quite angry when reading Steven Rattner's column titled "Your Grandchildren Are Already in Debt." It was the same stale argument. Michael Bloomberg's comment regarding universal healthcare bankrupting the country was more of the same. Universal healthcare will greatly lower overall healthcare costs. People too often confuse government debt with personal debt. The country cannot go bankrupt. The lenders will not demand payment of the principal. When the government borrows it also creates an asset, government bonds, for the lender, probably the most secure investment in the world.
27
@James Ward
This is just plan irresponsible magic thinking. Healthcare has to be paid for one way or the other. You can argue that universal healthcare would lower costs and therefore people can afford to pay higher tax rates (which is basically the case in much of Europe), but governments can't continuously borrow to pay for it anymore than people can.
That lenders won't demand payment of principal is irrelevant – they will demand payment of interest.
@Bill White The US spends way more on health care than any other advanced country. Universal healthcare will lower the costs. Yes, money will be shifted from insurance premiums and payments to healthcare providers, AND PHARMACEUTICAL FIRMS, but the overall costs will be much lower.
12
@James Ward So we are supposed to celebrate Interest Only debt that never gets paid down, but continues to go up?
Step one should be the Democrats introducing a plan to cut the debt by $ 1 trillion by repealing the Republican giveaway to the wealthy in the last Congress. Will this happen? No, because the Democrat Party elite eat at the same trough as the Republicans and the new comers are already being whipped into line.
9
Krugman is mostly right but what's missing from this piece is a substantive explanation of why the government can't "just print more money."
The simple answer being that the United States does not, in fact, exist in a vacuum but rather it's debts are owed to external actors who are closely monitoring the "books" of the government in much the same that the SEC monitors the books of private corporations. Just as cooking the books would result in a massive plunge in a companies stock prices, so too artificial currency manipulation would cause a massive increase in inflation which would actually lower the value of said newly printed dollars - particularly when you consider that most of our debt is held by foreign creditors who do not use our currency.
Additionally our ability to continue borrowing money would grind to a halt as creditor's lowered the debt worthiness rating of the United States and rates got worse for us. So why do we need to keep borrowing money in the first place?
After years of increasing the debt by hundreds of billions each year, we need to keep borrowing just to make payments on our existing debt. Much like a credit card then if left unchecked government debt balloons and soon your interest owed is growing faster than the minimum payments you're making. We're not there yet, but Greece and other EU nations are proof it can happen if we let entitlements balloon excessively.
2
@JP
This just isn’t true. The US owes debt denominated in a currency it controls—unlike Greece and the EU members that got in trouble. Also not true is that foreigners are the ones funding our debt—72% of our debt is in the form of US assets (i.e. US citizens or government). The Fed can purchase any amount of US debt it chooses—no need for any foreigners. Finally, you can look at Japan as an example of a country with twice our relative level of debt which can borrow at almost no interest. Just facts.
5
Good column Paul. Are you edging up to discussing Modern Monetary Theory? And you mentioned the Green New Deal in a decent light. Green Aurora Borealis tonight.
1
“….we needn’t fear that debt will snowball, with interest payments blowing up the deficit.”
Right – that is because national debt at 105% of GDP, and growing, has already snowballed and the Fed is holding (manipulating) interest rates low because they know it will only add gasoline to the deficits and national debt wildfire. A wildfire we cannot extinguish!
For every $1 of 2018 GDP growth we incurred $1.32 in debt. Every 25 basis point increase in interest rates adds $50 billion in interest to annual deficits. Social Security is in net withdrawals and must be funded with new debt, and foreigners and insurance companies have not increased their purchases of US Treasuries. You don’t have to be a Noble Laurette to see how this story will end.
We must find a way to hold self-interested and self-enriching Elected Politicians, government officials, their staffers and operatives from both parties personally and financially liable, responsible and accountable for the lies and half-truths they have told US, their gross mismanagement of our county, our $22 T and growing national debt (105% of GDP), and our $80 T in future, unfunded liabilities they forced on US jeopardizing our economic and national security, while benefiting themselves, their staffers, their party and special interest donors.
3
The only plank in the thin Republican platform is hypocrisy. There's never been anything else.
They live on the margins of policy debate but their echos of "fiscal conservatism" ring true when it's leavened with just a little more racism; another log on the fire of the culture wars that Republicans stoke so well that their smoke-and-mirrors are lost in the cacophonous din of abortion, free giveaways, opioids (which mostly affects the Trump "core," but, never mind).
When Paul Ryan was the House Speaker (and even before that), he was in the bright lights of American financial policy. He was hailed as a new voice of stature and responsibility; he unblushingly accepted the title of "wonk." Now that he has departed, anyone with an interest in the way money works can see that there was never anything there. He and his predecessor, John Boehner, stonewalled President Obama. They told him "no!", repeatedly. "We can't afford to beggar generations yet unborn," they mewed. That was not a consideration when the 2017 high-noon theft of the American Treasury was pulled off. All of a sudden, priorities changed and there was money to benefit the rich but the threats remained to Medicare, Medicaid and Social Security. No free lunches for inner city (black) kids. Nothing for infrastructure repair. Nothing for health care for the middle class. Too expensive, Republicans tsk'ed tsk'ed.
Now Ryan has skipped out of town, leaving Mick Mulvaney to speak the truth: "no one cares."
Who knew?
38
@Red Sox, '04, '07, '13, ‘18,...Oh, and by the way let's cut taxes and increase our military budget at the same time. We need a whole slew of 3.5 billion dollar planes, that don't work!
Wow, Who Knew?
1
It simple: People before Profits.
6
"That is, will the deficit scolds suddenly get vocal again if and when Democrats regain power?"
Below, my response to Rattner's op-ed yesterday:
Here they go again. First, Republicans explode the deficit giving tax breaks to billionaires like Steven Rattner. “Your Grandchildren Are Already in Debt.” When Democrats are poised to clean up the mess, as they’ve been doing since 1933, we’re warned by centrist billionaires that we can’t afford projects that protect and benefit the rest of the American populace.
Working from IRS data for the years 2006-2015, if the top one-thousandth of a percent (0.001%) of taxpayers (those with average incomes of $133 billion) had paid the “Buffet rate” of 30%, instead of the 20.25% they actually paid, the Treasury would have collected an additional $176 billion. That’s from about 1400 people. Apply Buffet to the top hundredth of a percent (0.01%) and it’s $325 billion, to the top tenth of a percent and it’s $512 billion, and to the top 1% it’s just under $1 trillion.
It won’t pay for a Green New Deal or Medicare for All, but it ain’t chopped liver. And unlike tax cuts to billionaires, a Green New Deal will create jobs and Medicare for All will save lives.
21
Let's stop our huge spending on war. That will save us hundreds of billions per year. Let's take care of Americans and America.
11
Here in California this republican talking point finally ran out of gas a we chucked them out of office. Wandering in the wilderness (where most of their districts actually are), the state republican party has fought amongst themselves as how to achieve relevancy; double down on the brain-dead stuff that got them where they are or actually come up with appealing policy?
