Good summary Dr Krugman. I especially applaud your remarks about "sexism if the [Democratic -- do I really need to specify this?] nominee is a woman". My wife predicted since the 70's that the USA would elect a black man president before a woman, and danged if she wasn't right! As you point out, the news media is very entangled in this prejudice. Although it's outside your area of expertise, I hope you return to this subject. The more we talk about it, the more the prejudice will be blunted.
23
So, between R-Reagan and R-Bush Sr. they made a mess of the economy, D-Clinton had to come and salvage it.
Then, R-Bush-II drove the country to a recession the likes of which we hadn't seen since 1930. I will never forget road-signs on the state highway in Michigan reading, accountant, Nurse, shopkeeper, Attorney-at-law.... "will work for food".
So, along came Obama, and you could see how economy steadily improved, on whose effects Mr Trump is basking.
Deficit aside, there is no real change in basic wages and healthcare cost is rising every 1st of July. Middle class is shrinking daily.
We will need Democrats to reel back USA from an economic debacle in future.
Perhaps, one can argue let Republicans make their rotten mess to the point of no return, so this country's denizens get it in their heads for once and all, Republicans don't know how to run a country.
Perhaps, another 4 years of DT should bring the poverty to levels that scorch this racism and annihilate the concept of 'the other' from their minds.
Only a threat to economy and personal liberty has the power to motivate masses.
14
People are being foolish if they take the tiny Trump slice of data and assume that the economy will be better under Republican policies and stewardship. Over the entire history of official data, GDP growth has been 138% better under Democratic administrations and the pace of job creation has been 83% better under Democratic administrations. The latter is like a basketball game with a score of 91 to 50, a blowout for Democrats, and the former is like a game with a score of 119-50, an epic blowout for Democrats.
14
The only situation that’s different in this “booming” economy is that now, instead of one minimum wage, no benefit job, everybody can have three of them. When this thing all heads south, and it will, the “business genius” in the White House will try to declare bankruptcy again and walk away...except this time...
6
"as a radical socialist poised to throw the border open to hordes of brown-skinned rapists." This will be the Republican campaign and it will be ugly, but likely successful for it has worked for Reagan to Trump. Republicans have had Americans vote against their own interests for decades relying on hatred and fear while America is in a downward spiral of decline.
7
His “overt racism delights his base” and can a “sufficiently terrible president lose an election”. Nice writing Paul Krugman - you hit the nail on the head.
5
I've been (perversely) rooting for an economic crisis ever since the 2016 election. It is the only real silver bullet to put an end to the madness. Hopefully something short of a full-blown crisis can do the trick. But I'm convinced that more people have to feel more pain in the pocketbook before they can see that the emperor has no clothes. (Forgive the metaphor mixing).
5
Funny I was under the impression that the economy was still under what Obama put in place durning his last four years in office and what happens here on out is going to be hung on Trump. He still hasn’t brought manufacturing jobs back, coal is still declining, and if Brexit doesn’t happen with new avenues for commodities to be sold and the tariffs still in place Trump and the republicans are going to be in a world of hurt.
5
.there is a reasonable likelihood that the 2020 Democratic nominee for president will be someone who favors, to a greater or less extent, something along the lines of the "tax the rich" plans being recently proposed by Sanders, Warren, and Ocasio-Cortez, among others.
The probability of the 2020 election resulting in a change in the tax code that significantly reverses the massive shift in the in the tax burden away from the rich and onto the middle class is still very probably low as long as the Democrats continue to combine such tax proposals with plans to spend the proceeds on various social programs like free college tuition. However, a plan to raise taxes on those with assets above $50 million and/or incomes above $10 million and use all of the proceeds to reduce the taxes on everyone else might have a much higher probability of being enacted.
It is hard to envision the Democrats being politically savvy or ideologically flexible enough to embrace a policy of directly shifting the tax burden away from the middle class and onto the rich. Rather than using the proceeds of taxes on the rich for spending programs.
the best thing government could do for most middle-class households would be to lower their taxes. Thus, many middle-class voters have been willing to grasp at any chance they think could lower their tax burden, and thus support candidates who promise them a tax cut, no matter how odious the candidates might be otherwise.
https://seekingalpha.com/article/4266831
3
If the economy starts to go south, you can bet that Trump will call for more massive tax cuts and even spending increases, if he thinks that will get him re-elected. Then he will blame the Democrats for being responsible for a deteriorating economy if they don't go along, and will take the credit if they do and enough stimulus re-starts growth. The racist comments are a distraction from the looting and deregulation that hurts everybody who isn't a millionaire--he's handing the Federal government over to corporate interests and billionaires==that, and healthcare is what we need to have story after story about from the press.
5
Not to worry, Republicans will discover the evils of deficit spending if a Democrats sits in the white house after 2020.
5
Paul writes: "Trump’s character won’t change, except possibly for the worse."
---is that actually possible?
4
One thing is certain. IF the economy turns sour, trump will blame Obama.
7
informative article but could you write about Americans paying more tax after Trump's tax cuts if that is indeed true and add in how contributions to charities have dropped significantly, again is true? and if true can you get the journalists to focus on that instead of over reacting to everything the president does that is covering up this significant news.
2
Hence the panicking by Donny (and those who wanted to RAISE Fed rates in '10-'11 during a clearly depressed economy) to pressure the Fed to raise rates during the so called "greatest economy of all time". They are terrified the "Trump Bump" is petering out. Intellectual honesty is dead.
5
You should all read the article in today's NYT about how the 2017 tax bill contained a loophole to allow foreign banks to avoid paying US income taxes thereby further increasing our deficit. How did that happen? Well, they lobbied with their "free speech" (i.e. money) and the Trump Treasury Department (i.e. Goldman Sachs South) gave them what they wanted.
7
Trump intended that his tax and regulatory cuts juice the economy so he could campaign for re-election on the tried and trued motto of “it’s the economy stupid.” He now understands that the corporate and upper class tax cuts may not insulate him from defeat in 2020. Thus he resorts to what has always been Plan A: a loyal base who believes in Trump, and not in he success or failure of any policy. He has fostered a bond with his loyal followers based on a cult of personality. He has regurgitated their basest fears and prejudices, establishing himself as a member of their tribe. He has planted the seeds of excuses ( Fed chief Powell is destroying the Trump boom, likewise the Socialist Democrats) that will bloom in to campaign rally rhetoric. He will build on that base with affluent voters unwilling to give back tax benefits, Republicans unwilling to defect and other targeted groups. He will rally evangelicals with his judicial appointments and cynical pro-life stance. He may peel off enough Jewish votes with his Bibi love affair and Cuban American votes with his malice towards Cuba to secure Florida. He will brag about criminal justice reform. He need not win a majority of Jewish, Hispanic or African American voters; he needs to peel off enough in key states.
Do not underestimate Trump’s instincts and guile: he knows he can’t rely on the economy, which can slow or crater due to his policies or events beyond his control. Blatant racism is only one of his tactics.
4
more than sexism, overt racism works in America it seems. the change of send her back show that quite a few people want permission from likeminded crowd to show their true colors.
thus far it used to be dog whistle, of silent majority, of welfare queens, of willie Horton. now that mask is off.
3
Trump voters vote for him b/c he's a racist, not in spite of his racism. The "I don't approve of X comments but" is simply rationalization. So the economy doesn't matter.
Recent polls show White Christian Evangelicals are least likely to hold favorable views on immigration, so let's do away with the Judges/abortion myth as well. That's a bonus.
The racism has always been there, it simply ebbs and flows based on shaming. Do they represent enough to elect Trump?
5
I'd like to know how much responsibility for the "good" economy is credited to Barack Obama and the policies and recession remedies he set in place.
3
I’m more worried about the effects of sexism if the nominee is a woman — not just the sexism of voters, but that of the news media, which still holds women to different standards.
The NYT and Hillary's emails for instance?
7
Paul, From your lips to God’s ears.
1
Trump's fanatic supporters care little about the or their own economy. If that were the case they would have voted for a Democrat.
Trump's already tried to take away their health care, given tax breaks to billionaires that didn't trickle down, cutting back entitlements and protections. He created a massive deficit, fights trade wars that hurt ordinary Americans. He is corrupt, has appointed corrupt and inept people and uses Fox State Television to whitewash his abhorrent Presidency.
His supporters don't care. The reason why they do not care should scare us all. We've seen it happen in North Caroline a few days ago. Trump supporters are white, scared and see in Trump an enabler of their racism.
Lucky for us this group is shrinking. The Democrats need to make sure everyone turns to vote Trump and his GOP sycophants into oblivion, where they belong.
6
One can only hope!
1
The sellout of America continues. President's family selling dead real estate to the Saudi's. Saudi's getting new military equipment. Saudis getting a new American base to help them fight Iran. No one will care about the environment, infrastructure or the economy when these Trump supports OK a war with Iran. Fear, Fascism and forgetfulnuts...the new Know Nothings.
5
My Dear Guru Krugman, I sincerely hope you're right!!!
1
What can we do about the sexism?
2
Why would a person so apt to go bankrupt as a way out of bad decisions care about putting the country into a further hole with his deficits?
6
The article's conclusion is wishful thinking.
1
Weren’t you the guy who claimed that the economy would tank the second Trump got elected? Kind of hard to take your opinion on this matter seriously, even with your Nobel Prize. You have let political bias dictate your economic analysis.
@Jake
Get off it, Jake. Prof Krugman has long since admitted his mistake. Unlike the GOP and their "economists" who not only get it wrong, always, but lie continually about it. Fifty years of GOP supply-side trickle-down has been a disaster for everyday Americans, yet conservative Republicans continue to promote it with proven lies; they continue to address the debt with hypocrisy; they continue to hold the debt ceiling hostage, they - oh, wait - they have now changed to "raising the debt ceiling is a good idea" or else the country will tank, which is something they only want when a black man is president. With their racist in the house they can raise the debt ceiling even though doing that will go against their closely-held conservative tenets. Sort of like they did with tariffs, the deficit, and having the government pick winners and losers (hint- bad when it picks solar energy, good when it picks Big Oil, their Big Donors.)
So, I can accept one Dr Krugman slip-up. You and the rest of the conservatives apparently are incessantly upset with that one error, but okay with 50 years of GOP lies, hypocrisy, flip-flopping, and economic sabotage. So maybe you can see why conservatives are the ones who cannot be trusted to predict, much less manage, the economy. I'll bet you still bring up "Obama lied about keeping your doctor" when healthcare discussions come up. It is the Brett Kavanaugh school of hyper-partisan false equivalences from which so many in the GOP have graduated.
6
I'm praying for a market crash next summer. If the only thing that can get rid of this despicable creature is misery for the population at large, then let there be misery, especially for his base. I hope they turn on him and his sycophants like a pack of wolves. He deserves no less.
4
Fair analysis as always by Prof. K, but the problem is that the Republicans have long abandoned the traditional strategy and talking points around "it's the economy, stupid" in favor of "hit the hate buttons, stupid".
Once rationality is out the door, only one party wins.
5
Deficits don’t matter, when the GOP are in Power.
Duh.
3
Mr. Krugman....
from your lips, to God's ears. So let it be.
1
Anyone who is enjoys a growing debt binge feels good... UNTIL the debt growth has to stop and payments on interest and principal have to be made. Like a drug or alcohol buzz, everything is wonderful until the hangover or cold turkey. Just ask the Greeks. But they got some methadone relief.
The US will party till dawn, when our status as the currency of the world falters. When will that be??? No one cares because humans are short term in perspective. So it looks like the cliff , like global warming and ocean's rising, is at more than 10 years from now. So, no worry.
Our kids are doomed, but we look safe. Like Open Borders where we bring in a million plus poor people to add to our wealthy of 50 million below the poverty line. And with no plan to help people in their own countries. So Open Borders is a short term "compassionate" panacea, that doesn't address the cause and source of the problem, just the immediate symptoms. Problem deferred seems to be the view. Typical short term approach to problems.
We have an idiot president and the Dems are OK with their view that is also short term and apocalyptic. So the Dems don't even have Social Security reform as main talking point since int appears to be just beyond the 10 year horizon. We wait for the crisis that is long term and hope for a quickie fix. Long term problems need long term solutions. No free lunch!
@Paul
Illegal immigration and Social Security reform are not even in the top 25 problems facing America today. The GOP has consistently attempted to focus us on minutia while they pillage the country. Democrats are the only answer.
4
Thank the Universe for everything that inhibits the growth of the
Cancer on the country called Trump.
1
Paul, in your penultimate paragraph you state
"Republicans will, of course, portray the Democratic nominee — whoever she or he may be — as a radical socialist poised to throw the border open to hordes of brown-skinned rapists."
Other democrats are portraying the candidates that way, we are truly doomed.
1
Priority no. 1 for the upcoming 2020 election must be that we act to secure our vote-counting process. The U.S. is an outlier when compared to other major countries in counting votes with proprietary software. Voting machines can be easily hacked or manipulated by insiders without leaving a trace.
Other democracies count their ballots by hand with observers present. It’s the gold standard.
Victoria Collier: How to Rig an Election https://tinyurl.com/y9xx63f6
"It is Germany, however, that has now become the standard-bearer for clean elections. In 2009, that nation’s constitutional court upheld the basic principle of the public nature of democratic elections. By ruling that the vote count must be something the public can authenticate—and without any specialized expertise—the decision directly challenged the use of computers in elections.”
In 2012, Ireland's Environmental Minister sent their machines to the recycling center. He called computerized voting a “poorly conceived, scandalous waste of money.”
Norwegian Votes to Be Counted Manually in Fear of Election Hacking https://tinyurl.com/y7gcwbwl
Fearful of Hacking, Dutch Will Count Ballots by Hand https://tinyurl.com/gmyfnaw
Herbert Bos, a computer scientist and an election integrity expert: “Election results are the heart of our democracy. You cannot risk any of this. Even if the vulnerabilities were small, you do not want to take any chances.”
Europe Rejects Digital Voting Machines https://tinyurl.com/yczjwo64
7
Mr. Krugman likely correct regarding the so-called sugar high from the tax cut aimed at filling the coffers of big companies and added to the influx of cash to the ueber-wealthy and ueber high-income, otherwise known as the predator class of society.
Regarding Mr. Trump'es evermore overt and flagrant white supremacism, that, along with everything else about Mr. Trump, has already turned off any voters other than the white supremacist group itself, likely the 30% of the population which would welcome a reincarnated Adolf Hitler as USA president and whatever swath of the population that represents the remaining 10% of Mr. Trump's support. But that leaves 60% of the population disgusted by Mr. Trump for every reason that gives hourly. The restrictions on voting and so forth placed by Republicans for decades now to limit voting by those who would support Democratic candidates, along with gerrymandering will continue to limit electoral gains in the USA Senate for Democrats. So-called swing Congressional districts have already moved to support Democrats, so no losses there in the next election.
I thought that Mr. Trump had near-zero chance of election in 2016, so was as wrong as can be. I see the same, i.e. next to zero probability of Mr. Trump's re-election for 2020, assuming that Mr. Trump is not impeached and convicted by the Senate before then. The Democratic Party has learned its lesson from the poor candidacy of Mrs. Clinton and her poor campaigning.
2
Reagan Phil. MS Freedom Riders murder site doing a states rights speech, Willie Horton, etc. Racism has been a key tenet of cons/pubs for years.
Hillary had hundreds of millions and hours upon hours of airtime destroying her character. Swift Boats for John Kerry.
They will make the democrat unelectable to enable them to cast a racist vote as the lessor of two evils.
Facts matter in this election. Don't be fooled and elect a fool.
5
I have trouble putting my head around that an estimated 40% of American voters are going to vote for Donald Trump in the forthcoming 2020 election. He is a known outright racist, bigot, sexual abuser, and sociopath.
If he gets re-elected in 2020, I moving out of the United States.
2
Bread and circuses.
1
To paraphrase Bill Clinton’s 1992 catch phrase, “ lt’s the economy stupid”, the Dems should be saying “ it’s the deficits stupid”. Our massive national debt requires interest payments. Right now, we are facing another debt ceiling raise. I am hopeful that it is resolved. We have a potus who has made commitments that he doesn’t keep. What if an intransient president or house of congress does not budge and we default on our debt. The “trusim” , “backed buy the full faith and credit of the United States” will mean nothing. Some worry about Trump controlling the nuclear codes. I am more worried about him controlling our fiscal reputation.
3
We should be worried about the media no matter who is nominated. Look at the coverage of Biden and bussing. Look at coverage of the squad and Pelosi's dumb comments. 2016 all over again.
3
The "feel good" effect of the economy is the critical factor in normal times, with normal candidates debating issues. 2020 (as was 2018) is not normal; while some (the "deplorables" as Hillary called them) will vote Trump no matter what, a bulk of the country (including the white women who voted Trump in 2016) are sick in their stomachs of the vileness of this POTUS and his team. The Dems have to make sure they dont step on their own and trip themselves up. Keep the 2018 lessons in mind.
2
As usual, the plutocrats are all in for the Republicans. The Mick Mulvaney administration will use Trump as it's figurehead to run against the Democrats in the Presidential race. The Plutocrats would rather not have someone as off-putting as Trump running as their candidate but hey, whatever it takes. Meanwhile the Plutocrats couldn't be happier with the Mulvaney administration which works in every conceivable way to give them everything they could possibly want.
6
What kind of country will we have as we cater to the rich, but sacrifice our souls and moral consciousness
5
Dr. Krugman--You are correct that sexism is a critical factor, but nominating a woman would call the country on its sexism, epitomized by DJT, and make us face the issue. Given the choice between DJT's sexism--racism, incompetence, dishonesty, corruption, record of wrongheadedness, etc., etc.--and the competence and character of any of the women presently vying for the nomination, wouldn't we choose the woman? I think it would be a wave election. Warren/Harris 2020.
2
Here’s Mr. Krugman trying to have his cake and eat it too. He calls Trump “Deficit Man” but at the same time he can’t resist showing that he was right about Paul Ryan and the other deficit hawks. So which is it, is the deficit a big issue or not?
1
I believe Dr. Krugman was making the point that Ryan was AWOL when the cuts were passed.
1
@Paul
I get that - the Republicans only complain when it's a Democratic president.
My point is that he's calling out Trump for increasing the deficit, while also mocking Bowles and others for overstating the importance of the national debt. So, the deficit is either a big threat (Trump is bad) or the deficit is not a big threat (Bowles and Ryan are bad). Can't really be both.
Thank you Dr. Krugman for your soft analysis of economic
reality, the US is facing.
Being a professional of non economic background, I see malaise in making, more, decline of the country I loved in my youth time. Country run on a principle of reactive Presidential orders, without a coherent proactive Developmental Program and defining mega trends to keep “America Great again” is becoming a laughing stock
for anybody who can still think.
Where is this promised investment in infrastructure?
Please tell me about any project the society can benefit from. Yes, this is sad…
In the meantime, when you hear about the other countries with a coherent thinking process, more advanced than displayed by the Tweeter in Chief, you feel nothing but despair.
Planes are falling of the sky, railway system is representing
the 19-fifties. No electric traction connecting East and West.
10 years behind in 5G technology. No national pipeline system. No response to hyper sonic (15 x speed of sound) rockets made by the adversaries…, etc.
2
Well, he still has plenty of time to start a war. Not a trade war, a war war.
4
Individual-1 and his mindless base love negativity. Please write about positive issues that Democrats are proposing or write about former presidents in their most admirable moments. You are not going to change one Republican vote. America needs inspiration, not more depression.
3
Trump's MO in his business life has been pretty steady: run up debt (he's the self proclaimed king of debt), then declare bankruptcy. Start an other business, run up debt, then declare an other bankruptcy. He's been there 5 or 6 times. Some would call that a patern.
And now, he's running the US Government the same way he ran his businesses. What could go wrong?
4
While I am somewhat ashamed to admit this, I would welcome a recession. A significant downtown in the economy might be enough to unseat Trump. I say might because his core voters are motivated by social issues and his racist diatribes far more than his economic policies. A turn down would impact middle of the road voters. And Trump would blame any decline on actions taken by the failed Obama administration. Trump is damaging every aspect of American life, including the future economic stability of the nation. He must be voted out of office.
2
Yes, the Republicans are silent, exposing their hypocrisy on financial responsibility.
This is why you need to keep writing about it Mr. Krugman.
A fiscal crisis may not be imminent, but it is inevitable if deficits remain at this level. Someone needs to continue to sound the warning.
1
I suspect a lot of voters are going to look at their 401K balance, hold their nose, and vote for Trump again. I truly wish that weren't the case.
1
The thing I don't get about the terminally myopic Democrats is, Republicans' long-term goal has always been to kill Social Security. Why don't the Democrats realize this and campaign on it? They win 2020 if the promise to save our checks. Even Trump voters want their Social Security checks. But #FakePresident's budget deficits will give the GOP the cover it needs to kill Social Security as they "starve the beast."
Wake up, Democrats! Shout this from the rooftops every day: Republicans are coming for your Social Security checks; they will be here soon; and you can live on cat food; with no health insurance.
4
What depths we have reached when there is even a chance this president will be reelected. Anything good that has happened to the economy has been in spite of the president, not because of him. And even IF he were better at economics than the man who bankrupted five companies, there is still the hatred and racism he espouses every day.
4
As much a fan am I of Paul Krugman, I think he needs to emphasize more how Trump was claiming the economy was his the day he strode into the White House; on another note, I also think he needs to look more at how "growth," the knee-jerk criterion for rating the US economy has lost much if not all of its meaning today given that climate change is a direct result of mindless economic growth.
1
Trump has the perfect platform:
Democrats are not racist enough.
Democrats have too many female candidates.
Democrats won't but taxes for the 0.1% and may even raise them.
The possibility of a Democrat win has tanked the economy.
His base will eat it up.
There has always been a large portion of the electorate who are stupid (meant in the literal, not the derogatory sense). They have no ability to seek out or decipher truth from fiction. Fostered by the dangerous behavior of Rupert Murdoch, these poor folks remain encircled by bad information and more importantly comforted by being surrounded by like individuals.
Don Trump has been the same person intellectually, ethically, and morally all his life. His behavior has been consistent for over 40 years. To the meagerly informed, this is an obvious point.
The good news is that the behavior and subsequent coverage of Don's behavior is so prolific that some of those unwashed (unthinking) mass realize that they made a mistake.
Regardless of the economy, this election is not only about issues but a referendum on Don's behavior. I am hoping that this presidency will be a blip mistake in history and that we can correct his errors within the next 20 years.
While I believe democrats will win the presidency it is even more important that we elect a democratic majority in the senate.
While I remain hopeful that we can stem the danger this administration has put us in, I am mortified that, after all the Trump coverage, that 4 out of 10 folks believe he is doing a great job.
3
Another timely warning from Mr. Krugman. I'd rank this one right up there with what he posted the night of the 2016 election. Remember?
"It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover? A first-pass answer is never… So we are very probably looking at a global recession, with no end in sight."
I'm so glad I pulled every dime of my savings out of the market on election night. Who knows how many dollars I've saved thanks to the brilliance of Paul Krugman?
1
I am flat amazed that commentators, both those who take time to think out and publish their predictions, as well as the fill-all- the-air-all-the-time talking heads on TV. simply ignore the Russian influence when speaking of our presidential election, either the last one or the next.
Ahem.
Remember what Mueller concluded?
Russian interference in our 2016 presidential election was a big deal. Remember hearing that?
The results of that election were impacted to some effect. Well, less than 100,000 votes in three states determined the outcome. The votes for third party candidates in those states swung the result. Russians were regularly in the email boxes of American voters in those states.
GOT IT?
Russia hacked out last election and reason lost. This administration has done nothing, I repeat nothing, to prevent repetition of this attack.
Talking of the next election as if there were going to be free of pollution, is simple nonsense.
5
We must not underestimate Trump. The immigration issue and probably abortion are decidedly in his favor.
As to the economy, it is and will be good enough. Incumbents generally win. Former Vice Presidents never do.
It is a strong wind we must fight.
3
Both Nixon and George H. W. Bush won. Al Gore probably won as well, based on a full ballot count.
3
@Joe S. touche. you are correct. But it is relatively rare, and Nixon lost before he won.
my main point is :be scared, run hard, don't run a weak candidate, and FIGHT.
Dr. Krugman, just as a matter of factual representation:
How one can call this economy a good one if it is propped up by 1 trillion of borrowing? Take 400 billions away from the budget and everything is falling apart. Anyone can produce record unemployment by constantly throwing money at it. This is crazy and unsustainable.
It is like a home owner, with a leaking roof and septic tank, goes to the bank and borrows $50,000 to buy BMW, other toys and takes family for vacation. Everyone around envy what a successful family it is. Or is it just plain stupidity?
Can we have a well balanced economy that produces low unemployment and budget surplus at the same time? Like in 1999-2000? A truly "good economy", not a fake one like today. With the extra money to use for investing in the future? I mean real future, like more than 5 years ahead?
1
Thanks Professor Krugman for your years of incisive insightful commentary.
2
The republicans won't talk about the economy or the increase in the national debt that has resulted from their "tax reform."
Their base doesn't understand and they don't care.
They will smear brown and black people (think Willie Horton or the Welfare Queen) or tell white people that universities are given special preferences to brown or black children at their own children's expense.
They will "swiftboat" whoever becomes the Democratic candidate.Think Kerry, Obama, HRC. Condemn them as elites, socialists, destroyers of "our American way of life."
They will say that the Democrats will raise their taxes and take more money out of their "hard earned" paychecks and savings.
They will never mention that hoax, "Climate Change." They will claim the Democrats want to take away their SUV's, increase their energy bills, collect grazing fees for their use of public lands, and take away the guns that protect them and their children from the "guv'ment" and "thems."
Or they might initiate a war with Iran, wrap themselves in the flag, and claim that all patriotic Americans must support our troops over there so we won't have to fight the Iranians on sacred American soil.
And since Russian support was not a provable or traitorous crime, expect more in 2020. If the election is close, expect electronic voting to be manipulated and the count skewed in favor of Republicans.
And since voting rights and gerrymandering are not the Federal Courts' business, gerrymandering will get worse.
4
It appears as though the only time that deficits and the national debt matter is when a Democrat is in the White House.
1
It does not seem to be Trump alone who is shaping Democratic party and this "reality show" of Dem presidential nomination process.
This ongoing Democratic nomination process may be another sign that probably most American voters, officially affiliated to Democratic party and important to get Democratic presidential nomination, are equally interested in senseless soap opera than a substantiate, factual debate among the candidates, as we seen many times in GOP presidential nomination, more notably in 2015-16.
Policy issues increasingly seem irrelevant than catering to senseless emotion and rage of people based on personal interest and racial/religious/political allegiance.
One good example would be far left leaning talk of many Dem presidential candidates to abolish ICE, open border, decriminalize illegal border crossing (and probably many other illegal issues that aspiring illegal immigrants and thier patrons in the US care about.)
//And in a primary to determine who will face Mr. Trump next year, how candidates punch and counterpunch is as relevant to voters as any position they may hold.
“One of the salient questions in this election is who is going to be able to go toe to toe with the president and not back down,” Ms. Dunn said. “Voters could be looking for a calm, steady presence, but that is not going to distinguish you in a debate.”//- https://www.nytimes.com/2019/07/19/us/politics/next-democratic-debates.html
1
You have to admit the irony of Trump warning about rapists.
4
For Trump's working class/middle class base, nothing much matters to them except the racist and anti-immigrant filth from him. As long as they hear that, they are thrilled. Doesn't matter if he cuts their social security, their medicare, etc. As long as they hear the rascist attacks, they will be very happy.
For Trump's rich and super rich supporters, the tax cut that is pouring money into their off shore bank accounts is making them happy. The rasism and anti-immigrant filth is just a bonus!
1
There's another factor that Prof. Krugman could add to this which is how expensive everything is. Employment might be good but everybody is unhappy about the expensiveness of essentials like housing and healthcare. Democrats should point out that Republicans gave landlords a tax reduction at workers expense.
2
May this go from Krugman’s lips to Mammon’s ear...
Trump's recent outbursts have exposed the truth of what his base really cares about. All this talk about the impact of globalization, or anxiety about jobs or the economy was just a screen for the real truth -- racism. OK, so it's really white nationalism and isn't ALL about skin color but includes a fair amount of non-racial xenophobia. And, OK, these Nazis wear red hats instead of red arm bands. The GOP leadership thinks it can keep this anger and hatred under control and continue to use Trump to advance their agenda of conservative judges and lower taxes for business and the rich. The business elites in Germany thought the same thing about Hitler.
4
Finally, some good bad goodish news.
1
The Democrats need a plan to address the deficit. Even if the end isn't near, you know that the press (not just Fox), will make this seem like there's an impending crisis. The Dems need to focus on: Healthcare, Climate Change, Income Inequality. Employ the KISS philosophy. Talk about raising taxes on the highest 1%, but present it in a way to reduce deficit, income inequality, etc...
Trump's racism is just the beginning of his strategy. The GOP will make this about all forms of culture wars. If the Dems fall for it and get sucked into it, they'll lose. Period.
The margin of victory in CA, WA, NY doesn't matter. The Democrats need to not alienate voters in WI, MI, PA. It's really that simple.
The press will make that difficult and will push for "gotcha" moments. That makes for good headlines. And, heaven forbid a politician ever changes their mind in light of new evidence.
1
It’s all about the GOP lack of humanity. They represent the 1%, they represent the rich and powerful, the companies and individuals who donate, whose private jets they borrow, who they play golf with (including Trump). They don’t care about the poor or even middle class, having no healthcare or being bankrupted by their health costs, or forced to choose between food and insulin. But they are fine with their own government heath plans and their benefactors are certainly fine with their first class private healthcare. They are immune to suffering. They are similarly immune to the suffering at the southern border. So when Democrats want to improve social security and healthcare for the lower economic echelons of America they fight against it. They attack it as increasing the deficit. But they applaud increasing the deficit when it benefits their rich friends, their benefactors and of course their own wealth. Such is the despicable, immoral, shameful, moral bankruptcy of the Republicans. And if Trump is re-elected heaven help the people in the US, because it will become a land of privileged rich, white Americans and the rest will be told to go to hell.
Dr. Krugman, I thought you’d mention the yield curve, and what it portends with her economy in the coming 15 months...
I must wonder about the reference to the deficit going to be only a trillion dollars, down from the recent estimate of 1.1 trillion dollars. Trump and his appointees have successfully gotten rid of so many competent scientists who reported the numbers on global warming and other areas. I heard just yesterday that the agency in the Department of Agriculture that is mandated by Congress to report figures for agricultural trade, which Trump's tariff wars have harmed, is being relocated and few of the professional staff will be retained. Trump's minions, being Trump's minions, will surely prevaricate about the figures.
6
The current S&P P/E ratio based on 12-months trailing earnings is about 22.3. The historical average P/E is about 15.5-16.5. If slower US GDP growth occurs this year and next, earnings from many US sectors should decline. And, simply put: earnings are a key driver of stock prices.
Already, world-wide global GDP growth rates of developed countries are expected to decline. And, US S&P 500 firms generate almost one-half of their revenues from out-of-the-US sources. Now, the US has a relatively higher valued market due to its brighter economic and future earnings prospects. But, if US GDP growth slips, then lower earnings may follow with significantly lower stock valuations based on discounting 12-month future valuations.
As Dr. Krugman states, deficit spending limits seem to be nearly reached with an expected deficit of $1 trillion in 2019; and the Fed has only about 10 federal fund rate cuts of 25 basis points in its inventory; but, also the recent very high stock valuations have acted as a source of both federal and state capital gains tax revenues. Both will be dearly missed if stock valuations decline due to weaker US and international earnings.
[07/19/2019 Friday 12:24 pm Greenville NC]
1
When the TV pundits say the economy is strong they cite the low unemployment and GDP. That is only half the picture. The other half is the ballooning deficit. They should be citing those statistics too. The deficit is also part of the economy and questions should be raised about why it is so high and what is Trump's plan for dealing with it. Maybe, maybe people would become more aware of it if the topic was injected into their comments.
1
Dr.Krugman: Not being an economist, I am not understanding part of the discussion. I need to be instructed. You say that deficit spending gives the economy a short-term boost. But why short term? I would think that the boost from the deficit is a "boost that keeps on boosting". There will be a continuing deficit next year and into the future until policy changes are made to contain it. Seems to me that ongoing deficit will continue to boost the economy. What am I missing?