Time for us to do the same to their brethren on a nationwide scale. The Republican Party deserves to be dashed into irrelevance. The sooner we vote them all out the sooner they can become responsible contributors to our republic.
16
Here's the logic that I don't get: How do you argue that it is too expensive to work towards heading off catastrophic climate change? Answer: You can't.
14
By the time American politics sorts out the hysteria from effective policies, climate change and mass extinctions may well have a direct and undeniable impact - in the dying of insects and the consequences for agriculture, in flood and droughts and fires. And the ignoramus who pretends to be the president still won't be able to distinguish between weather and climate.
3
Transportation is vital for Americans - to get to work, school, healthcare - and should be a guaranteed right for all. Free cars for all are necessary as the infrastructure of public transport is so poor. Electric cars for all will be a huge step to fixing climate change and providing jobs, while also supporting politicians.
The debt won't matter, until it matters and it will. I worry less about government debt, than the fact that while we are going into debt the only programs that are being supported are ones that make arms. There is no money for the environment, or infrastructure, or healthcare, just more guns. Reagan started us down the trickle down path and since then we have seen depressed wages, people losing benefits, ever more profitable corporations and an overall decline in the standard of living under Republican governments. Then we have a democrat in the house who tries to mop up the mess and we go right back to being further in the hole.
6
Republicans haven't cared about deficits since they adopted what Bush 41 called "voodoo economics." The problem is that everyone inside the Beltway fell in love with someone named "Simpson Bowles." He was the toast of Georgetown, think tanks and cable talk shows. Invited to every party and symposium, given lots of op-ed space of the most prestigious newspapers. Everyone laughed at his jokes and nodded along as he pontificated. But he was wrong.
4
We know that, in a capitalistic system, the economy fluctuates regularly. The government needs to spend during recessions and balance budgets during good times when tax revenues can be high. Republicans like George W. Bush and Trump have shown us that political parties often don't care about this, and are more than willing to spend money and cut taxes when they should be paying down the debt.
So why can't congress pass a law that limits how much leeway politicians are given to tax and spend during these different cycles. We obviously cannot trust their judgment, so why not put it into law within reasonable parameters set by economists ahead of time?
2
Some little knpwn facts about the federal debt:
1. The federal government thru the FED can create as much money as it needs out of thin air. Therefore it can never go bankrupt.
2. We have paid off the federal debt exactly once in our history, in 1835. In 1837 the longest depression in all of our history began.
3. In fact, even just paying the debt DOWN by 10% or more has thrown the country into a depression. We did this 6 times producing depressions in 1819, 1837, 1857, 1873, 1893 and 1929.
4. All of our depressions have been preceded by a period in which the federal debt was paid down 10% or more.
5. That 22 TRILLION debt includes many TRILLIONS that the government owes to itself such as the 3 or 4 TRILLION owed to the FED which returns the interest to the Treasury,
6. As a percentage of GDP the debt owed to the public was 47% larger in 1946 than today. That was followed by 27 years of great prosperity.
7.The federal debt was only 16% of GDP in October of 1929. What happened next?
6. We need money to conduct commerce and so that banks have reserves to make loans. That money comes from the federal government via deficit spending, Thus except for when when we have a huge trade surplus (which will probably never happen), we must have a deficit, and so the debt must increase.
6
@Len
I don't doubt your numbers, nor do I doubt your hypothesis. It is all of the spending in between that I (and so many others) have a problem with.
A trillion dollars is so unbelievably abstract and people cannot fathom what is means. It means an illegal war or higher education and health care for all. It means millions upon millions getting higher education and tens of thousands getting a new lease on life as opposed to oil companies keeping the status quo and tens of thousands being wiped out through conflict.
Perhaps we need to stop talking in the abstract and truly break it down so people would understand? Maybe then they would not continuously vote against themselves.
Just a thought.
4
@Len Charlap - You've been posting this comment for years. I refuted it a long time ago. Let me try again.
The economy is cyclical. Recessions have many causes. Historically each downturn is different. The private sector is the primary contributor to aggregate demand. When it experiences a slump, Keynes showed it is appropriate for the public sector to engage in deficit spending for counter-cyclical purposes.
During recessions, the federal budget AUTOMATICALLY goes into deficit or experiences a widening of its existing deficit. The reasons are obvious - tax revenues decline and safety-net outlays rise. There is less private income to tax (both personal and corporate) and more public spending on items like food stamps and unemployment benefits. Because of how they cushion aggregate demand during economic downturns, safety-net programs are often referred to as “automatic stabilizers”.
My point is the federal budget RESPONDS to recessions; it doesn’t CAUSE them. Every economist knows the economic growth rate at any time is influenced by dozens of factors. And every regression analyst knows correlation is not causation. Please try to recognize the deficit/debt are the exogenous (dependent) variables in the equation and the level of economic activity is the endogenous variable.
As Keynes said, “The boom, not the slump, is the time for austerity.” He didn’t say we should avoid austerity altogether, nor did he claim that austerity causes the slump in the first place.
3
@Len Charlap - According to Wikipedia, the US economy has suffered 47 recessions in its history. You only (fallaciously) link a handful of them to federal debt reduction, mostly in the 19th century when the federal budget was tiny and the Federal Reserve system wasn’t even created yet.
https://en.wikipedia.org/wiki/List_of_recessions_in_the_United_States
3
If Republicans really cared about deficits, they wouldn't keep pushing for tax cuts on the wealthy.
14
The idea that the federal gov has to pay for things, good & bad, with taxes or borrowing is just plain wrong.
The gov doesn't need your money. It can (thru the FED) create as much as it needs out of thin air. Just think about where money you pay your taxes with came from in the first place. Unless you have a printing press in your basement, it originally came from the federal gov.
But there's a catch. If the gov needs to create too much money to do the things we want it to do, we may not be able to make enough stuff to soak that money up & will have too much money chasing not enough stuff, i.e. excessive inflation. This is rare & is usually caused by shortages, e,g, of oil.
But that's easy to solve & where taxes come in. Taxes allow the gov to take back the excess money & prevent inflation. The purpose of taxes is to adjust the amount of money in the private sector. The more we can produce, the lower taxes can be.
So the way to run things is to spend money to facilitate production. Tax cuts do this, but in an inefficient way. If we cut Daddy Warbuck's taxes, he does not need to spend the money; he uses it for financial speculation. If we cut poor Joe's taxes, he spends the money on stuff--food, house paint, etc.etc. This promotes production of food, etc.
Even better if we pay Joe to fix a bridge, the money still gets into the economy, AND we get the bridge fixed.
Just remember, the federal gov will run out of money when the NFL runs out of points.
4
@Len Charlap
"The more we can produce, the lower taxes can be."
The economy is now growing at a 3% annual rate. That's nearly twice as fast as Obama's final year, when GDP inched ahead by only 1.6%. Since we're producing more, then by your logic the GOP tax cuts were appropriate, right?
2
@Len Charlap
Does “But I still have checks, I must have more money” mean anything to you? No, probably not! As long as the dollar is the exchange currency we can sell debt until the system flounders ( we will and it will too!)