On thing that I am not missing is that this ongoing deficit spending is not sustainable. That which is not sustainable eventually stops. If we are fortunate enough to have the Democrats come back into power in 2020 then they will be the ones who will have to raise taxes and/or reduce spending. To say that will be unpopular is to make a huge understatement. The result is not hard to imagine and may tarnish the Democratic party for years to come.
Deficit spending (within reasonable limits) that results in tangible *investment* will certainly boost the economy in a reasonably sustainable way. Spending to line pockets of our oligarchs and stock buybacks from companies will *not*. In the mid-to-long-term, the economy figures out that this is a heroin high and not good nutrition. If as you say, that come-to-Jesus moment happens during a Democratic administration, unfortunately yes - they will pay the price unfairly. (as they always have)
The news media are busy trying to push their choice for the Democratic candidate; Joe. Bernie can't get a kind word.
Some report that the 3.2% GDP gain contains 1.2% of inventory stockpiled to protect from the tariffs. Consumer spending, the biggest part of GDP, is off.
High employment should be increasing tax revenues which should reduce federal debt. Perhaps the wages aren't high enough to generate much tax that would come in as withholding. Corporate profits may be up, but their tax rates are now lower.
Low interest rates don't leave room for fighting recession. It looks like Trump bullied the Fed into not raising rates.
Doesn't look like the next year will be dull.
1
None of this makes any sense. The global economy is in terrible condition. The only bright spot (except maybe Brazil) is the US economy. The fact that we are still in good shape is only because of our current economic policy. I seriously doubt we can stand alone for long but the fact that we are in a good place is terrific.
1
It is all about the economy.
This is what the Democrats should be talking about.
Whose hands do you want on the economy when it starts to slip into a recession, which looks inevitable.
Who has a plan? Whose plan looks best?
2
I know this sounds conspiratorial but it begs an answer. What is the possibility that the economy is in the hands of the wealthy and that they can manipulate the numbers when necessary? To me, it would be nothing for them to raise the wage of workers a few percent, increase demand, and give the impression that we should stay the course prior to the next election then allow an economic collapse that they would end up profiting from, like the Great Recession. With a Republican in the White House the wealthy can ride in as before, the saviors of us all, and be heroes while lowering wages and thinning the employment pool. The end result, as last time, is that they end up with a greater percentage of the wealth and a more pliable workforce thankful that they at least have a job (though with less benefits and wages and little thought of asking for a raise).
The wealthy have made out so well under Trump that I can't help but fear that even a few quarters of less profit is meaningless given how much they will make with him still in charge. This would guarantee another Supreme Court Justice who would ensure that nothing becomes law that would diminish their superior position in this country, maintaining their ability for their will be become the will of the land.
Would it be possible to answer this question from a well reasoned, economically based stance and not just from how I perceive the course of the past 4 decades?
4
Clinton inherited the Reagan-Bush deficits and a faltering economy in 1993. In 2001, he ended his second term with a thriving economy and a budget SURPLUS in the range of $350 billion per year. The younger Bush inherited Clinton's economy and surplus and, with the help of a friendly Republican congress, he ended his second term with a crashing economy, a growing trillion dollar-plus budget deficit and two unresolved wars with no end in sight.
In 2009, Obama inherited the GOP's death-spiral economy, massive budget deficit and botched wars. He left office in 2017 with a booming economy, a reduced deficit and a cautious and difficult disengagement from Republican wars - all despite relentless Republican obstruction aimed at preventing his success. Trump inherited Obama's strong economy and reduced deficit and, with the help of a rubber-stamp Republican congress, promptly passed an unnecessary tax cut primarily focused on the very rich, that every sensible economist knew would result in another trillion dollar-plus Republican deficit in 2020.
So here we are again: the Republicans are toying with trade wars and economic stimulus to mask their resurgent budget deficits, and selling out future generations to pay for more tax cuts for the rich. When their new economic and fiscal house of cards comes crashing down, we should already know what they will say: the Democrats did it!
We've seen that movie before, and no one I know is interested in watching a rerun.
9
Trump is a master salesman. He has it covered both ways. If the economy is good, he will take credit. If the economy goes south and his numbers follow, he will say the market is reacting to the possibility of a Democratic POTUS. What the Democrats consistently miss about the GOP is that facts don't matter, but presentation does. Style over substance.
6
@eric masterson Democrats know that, but you can't convince people whose entire identity is immersed in illusion that reality exists. That's why courting trump party voters is a losing strategy, Mr. Biden.
7
All we need to win the White House back is a few more Independents who voted red to vote blue -- and a greater Democratic turnout -- in the right states. Despite my fellow Democrats being worried about the results of the 2020 election, I'm not worried. We will unify behind a solid Democratic candidate, no matter how nasty the primary gets, and enough Independents will follow to take the White House back.
Here's why:
The most sophisticated my economic analysis can get is my belief in the power of hatred. Hatred for Hilary put Trump at 1600 Pennsylvania Avenue -- it's that simple. The Left is now motivated by hatred, no matter how kumbaya our foundation. Hatred works and will boost turnout. Combine it with sensible independents and we'll take him down. Stay calm, hate him with the power of the thousand suns, convert a few Independents and we'll win in a landslide.
That said, I'm 56 years old and I'll be long gone before we can fix the damage. There will be no Marshall plan for the wreckage.
3
@MAA
You are wrong about Hilary. She lost not because of hatred but rather because she felt entitled and did not campaign as hard as she should have.
You summed it up well, at this stage of the race it is clear the GOP will have no problems winning in 2020. The liberals just don't get it, and so remain in the hole dug by themselves. It is clearly a different world out there, and the Dems are blind. But despite their indifference to what goes on in the streets of America, they shouldn't have to squint to see the general feeling is Americans don't want handouts, like free education, like forgiveness of education loans, like Medicare for All, and the list goes on and on. The idea of increasing handouts and having the rich pay for it just doesn't cut it. If anything the Dems should be saying the first action with a win in 2020 is to repeal the 2017 tax law. The Dems just don't get it. They remind me of England with Brexit: no plan, all talk, no action, no results.
2
@Me Too you’re not aware, evidently, of a) Dem candidates plans - see esp. Elizabeth Warren; b) actions including House condemnation of the Commerce Secy and Attny General, vigils and marches protesting treatment of asylum seekers, children and separated families; c) results including wins of 2018 midterms. Of course Mcconnell is stymieing actions and results, of course he is. The GOP has only one plan - obstruction of progress; is all talk about the nation coming together, rising economy floating all boats, peace and prosperity and infrastructure investment, and no results in making America anything but worse.
10
@Me Too Let's be clear about what you're really saying. Republicans are not in favor of handouts--unless they come in the form of tax cuts for the wealthy, tax cuts for corporations, or donations from wealthy PACs. And when you say "Americans don't want handouts", what you really mean is that people like you don't want to give any of their money to people in need.
22
@Me Too
You need to challenge your own assumptions about "handouts"...maybe do a little reading on great societies and how they work. Survey yourself about why you would resist helping others. Question yourself about why you consider social investments like education, healthcare, and fair lending as "handouts"...how do you feel about social investments when people are all the color you like? I think it's right wing republicans who don't get it...and they're ruining the country. Ironically....people from states like ours are the first to call social investment a handout...all the while taking the higher percentage from the federal government than they give back.
3
"If anything, the growth bump under Trump has been smaller than you might have expected..." This from the guy who said 3% grow was impossible. Why do people continue to listen to Krugman?
@Mike
Krugman was referring, I believe, to potential or long term growth.
Real, or short term economic growth, reflects the business cycle with its booms and busts.
It is not unusual or remarkable for real growth to exceed 3% in the short run, but it's unsustainable unless potential grows at a similar rate.
Potential only grows with increases in the quality and or quantity of capital and labour. An economy also needs a sprinkling of innovation leading to productivity growth. None of that was or is in evidence, and Krugman is correct: for the time being at least, long term sustainable economic growth in the range of 3% is for all intents and purposes, impossible.
1
The first thing one needs to know about the Trump's economy is that it is coming at the expense of trashing the environment and damaging human health and rapidly accelerating climate change. Trump's deregulation frenzy is behind all of those effects, and deregulation was his ace in the hole from the outset, because deregulation and spoiling of the commons has always been the Republican Partiers' plan.
Those bills will absolutely will come due, and they will be devastating.
314
@Mark It's a lot like burning down the house to stay warm on a cold winter's night. The warmth is intense, but short lived, and the aftermath is devastating.
23
@Fourteen14 - The problem with laying all the problems at the feet of capitalism is that East/West Germany were divided from 1945 until the 1990's and if you look at environmental devastation it was much worse in Socialist East Germany than it was in Capitalist West Germany. I think the problem is a more basic human failing of greed and short-term thinking. We need to educate people about long-term consequences of our actions not get into arguments about how we organize our economy.
12
@Mark
One of the funny things about Trump's deregulatory efforts is that his own OMB evaluated the benefits of the Obama regulations and found they were a sizable boost to the economy.
The "lowest benefit estimate" was $302 billion, and the "highest cost estimate" was $128 billion for the 2007-2016 periods, measured in 2015 dollars. That's a 2.3 benefit to cost ratio.
That didn't stop Trump from repealing anything Obama did to appease his racist base, regardless of merit.
The OMB report was called the "2017 Draft Report to Congress on the Benefit sand Costs of Federal Regulations and Agency Compliance with the Unfunded Mandates Reform Act."
7
The electoral cycle in my lifetime has been: Democratic administrations get elected to salvage the country from the deleterious effects of prior Republican economic policies. Then Republican administrations are re-elected on the rising fortunes of economic renewal under the Democrats. Then the incoming Republicans, anxious to "starve the beast", once more wreck the economy, hoping that their Democratic successors will be saddled with a failing economy going forward....and so on and so forth, ad nauseam, America lurches from one boom and bust cycle to the next.
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@Reed Erskine Meanwhile, the Republican elites use each cycle to build vast fortunes at the expense of everyone else, giving them ever increasing political power to be used in the next cycle. Those elites become ever stronger, and in the process pass that wealth to their offsprings, creating a false aristocracy who treasure their unearned wealth and privilege. The rest of us? Let them eat cake.
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@Antoine
Good point Antoine. The Subprime Mortgage crisis of '08 cratered the real estate market as massive foreclosures created investment opportunities for banks and vulture capitalists. The boom and bust cycle is a necessary component of wealth formation for the investor class.
44
@Reed Erskine Absolutely right! Furthermore, those moderate/centrist Democrats, considered the only "electable" kind of Democrat, according to received political wisdom, behave in practice like Republicans Lite where the economy is concerned, not progressives. Whether it's a Republican Lite or a Republican Heavy on the ballot, it's a cant-lose situation for the uber-wealthy that run this country by conning us into believing that disaster capitalism is our only choice. Enough already.
29
Republicans have simply figured out how to fight dirty and are ruthless enough to do it, whereas democrats are like Charlie Brown.
1) They know deficit spending can boost the economy, so that’s what they do.
2) They know that debt can eventually help lead to recession and make recession difficult to get out of.
3) They know that if democrats take over the economy will be saddled with debt from Republicans years. That is the time for fiscal conservatism - balanced budgets and reduced spending.
4) Fiscal conservatism makes it difficult for democrats to keep their promises - so use that against them, to help run them out office.
Makes sense. What doesn’t make sense is that the Democrats continue to be clueless or just spineless enough to let them get away with it.
244
@strangerq
"2) They know that debt can eventually help lead to recession and make recession difficult to get out of."
I cant think of any time "Government" debt has lead to a recession. At least not since we left the Gold Standard, and even then I am hard pressed to find one. Its usually private sector debt that tanks things. Not the government (although they can push too much private debt by cutting government spending).
18
@Scott
The withdrawal of deficit spending can certainly lead to a recession, or in the case of the 30's prolong a Depression. Post WW2 might be another example, though high taxes at the time let us spend on MIC and pay down WW2 debt. I think that's what the original author meant in #2.
11
@strangerq I believe the answer is that the majority are basically pro-business, fiscally conservative folks themselves, who would probably be in the major centre-right party in any other of the best and richest democracies of the world. They don't have the fundamental genuine leftist's inclination to put more money in the pockets of the vast majority of the people and to otherwise increase their well-being through greater provision of publicly funded social goods. There's a corresponding cluelessness on the other side of politics of not appreciating that such policies can boost profits and jobs (particularly in small businesses) and actually lead to savings in public spending (through lower law enforcement, incarceration and healthcare costs for instance). It's important in a democracy that both sides of politics are adequately and authentically represented. Too bad "Slick Willy" didn't get this.
15
What if we get middle of the road to challenge Trump? If we win we get the status quo - ongoing Republican mischief and and the economic philosophy that considers government a drag. Patch the inequality here and there while never changing the vile economic system, supported by Christians, that blames the poor for their poverty.
No. We are way overdue for revolution. And that's just the economics. Global warming takes the Republican threat to Defcon 1.
3
If the economy goes south, the only candidate that even remotely understands how it all works is Elizabeth Warren. I think she is probably the only one running that knows enough to pull us through in a way Obama never knew how to. In many ways we are still paying for the mistakes we made the last time the economy crashed, biggest one was thinking republicans were a reliable governing partner. I dont think many people would make that mistake again.
467
@Scott
Check the GDP chart. You can tell without any labels where Obama took over; the GDP soared after it had been going down like the Andria Dora (little tired of the Titanic analogy). However, I'll agree with you if you are saying the Obama stimulus wasn't enough; Dr. Krugman has pointed this out many times. The reason is, the Republicans weren't "reliable" partners as you say, but after Ted Kennedy died, they had to be partners and Obama couldn't ignore them.
You are also right about Elizabeth Warren. I just hope she will drop some of her more extreme positions after she is nominated. She can't beat Trump if she doesn't get nominated.
49
@Scott,
You are absolutely correct. Obama was a great friend to Wall Street and Corporate America, but he twiddled his thumbs while millions of people went bankrupt in the housing market crash, and he never used his political capital to develop a jobs & infrastructure program. The Fed's monetary policy under Obama kept the financial system from collapsing, but did little for the Main Street economy.
As Obama has said himself, he's enjoy being a businessman.
16
@Scott
Your view of recent US economic history seems misinformed or myopic. The mistake "we" made was electing Bush, under whom the economy collapsed in 2008, in the last months of his administration. Under Obama, despite the obstruction of a Republican Congress, the unemployment rate was halved, thousands of jobs in the auto industry were saved, and the stock market recovered and advanced.. The Treasury Dept. under Jacob Lew increased the monetary supply and flow, while an independent Federal Reserve under Janet Yellen was able to revive the housing market, by keeping lending rates low on mortgages.
126
Wouldn't surprise me a bit if this time next year, the economy starts to sink, the markets start trending down, unemployment inches up, ever so little, then Trump blames this all on the FED. Then declares that the Federal Reserve are all Democrats.
Then his followers will just fall in line and vote for him again. So it's up to the Democrats to just out vote the Republicans at the polls.
Nothing the Democrats can say or do will change the minds of these Republicans. Heck, we could be entering a deep recession like 08, it won't matter.
So donate where you, campaign for the nominee, and get out the vote. Please.
598
@cherrylog754 - Democrats out voted Republicans in 2016. We need to target where we out vote him to be effective.
10
@cherrylog754
Vote them out, vote them out, vote them out.
8
@cherrylog754
I don't know who you are, of course, but you make astute political comments repeatedly.
I wish you'd run for political office, but that's an awful life, in my opinion. You try to say and do the right thing, but people hate you anyway.
Anyway, thanks again for your posts.
10
The economy is not booming in the area where I live. I suspect that's true of a lot of the nation where most people continue to support Trump.
If Trump can make enough of my neighbors and there counterparts in other places hate and fear, they will vote for him. It won't matter that the economy continues to leave us behind.
5
This isn’t Trump it’s Cuomo. Albany does nothing to help upstate.
2
we best come to the realization that NO ONE will ever pay for the national deb or cares about the deficitt. So It's best to just cancel it.....whatever that means.
If the economy starts to falter between now and the election, Trump will play the tariff card. That might give him a very short term boost but it will precipitate a massive inflationary increase. That will eventually lead to a major recession as the falling dollar buys less and less.
even that may not be enough to keep the Republicans from holding both the Presidency and the Senate another four years. But, if that happens, expect to see the Treasury Secretary on his knees begging Nancy Pelosi, or her replacement, to pass legislation to try and recover the economy sometime between Jan 20, 2021 and Nov 3, 2024.