Rather than just tax American Citizens for all the “free stuff” we’re doing or giving to the world, why don’t we make the rest of the world pay for it?
That will never happen either!
1
@Schumpeter's Disciple - Also if we cut poor Joe's taxes, he spends the money on stuff--food, house paint, etc.etc. This promotes production of food, etc.
Even better if we pay Joe to fix a bridge, the money still gets into the economy, AND we get the bridge fixed.
That's why deficit spending is better for the economy than tax cuts. BTW we have plenty of stuff that needs doing.
2
Healthcare for all Americans need not raise the federal deficit. We spend a larger portion of GDP on healthcare than any of the industrialized countries that provide healthcare to all. The spending may shift from paying for private insurance to federal taxes but the total spending need not increase and may decrease.
23
Sorry, but you are using facts and reason to rebutt partisan propaganda. Facts lose nowadays.
If there is one overriding Republican ideological imperative it is Ends Justify Means. Thus lies are their go-to strategy.
Why can't the defense budget come down to cover the deficit and needed investments? Is that a given?
8
I would go further than this. Republicans cut taxes specifically to undercut democrat's ambitions to expand the safety net. By sending the deficit sky high, they make it harder for democrats to find funding for anything.
70
@no one special
I would go even further... Republicans want to contract health care coverage and let the poor and minorities die younger. Looking at the latest life expectancy numbers this strategy seems to be working for them.
4
https://fred.stlouisfed.org/graph/?g=mAAp
January 30, 2018
Federal Government Debt as a share of Gross Domestic Product and Federal Government Interest Payments as a share of Gross Domestic Product, 1980-2018
2
The national "debt" is so big, should the rulers decide to redistribute this much to their investors, that would require extremely unpopular taxes. The investors will continue investing in government bonds as long as they expect to unload them to others. The rulers will honor the "debt" until some emergency when they won't, and the bond holders take a partial or full haircut. They know the risk, and they willingly accept it, even if they end with nothing. If they end up with nothing, they have no legitimate complaint, none.
The capacity of the government to sell bonds is very far from exhausted, regardless of any dire warnings. This capacity could easily pay for all Democratic and Republican wish lists, including fully funding free healthcare, free colleges and universities, massive tax cuts, government funded maternity leave -- and wars against whomever you want, etc.
While some might argue that that would lower the bond ratings, notice that when that happened some years ago, it had negligible impact on bond sales. Won't his "debt" have to be "repaid"? This $22 trillion boat is never coming back.
7
One thing Mr. Krugman missed is that health care reform is essentially revenue neutral - the cost of health care is going to be 15% of the economy, whether it is paid for by a combination of taxes and premiums like it is now, or just taxes as in now proposed.
6
@Dave
Not quite. Your thesis is valid for the current number of people in the system. However, with universal coverage, all those extra millions of people will make the health-care pie bigger, i.e. cost greater.
@Bill M, correct if we assume that those folks aren't getting any health care at all. However, there are cost savings associated with the additional preventive care provided to the insured, i.e. more prescription inhalers and better management for asthmatics (like myself) reduce the number of expensive emergency room visits for the uninsured, and unpaid ER bills. There may also be significant savings in the administration of national health care, versus the patchwork system we now have.
2
@Dave
I certainly think we would save money with a single administrative system that could focus on efficiency rather than on maximizing shareholder profit. You're right that certain savings could be had by having less expensive emergency visits through preventive care, but I can't see that with millions of more folks going to the doctor for all the things that we go to the doctor for over a lifetime and all the tests and prescriptions that that entails wouldn't increase the costs overall. Don't get me wrong, I think everyone should have a right to medical care and whatever it takes we should do it. Heck, other advanced nations do it. A society should take care of all its citizens over listening to the billionaires who say it's too expensive.
Concerning Trump's coverage of the deficit in his State of the Union address, Sherlock Holmes referred to "the curious incident of the dog in the night-time". Watson replied, but the dog did nothing in the night-time. Exactly.
Krugman correctly points out that the same goes for all the Republicans who on the debt are dogs who do nothing in the night-time of Trump's presidency.
2
@Marvant Duhon. Well said.
There used to be three death industries: tobacco, alcohol, and guns. Now there are four, including the fossil fuel gang. The first three spend oodles of money courting members of Congress but have relatively impact on the economy or the fate of the earth. The fossil fuel gang represents a much larger industry and trillions of dollars annually are at stake if the progressive, green approach takes hold globally. The gang will use all of its tricks, distortions, and lies to persuade voters that what will kill them and their children and their children's children is better than, gasp, THE DEVIL'S DEFICIT!
5
@MEM
There are 5! You forgot the NHS!
1
Thank you Paul for your excellent analysis. Dems have proposed a way to pay for their big ideas — tax the rich. No, not “crazy” tax proposals. Very reasonable in fact. Much lower than previous tax rates in the 40s and 50s.
The simple truth is all of the proposals in the green new deal can be paid for by having the rich and corporate America pay a fair share.
And when we talk about healthcare, let’s remember corporations and small businesses and individuals are already paying. Universal healthcare simply moves that money to a single payer system, which will squeeze much of the inefficiency out of the current system and remove the multimillion dollar bonuses for insurer CEOs. And what about all those uninsured people, you say. We are already paying for them through higher insurance and hospital costs.
So when the GOP says we can’t afford what every other industrialized democracy has, you know better.
17
I think I recall in 2007, just before the financial panic struck, that the Fed Chairman said the mortgage situation was "manageable". Then the lid blew off and something like an existential financial panic ensued. How does that happen? Nothing ever seems too risky until it does; sellers suddenly appear in greater numbers than expected, buyers disappear. When does it happen? When sensible financial parameters are exceeded: too much leverage, too large gov't debt, etc. Democrats today are pushing spending ideas that will again push us into the risk red-zone. They might get lucky, nothing may happen, but then they might not. Do we need to find out?
Except that you’re confusing debt fueled consumption (that then got dishonesty sold in the form of junk derivatives) for debt supported investment in the National productive capacity.
PK is always right — until he’s wrong.
@Ronald B. Duke Baloney! You give a pass to the GOP tax cut, but democrat's spending for the welfare of the American public is pushing spending pushing us into the risk red zone. You got it backwards buddy. That was a give away to the already rich while leaving everybody else footing the bill. They got you right where they want you. Paying for the rich to be rich.
"Really big spending plans, especially if they don’t clearly involve investment — for example, a major expansion of federal health spending..."
Federal health spending NOT and investment? Please. It is the most important investment we can make. Poor people in this country can make a tremendous contribution to the welfare of us all but they can't do it without decent healthcare.
lff
9
Well, suppose interest rates remain low. Even if this happens, the Federal debt, and the interest paid on it, will get bigger and bigger.
So the government will collect taxes, and then pay out the money in interest to wealthy holders of Treasury securities. The amount paid out will increase every year.
This does not seem like a prudent approach. RIght now the interest on the debt is only 6% of the budget, but it might start to rise rapidly. While Congress has the power to cut or eliminate any spending program, they can't not pay the interest on the debt.