The current tax law is flawed beyond repair, any new law is going to have to make some draconian changes in order to curb the deficit and draw down government debt.
Unfortunately, if the Democrats win, almost the same thing will happen. The five current leaders of the pack are woefully ill equipped to deal with the problems a Trump administration will leave behind. Read all of Warren's plans. I have, and the woman is way out of the league in so many areas it boarders on the hilarious - and she's the smartest of the whole bunch.
It's time to spiff-up the cold war bomb shelter in the basement and move all your assets into precious metals.
1
Should Dems win next year, the GOP will re-discover its concern for the deficit--starting on January 20th, 2021.
7
Well, I should think so. How much do you think free college, health care and canceling student loans will cost? That should easily triple the debt.
1
@Florence
The three things you quote would be a drop in the bucket.
Student loan debt alone is currently 1.5 Trillion. That’s a pretty big drop in a bucket.
Thank you for this article Paul. I have been waiting for someone to sound the alarm that we are using all the tools needed to rescue the economy from a recession during a strong economic period. Trump did this to over stimulate the economy and thus his popularity, however, since the economy is cyclical, what tools will be left if there is a recession? Will his over-stimulation of the economy take away the tools needed to stave off a recession and therefore bring forth a depression?
4
Isn't the Republican ideal to shrink the government because as Ronald Reagan told us, the government can't solve our problems because the government is the problem. No government, no problem. The corporate elites will bestow all favors necessary. There seems to be a clear basic ideology here. You don't need a ph.d. to understand this.
2
You’ve left out one possible economic factor; if our political picture worsens, how long before international borrowers decide that U.S. debt offerings are no longer viewed as, safe. What are the current interest rates for Canadian, French, German bonds? England, facing it’s own crisis, may decide to up it’s rates to entice much needed financing.
Pressuring the Fed to keep rates low, to keep the markets humming- so much for an independent analyst. Rising wages? Where do you think that bill to raise the federal minimum wage to $15 an hour is going? Low inflation? See again, insulin prices, health care deductibles, the average family savings account for emergencies.
You may not be predicting a recession, but I am. And we’ll be lucky If that’s all it is.
7
Your article brings up some very valid points but it ignores one thing--something truly unusual and unexpected happening, like a war or something else that elevates the price of oil exponentially. A sudden spike in energy costs is closely associated with most US recessions, and given how cheap gasoline is right now and how it's harder and harder to buy an actual car these days instead of an SUV or truck, if gas prices explode, it will be a rude shock to our economy--probably not as bad as it was when the Great Recession hit, but bad enough to slow hiring and wages.
What remains to be seen is how Russia and Saudi Arabia would respond. Just like Texas, they make a lot more money when the price of oil goes up, so would they be willing to help Trump by increasing production? And if so, to what extent could they do that? Given how popular Trump is with them, my guess is they would do what they can for him, but only up to a point.
3
Paul, I think that you are making a mistake by focusing on Trump. Trump's tax plan was the same plan that Paul Ryan was pushing for a decade before Trump put it over the goal line. Trump's tax plan is the Republican Party tax plan. Don't let readers forget it because Paul Ryan will be back. The Republicans will run him as the anti-Trump at some point in time. Ryan's machine is already planting stories and pushing books about how noble Paul did all he could to hold Trump in check. The only difference between the Trump plan and the Ryan plan was that the Trump plan did not incorporate the tariffs that Ryan sought. Trump put the tariffs in place through the back door, however, by starting trade wars with all our trading partners. The tariffs generate revenue that ultimately comes from the American consumers.
Please focus on the Republican Party. If you don't the party will merely wheel out a selfless courageous public servant named Paul Ryan - and the media will lap it up. The Koch brothers will win. American workers, their health, the environment, the social safety net, and a secure future for our children will lose.
19
I work for the largest airline in the world. When my company benefited from the tax cut, I got $1,000.
My company will continue to get gigantic tax breaks.
I would love to see these large companies continue to give $1,000 to every employee every year because the benefit of lower taxes to companies will last forever.
I used my $1,000.00 to help pay for my higher health care costs. My health care cost went up $3,000 last year and I am sure they will continue to go up forever.
9
@Kathy, I have several friends and family members who had to pay upwards of $1000 more in federal taxes last year. And of course their health insurance costs also went up too.
7
With respect to the unemployment level, there are jobs that support and promote the economy (new businesses, technology, manufacturing, investment, agriculture) and those that don't (food servers, road sweepers, big box store workers, janitors) but are necessary to "keep things going". Jobs that pay a living wage (the former group) and those that do not (the latter group)
Somewhere in the jobs report this distinction is made. However, the press never seems to highlight it. That is a disservice to the public that supports them.
While all folk should be equal, all jobs, especially in USA, are not.
This should be made very clear in the election debates. So far I've only heard it from Sanders and Warren but must admit that this far from the election, I'm not listening too hard.
7
"But the tax cut was supposed to be more than a short-run Keynesian stimulus."
I don't think it was even that sophisticated. The Republicans were paying back the bribes ( sorry, "campaign contributions") that they received from wealthy donors.
27
We want a new car. But we aren't going to pay tariffs on it, so we won't be buying a new car. I would think that anyone who doesn't want to pay this tax on Americans would put off a lot of purchases.
Until I can vote at the ballot box, I am going to vote with my dollars. By not spending them.
21
Those of us who want Trump out now, then, forever hope that your predictions are spot on, Dr. Krugman. The tax slash added the fuel to the deficit which is now roaring along nicely. I ask now as then why did Dems vote for it? To get along w/the Prez? Watching a week of moon-love over the Mercury and Apollo shots and the enormous sums needed to the effort, which was in the beginning not much more than a race to beat the Russkies who went broke doing same reminded me of MLK's point about how that money could be spent elsewhere. For example, in real people w/real needs from education to jobs to health to reach a truly good level for all. We lag behing smaller countries who are yes, gasp, social democrats. Our economic policies are off. Let's hope a bump at the right time will get the results we want: a new president.
10
Looks like we need a new tea party. The base's grievance-based platform has forgotten all about fiscal responsibility. In a normal election cycle, this would be front page news. I miss those days.
At this point, I almost don't care about the deficit. Excising Trump is job 1. However, those tariff/seizure-based executive orders and pronouncement chickens will come home to roost someday.
Trump can't be in office when that happens.
8
@RA GoBucks If a democrat is in office when the chickens come home, he/she will take the blame from most of the country. Obama didn't cause the great recession, but he sure took a lot of blame from people who think that whoever is POTUS on any given day is responsible for the result of policies put into place years ago.
You know as well as I do that the "tea party" was never about fiscal responsibility....it was always about various grievances.
To Dr. Krugman's concern about "the effects of sexism if the nominee is a woman — not just the sexism of voters, but that of the news media, which still holds women to different standards," let's just remember who the powered the House results in 2018. Per Theda Skocpol's research, "about 70% of the participants and most of the leadership of local Indivisible outposts are women." As she put it, these grassroots activists "look like retired librarians rolling their eyes at the present state of affairs, and then taking charge." A good quality candidate who happens to be a woman is going to fire up this base (already is), and they, in turn, are going to fire up a whole lot of other folks to bring in the win. So, let's not get bogged down in handwringing about the effect of sexism. No matter who the Democratic candidate is, the attacks against her or him will be brutal. The job for each of us is to vote, in the primary, for the person we think will make the best President, then, in the general, roll up our sleeves, dream big, fight hard, and win.
20
@Susan
To the media, especially to Newyork Times: do not be fooled again by ‘Clinton emails’ like stories.
2
Does it really matter whether Trump voters read analytics and figures? Trump will just talk about his “great economy” and they will echo him, no matter what their own situations are.
It’s as mindless as the chants he leads now, and as indefensible.
29
@Nancy Rathke,
As long as Trump supporters think that all the people they hate are worse off than they are they will support Trump.
1
In normal times, a yearly, trillion-dollar deficit would be of great concern, but these are not normal times. It is important to understand that large deficits are part of the Republican plan.
This is the Republican plan.
(1) Cut taxes for the wealthy and corporations. Check.
(2) Increase spending on defense and other Republican priorities. Check.
(3) Grow the deficit – tell everyone that the boost to revenues is just around the corner. Check.
(4) Roll out the talking points that the deficit is unsolvable so long as social programs and other priorities of those socialist Democrats are funded. Check.
(5) Acquire support at the state level for a Constitutional Convention. Ongoing – nearly completed.
(6) Call for a Constitutional Convention.
(7) Pass a balanced budget amendment.
(8) End all social spending.
(9) Return the US to the good old days - pre-New Deal. Mission accomplished.
Most supporters of the Republican agenda either do not understand the plan or do not care. It amazing how those whom will suffer the most are so oblivious to the truth. Wave the flag and they are sheep.
As for deficits when Democrats are in charge, Republicans oppose spending by Democrats because it just might benefit you and me and show that government can work for the people.
It is important to remember that Republicans play the long game. Trump’s defeat in 2020 would certainly be a setback but it would not end the Republican plan. They are at least half way to their goal.
48
@Mr. Anderson Good, but scary, list. Maybe if this is published often enough some base people will read it. Maybe even realize their best interests do not coincide with Trump and the Greed Over People party.
9
@Mr. Anderson
"Most supporters of the Republican agenda either do not understand the plan or do not care."
Probably not. For instance, I read that one of the goals of the Tea Party was to "repeal the 17th Amendment". For those who don't read the Constitution, this would mean abolishing senatorial elections and having senators chosen by state legislatures, presumably on the basis of secret backroom deals. At the same time, the Tea Partiers complained that the government was out of control.
13
@Mr. Anderson
I suspect the goals of the "Constitutional Convention" are a lot more extensive than that. For example:
(1) Make evangelical "Christianity" the official religion of the US -- even though a lot of the evangelicals have secretly abandoned Christianity and replaced it with Trump-worship.
(2) Make it easy for the President to imprison or exile his critics -- something Trump has obviously dreamed about for some time.
(3) Roy Moore the Child Molester suggested repealing all amendments after the 10th. This would mean cancelling the Civil War Amendments and thus making it possible to re-institute slavery.
10
There's little evidence that the tax cuts have contributed anything to growth although they have ballooned the federal deficit at a time when the deficit would normally be falling. What is responsible for the recent growth spurt? The data clearly point to a surge in total government spending (including federal, state and local governments) that began back in 2017. The chart below makes this clear. As can been seen there was an actual decline in nominal government spending from Q3 of 2011 through Q3 of 2013. This was a direct result of the GOP strategy to deny Obama a second term by imposing austerity, not only at the federal level but also at the state government level. At the far right of the chart there is a sharp increase in year-over-year government spending growth starting in Q3 of 2017 and peaking in Q3 of 2018 at 5.3%. That's quite a surge that never occurred during Obama's two terms when it would have been much more useful to help recover from the Great Recession.
https://fred.stlouisfed.org/graph/fredgraph.png?g=or5A
8
Recent studies have shown that Millennials have been paid 25 percent less at the same phase of live than Baby Boomers, and Gen X has been paid about 10 percent less than Boomers. And their life expectancy is now lower. That is who will ultimately pay for the Trump tax cuts, the Bush tax cuts, and the Reagan tax cuts.
And infrastructure deterioration and global warming.
And the multi-employer pension plan and public employee pension plan benefit increases, underfunding and bailouts, and the increase in Social Security benefits for existing beneficiaries (and cuts in their taxes) proposed by the Democrats.
Donald Trump is THE MAN of his generation. Which is also Paul Krugman's generation. As long was they can keep pointing fingers in a circle, the victims won't understand what has actually gone on.
5
Ah, yes. Krugman criticized Obama for only one thing--no fiscal stimulus. When Trump did it and tried to mitigate the effects by raising interest rates, Krugman said they should be kept low. Now he says--what? Presumably that Trump should have raised them higher so they could be lowered more.
If Krugman is half accurate, all Democrats should vote for Trump. The evidence is strong that the economy will be excellent next year, but the next four years seem much more worrisome. If the Democrats win and institute Krugman's lower the deficit program. (I assume that is what he is advocating) they may get a super-recession that keeps them out of office for years and years.
1
@Jerry Houghuh, Trump opposed raising interest rates, but the Fed did so anyway. And anyone with a rudimentary knowledge of Keynesian economics—Krugman is a Keynesian—knows that lowering the deficit should come only when the economy is expanding—like now, not when it starts to slide.
7
@Jerry Hough
Not sure what you have been reading Jerry. Krugman wanted more stimulus when the economy was in deep recession . No need for that not now when the economy is doing "so well".
Your assumption that Krugman is now pushing a lower the deficit program is also mistaken. What Krugman is / was saying was there was no need for your Mr Trump to blow the deficit through the roof by tax cuts for the wealthy when the wealthy are already mega wealthy and so that claim of stimulus would not work to create demand. Krugman was actually drawing attention to the GOP hypocrisy on fiscal responsibility when they are in and out of office.
Does that help any?
12
Uh...Jerry, what Krugman criticized was the too-small size of Obama’s stimulus, which was not a “fiscal stimulus.” Are you talking about Treasury and the Fed’s quantitative easing?
Nor did Trump “raise interest rates.” He can’t. That was Janet Yellin’s Fed Reserve, and Trump’s been yelling about it ever since.
Last. Krugman’s point on deficit and debt is this: evidence suggests that’s just what you guys on the Right bellow when you’re not in office, not at all something you give a hoot about when you’re in power. Because in this case, The Right and Trump have juiced the economy not only with their tax cuts for the wealthiest, but with doubling the deficit and shoving up the debt.
Really, Jerry, you must try reality sometime.
Let's recall the basis for the Republican tax cut.
It may have been sold by the Republicans as a device to stimulate the economy, but remember, Paul Ryan and his crew were under intense pressure from their benefactors to produce, or the donations would stop. The Donor Class wanted their Return on Investment, and they got it.
13 days after the tax cut was passed, Paul Ryan received a $500K 'donation' from Charles and Liz Koch for Ryan's joint fundraising committee.
I doubt the economy or the deficit was ever a point of Republican negotiation or discussion when drafting this bill.
27
Sexism may work another way as 2018 taught us. Democratic women candidates brought out and changed Republican women voters to Democratic voters.
I expect the same to happen in 2020.
10
@Edward B. Blau
I also read in the Times that the women who stayed Republican envy Democratic women's success and want to emulate it. Of course, what they don't realize is that Republicans are dominated by evangelicals, who consider it degrading for a man to take orders from a woman, and who are therefore unlikely to support women for office.
3
I read in Market Watch that the the Fed Data showed a recession last Tuesday. On closer reading, only the Industrial sector is in recession, with two quarters of negative growth. Since the recovery is very long in the tooth, we will probably be in an overall recession in 2020, in which case Trump is probably toast (but it's very hard to predict how the Trumpeters will vote if there is a recession).
Prof Krugman incorrectly says Trump cut taxes and that's causing the massive deficit. Checking the numbers, tax revenues are up, and the Lafferites are cheering that the tax cuts increased tax revenues. But tax revenues are up because, while Trump cut income tax, mainly for the rich and for businesses, he increased taxes overall on everyone. Income tax revenues are down sharply, but total tax revenues are up because of the new taxes (so much for the Lafferites).
The deficit is up in spite of increased tax revenues because of greatly increased spending (but most of that spending is for the military, and military spending has a very low multiplier, so it does not benefit the economy).
6
@Michael Sorry but Tax Revenues would have to go up if you through borrowed money into an already growing economy. The Tax Cuts in essence was pulling money out of Revenue and giving it to the 1%. Had the Tax Cuts not been passed the economy still grows and the amount of Revenue to pay down debt or borrow less would have materialized. Ultimately this current course Trump has gone down is no different than he has done in his businesses, grow with debt financing then slice your cut and say your bankrupt. The only problem is it will be our children who will be without government services as the interest on the debt will not be forgiven by those who hold the Treasury Securities in the future. This interest will eat away at any future growth in our economy.
6
Well, Powell thinks a significant issue for the economy is the failure of wages to keep pace with even a low rate of inflation. While the Democrats just passed a bill to increase the minimum wage to $15/hr by 2025 (no hurry?), the Republican Senate will probably not even consider the bill much less pass it.
And the tariffs keep increasing inflation and taking money out of people's pockets. If the Republicans are successful at tanking the ACA, they literally have no replacement plan. The Democrats must develop a way to make voters understand the lies they are being told. The economy is booming for the 1%, the rest of us are doing our best to hold on to what we have. The economy should not be a selling point for Republicans.
19
Emphasize informing the country of the "lies they are being told". Democrats squabble at their own and the country's peril. I think this is where "the Squad" is weak: they don't seem to have heard of Aesop's parable about the strength of the sticks when bundled together. This is not the time to engage in the issues that divide our country and the Democratic Party. Let us win majorities in Congress, put a Democrat in the White ouse and sort it out then.
3
"Corporations are getting to keep a lot more of their profits, but they’ve been using the money to buy back their own stock, not raise investment."
I hope that I'm wrong, but this is frightening. When a company buys back stock, there is a short term rise in stock prices as there is more demand for the shares of stock. Longer term, it would seem to me that the prospects of a company would be hurt as there is less investment in plants, equipment, employees, research and development and - my favorite - IT systems.
If you think of a business as being primarily an entity that invests for the purpose of yielding a better return , share buybacks fail. Essentially with the buybacks, management is saying "we have this extra money. We don't have any better use for it, so we'll give it back to shareholders."
Its shrinking the company - an admission of entrepreneurial failure.
12
@yeti00 Buying back stock is a defensive move. It tells me the leadership in these companies agree with Dr. Krugman -- i.e. they believe the expansion has played out.
6
@yeti00
Lots of corporate officers are not interested in "longer term". They hope to bail out of their companies before the long-term problems come up. I worked (in a low-level position) for a company where this happened; it's no longer in business.
@yeti00
The pace of annual business investment is up $512 billion since Q4 of 2016 after being down in 2016.
That's more than 25%.
1
The obvious GOP strategy: tax cuts, ballooning deficit during GOP tenure- set up to deliberately to stymie any Dem initiatives knowing voters will eventually toss the reckless GOP out. GOP become deficit hawks again. Repeat.
11
The Trump Bump? To which Bump are we referring?
The bump in uninsured, which is up 2 million since Trump took office?
The bump in goods prices due to tariffs, up about $400 annually per family so far and $800 if fully implemented as threatened?
The bump (down) in job creation, from 221k/month in Obama's last 29 months vs. 194k per month under Trump so far?
The bump in inflation, from 1.3% in 2016 to 2.4% in 2018?
The bump in mortgage rates, from 3.7% in 2016 to 4.5% in 2018?
The bump in the trade deficit, from 2.7% GDP in 2016 to 3.0% GDP in 2018?
The bump in the budget deficit, from 3.2% GDP in 2016 to 3.9% GDP in 2018?
Or perhaps we are referring to the bump (down) in real wage growth, from 1.3% in 2016 to 0.6% in 2018?
So many Bumps in this road!
59
@David Doney
I think that you need to go downstream a few steps to look at the Trump bump:
1. Full-time jobs up 3.1 million in 2018 as compared to the 1.56 million added in 2016, a 100% increase
2. Food stamp welfare dependency is down by over 5.7 million
3. Stock market at $32 trillion, up $9 trillion since Trump’s election
4. Total wealth is $108 trillion, up $15 trillion since Trump's election.
5. Economic growth of 3.2% in 2018, up 100% from 1.6% in 2016.
6. Consumer confidence is at its highest in 15 years, up sharply from the downward trend of 2015 and 2016.
7. Inflation of 1.6% in 2018, below the Fed target of 2%.
8. Unemployment is 3.7%, lowest since 1969. Insured unemployment 1.2%, the lowest ever.
9. Employment of Blacks and Hispanics is at an all-time record and at higher wages than in 2016.
10. Mortgage delinquencies are down 25%, delinquency rate to its lowest level since 2007.
11. Manufacturing employment up 680,000 v.s. negative 7,000 in 2016.
12. Real disposable personal income is up a stunning $750 billion in the last two years.
13. Total job openings increased 20% from 5.4 million at the end of 2016 to 7 million currently. Unemployment down to 5 million from 2016's 7 million.
14. Business investment up 8.9% under Trump as compared to a negative 3.7% under Obama in 2016
15. Homicide down 6.4%.
20. Opiod overdose deaths down 5% as a result of over a million people pouring off of Social Security Disability into jobs.
3
@John Huppenthal
1. FT jobs virtually unchanged in 2019, + 235k. PT jobs down nearly 200k. So no job creation this year by your measures, which are secondary to the job figures I cited.
2. Food stamp usage peaked well before Trump took office.
3. At this point in his Presidency, stock market under Obama was up about 44% vs. 32% for Trump. And that despite 30% decline right after Obama took over due to Great Recession.
4. Yes, net worth is continuing to set records we've set every year since 2009. We'll see if Trump get's to the $29 trillion increase we saw under Obama.
5. GDP growth was 2.9% in 2018 (not the 3.2% you cited) same level as 2015.
9. Unemployment of blacks & Hispanics improving since 2010.
13. We wouldn't have so many job openings if were letting in more immigrants.
20. Opioid deaths were way up in 2017; haven't seen the 2018 figures yet.
I haven't looked through your other figures yet, but that should be a fun project!
6
@David Doney
Thanks for looking at the whole picture, Dave.
2
Will trade partners turned adversaries continue supporting large US deficits through massive purchases of debt? Will their ability to lend not diminish as tariffs lessen their bottom lines? The days of reckoning with global warming, which seemed to be on some distant horizon, have arrived. Are the distant days of reckoning with US debt closer than we realize?
9
Will trade partners turned adversaries continue supporting large US deficits through massive purchases of debt? Will their ability to lend not diminish as tariffs lessen their bottom lines? The days of reckoning with global warming, which seemed to be on some distant horizon, have arrived. Are the distant days of reckoning with US debt closer than we realize?
4
The actual performance of the economy will not matter. Trump will keep saying it is the greatest economy ever and most in the TV media are incapable of pushing back and explain the truth.
22
@TLeeTee Yea, but everyone knows how they are personally doing. If they are not doing well, it won't matter what the media says.
If the media push back, they will be attacked as enemies.
Trump’s trade wars are not likely to stop, but they have already caused substantial harm to the US economy. Farmers are hurt by Chinese retaliatory tariffs on US soybeans, so Trump finds $25 billion to provide welfare payments to farmers so he can keep their votes. Trump thrills at reported declines to the Chinese economy, but part of that comes from the West buying less of China’s products.
And Trump claimed he would create a $1 or 2 trillion infrastructure program: another of his wild claims with no foundation and not the slightest indication he is pursuing anything. Infrastructure spending could boost the economy, but Trump’s tax cuts causing massive increases in the federal deficit makes even a minor infrastructure program unlikely.
The Fed May reduce interest rates, but once done there is nowhere else for the Fed to go to provide stimulus.
So Trump’s current rosy economy for some may decline before the 2020 election.
11
@Harold R Berk
I read that Trump's infrastructure failed because Republicans in the Senate promised their wealthy contributors that they would not raise taxes. Trump was caught off guard (he's not very bright) and faked a temper-tantrum to cut off the discussions.
At some point between the Democratic Party convention in summer 2020 and the election in November, I have to decide on whether or not whether or not me and my wife’s retirement funds stay in the stock market or go to cash. Wonder about a similar decision of all other retirement fund money managers? What does Professor Krugman have to say or advise on this crucial matter?
4
@Scott G Baum Jr
My investment manager was skilled enough to keep my investments steady during the 2008 crisis. But I just lucked out.
Another great recession will only further concentrate wealth in the US. Recession strips the leveraged of their physical assets.
9
"For example, the Federal Reserve Bank of New York believes that the economy’s growth was down to 1.5 percent in the second quarter."
Just a technical question:
The statement above implies an annualized growth of 4.5%.
If the growth RATE for the second quarter was only 1.5% (per year), that is an entirely different situation.
Which one is it?
2
@Pat Roberts: This statistic is expressed on an annualized basis. The 1.5% projection is over a whole year.
3
@Pat Roberts
Sorry, I made a miscalculation. The statement implies an annualized growth of 6%, not 4.5%.
1
Year over year annualized growth rate. Not additive.
The economy is very unlikely to be an issue the Dem candidate can use against tRump because the Fed has apparently moved to a policy of preemptive rates cuts.
Compare what the Fed did prior to the last recession, which lasted from 12/07 to 6/09:
The 2yr-10yr spread was negative (inverted) by 14 basis points in February 2006. It went positive in April by was negative again by June when Bernanke made the last of 17 rate increases in the cycle. They didn't make their first cut until September 2007.
This contrasted with the mid course correction cuts they did in 1995-96, lowering rates by 75 basis points while the 2-10 spread was still positive. And those cuts were made when the spread was in the 40's, compared to the 20's now.
1
It's hard to see where another economic bump might come from. However, make no mistake, the Trump administration is searching tirelessly for it right now. We're talking about the administration who declared an emergency in order to steal funding for a border wall and provided billions in aid to suffering farmers who Trump made suffer. At the very least, Trump is going to make token gestures to appease various niche constituencies.
The question of course is what role will corporate activism play in the 2020 election. The problem with an increasingly oligarchic business environment is a small number of people have the power to influence aggregate economic indicators in meaningful ways. Meaningful enough to distort our perception of the economy one way or the other. Business won't be neutral in 2020 so we can't expect the economy to behave indifferently either.
13
@Andy
"Where an economic bump might come from..."
You are puzzled because we have all been brainwashed into believing that tax rates have no effect on economic growth.
Tell that to Poland, with tax rates lower than the U.S. and grew at 5% while France and Italy shrank in dollar terms.
Tell that to Vietnam which grew at 13% over the last two years.
The bump, heavily forecast by the stock market as coming in at over 5%, will come from consumer confidence, the availability of jobs and the two million immigrants so eager to work that they have walked 2,000 miles for the opportunity.
So Paul, I've been waiting for your analysis of ever increasing deficits .Perhaps I've missed it. I can't remember the name they've given to this theory, which says that advanced nations can spend and borrow an endless amount without adequate taxation or consequences. What about this?
2
@Antoine - I guess you are referring to MMT which K has attempted unsuccessfully to rebut several times in the past.
But like most people you have it wrong. MMT says any country which can create its own currency can add money to the economy by spending so long as it increases production. Adding money tends to raise prices, but increasing production tends to lower them. A bumper wheat crop lowers wheat prices.
If production can not be increased, then either the gov should not add money or it has to tax some back. For example:
During and right after WWI over 1,000,000 Germans died from starvation. Germany simply did not have enough arable land to feed its people and the allied sea blockade prevented it buying it elsewhere. Food prices went through the roof. There was clearly no way to increase production. But people were starving. So the Weimar government began to print money. Of course, this raised prices further, but it is important to note that inflation caused the printing of money. Then the printing of money caused more inflation.
For a start you can read https://www.nytimes.com/2017/10/05/opinion/deficit-tax-cuts-trump.html
If you are really interested, there is a new textbook "Macroeconomcs" by Mitchell, Wray & Watts which is a college level introductory text.
4
@Len Charlap Thanks for that Len. But since you say that Paul has attempted to rebut unsuccessfully this theory, what would be the correct rebuttal?
@Antoine - Well, as far as I can see, there isn't one, since the MMT people appear to be correct. Their theory explains previous history like our 6 depressions better than any other economic theory. Their economists predicted the 2008 financial crisis when mainstream economists like Krugman were clueless.
I am sure that the Republicans understand the liability to the economy posed by their endorsing and passing the tax cut. It seems they understand Bones spur is merely a way to continue their corrupt path. Gerrymandering and voter suppression is part of the plan. They don’t expect to win the majority and this is part of their plan.
4
Economy is on it's way down.. most don't see it yet. But on grounds, sure it feels like it. And as free money dries up; it will pick up steam and then there will be no profits to cover for tax cuts..
we will have much bigger deficits by Reagan's star wars; (deficit don't matter) and then Bush wars; and Trump tax cuts for the Billionaires.
Those money would have paid for all the infrastructure and jobs we need; and would have made our country more stronger then ever. You can't get stronger by yelling; you have to build your home stronger first.
5
Instead of "the economy" we should be talking about the underlying plans for our future economy:
4th industrial revolution - increased funding of technology, more robots less jobs
blockchain and cryptocurrency (huge energy requirement should be discussed)
5G rollout and its effect on humans both environmentally and surveillancewise
These things and the Green New Deal to fight climate change need to be in the consciousness of the common people. Surely Paul Krugman can enlighten us.
3
@betty durso: You could find Paul Krugman's articles on many of these topics if you simply searched for them. The NY Times empowers everyone to enlighten themselves. Whether you choose to exercise that power is up to you.
One thing that I think Dr. Krugman misses in his analysis of the state of the economy, is the shaky nature of the "historically" low unemployment rate.
I have lost count of the number of people I know--or at least know of--who are working (a.k.a. fully employed) but at two or three different jobs--struggling to cobble together sufficient income from jobs that offer relatively low hourly wages, zero benefits, and severely limited (a.k.a. part time) hours.
For a sizeable chunk of the American work force--we are living in a time of false prosperity--with the top 5% doing okay, and the top 1% making out like bandits--while the bottom 95% are--at best--just getting by.
The strategy of Trump's GOP--which has clearly become the last refuge for the greedy wing of the plutocracy--is to hope a sufficient number of voters can be distracted with race baiting and blame shifting to tip the 2020 election in Trump's favor.
Will it work?
God help us all if it does.
12
Agree.
Notable that economists have glossed over the change made during the W years to the way employment is calculated.
Under the new smoke-and-mirrors accounting, if a company hires a person on a part time basis, that is counted as a full time equivalent.
Nice, eh.
6
@No Time Flat
That's interesting; so if a person has 2 part time jobs then it works out to 2 full time jobs?
K makes a good case that the Trump tax cuts are not good for the economy although more can be said. Briefly, the cuts put more money in the hands of the Rich who spend a lower percentage & use the rest to speculate which adds risk. Thus this money is less useful for commerce. Economists would say it has low velocity.
But K cannot resist the appeal to kitchen table economics. The cuts have increased the deficit & thus the national debt. This is not a red herring; it is a huge red tuna.
Let's ask the question when in all of US economic history has increasing the deficit or debt ever hurt the economy? Significantly (10% or more) DECREASING the debt has led to our 6 terrible depression. Federal deficits that were too small, less than the trade deficit, in 1996 to 2008, led to the crash.
I understand that people believe that stuff must be paid for because that is true for them. BUT the federal gov (thru the FED) can create as much money as it needs out of thin air. Unless you have a printing press in your basement, you cannot do that.
But wait! INFLATION!! WEIMAR!! Well first of all, if the new money goes to the Rich, that will affect prices very little, cf 2009 to today. Then if the money is spent so it facilitates production, again prices will not rise too much. Finally if there are conditions like shortages that prevent production from increasing, why then the gov can tax some of the back.
Deficits & debt are important, but they are entirely different for the federal gov.
Republicans spend a good deal of time touting the greatness of the current economy...but in reality how great is it? Republicans want to make the american economy synonymous with the state of the stock market or the last unemployment reading or bankruptcy rate, these numbers are repeated over and over again as proof that all is well.
The reality is that most americans could easily fall into bankruptcy if faced with a 500$ medical bill , have not seen significant wage gains in twenty years, and many invested in educations that they may never be able to pay off. Americans are rarely handed a metric by which to measure how the economy actually impacts them, they are however told incessantly that budget deficits require the cutting of entitlements and health insurance, education and environmental protections...all in order to maintain a "good economy"
Presidential candidates like to ask voters if they are better off than they were four years ago. It is clear that many may be fooled by wall street measures, however as another politician said , all politics is local and if americans ask the indelicate question of are they really personally better off , Trump may find it difficult to fool the people as he did the first time around !
4
Deficit Man, Tariff Man, a "stable genius" who thinks "trade wars are good" is captain of our economy. What could go wrong? All the warning signs are out there. When the recession hits he will, of course, blame everyone but himself and leave the mess for another president to clean up.
8
So just how much has the deficit increased due to Trump's tax cuts and additional spending?
Just before Trump was inaugurated, CBO published it's annual ten year forecast. The deficit in 2018 was forecast to be just under $500 billion; it turned out to be about $800 billion, up 60%, due to Trump's tax cuts and spending, not economic changes.