1
@Jonathan This is silly bean counting. Look at what is being paid for, the cuts to the wealthy not interest on the national debt.
@Jonathan
Cut it out; you're scaring me.
The debt has to be paid on, or the credit rating will go down and the interest rates will increase. We finance the debt with treasury bonds which are bought by institutions, other countries, retirees and those that want fixed income.
As the debt increases, the bonds interest rate increases, and the bonds value decrease the income will not keep up with inflation. This of course results in lower consumer spending. Also the government spending is restricted as the budget will also suffer. The fed buys treasuries to increase the money supply, it will cost more and decrease the value of the dollar. If your dollar is lowered in value and the interest you have to pay for big ticket items increases, that is the same as a pay cut.
Government services will have to bu curtailed, and that is the plan behind the GOP tax cut, it is their way of shrinking government, a tribute to St. Ronnie. We have already seen calls to cut what they call entitlements like the SS and Medicare you paid for. Even something like food stamps, a minuscule part of the budget is under fire. While at the same time calling for more military spending exacerbated by scare tactics,
The GOP thinks it can evade the basic axioms of economics, human action. Supply does not increase demand despite the wishes and hopes of the conservative mentality, it is the road to another crash.
6
@David
You lay it all out in black and white mate. There is the possibility of us changing course, but Democrats may follow the usual of trying to stay the course on taxes so they may hold the line on social programs.
However, I think the cupboard is now completely bare. (especially after two decades of illegal wars) Taxes will have to be reverted, peace declared and priorities set. Progressives are finally starting to break through with that message.
We shall see.
5
The middle and upper middle class in America really needs to understand the GOP legislators and their oligarch employers, 'the donors', are engineering this huge debt on purpose. Their plan is simple, 'we donors fix it so we stop paying taxes and let the 'little people', the American middle and upper middle class, pick up the check.
12
Fortunately for the Democrats, there's a very easy way to pay for much if not all of Medicare-for-All and the "Green New Deal" without blowing up the deficit - roll back the huge tax cuts Repubcans have given to millionaires and billionaires (excuse me, Mr. Schultz, I mean "people of means") and corporations over the years. And if they do, you know what? The rich will still scheme to amass riches, and corporations will seek profits ... while the rest of the world would be better offf.
17
Paul, we will pay for this investment spending by rescinding the Trump tax cuts as soon as possible, by adding a number of additional levels of taxation on high net worth individuals and families (like Liz Warren's proposed wealth tax), and then by slowly (over a number of years) raising rates on everyone until they resemble those of the Clinton era - which was an era of both broad prosperity and balanced budgets.
15
Trump, the self-proclaimed "King of Debt", never worried much about paying back what he owed. There was always someone else to stick with the bill.
The GOP shares that same approach. GOP politicians and their donors never really worry much about paying higher taxes if the deficit gets too large. There is always someone else to stick the bill with.
They'll just blame it on the "Takers", cut safety net programs, declare Medicare and Social Security unstainable, demonize those who don't look, love, or pray like them as a distraction, and then demand another round of tax cuts for the "Makers" to inspire them to get out of bed in the morning.
I don't know at what point a growing national debt relative to GDP becomes a problem. I'm not as sanguine about it as Mr. Krugman because politicians have a habit of calling any type of spending that gets them votes an "investment". And what can't go up forever, won't.
But in a country where tax laws written by the wealthy for the wealthy are barely even enforced on the wealthy, I figure we have a few obvious options to help fund much needed programs if faux Republican deficit scolds are really worried.
7
The Republican play calling is well established. We know the GOP is lying when they pretend to care about deficits. However, I'm nervous when we discuss low interest rates as justification for borrowing in an ostensibly good economy.
We can't always have low interest rates. Otherwise, the Fed's independence is already co-opted by special interests, including the executive branch. Borrowing is advisable with historically low interest rates. However, that's not what's really happening.
Interest rates are supposed to rise when unemployment rates are low. Something is wrong with our economy when this relationship fails in one direction or the other.
I'll suggest the problem is wealth inequality. More technically, insufficient returns to production, namely labor. We can't raise interest rates despite a growing GDP and low unemployment because wage base consumption is still persistently anemic.
As a primarily waged based household myself, I would love to see social programs that benefit the full spectrum of income based subsistence. However, I'm not sure borrowing is the right way to finance the project. We need to get interest rates off the floor or all government stimulus is beholden to Congress. We've seen how that works.
I would suggest a strongly progressive tax program instead. We need the social programs but we also need to steam vent pressure on the Fed. Hence, economic conservatism but economic conservatism directly targeting extreme wealth. Finance the spending.
3
Medicare for all sounds good. Devil is of course in the details. Tell private health insurance companies they are going to fold or even just face competition from a public option and they will scream socialism and that it is a government take over of the health insurance industry.
Similarly tell people they might not be able to see their current doctor and they will fight it tooth and nail.
The only solution I can think of would be a gradual approach to a more affordable equitable system .
Oh one other thing Pelosi was talking a few months ago about passing a law that requires any increase in spending to have a super majority. Terrible idea that will hamstring us.
2
Absolutely. Bring on your ambitious social programs and don't worry about revenue. It's all an investment in the future, and that's a good thing. Just ask Greece. Oops.
2
@JC
In the case of Greece, perhaps what we're emulating is a failure to actually collect the taxes people owe.
1
@JC Oh, you mean like the right wing has done with wars, invasions and then tax cuts, instead of increases to Pay for the wars, it was all done on the Credit Card, and yet the Repubs do not want us to pay down the credit card because They own the bank getting the Interest Payments, so nothing goes to the principle and all to interest, forever, on trillions of debt...that is well worth enough to cheat and kill over.
I would prefer social programs to help our own Nation's people rather than bombs to sell to someone else with the profits privatized, to blow apart innocent women, children and old men just because of ancient tribal feuds.
1
@JC
Yeah, we are so like Greece. Nice comp.
1
They still talk about "fiscal crisis", but that's just so they can float destroying social security and medicare. Even erstwhile liberals like Stephen Ratner: just look at this editorial today which while it does address the issues of taxes also suggests unconscionable ideas like raising the social security retirement age yet again. This is an attack on the very idea of social security as the people who are harmed by such a policy are the working classes who have much more physically demanding jobs and little or no other source of retirement income. Ratner is basically joining the "work til you die" chorus of the deficit scolds. So, Mr. Krugman, I'd suggest the scoldery has not gone away, it's just singing a slightly different tune.
6
@chris
Rattner is a conservative wolf in progressive sheep's clothing. Trying to appear reasonable. Haa!
I am glad Professor Krugman talked about deficit scolds in the context of American Politics. As stated it is never a good idea to simply borrow money to waste it. However, it would be good to make a comparison with very high deficit countries, namely Japan. With the assistance of the Japanese Central Bank a deficit of 236% of GDP is sustained with little stress on the Japanese economy. Japan's treasury issues debt with near zero interest rates, (private debt has higher interrrrrrrret). While Private investors shun purchases of this debt, the Bank of Japan is happy to buy it. The minimal interest charge is returned to the government as profit from the bank of Japan. Whether the public wants the debt or not, the Bank of Japan can buy it eliminating the cost of debt service to the government. Given the Federal Reserve can purchase low interest bonds, its hard to see how the Federal Government could get into a debt crisis.