CBO also forecast the 2018-2027 period in January 2017, expecting the sum of deficits to be $9.4 trillion. That estimate is now $13.0 trillion, up nearly 40%, assuming Trump's tax cuts for individuals are extended, which is more probable than not (Obama extended 80% of the dollar value of the Bush tax cuts).
How much did revenues drop due to the tax cuts? Well, using a similar methodology the tax revenue in 2018 fell about $275 billion relative to forecast, about 8%. Corporate tax revenues alone were cut by nearly one-third. They remain very low as a % GDP compared to historical trends.
It takes Lindsay Graham-like hypocrisy, which deserves to be a verb or adverb of some kind (e.g., "You're Graham-ing") to attack Obama on the deficits he inherited from Bush and then not attack Trump on the deficits he created.
28
@David Doney
"Your're Lindsay Graham-ing" as a form of egregious banal hypocrisy should be trade marked or copyright! Brilliant suggestion.
2
Let's just not discount the prospect of starting a small war to rally the base and draw back in some of the reluctant suburban Republicans. Does anyone think that he wouldn't start a war to improve his chances?
15
@John Duffy Americans are war weary after Iraq and Afghanistan. It won't help him especially if he is perceived as starting the wars.
1
Excellent piece, Dr. Krugman. I appreciate your comments on the tax cut and the deficit. You are entirely correct that deficits seem to matter only when Democrats control the White House.
One question: you had predicted a recession on the basis of Trump’s threatened trade war with China. Is the change in your forecast based on Trump’s lack of follow-through?
4
Paul Krugman is spot on with this column. Any reasonable analysis suggests Donald Trump is not the political genius many on the right make him out to be, but is in fact a flailing, weak president who is highly vulnerable in 2020. Remember, Trump lost the popular vote in 2016. He can't bank on a perfect vote distribution next year (the famous "inside straight"), and almost certainly needs a substantial improvement over his campaign's 2016 performance. So he's starting off from a weaker position than most incumbent presidents.
And guess which president Trump's approval numbers resemble more than other other's? Jimmy Carter. That's who. And, while President Carter is a great man whose presidency likewise looks increasingly great in the light of history, he was, alas, beaten in his reelection bid.
And then there's Trump's disastrous performance in last fall's midterm elections.
Obviously there's far from a guarantee that Trump will be defeated next year. But Democrats quite rightly smell blood in the water -- don't let the Serious People spin you otherwise. He's highly beatable with even a modest weakening in the economy in my view. And that weakening -- while not obvious -- is already visible if you know where to look (inverted yield curve, sharply declining trade volumes, slower overseas economies, rising unemployment in select states, serious problems in the agricultural sector, a real estate slowdown, etc).
19
if a Democrat wins the White House in 2020, he/she will be faced with a huge deficit, but will be unable to do much about it, given the GOP Senate fortress, which will block virtually everything. And look for a revival of the Tea Party, whose war cry will be: balanced budget now ! (almost as good as Send Her Back!)
15
@Gordon
This is why its more important, although makes me cringe, that we focus on the senate races. We need to get rid of Mitch McConnell - he is the key to the misery most Americans feel or will feel. He is an evil, mean spirited, greedy, lying fraud who duped his constituents to believing he represents them. His mission is clear - fix the system so that no matter what the majority of people in our country want, the narrow minded, ignorant minority will continue to have power.
This is not what our founders wanted. Its not what we, the American people, want. We want people who represent our needs, our dreams, our future. We want people who think with their heads and their hearts, not their bank accounts.
Getting rid of Mitch McConnell would be one of the best things that can happen in 2020. And if we can get the senate back, even if Trump "wins' again thanks to his master Putin, at least we can stop him in his toilet papered steps and try to undo all the damage he has done.
DITCH MITCH!
To any and all Republicans out there, here's a question I like to pose that I haven't yet seen an answer to:
Recall from during Obama's early years as President, the government was running high deficits, and the GOP Tea Party people were very loudly up in arms about it. And that deficit was primarily driven by the great recession economy that Obama inherited and secondarily by the $787B stimulus (tax cuts and spending increases) that he and Congress put in place. A stimulus necessary to help pull us out of the recession -- and yes, it worked! And if it wasn't for the resistance of Republicans like Mitch McConnell, the stimulus would have been even larger and the recovery probably would have been faster and more robust.
Now the economy is much stronger, however the Trump/Ryan/McConnell 2017 tax cut -- a lot LESS necessary stimulus than Obama's -- is now re-inflating the deficit and federal debt. But NOW, the GOP Tea Partiers are eerily silent about the growing deficit. Other than the fact there's now a Republican President, how do you explain their silence?
Somehow, I get the sense Republicans don't like this question!
15
I agree that the current debt surge is very concerning. I have recently been looking a long term charts (100-200 years) of economic and social cycles. There tends to be a 60 year cycle with peaks in 1840, 1900, 1960, and expected in 2020, with many factors alternating between extremes at each peak. Thus today looks very much like 1900. The only factor that does not currently fit this pattern is national debt as % of GDP. Debt has declined into all the previous peaks but has increased into this one. This unusual situation makes me fear some unusual event will be needed to bring debt levels back into line. Also, the stock market typically rises in the decade or so prior to the peaks, then levels off, or actually falls in inflation adjusted terms, for the next couple decades. So the cycle already predicts that the long stock market rally is about at its end.
1
@dj sims - The debt ratio declined after both WWI and WWII. It was only 16% in October of 1929. AND THEN WHAT HAPPENED?
On the other hand, it was 121% in 1946 which was followed by 27 years of Great Prosperity during which GDP growth averaged 3.8% and real median household income surged 74%.
What was the difference? Well, fron 1920 to 1930 the debt (in dollars) DECREASED 38%, while from 1946 to 1973 it INCREASED 75%. This shows that while one must use the debt ratio in comparisons, it tell us very little about the state of the economy.The change in the debt is what's important.
The situation where a decrease in the debt leads to a depression has always been true:
The federal government has balanced the budget, eliminated deficits for more than three years, & paid down the debt more than 10% in just six periods
since 1776, bringing in enough revenue to cover all of its spending during 1817-21, 1823-36, 1852-57, 1867-73, 1880-93, & 1920-30. The debt was paid
down 29%. 100%, 59%, 27%, 57%, & 38% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 & 1929.
What is worrisome is that a recession has usually been preceded by a decrease in the deficit which causes an increase in private (household & business) debt and then to a recession.
The deficit decreased 75% under Obama. Unfortunately the increase in the deficit due to the tax cuts sent money to the Rich. That money has low velocity and thus does not help very much.
And private debt is increasing a lot.
3
I read previous comments, and realize just how divided we are. The Republicans seem to truly hate the liberals, for daring to want what most free societies already have, public investment in Higher education, health care and immigration, and then assure themselves that we couldn’t possibly want them. The alternative seems to be that we should “know our place”, and just take whatever they give us, the back of their ha Socialism is great if you’re wealthy and connected. The tax cuts were a thinly disguised reward to their donors. We know the wealthy don’t share, they just demand more. I read an interesting comparison, “ Socialism MIGHT limit our freedoms, but Capitalism took our jobs, our pensions, our healthcare, but left us anger, hate and guns.” We’re a two class society, and all know which one we are. What good is low employment if you need 2 or 3 “jobs to live?
9
I feel sorry for the next president who will have to deal with a recession and a twenty plus trillion debt. The low interest rate create a high housing cost and as a result, a demand for high wages.
In Washington the national debt is shoved under the carpet. None of the Democrats mentioned it. But the it is waiting out there.
If there is not a good economic policy, just tax cuts to please certain groups, it will lead to another recession. The economic structure of our country changed in the last three decades, and it's not on the good side. Many countries left us behind in the dust.
10
Have no fear. The GOP is a recession specialist. Of the 111 months our economy spent in recession over the post WW2 period since Ike, almost the entirety (89%) were accumulated under GOP tenures (see NBER). It's coming .. the GOP will deliver, it always has .. count on it.
13
Remember we are dealing with a president who would tell charities he is sending them a big donation. Except the check in the mail never seems to arrive. The real question for the average American is not are you better off than you were a few years ago. Part of that was going to happen no matter what. The real question is are you poised to weather the next downturn? In other words have you been able to replace the tires on the car and get the wheels aligned while the going is good? Knowing full well 'your' tax cut is going to be eliminated and the roads and bridges are no closer to being repaired now than they were 10 years ago.
8
whoever the Democratic contender ends up being they need to have a credible set of proposals for those that are President Trump's base. Many of these who have been overlooked over the past 30 years and not benefited from the globalisation process. Cheap manufactured goods only compensate so much for no or very low paid jobs.
3
@David Jepson - Sorry David, but they have benefited. American's don't care so much about globalization, they care about cheap stuff. Why spend $30 bucks on t-shirts at Macy's when we can get a $10 one at walmart. Business leaders know this, and look around the world for the cheapest labor so they can 'offer' you cheaper prices, and get larger market share.
8
@JFM The problem is, the t-shirts at Macy's (and even higher up the retail prestige-scale) are made in third-world countries. The labor is just as cheap, only the mark-up is higher.
3
@David Jepson: Democrats should make credible proposals that will help the truly needy in Trump's base. It's the right and sensible thing to do. But those proposals won't help Democrats to win in 2020. Trump won't be worrying about credibility and his base will love whatever he proposes. But if Democrats can win in 2020 the good they must do may help them to win again in 2024.
2
Even though there is a strong correlation between the economy and the Presidential election results, there is such a small sample size of elections that any predictions need to be taken with several grains of salt.
Meanwhile, Rush Limbaugh stated flat out on his radio show yesterday that the deficit doesn't really matter and it was just a cudgel used to bash Obama.
8
"Trump’s deficit-fueled bump came too soon to do him much political good."
True, but the Democratic winner in 2020 will have deal with the crash of 2021, a departing gift from Trump.
Sound familiar?
229
@Karl Gauss
That's a trade I'd take in a heartbeat.
Generally speaking, presidents who take office during times of economic weakness get reelected (FDR in '32, Ike in '52, Nixon in '68, Reagan in '80, Clinton in '96, Obama in '08) get reelected, given the the usual progression from recession into (eventually) recovery.
8
Trump team of economic advisers is a motley crew of Fox news talking heads, deluded trade warriors, aging grifters ( Ben Carson and Wilbur Ross, e.g.) and a few unremarkable people who can afford a Mar a Lago membership and a jet time share. Trump may have a undergraduate degree from Wharton, but you wouldn't know that from his policies and rhetoric. The economy is slowing, and there is not an obvious stimulant on the horizon to give it a nudge: it's not going to come from overseas trade, which Trump went out of his way to harm, government spending on infrastructure or social investments, or any increase in business capital investment in the next 12 to 18 months. My stock and bond portfolios are doing quite fine, but most people don't have $500 to pay for an major car repair or trip to the ER. Trump hasn't delivered: there is no clean coal industry going gangbusters, there is no surge of reindustrialization in the heartland, and no parades for the heroes returning from trade wars. Trump will be selling fear and the democrats will be selling programs and policies addressed to those who haven't benefited from the last few decades of growth. Not sure whether this gets many people to switch parties or into the voting booth. As such, I believe that the election is going to be about Trumpism , GOP acquiescence to it and the cultural and moral issues that define what we mean when we say that we are proud to be Americans
117
@rgoldman56
He actually bought a Masters in Business.
This economy won't last and voters will notice. Daily Trump gives people a reason to vote against him. The base is not going to be enough. Go vote. The survival of our democracy depends on it.
297
@Dave I wish you were right but you're not. White nationalism coupled with denial of racism is rampant in white America. Remember he only won by 80,000 votes when such sentiments were frowned up by most Americans. Now they are freed to embrace the racism and blame other. White Christian Evangelicals are least likely to embrace any immigration. It will take a massive effort by women, college educated and "other" to beat back this racist tide.
2
The GOP will not wait to have a Dem in the White House to resurface as deficit hawks. They will start bemoaning the Dems' plans for social change as disastrous because, 'oh, my God, what they do to the deficit!'
The Times opinion page asked folks who voted for Trump in 2016 to weigh in on whether they would do so again. Ironically, but not surprisingly, one who said he would again vote for Trump expressed dismay about the deficit and opined about how the Democrats who were big spenders would drive it up. Not a hint that he understands how we got where we are.
421
@Anne-Marie Hislop Rand Paul and Mike Lee have already sounded the deficit-hawk false alarm with the bill to extend funding for benefits for 9/11 survivors. "We can't afford it!" As if we can afford trashing those who did their jobs as civil servants and, above and beyond their pay grades to control a bad situation and get people to safety.
83
@Anne-Marie Hislop
They are bemoaning already, exactly as you say. "How are they going to pay for ... proposal?"* It will get worse.
* As long as it's not another trillion-dollar tax cut for billionaires. As we all know.
37
@Anne-Marie Hislop
Ah, that’s just repeating a standard line from the Republican playbook. They all do it. It’s like they memorized it. You can’t get any reasoning for them, just rhetoric.
27
For most mainstream economists, the question is not "Are we headed for a recession?" but "Are we already in a recession?". In other words, the consensus is that we are headed for recession, but won't know for a while whether we are already there. Sometimes you can't tell until it happens.
The US treasury bond yield curve has been inverted since January, and that is a reliable predictor of recession within 12 months. Bond yields are similarly inverted in Europe. This is not a US-limited phenomenon.
The US stock market is no longer connected to the general economy; stock prices are rising despite reduced price-to-yield values: stock prices are going up while the return-per-share is going down. Why is this happening? Because cheap money (from the Fed) is going toward stock buybacks, which increase the >apparent< yield per share because fewer shares are on the market. It's a sham, pure and simple. Just as you'd expect from Mr. Trump.
The Fed cannot lower its own interest rates much further, because the rates are already so low. Which means that the Fed has few tools to address a recession by means of monetary stimulus.
The only other options for economic stimulus are too obscene to describe here. Pray to your God that it does not come to that, before we have the opportunity to remove this pest from the White House.
Vote in 2020, please.
128
@Duane McPherson - yes indeed, as you say: "The US stock market is no longer connected to the general economy." The goal of our emerging oligarchs is to build their own wealth and siphon it off overseas.
But Trump's base will never believe this. For those who are doing okay, the message is "we'll make sure Those Others Don't Get Something They Don't Deserve (jobs, healthcare, housing, or even a precarious presence in the country)." For those who are under water the message continues to be "the factories and mills are coming back and you'll have good jobs again." And voilà! They'll believe anything Trump says.
We not only need to vote, we also need to get out the vote in those marginal purple counties.
6
I agree with Professor Krugman.
About an hour before I read this column I thought how we need to point out (and repeat until we're sick of it) that the economy was GROWING FASTER BEFORE he took office than it has since.
It strips him of the only issue that reaches outside the fever swamp of his base. And has the virtue of being true.
It won't wok unless it's pounded endlessly and reiterated no matter what else there is to say.
183
@Peter Quince
Alas, that might have worked in a pre-Trumpian world, but we are now in an era when facts have become irrelevant and truth is whatever those in power says it is at the moment, or as Kelly Conway infamously explained, there are alternative truths. People are unwilling to even consider facts that do not jive with their worldview, no matter how delusional their beliefs are, or even how detrimental to their own interests. It is why we have a President who claims there is such as thing as "clean coal" and that climate change is a hoax. Welcome to dystopia.
32
@Peter Quince, new job numbers grew more before he took office, but not the economy by the gdp. 2016 was a down year, in the lower 1%s for gdp growth. 2017 was not great at 2.3%, but that is higher than low 1%s, and then 2018 came in at 2.9%. (PK cites it at 3.2% in the article, but that isn't the calendar year figure.)
It is true that PBO's best year was also 2.9%, but that was '15 (or '14?) and people remember '16 more because it is more recent. PBO had higher several higher quarterly gdp numbers than PDT's best, at 4.1%, but again in '15, iirc.
You cannot really make the growth argument. Which is too bad, because I yield to no one in my distaste for this president.
5
"But as far as the economy goes, the odds are that Trump’s deficit-fueled bump came too soon to do him much political good."
And what would the bump (to the markets at least) be if Trump miraculously pulled a trade settlement with China out of the hat in the months leading up to the general election? Isn't he just that cynical?
4
To Donald Trump, as well as to a disturbing number of financial journalists, the strength of the economy is demonstrated by the level of the Dow Jones or the S & P 500.
All incumbent politicians, of course, claim that lofty levels of the equities markets reflect the wisdom of the incumbent’s economic policies, and a dip in any index is blamed on reckless words or actions by the party out of power.
Donald Trump and the Republicans inherited a strong economy from Barack Obama, much as they choose to deny it. Their tax cuts then gave stock prices a little boost, because the chief beneficiaries of the cuts were members of the investing class. If the tax cuts had been more broad-based, the salutary effect on the economy would have been greater or less transitory.
The silly and disruptive Trump Tariffs have done some serious damage by picking winners and losers according to political favor and by making America’s word in international trade negotiations worthless.
We will survive the tariffs, and the positive trajectory of our economy will continue for a while. Paul Krugman is right, however, that the economic good news may have peaked a little too soon for Donald Trump.
An economic trend which is only moderately good will be unlikely to offset an increasingly terrible Trump.
5
The Tax cuts are a Republican robbery and the tariffs are taxes on the 99% to offset the deficit increase the tax cuts created as they benefit mostly the wealthy. Where are the alpha male Democrats on this? They should be proclaiming the simple truths as I outlined. I'm not inspired by the present herd of candidates. I also share your foresight in the knowledge that a woman candidate will lose, just like Hillary did, and its' shocking how disconnected the candidates in Mr. Rogers neighborhood won't acknowledge that. It's not safe to go back in the water on Amity Island. The sharks are everywhere and the Pirates leading them could win again. I appreciate your analysis of the economic situation, but the nation is reduced to primitive instinctive thought, just as was intended by the Pirates. The economy won't matter. Trump has successfully cultivated a state of ignorance in the Republican base with hatred and anger, thus rendering society thinking dangerously. The state of the economy won't matter. So why am I the only alpha male writing this hoping more than three people agree? Get going Democrats. You're acting like losers. Don't prove Trump right.
3
Clearly, Trump's supporters and Republicans in general don't care about what were long espoused as principles of bedrock conservatism. Large deficits, exploding national debt, lower federal spending? Just kidding! Those are for the other guys.
No wonder a huge swath of Americans regard politics as even worse than prostitution, or at least a poor variation on the theme.
Whether or not Trump peaked too soon remains to be seen. That he cares only for his own economic well-being, however, and not for that of the country and even his supporters, is blatantly obvious.
5
My conservative, Mr. Republican father, must be rolling over in his grave at the thought of a trillion dollar deficit. What happened to fiscal responsibility; I have heard nothing from either side of the aisle. As my conservative, Madame Republican mother would day, some day the chickens will come home to roost -- I am afraid that will happen to sooner than later.
2
Trump is a weak President. In the face of real crisis, he'll be a disaster.
Democrats need to recognize how dangerous the situation is, and stop pretending they need a revolution. The best case scenario is that Trump resigns, because of a pardon that lets him keep his wealth and reputation. That means uncovering his crimes, but using that info behind the scenes to force Trump's hand.
Why is this best? Because 1) Trump lovers will turn out the vote regardless of any crisis, 2) Trump could start a war to get elected, and 3) Trump might refuse to concede the election. Getting him out of office needs a tough strategy.
Meanwhile Americans need to hear how a major part of the US long boom was China's output and demand. Trump is doing his ignorant best to undo that. But where is the counter-argument? Democrats can't seem to muster one. It's not in the media, nor the pundits.
It's time to start thinking and stop wishing.
4
Trump still has a terrible, cynical ace up his sleeve. He could go back to promoting infrastructure. He wouldn’t even need a bill, just the talk of it would be enough to capture some of the purple places he’s in danger of losing. Talking infrastructure would put the Dems in a big bind and if he only talks about it he can and will reverse course if re-elected just like he did with Mexico paying for the wall and big, beautiful healthcare reform. Of course, Trump talking infrastructure would put him squarely in the sights of one first term female representative from the Bronx. That could be fun.
2
@Denis
*****He wouldn’t even need a bill, just the talk of it would be enough to capture some of the purple places he’s in danger of losing.******
I don't think any of the polysci research suggests mere "talk" of infrastructure legislation would be remotely enough to move multiple states from purple to red.
I think a "wag the tail" style war -- borne out of political desperation -- is a far greater danger.
trump is only getting started as he monkeys around with the US and global economies and tries to "fix" fiscal policy. There is time yet to do serious damage due his ill thought governance. His track record of 6 bankruptcies says it all.
trump seems to have taken his first year in office to see what he is able to get away with. In the past year he has been focussed on an agenda without rhyme, reason or sense of time. These are dangerous times without adequate oversight of his reckless and feckless decisions by qualified staff and a GOP senate that is missing in inaction.
4
Dr. Krugman writes, "His latest foray into overt racism delights his base but repels everyone else." And this is precisely the reason why Trump will win a second term.
Dr. Krugman has a very well reasoned column about the potential effects the economy should have on next year's election. And in some other democracy, or in some other time, his reasoning might hold sway.
But we are no longer a democracy. We are in the throes of our first dictatorship, supported by a very large minority of vicious racist Americans. Understand that a dictator does not need the support of a majority of Americans to hold power. A large, rabid minority will do just fine. And as long as Trump reflects their racism, his base will never leave him.
Trump has shown that he may win the presidency with this large minority. And they don't care if we're in the throes of the next Depression come next November. They will gladly stand in soup lines for this man, as long as he tells them that as whites, they're the only "real" Americans. They'll gladly see their children suffer because they cannot afford health care, as long as he continues to tell them that brown-skinned Americans hate their country.
And so this column would be very persuasive in a democracy populated by a large majority of decent, thoughtful, caring people. But we are no longer that country. Trump voters love the ignorant, racist backwater our nation has turned into, and they will do whatever they can to keep Trump in power. Get ready.
5
@Noah Drummer Noah not only sums up the present dilemma but also has described Trump's election win. Racism trumps issues every time. And that's what put Trump in office. The racist mass of our country has no appetite for "education reform, debt relief, medicare for all, etc." The democrats waste their time promoting this issues as a way to beat Trump. Rampant mean-spirited racism in all its forms wins. It's a sad state of affairs. My biggest fear is that Trump will annoint himself as "president forever". In that event let's hope our military steps in to remove him.
Ah, the deficit....
If Paul Ryan’s ugly mug deserves to be on a milk carton, then there should be an amber alert for the entire Republican caucus. However, there remains one bright shining light of Republican deficit hypocrisy, and that is of course the solipsistic Rand Paul.
For those who cannot bear to pay attention, it is worth going to YouTube to see the junior senator from Kentucky stand in the senate and singlehandedly stop funding for 9/11 responders’ ongoing healthcare needs. After watching that spectacle, then find Jon Stewart’s interview on Fox where he lays out the (obvious) reality behind the senator of selfishness’ obstruction.
All of this brings to mind JK Galbraith’s quote: “The modern conservative is engaged in one of man's oldest exercises in moral philosophy; that is, the search for a superior moral justification for selfishness.”
8
It's beyond economics. Trump is a freight train we cannot stop as he carefully cultivated so much hate and anger, his followers wouldn't care.
3
Trump is crashing the economy and the Dems should not try to win the Presidential election in 2020; let's the GOP live with the result of Trump's no-policies.Trump being Trump you will be in a wild ride for the next 6 years but , after this period, the sky will clear.Being a "president" after the mess created by Trump and the GOP is suicidal; let's the GOP have the full responsability of Trump!
It's the economy stupid - but whose ? The economy is doing well, it’s just most Americans aren’t particularly benefitting from it. Krugman explains some of the reasons in this article. I’d like to hear more from him about the financialization of an increasing portion of our economy that doesn’t contribute to the ‘real’ economy which involves making things or providing services thus creating jobs, salaries and circulation of capital. The GOP complains of government redistribution involved in social services, education and other spending. However, the tax cut, trimming of social services, gifts of federal lands and mineral resources to large corporation and other policy features of present and past administrations have had a huge redistribution effect, namely of pumping wealth from the middle and lower classes to the top. So the question is not about whether or not for government to redistribute, but for whose benefit.
4
Typically, Republicans overspend on tax cuts for the wealthy instead of on programs to help people or infrastructure and then start a war to deflect from the recession they've caused. Iran, anyone?
3
Trump's casinos borrowed heavily, going bankrupt or being bailed out by his daddy. The parties were lavish, but the end was bad. Now he's doing the same thing to the country, except Fred Trump can't bail us out. If only a Democrat would point clearly at the massive unpaid bill that we've run up to finance this boom, we might win back the White House.
1
Paul,
We've got one chance to get this right. Right now, no thanks to news media, including the NYT, Biden is losing steam. (Notice how his debate performance keeps getting worse even though the debate has been over for weeks.) Biden is probably the best because he can reassure moderate Dems and swing voters that he won't be too extreme in his governance.
Harris looks good because she looks like a feisty fighter. And she knows what she's talking about.
But the person who would be the best president is Elizabeth Warren. Unfortunately, the best potential president isn't always the best candidate.
1
@Thucydides
But if we keep saying "Warren can't win", then she won't.
I wonder what role Xi will play. He must be fuming at the position Trump has cornered him into with the Chinese people. Will he string Trump along on a trade deal but then hang him out to dry at election time? Make Trump's choice a bad deal or a failure to get any deal? Xi can't want another four years of dealing with Trump.
We are underemployed, underpaid and prices always seem to rise at the worst possible time. We have saber rattling in the Middle East. We have the threat of pogroms domestically.
Yet, Trumpettes would have us believe these are the BEST of times.........but only for the upper one percent.
It may have come too soon for 2020, but the Republicans had to do something besides appoint flawed judges before 2018. This was the only big something they could manage.
It may have helped them keep the Senate, so the Senate could focus on their main reason for being of appointing flawed judges while the administrative branch focuses on an endless celebration of corruption, sadism, incompetence, willful ignorance and, of course, racism.
A little late to the party aren't you professor?
The Republicans have been running this annual trillion-dollar budget deficit game for a couple three years now so where have you been?
They are on the verge of causing some real long term harm to the American economy. And most of the American people don't seem to care. It would have been nice if you had been warning the country about this several years ago.
A day late and a borrowed dollar short professor.
1
Speaking of socialists, has Trump become one ? He has eliminated the individual mandate of the ACA, now subscribers no longer have to pay to opt out, the government has to pick up the entire tab. Isn't this socialism ?
1
Boy, it's HOT HOT HOT outside. No mention about the environment, which is going to sink us all. Not a single commentator. I have a small farm, and the unnatural weather is of great concern to me. It's your environment, too. All this talk, and no mention as to preparations for the oncoming environmental disaster that is Trump. You ain't seen nothin' yet. Batten down the hatches, it's going to get much much worse.
3
Agree about the effects of sexism. This country elected a black man, twice, but has yet to elect a woman as president.
1
Yet Mr. Krugman, it will be needless to paint the Democratic candidates as radical, calling for open borders, race reparations, abolishing private health insurance and forgiving billions in student loans.... because, that's exactly how the candidates in my party want to be seen. Are we supposed to take serious a group of naive, ill informed congresswomen who instead of representing their constituents and working on issues that matter, opt to form a sophomoric "squad" who obnoxiously advocate illogical, and simplistic fixes with radical roots to please a sliver of people in their base? (Sound familiar - Trump) If one challenges any of their policies one is accused of misogyny or racism. The right didn't create this. We, Democrats, are in trouble. We've wasted a great opportunity to not repeat mistakes only to make a bigger one. Trump was elected by people who wanted a Capitalist disruptor. They got him, and so did the rest of us. But should our answer have been gender and identity politics and socialist policies that have proven fatal to economies time and again?
1
Ryan's face on a milk carton?
Only if we are looking for him, though he was always lost.
And again - the problem is Democrats don't know how to do politics. Where are the Democrats challenging the GOP deficit rising to $1 trillion? The average American has no idea. The average American thought that the $600 billion deficit was a huge problem under Obama because of constant GOP shrillness. Now its almost doubled but the Democrats are mute? Have they learned nothing?
5
We need to change the presidency to the Mexican model: a six year term with no succession.
With our endless political contests whether de facto or de jure means any president has about 18 months at the start of his first term to enact policies and then 30 months to work for his re-election. If re-elected, he spends another 18 months seeking change and then the last 30 months polishing up his "legacy".
So, an eight year term of service nets us a president for only about half the time with the remainder devoted to posturing for political survival and not societal improvements.
A single six year term without succession would reduce political pandering and raise the percentage of time spent on the nation's business from about 50% to closer to 66%.
And, since this would require constitutional change, I am opening a livery service for unicorns as well.
5
@Douglas McNeill
Interesting concept, brought to an exquisite conclusion with your final sentence... “And, since this would require constitutional change, I am opening a livery service for unicorns as well.”
Brilliant!
It’s amazing how Paul thinks this is a short term boost. Is he still waiting for the market to crash as he predicted? And by the way, which of the Dem candidates are addressing the deficit or debt? Their “plans” will increase both.
1
@Jackson Not understanding your comment. So are you saying it is OK when the Republicans raise the deficit?
Of course it's perception that matters, but let's take a look at the economy using candidate trump's own evaluation. Back in 2018, he dismissed the strong economic rebound that we experienced during the Obama years as being a sham. His rationale was the record low labor force participation rate. In July, 2018, the Labor Force Participation Rate was 62.9% according to the Bureau of Labor Statistics. Where is it today? 62.9%. By trump's own measure, this economy is not firing on all cylinders in any way shape or form.
2
Is the economy won't help Trump win a second term and racism is already baked into the numbers and he's still short of a win then what else will he use to gain votes?
As we inch closer to war with Iran, keep in mind that there are a lot of people who will vote incumbent in a time of active war. The voters who would vote against Trump because of war would vote against him anyway so it's a no lose situation. A war will also enable increase military spending and the weaponized Keynsianism that goes with it.
Government spending is Government spending whether it be military or infrastructure, both will help the economy. Time the war right and there would be a double bump in votes for Trump. When is the right time? Before the next budget would probably be too early so look for a ramp in aggressive posture near the end of the year in preparation for war and if/when (I'd say February) it happens an emergency military spending bill won't be far behind.
5
"This tidal wave of red ink is even more extraordinary than it looks, because it has taken place despite falling unemployment, which usually leads to a falling deficit."
I'm with you, Dr. K: I don't think the Trump economy can last for the very reasons you outline. No matter what the GOP says in a strange attempt to deny reality, the mounting deficit is a big bad monster threatening to engulf our economy.
And, since full employment is often more and more linked to multiple jobs and gigs, it's hard to see how anxious workers alone can keep the US economy purring indefinitely.
The funny thing about voodoo economics like the tax cut, is when things go south, the impact can be quick, severe, and galloping.
Trump hasn't produced a strong economy, he's produced only one that looks good on paper but ultimately won't produce for the long haul. That said, I believe paying the piper won't begin until after the election--still time enough for this economic charlatan, so focused on short term gains to claim victory before the debacle.
11
The status of the economy is not nearly as important as what Trump followers BELIEVE to be the status of the economy. The current White House occupant will lie about it, and those that worship him will believe him.
13
If you look at one sector of the population that I happen to belong to, Social Security recipients, we are not doing all that well.
SSA cost-of-living adjustments for 2017 and 2018 were 2.0% and 2.8% respectively. However, the Consumer Price Index for all items for the period June 2017 through June 2019 has hovered around 2.0% with some months being higher and some lower.
Those Social Security recipients with additional income from stocks, bonds, retirement plans, etc. are probably keeping their heads above water but for many, many others they are very close to drowning.
I suspect that those working but at the bottom income levels are just getting by thanks, in part, to public and private welfare efforts.
If you assume that some part of both groups make up "Trump's Base" clearly they are getting something from Trump other than economic well-being.
He's a tool through which they express their anger and frustration and they are Trump's tools for improving his brand.
7
An economy based on people buying more stuff that they throw away to buy more stuff is ultimately destined to fail regardless of who is running the show.
17
It must be so hard to write this column Mr. Krugman, After all the economy has defied your predictions completely. The trend which you point to as key has been a steady decline in unemployment to record low levels with an absence of inflation AND lower long term bond yields, which is a Goldilocks scenario. The Fed has gently moved away from its zero rate stance giving it 200 basis points of cuts if ever needed and wages in all parts of the labor market are improving. You hate this President and predicted that the effects of the tax cuts would be short lived, they clearly are not. Good thing you write economic theory as opposed to actually running the economy of investing for others, following your predictions of the effects of Trumps economic policies would have been a disaster for the oast 2.5 years.