1
The ballooning debt stems from tax law/policy favoring the 0.1% in a way not seen since the advent of the income tax over 100 years ago. It can easily be brought under control by returning to an equitable approach.
33
Krugman has been pointing out to the double standards on debt for a very long time. The Republicans talk up a good story on fiscal responsibility whenever Obama or any Democratic proposals come up for spending, such as on infrastructure or healthcare, However, when they are in power, like drunken profligates, they give tax breaks to the uber rich and corporations. So, the double standard is alive and well.
The real culprit is Mitch McConnell. Trump is just the convenient errand boy who makes insane proclamations while Master Mitch devilishly plots the giveaways to his rich buddies.
If the midterm results are to be believed, there will be push back against Master Mitch and his cronies. I hope it is strong enough to overcome the opposition and pass a spending bill on infrastructure that is truly gigantic. It will help update our crumbling bridges, roads, airports, and other elements in our infrastructure and bring us on par with South Korea, Singapore, and other countries that have been more prudent in their investments.
31
Just wait until the Republican chorus starts joining billionaires Michael Bloomberg and Howard Schultz in screaming about the deficit and saying "We're can't afford it!" when Democrats push for "Medicare for All." Of course, what that translates into is, "We, the wealthy, don't want our taxes raised to pay for universal health care." And, if that's not enough, wait 'til there's a firm legislative proposal for the Green New Deal and infrastructure repair. The deficit hawks are just hiding in ambush to yell "We're too broke" to fix anything that the Democrats propose.
50
@Paul Wortman, Yes Paul you are correct, and to add more fuel to the fire the Republican response will be to increase Military spending to an even more absurd level. We can't afford to have basic health care for our citizens, but we can blow up the world 10 times over.
2
If Democrats can capture the White House and Congressional majorities in 2020 they need to focus on 2 things: First, expand Medicare to anyone who wants to buy in to it. There could be limited subsidies at first but this would give anyone who wants insurance an opportunity to enroll in Medicare. Medicare has the clout to control the root cause of our health care crisis which is exorbitant and growing costs. This single payer solution could be phased in as Obamacare is phased out.
Second, Democrats need to pass legislation to tax capital gains at the ordinary income tax rate. This is long overdue. The current low long-term capital gains rate is what is causing the unprecedented accumulation of wealth at the top. Why should a self-made person making good money have to pay a higher tax rate than a person who inherited wealth?
54
Krugman has made his points about fiscal policy and the effect of government debt on interest rates and economic growth. I think he makes good points--borrow and invest when interest rates are low. Pay down debt when high.
However, one thing he neglected to mention is the effect of interest expense on the federal budget.
You know how the magic of compounding interest works wonders for savers? Well, that magic works equally as strongly -- in the opposite direction -- for perpetual borrowers.
Interest expense is expected to hit 12% of the federal budget in five years in 2023.
OK, so in the short term we can just borrow more to maintain the same level of government spending on primary outlays. Kick the can. Pay down one credit card with another.
Now 2093 may seem fairly far off, but there are millions of children alive today that should make 75 more years. And right now, some projections show that interest expense will constitute nearly 50% of the federal budget by 2093.
So just about the time global warming sinks NYC, the federal government will need to double tax revenue or halve government spending. If the U.S. hasn't defaulted already, which I assume would cause a global economic panic. Something maybe on the level of the Great Depression multiplied by the Fall of Rome.
So just one man's opinion but maybe the national debt is something we just might want to keep on our radar.
4
"Really big spending plans, especially if they don’t clearly involve investment — for example, a major expansion of federal health spending — will have to be paid for with new taxes."
It is curious that more consideration isn't given to simply doing what other countries have done with health care - which would reduce the USA cost to half what you pay now. Just pop over the border to Canada for one simple example. Or England, Scandinavia, most of Europe, Australia, New Zealand .....
America could expand health care and offer a better health care system at lower cost to all citizens by simply copying successful systems in use all over the planet.
Is this an option?
12
@Brett Not only is it an option. I would be wisdom. All of he examples you mention spend a smaller portion per GDP, with great efficacy than we do.
We must drop the pretence of AmerIcan exceptionalism.
2
P.K. says "Enough already." He's right.
Politics requires short, repeatable, clearly truthful statements.
1. Debt is bad or, at its best, it's not good.
2. Sometimes bad things are needed for practical reasons. This is the case of debt -- always.
3. Transparency empowers taxpayers. Absolute transparency is never bad.
4. So, then, public debt has to be handled transparently.
CAMPAIGN FINANCE GRAFT is currently the social disease that weakens transparency in many societies including the US.
Draconian campaign finance reform is what Democrats, Horrified Republicans (they exist - I met one) and Independents need to fight for together.
And after that, the discussion of debt will get serious.
6
I disagree with Dr. K fairly often, but this is not one of those times. The grandchildren will be furious if we pinch pennies or insist on some nonsensical zero-sum carbon tax to fix climate change.
Let's pay to do what's needed & tell them "you'll thank us later".
5
@Paul K
Why can't we just raise the federal gas tax another .50 cents a gallon for 5 years? I know there is a law that says it can't be raised.. but it certainly seems like the quickest and easiest way to increase revenue.
European countries pay well over $6 dollars a gallon and they enjoy affordable healthcare and free college.
13
@Aaron: In European countries they also drive much smaller and fuel efficient cars and there are very few families with more than one car and quite a few who don't own a car. Public transportation is excellent, widely available and comfortable compared to the USA. Despite the cost of gas, European car drivers in all likelihood don't pay more per year for gas than American drivers...
4
@Aaron
I agree with the sentiment, but the money is going to (siphoning off by ) defense. (and of course illegal wars)
Until we deal with an all of the above strategy (cutting seriously the defense budget) we are merely cutting around the edges.
5
@Aaron
There is no such thing as being free. Really.
As an immigrant to France I assure you that I know our taxes are supporting what we value most in life. The taxes are higher compared to the USA. That is what the 'Yellow Shirts' are supposedly protesting.
I'm probably not going to state this correctly but here we go.
The Great Depression was caused by distrust. Because of distrust people hunkered down. Venturing out on a new idea did happen but it happened so infrequently that there were hobo camps from sea to shining sea.
FDR's administration worked to restore that trust. If I remember my history from my Grandparents correctly, the government hired people to sweep the streets. The government invested the taxes of the people back into the people and so trust was rebuilt.
I have 3 choices:
1. I can pay higher taxes and trust that the people we vote into governing will allocate it appropriately as the majority wishes: investing in education and infrastructure, preventative health care and regulation against fraud and monopolies.
2. I can pay lower taxes and promise my civilization that I will invest the money saved into job creation and helping students and the poor or sick. Surprise! I do that in some other country but not the USA.
3. I take the money I saved and build a nice big house, retire early, divorce quite often, buy a lot of things, and take great vacations.
Socialism is a civic commitment to the best good to the most people for the duration.
8
"Really big spending plans, especially if they don’t clearly involve investment — for example, a major expansion of federal health spending — will have to be paid for with new taxes."
Not necessarily. Our debt is denominated in US dollars. Therefore, it can be paid entirely with a printing press. And I believe it ultimately will be.
4
The problem with "thinking small" with respect to the national debt of the USA is that it would inhibit people from passing on the debt to their children and grandchildren - when great-grandchildren are also available to assume responsibility. This would expand the pool of people who have to assume the consequences of the over-spending by today's generation.
The fact that some of these great-grandchildren are yet unborn is a minor triviality. Just imagine their pleased surprise at learning that prior generations couldn't say NO to any spending program.
1
Many democrats did object to the recent tax cuts on the basis that those cuts would increase the deficit. In fact, that was one of their principal arguments. Nobody objects to deficits resulting from programs they support. Everybody objects to deficits generated by programs they oppose. My guess is that the national debt will continue to increase irrespective of who is in power, until no more debt can be incurred. Then we can sort out what has been done to our country.
2
@william hayes: The reason the Democrats pointed out that the deficit would increase under the Trump tax cuts, was that the Republicans said it would not do so. The Democrats were against the tax cut for the rich because they feared it would simply be used to syphon money away from medicaid, medicare and social security, which indeed turned out to be the case when Ryan started to suggest to cut those social programs.
7
@william hayes
Can't quite agree on detail; it always seems the GOP is in favor of debt/deficit to further enrich its base, the very rich. And wars--let's not forget wars. When the dirty rotten socialist libruls try to enact programs to *help* people, that is, the rest of us, the GOP screams and wails about encumbering our grandchildren with debt!!
If they cared about anyone's grandchildren, apparently even their own, they'd pay attention to what climate scientists are warning.
2
"I’m not saying that Democrats should completely ignore the fiscal implications of their actions. Really big spending plans, especially if they don’t clearly involve investment — for example, a major expansion of federal health spending — will have to be paid for with new taxes."
Perched at the end of a tirade against deficit scolds, thius [passage may be missed.
I wonder if Prof. Krugman agrees with Steven Rattner in today's Times: "Your Grandchildren Are Already in Debt.
It’s irresponsible to pretend that America can add splashy new social programs without finding a way to pay for them."
Enough rhetoric. Whatshould and shouldn't Dems. do?
1
@Ian Maitland
There's no comment section on the Rattner article, so I'll point out here that his standard of fiscal prudence never seems to apply to military spending, only programs that benefit taxpayers. Funny how a new aircraft carrier is accepted without debate but health care spending is scrutinized and met with "we can't afford that" rhetoric.
5
We worry that the Fed needs room to lower interest rates to stimulate the economy when the slowdown comes. But, monetary stimulus has an alternative and there is plenty of firepower available. Tax the wealthy. We are not without great untapped policy potential. The world knows we as a nation are rich and will pay our bills one way or another. The deficit is a choice, not an inevitabillity.
4
I'm coming to believe that the biggest problem we're facing right now is priorities. Liberal brains just seem to have different priorities than conservative brains. While a conservative brain might sacrifice upgrades to America's school systems to build a border wall, liberal brains are more prone to believe that, say, mitigating potential damage to the future ecology is significantly more important than said border wall.
To paraphrase what I see as the thrust of Mr. Krugman's article. the problem is we've got different ideas of what we need to buy, but we're sharing the same credit card.
6
@Andrew
You left out "conservative brains might sacrifice upgrades to (you name it) in order to give more money to billionaires." It's just a different priority.
4
@Andrew Mitigating the EXISTING Ecologic Damage is much more important already than Trump's wall, give $5Billion more to the SuperFund Cleanup, and keep politician's families from contracting the work.
4
Agreeing with Dr. K., we have Exhibit A from elsewhere on this page today, pertaining especially to the author's first graph:
https://www.nytimes.com/2019/02/11/opinion/debt-tax-democrats-presidential-elections.html
which deserves spotlighting because it shows the liquidationists at work.
Vulture Capitalists can't build - they've forgotten how; they're about swindling.
11
@R.
Rattner is solidly aligned with the deficit scolds today. Sometimes he does better but today, no deep thinking.
5
@Thomas - Yep; it was a disservice that the piece did not allow comments, in order to refute voodoo and derpitude.
4
@R. Law
Thanks for the link. Everyone reading Dr. K's column should also read it.
Higher taxes aren't a panacea, but part of the solution. We also need accountability, including restraining our over- bloated military spending.
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“Borrowing at ultra low interest rates” ???
Who is to say what the interest rate being borrowed is at, if they are just 3 year Treasury bills ?
If they were 30 year bills, then you could say. But three years ? The interest rate is unknown, in the long run.
What happened to Greece ? What rate did they borrow at ? What were the rates once the banks got scared ?
And as those Treasury bills are expiring, there is the new debt, but also they old debt that needs to be funded again.
@David Martin
"Greece! Greece, I tell you! Grease!" (Oops, Freudian slip there.)
Seriously, Greece was sold out by its ruling class and nailed to the cross of gold by the northern Eurozone countries whose banks had made loans Greece could not pay and they knew Greece could not pay.
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@David Martin What does Greece have to do with this?
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@David Martin OMG! Greece!1
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Should government debt become a problem, plenty of room to adjust. Cutting military expenditures alone would allow far more valuable areas to benefit - starting with education, healthcare and the environment.
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There is 'useful' government debt, and there is 'other' government debt.
'Useful' government debt is debt that can be used as a political cudgel to attack the opposing party, and used to hamstring their policy initiatives. If enough FUD can be created around 'useful' government debt, it can be be used politically to enable turning back policy initiatives that your party opposes ideologically. In this category of 'useful' government debt we find: any government debt when Democrats are in power; all government debt when examining solvency of entitlements like Social Security and Medicare; and all government debt when new social welfare programs are being debated.
In the category of 'other' government debt we find: all government debt when Republicans are in power; all government debt when Republicans are trying to cut taxes for the wealthy; all government debt when Republicans are trying to increase military spending; and all government debt when Republicans are trying to "build a Wall".
Since Trump has taken office, all government debt has been converted to 'other' debt; it will immediately change back should the House Democrats attempt to enact any "socialist" policies, or should Trump fail to win in 2020. Otherwise, "Reagan proved deficits don't matter." is the operative logic... along with "tax cuts pay for themselves".
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@Jim Brokaw
Nicely stated. I note that "tax cuts pay for themselves" is correct for Republicans, as they pay off handsomely, when Democrats gain power, in the manner you described.
The unpunished hypocrisy is also a result of media trying to be "balanced" despite one side basing policies on facts and the other on rhetoric. That's why someone like Paul Ryan was seriously taken as a fiscal expert, and Republicans will unfortunately be invented when the situation requires. Paul Krugman, would you please run for Senate and put a stop on this?
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Voters really want to know how our tax money is spent. Using taxes, or more taxes, to invest in education and infrastructure are well supported by many voters like me. So is reducing the debt burden; that is, thinking and planning how to create a better future for our children and grandchildren. Reducing taxes by reducing unidentified government services and the size of our tax refunds to subsidize company buy-backs of stock? Not so much.
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Indeed, Dr. Krugman, Thanks.
And so we have deficits that Republicans had started to whine about and use to justify reducing the cost of social programs. ... We have stupendous and blatantly obvious hypocrisy here. Republicans created yet another round of deficits by tax cuts like Reagan and Bush. So this time let's fix it by raising taxes on the very rich and create a direct association between tax cuts and investment in factories and jobs.
Then let's apply some scrutiny to the reason we needed additional $100B's increase in defense budgets. Do we honestly need jet fighters that cost $200M apiece, or is that simply to satisfy the bottomless pit associated with the Military Industrial Complex that President Eisenhower sternly warned us of. Are those jet fighters for dealing with ISIS fighters running around the desert in small Toyota trucks? or maybe the caravans of middle easterners attacking us at our southern border. Maybe we could sell them to Saudis so that they can cause more human suffering in Yemen.
Certainly a big infrastructure program would do far more for our economy than fancy toys for underpaid soldiers. After all infrastructure creates blue collar jobs and continues to stimulate our economy with more blue collar jobs like those who operate high speed trains, or manage and run airports, or drive trucks. We might even be able to upgrade the NYC subway system and create other efficient commuter systems. We don't commute to work on $200M jet fighters.
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@dpaqcluck
Hey, what about a functional subway system for Los Angeles? Ever since GM tore up the tracks, transit redevelopment has been expensive and slow.
If we quadrupled the density of the current minimalist subway/light rail, it would reduce congestion, delays and pollution!
NYC already has the best transit system in the country!
I seem to remember some questioning about the deficit, to which the Republicans typically replied that the tax cut would pay for itself through increased productivity and investment. We see how that worked out. New investment came with increased demands for higher returns, and corporations spent more on buybacks (increasing the returns) without significant job creation or higher wages. The fruits of whatever increased productivity there might have been went directly to the usual places.
The elephant in the room is military spending. As sacred cows go, its right up there with Social Security. 55% or more of government spending goes to the military – and that's just what we know about. Nobody is willing to take that on for fear of appearing unpatriotic. We've seen last year that the Pentagon can't pass an audit, and we keep pouring money into this black hole, more money than any other country. We spend more than $2000 per person – man, woman ,and child – every year. We continue to fight to protect oil interests around the globe, and shamelessly ignore the suffering anywhere we don't have "interests" to protect.
But I digress.
I am sure that a Democratic administration will be assailed by deficit hawks who have rediscovered their wings. As long as there is war between the social contract and the military contractors, we will continue to see this drama played out over and over.
I hope the political will to change it exists.
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@michaeltide
To the last sentence, I believe it does. It is all about priorities and political will. (Certainly critical mass in the electorate does not not hurt)
I believe that the defense budget needs to be cut in HALF (aye 50%) with ALL troops coming home, and all wars ended. (and Guantanamo closed)
There should be marginal tax rates for the rich at or near 70% and a wealth tax. There should be single payer health care and an elimination of the FICA cap. There should be a line by line elimination of the waste in government.
The money is there. Just need to move around some zeroes where all partake, and not just a 26 people.
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@michaeltide
We need to see the military-industrial complex for what it is -- a giant jobs program that also conveniently serves as a gravy train for ultra rich investors and private contractors. Slashing defense budgets is very difficult because those contracts -- say for a new fighter jet -- are deliberately designed to spread the jobs and money over as many congressional districts as possible. No senator or representative wants to be the one to tell his/her constituents that government contract jobs in the district will be lost.
Indeed, such cancellations do cause pain for ordinary people, too. Anyone remember Grumman's F-14? Long Island's economy has never really recovered from the loss of those jobs, many of which paid well. I do think there are more productive ways to employ our people than building weapons, but the reality of military cuts is that they would need to be tied to new jobs for the displaced workers or it won't be only the owners of stocks who suffer. Not addressing this issue makes defense cuts a non-starter.
For that matter, it also touches on a reason why Medicare for All is threatening to many. What if you work in the health insurance industry? What if you're a medical coder? To sell these proposals, Democrats must address the human fallout. I'm not saying we shouldn't make major changes, but we should do a better job of addressing foreseeable consequences than Republican administrations do.
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@michaeltide
Actually, all the congratulations to Ronald Reagan notwithstanding, that's what sank the Soviet Union. They spent money they didn't have on the military. When they collapsed, we should have immediately attempted to save ourselves from the same fate by slashing our military spending.
Now we've apparently decided that we have to be able to defeat the whole world, all by ourselves, since our traditional allies can't be counted on to echo our policy line in lock step. That takes a whole lot of defense dollars. Mmmmm, mighty big bucks.
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Krugman is absolutely right.
However, as he says 'It's still a bad idea to run up debt for no good reason' and on this point I agree with him as well.
The issue I have with big time spending (as Krugman refers to it) is that it inevitably winds up being larded with billions of extraneous giveaways to lobbyists, constituents and various favored industries which have nothing to do with the original bill.
On this point alone, as an American taxpayer, the only way that I can get behind big, bold Democratic (or Republican, for that matter) plans is if it is done transparently and without the criminal artifice of pork that has marred so many of these efforts.
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The question is - What am I getting for my tax money and am I paying a reasonable price for it. I for one am not thrilled about the percentages or the prices paid, but innumerate is as innumerate does. Wave the flag and hope the yuan isn't more widely accepted.
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It would be nice if Democrats were focused on infrastructure, income inequality, healthcare and the green new deal. But political capital and public interest are finite resources. A lot of it, if not most of it is being spent on identity politics much to the delight of the Republican party.
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@Joe--Obviously, youy haven't been watching. The Democrats have indeed been focused (among other things) on infrastructure, healthcare and the GND Certainly most of the discussion is going in that direction, rather than Identity politics
But there's another factor that I haven't even seen discussed--our bloated budget for the military. With all the known waste, and, I'm sure a lot we haven't been told about, we could surely make up the cost of a lot of programs that would be of much greater benefit to the American people.
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@Joe
I disagree. Progressives won (historic turnaround) in the midterms (where lower numbers show up) by being true to an economic message for all, AND to demand human rights. We can do both friend.
The President's popularity is at historic lows (37% by Gallup) and disapproval is at historic highs (59% by Gallup)
I am sure there is no delight by them in that.
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@Joe
Sorry, but is "identity politics" really that big a threat?
It seems to be that when we decide, sort of in passing, that people of all sorts are people, and should have an equal shot, including at Congress, the GOP starts in about this--is it their code for *only white male Christians deserve anything*? And should we see through this and treat it with the contempt it deserves?
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I don't suppose the mainstream media angst over the debt disappeared because not only are republicans in charge, but the cause of the rising debt now is lower corporate tax rates? Who owns most of the mainstream media again?
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@JP
I think it is more that Republicans are in charge. The media also obsessed over debt when Clinton was in office. Nightly news broadcasts frequently featured the “debt clock”. Then Clinton and the Dems balanced the budget largely with a tax increase on uppoer incomes. We had a significant surplus that was rapidly paying down our total debt. The media ignored it even when Bush ran on destroying the surplus with tax cuts. (But then he was more fun to have a beer with, amiright?
The media ismloathe to abandon their favority storylines and one of those is that Democrats are recless spenders.
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Well, first of all--though it's not obvious to most Democrats---Trump is not a Republican, nor is he a Democrat--he is Trump. So while you rejoice that he didn't mention debt, you might want to be careful what you ask for. Wealthy people don't care a whole lot about inflation because they often own lots of capital items, and they have big loans, which they can pay off with inflated dollars. Ordinary people, on the other hand, don't have that kind of debt, and they don't own capital so inflation caused by huge government debt just destroys their limited prosperity. Trump has figured out that fighting with Democrats over debt just uses up time with no results so he looks contented to run it up---after all Democrats love spending more than they have. why fight with them?
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@Bill Clayton
Ordinary people do indeed have debt. Most of us owe a lot more on our mortgage than we have as cash or CD's. Inflation helps us pay off our loans with easier to earn dollars as both wages and prices. go up.
Inflation is one of those benefits that the rich can't direct just to themselves. Trump has not figured out anything, he just swallowed the "trickle down" lies Republicans fed him.
Democrats spend on things that benefit all of us and spend more than we have when fiscal stimulus is needed. Democratic administration have been much more fiscally responsible.
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@R. Mihm about 65% of Americans own a home, and that surely includes well off people; so 35% do not own homes, and have no long term debt. Short term debt doesn't benefit from inflation nearly as much. If you look at the big Eastern cities run by Democrats for decades, they are all in debt. It isnt just "when fiscal stimulus is needed", it is clearly all the time that they spend more than they take in; pensions, infrastructure, you name it they have overspent it, and they are ALL Democratic administrations, and all irresponsible.
@Bill Clayton
After all, what's worse: Spending money you have, or "money" you don't have and that doesn't exist?
Since 1981 it's been Republicans spending MORE of what doesn't yet exist. You might want to get out of the mountains sometime.
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Krugman is, as usual, spot on. We have two years remaining with a divided government led by Swamp Creatures. In the interim, I expect the Democrats to be exemplars of thoughtful planning, careful and deliberate execution. Change, revision, and articulate leadership are prerequisite. Our biggest challenge will be a unified voice. Fortunately Speaker Pelosi exercises very strong leadership in this area. Let us hope our Congress (both parties) can see the critical nature of reform and put dysfunctional party politics in its place. As usual, its up to us.
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Thinking big when you're so far in debt could signify some kind of character or mental disorder in an average citizen, but not with Paul Krugman. It's his generation's grandchildren who will be forced to repay that debt, not him. The debt is $20 trillion and counting. We've got a problem. We have a Nobel Laureate telling us that debt's OK, just so it's for a good reason. All politicians think there's a good reason for them to spend money, whether we can afford it or not.
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@Charlie Reidy
Grandchildren will reap the reward if money is spent on projects that enhance the economy at a rate greater than the interest on the debt. Since US borrows at 1% it is a good bet loans can be invested at higher return rate than cost of loan. National debt is really a loan taken to invest in capital generating projects for the future. It is not a cost to our grandchildren if we spend it right. The political question is - what is the best way to spend it? Roads? Free college? Health? Corporate tax breaks?
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@Charlie Reidy
Don't forget Bill Clinton left the budget in a surplus position! This isn't mainly a democrat problem by any means. Also, I think Dr Krugman was mainly pointing out the case for counter-cyclical deficit spending versus pro-cyclical deficit spending which is what republicans typically ignore. I think it makes sense. Run deficits when they are needed to stimulate the economy, (think 1933 or 2007) run surpluses when the economy is strong (think 1985 or 2007),
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@Charlie Reidy
You probably will ignore this, but, one more time: corporate bonds and stocks, which far exceed government debt in value and risk, are debt that constantly rolls over. We don't have a problem seeing the value of such debt-based investments, do we? We don't call those who sell such debt, corporate boards of directors, "mentally disordered." Do we?
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Before the November election, Nancy Pelosi was saying that if Democrats won back the House and she became Speaker, she would handcuff new Republican spending.
Now, in a presentation to medical industry lobbyists, Pelosi's aide reassured Big Insurance that Democrats would not be pushing Medicare for All.
This is now, and it is when the things we desperately needed in 2011, 2012, 2013-16, are still desperately needed. 2014 saw the end of long-term unemployment payments. Within 6 months, California and New York began to experience housing crises. Within two years housing went on to become a nationwide crisis. Raising the minimum wage slowly won't solve the problems arising from millions of Americans never resuming middle class jobs since the start of the Great Recession. The forced austerity under John Boehner and Paul Ryan was not resolved by the relatively low-paying jobs that were created, or by the gig economy. Now, it isn't only the 50-somethings that are in a bind, but their children in their 20's and 30's, too.
Taxes need to go way up. Spending on national, state and local projects needs to increase. Investment in Green New Deal projects is one way to spend. Another way to spend is to stop starving the poor and disabled and begin to pay out Universal Basic Income payments. If a recession hits this year or next, UBI will be needed.
---
Things Trump Did While You Weren’t Looking [2019] https://wp.me/p2KJ3H-3h2
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In the weeks to come, that anger will likely begin to boil over. First, there is the matter of the effect of the Tax Scam Bill on all Americans who are not rich. Many may end up owing instead of getting a refund. This may finally rekindle the anger left simmering since 2016.
The same things that ailed in 2015-16 still ail today.
"“In other words, for every statistic you can find, I can find one that tells if not a different story, a more nuanced one. Yes, the jobless rate is 5 percent, but the underemployment rate, juiced by 6 million part-timers who want full-time jobs, is a considerably less comfortable 9.7 percent. No question, wages are rising, but the major source of real income growth over the past year has been low inflation. Paychecks aren’t growing so fast as much as prices have been growing a lot more slowly.
Then there’s the geographical dimension to all of this. According to recent research by the Economic Innovation Group (I co-chair their advisory board), business and job growth have been a lot more concentrated in big cities than in non-urban areas. L.A., Miami and Brooklyn have been crushing it, both in terms of business formation and job growth; counties with less than 100,000 people were actually losing businesses, at least through 2014.”"
Profiling The Angry American In Thins New Political and Economic Era (June 2016)
https://www.rimaregas.com/2016/06/03/profiling-the-angry-american-in-this-new-political-and-economic-era-blog42/
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@Rima Regas
Your point about people finding out about how their taxes were really affected by the recent changes is well taken, but of course the critical thing is whether the GOP can deflect blame for it. And they are masters at that kind of political judo.
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@Pat
There are at least a zillion videos of Trump touting his tax cut as a boon for the middle class. The GOP can't squirm out of this one.
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