2
@michaelf
You sound sensible, but I'm going with Dr. K. on this. Business and finance folks may be having a field day because of Trump Admin's 'anything goes' attitude towards them. This kind of fizz does not seem sustainable. Deficit increase for what long term or public benefits? Seems to me it's principal result is to make the wealthy a little wealthier. Good that its working?
1
The Chinese economy is decelerating but so too is the US economy. Recent US GDP releases have been disfigured by pricing issues and inventory build-up. Trump desperately tries to prevent a recession before 11/20 and focus on a group to distract from his own failure to MAGA
6
"Clearly, deficits only matter when there’s a Democrat in the White House."
So does lying to Congress, breaking sworn Oaths of Office, upholding the Constitution, the Freedom of the Press, accepting the rulings of our Judicial system and treating citizens equally.
Apparently all Republicans are immune from any values. ethics, or honesty. And they don't need to be concerned about representing ALL of the people in their states.
Who knew?
66
Increase in wages was undermined and surpassed by the continuous and steep rise in healthcare , prescription drugs and education costs .
19
Dear Prof. Krugman:
Please do a review of how Republicans have used Fed policy as well as deficit spending to help themselves electorally.
After the Fed raised interest rates to 21% to help Republicans defeat Carter in 1980, an analysis done by a colleague showed the following.
Since the beginning of the Fed, interest rates were dropped in the two years before an election when a Republican held the Presidency. But when a Democrat held the Presidency interest rates were raised often in the last two years to help prevent reelection.
Is this happening again?
16
@louis v. lombardo
It's interesting to see how the Fed predicted in March that interest rates would be 2.6% in 2020, but the June forecast is only 2.1%; it then goes to 2.4% in 2021.
A nice little boost for Trump.
Senator McConnell declared that the tax cuts would essentially pay for themselves. Speaker Ryan opined that the tax cuts would not add to the deficit. And then , of course, there is president Trump himself, who has no need for math or observable reality ( i.e. inauguration crowd size ) if either conflict with his narrative.
President Trump and the GOP: Partners in lies. Masters of ulterior motives and nefarious means.
30
Trump manipulates and dominates news coverage with his litany of bewildering tweets. With the cameras on him, he smuggles in often unrelated messages crafted to affirm his base's biases, but also swing voters. Targeted for the latter, those messages often take the form of yes, no and maybe. Listen for phrases like, "maybe it is, maybe it isn't, who knows," or "maybe it will, maybe it won't, we'll see." That subliminal messaging negates fact-based reporting, to his benefit and the country's detriment.
16
@James
I disagree. To the outsider, it seems what Trump says is what any idiot with no understanding of what is going on around him would say. He doesn't plan, because he doesn't know enough to plan, and wouldn't have the discipline to do so if he did. Sometimes his idiocy is politically palatable, sometimes not - he's not playing chess.
Mitch, Lindsey, Paul R. and the rest of the GOP leadership knew that the tax cut was nothing more than a reward to their donor class. The idea of long term growth and a benefit for the entire country was a smoke screen. They have never had any real intent of serving anything other than their donors and their own political careers. There is no evidence to the contrary. The disgrace is as much with them as with Donald Trump.
23
Starting a war would stimulate the economy. Still time for that. Nothing would surprise me at this point.
20
Prof. Krugman provides the most sensible criticism of Trumpy and the Republicans. Rather than having to fall to pieces each time Trumpy says something vile (which is several times a day), it's more important to expose him and his enablers for the sham they've brought on. The economy's is troubling for those of us who aren't in the 6-7 figure income bracket. Environmental and other protections are dismantled. etc.
11
Although the economy may be a critical factor in the 2020 election, I'd like to point out that the economy, in the eyes of most voters, if what the government tells us about the economy.
If you expect a truthful picture of the economy that could redound negatively on Trump's re-election chances - you just don't know Trump and his administration.
I suspect this is already happening.
If I were the Democrats, I would be already preparing whatever is needed to provide their statistics on the economy. I know the Trump base won't believe it, but perhaps independents will.
10
Paul,
Good article and analysis.
First, as almost nobody remembers now Ronald Reagan was the first post WW II President to show the way to massive, unbridled, irresponsible, deficit spending. This occurred while he was openly lying about cutting spending.
During his fantastical increase in deficit spending, mostly on pointless things like "Star Wars" defense systems, Republicans were actually saying they were cutting spending.
It was much harder to see the truth before one could google actual deficit spending and see a graph back to WW II in a second.
So, Pubs have been lying about their priorities for years. Actually, for my entire adult life.
The last President who ran a fiscally responsible ship was Jimmy Carter.
A Democrat.
Clinton flattened the deficit in his last two years, but, it is hard to give him credit for being "responsible" given his other grossly irresponsible habits.
Not a single Republican since Ronnie has even tried to maintain a responsible fiscal stance.
The last Republican who was responsible was Eisenhower.
A long time ago now.
Long enough to assume that we are back to the future with Republicans of the 1920's ilk.
Remember those Republicans? The ones in charge of all branches of gov from 1921 to 1929 who spent eight years prior to 1929 making America Great Again?
yep. Great Depression sponsors they were.
ooops........
16
As much as I’d like to agree with this, the GOP has perfected the art of getting their base to vote against their economic interests. As with so much in today’s political arena, the Dems are held to a completely different standard by the center and as many others have pointed out, they will be branded as economy destroyers by the GOP whether than go left or right. So while I hold out hope that dr k is right here, color me skeptical. There is no end to the rights ability to distort reality tonsuite their political ends.
7
But there already has been a Democratic tax cut in the form of a repeal of the ACA Cadillac tax on health benefits to help the Unions. Our only hope to avoid becoming like Greece is to stop any of the 25 from becoming President.
1
@Rich Murphy
There's a considerable number of well paid middle managers and executives that will gain with the repeal of the "Cadillac tax," so I wouldn't be surprised to see some Republican support for the repeal.
@Rich Murphy Greece has a budget surplus.
We're not going to develop one while Republicans are in the White House.
@Rich Murphy
Recall that the R's 'taxcut' in 2017 kept the tax but reduced it to zero. Also, recall the lawsuits against the ACA (the current administration as joined with the plaintiffs against the ACA) which purport to argue that since the ACA no longer effectively has a tax, it's no longer constitutional. Removing the tax from the law is an attempt to keep the law somewhat intact, so I wouldn't read too much into your statement with its assumption it somehow reflected tax policy by the Dems.
"none of the Republicans who warned of a debt apocalypse under President Barack Obama have protested the Trump deficits."
Well except for Rand Paul, who despite voting in favor of the deficit causing tax cuts, decided that the deficits are too big a problem to allow the government to pay the medical costs of 9/11 first responders.
21
If the economy crashed tomorrow it would still take 15-20 months for Trump supporters to accept the new reality of the economy. Remember in 2016 when we were at 4% unemployment, yet Trump claimed the unemployment to be “20%, 30%, people are telling me it’s 40%?” His supporters openly embraced this narrative. Don’t think they wouldn’t embrace an economy at 10% unemployment if Trump tells them that’s fake news and the real unemployment is 3%, even if the bread lines are visible.
17
There are still ways for Trump to keep the economy running till election day.
He could make a small trade deal with China, claim victory, and so let trade war fears fall down.
He could also start a little military campaign (military keynesianism) to boost spending.
He could further pressure the FED to lower rates.
The spending linked to the election campaign itself will provide some GDP boost.
More stock buybacks are probably on their way to prop up the stockmarket.
That would help a lot to get the economy humming till 2020. What happens thereafter doesn't matter for Trump and the GOP for now.
9
What about the obvious?
Closer to the election, Trump cancels all the tariffs, proclaims an agreement with China and great victory in the tariff war.
Would that provide the short-term boost to the economy to get him re-elected?
11
Prof. Krugman notes that "real G.D.P. grew 3.2 percent over the past year". My question is does that take into account the drag of borrowing and paying interest on the national debt? Also while supposedly we have full employment, the number of actual working Americans falls when the unemployed (not counted in the statistics) are considered. Ditto for the under-employed. I submit that this is not a hot economy.
6
Paul Krugman knows that a 2% inflation target (by the Fed) has lowered the economywide prices expectations below to an average of 2%... The policymakers have set a price increase of 2% on each product in CPI, including food and fuel, and whenever average inflation (CPI) reaches over 2% investors would start selling stocks/inventories, because of tightmoney by the Fed and lower demand and price expectations... which could further reinforce lower price and interest rate expectations and delay in demand and growth (expectations)...
3
@Shaleen-Excellent points. Thank you.
1
"Strange to say, none of the Republicans who warned of a debt apocalypse under President Barack Obama have protested the Trump deficits."
Not so strange. Republicans for a long time put obstacles on any democrat no metter what, and help the wealthy and corporations.
19
Isn't worldwide growth down? Shouldn't that also be a drag on the American economy?
6
Trump might not be able to influence the growth of the economy in the run-up to the Election, but he could certainly engineer a rising stock market and “feel good” factor at the right time with promises. So, as much as I respect Dr. Krugman, I am not so sanguine about Trump losing his trump card.
7
The election appears that it will be stolen again; it will be illegitimate due to multiple election frauds. The state of the economy will have little to do with another illegitimate election of Trump. Russian interference will continue to stoke anger and divisiveness. It will embolden a cross-section of racist and authoritarian voters to cast ballots for Trump whom Moscow dictatorship supports and keep many voters home because of all the false news by the Russians against the Democratic nominee. Also, voter suppression in states where election poll watchers are allowed to challenge a person's identity or proof of identity, can keep voters away. These states usually Republican-controlled limit voting usually in minority areas which tend to vote for Democratic party. For example, Florida in the 2000 election where about 50 thousand voters were purged prior to election with reason given they were ex-convicts. These voters criminal records were reviewed, most were not criminals. In Ohio, many mostly minority polling places had a severe shortage of machines, while other regions had an adequate number of machines. Many purged voters(skipped two consecutive presidential elections) cast provisional ballots which were not counted for various reasons. When polls closed long lines of voters waiting were not allowed to vote. Kerry could have been elected president winning Ohio without voter suppression. These and other methods to limit Democratic party only need happen in swing states.
53
@John
Excellent recap of those election frauds going back to 2000 and 2004. I used to laboriously point some of that out to people, but man, it gets so tiring! Thanks for doing the heavy lifting.
23
@John-Sadly you're right. The conservative Supremes have set up things to spike the 2020 election in Republicans' favor: with the recent gerrymandering decision and the Ohio case which gave state election officials (most seats are in Republican hands) judicial cover to purge voter rolls.
14
@PJD. Point it out to you representatives WEEKLY and encourage others to do the same!
1
The election is too far off to meaningfully speculate but that is the point in a way since it allows to one spin out any number of merely plausible predictions. The current political moment (interminable seeming to many I realize) itself is so much in defiance of expectations that one should be more skeptical than usual of the next American Nostradamus. Trump is unlikely to suddenly transform into a Saint and begin washing the feet of Guatemalan migrants. Failing that I would suggest he work on solving these trade issues and lifting the tariffs. That's a variable he may have some chance of influencing.
2
As long as its tax cuts for the rich, it is not considered socialism, but when the money goes to food stamps, and medical care that is a different story!
109
I think Mr. Krugman misses the central economic talking point that Republicans will throw at Democrats in 2020: Socialism will bankrupt the treasury and tank the economy. See how good we made it with our 2017 TCJA? Democrats will ruin it, trash it to pieces, with profligate spending on Medicare for all, minimum wage hikes, and so on. Economic disaster.
We know Trump's base will buy the story. The question is, will more moderate Republicans buy it, especially in the swing states? That's your election story.
5
I, for one as a retired senior, have been forced to participate minimally in the retail sector after I was punished, thanks to the so called tax cuts, to the tune of 9K which is a small fortune on my income. I am single and frugal meaning that I don't have any deductions to itemize. I made the mistake of taking money out of my IRA for a project of home improvement. I also noticed that my non-monetary retirement benefits are now being taxed as income even though I never saw a penny of it in my bottom line. Now I just buy food and drive a 20 year old car. I am sure that I'm not the only one. I can't wait for the wacko despot to disappear along with his sycophantic cohorts in Congress.
100
@Suzanne Wheat The tax cut was truly horrible and destructive to anyone outside of the oligarchy. But it has nothing whatsoever to do with your personal plight. As you so clearly wrote, you made the mistake of withdrawing IRA funds for a home improvement project, and that is the one and only cause of your problem. For most of us, the tax “cut” was neutral. This senior’s liability went down $120 on the same fixed income. Meh
1
Dr. K,
I agree "economic growth will probably be meh at best".
I can't predict how the media will treat the Presidential campaign, but I remind your readers that Hillary Clinton won the popular vote by 3 million votes but lost the electoral college vote in States that are unlikely to vote for Trump again.
Wisconsin, Pennsylvania, Michigan, and Ohio will recognize that Trump did not deliver as promised and most American's now understand that the internet ads, and email releases were arranged by Russia.
Issues that will probably be around as the campaign matures like the distribution of income and work will be heightened, when the unemployment rates and labor participation rates are tracked by State, such as in Wisconsin, Ohio, Michigan and Pennsylvania will underscore Trump's policy failures.
Further, I don't believe voters will miss the incompetence of the DJT Administration, one example is the executive order policies on the Southern Border. Clearly, a shameful embarrassing mess.
The failure that you discussed: the undelivered promises of the tax cut. It just has not worked out as promised, it only exacerbated the income inequality problem.
The failure to deliver a decent health insurance program or slow the cost growth for health care.
The failure to recognize global warming and to use the considerable talent in the U.S. government to formulate a plan for evolving the World economy away from fossil fuels and using the plan to improve the economy of the U.S.
11
I hope you are correct!
The Working Class did not benefit from the tax cut and they know it. They are still living from paycheck to paycheck. Any unexpected expense and they fall further behind financially. Yes, they are working night and day and yet they are not free from debt. In fact, the more they work the more they fall in debt. This is a direct consequence of the tax cut and the exponentially growing deficit.
8
I don't know much about economics and particularly about what might cause a recession in the next couple of years. Having stated that, I keep reading that an inverted yield curve is one of the best indicators of a coming recession. And the yield curve has been inverted for about two months, a significantly long period of time. Apparently, the longer the yield curve is inverted, the more likely a recession is in the offing.
When one considers that Trump's tariffs have considerably hampered growth for many countries across the globe and that European economies now tend to be slowing down, this coupled with an inverted yield curve makes me think that a recession will probably occur at the worst possible time for Trump. It is hard to argue that it would not be fair to Trump since he has done just about everything a leader should not do to keep an economy rolling along.
How ironic it would be if Trump is able to remain in office to run again only to have a slowing economy be the primary thing that causes him to lose. After all, isn't Mr. Trump one of the smartest businessmen in the world who is supposed to make America great again?
7
"...was sold as something that would greatly improve the economy’s long-run performance..."
So far, so good:
GDP growth in 2018? $1,070 billion Deficit? $780 billion
Net? $290 billion
GDP growth in 2016? $485 billion Deficit? $580 billion
GDP real? $680 billion
GDP real in Europe? $210 billion
@John Huppenthal
Cryptic. Short-run, too.
1
"This tidal wave of red ink"
Professor Krugman's argument loses much credibility right on the outset.
The deficit went from ˜3.5% of GDP in 2016 to ˜4.5% of GDP this year. That is it!!! A mere difference of 1% of GDP. Hardly a tidal wave.
The fact of the matter is that the entire world economy, from China to Europe is slowing down markedly. The American economy, thanks to Trump and his tax cuts is the best performing economy in the world.
Krumgan's prediction that the economy with crash now are no more likely to be right than his prediction that the stock market would crash after Trump's election.
Keep betting against America and Trump at your own peril.
4
@Baron95
If that is so. why do Republicans try to reduce it by cutting federal programs that help the poor and the disadvantaged, eliminate the ACA, refuse to expand the Medicaid program, and reduce the budgets for the EPA or FEMA? And why have they threatened three times to bring the US into default US by failing to raise the debt ceiling, resulting in the downgrading of US credit rating?
30
@Baron95 Uh... 1.5% makes a giant difference.
3% is the maximum level of deficits that could be considered sustainable. The idea is that the economy grows faster than 3%, allowing the deficit never to grow to become a serious problem.
Unless we are going to have 4.5% or higher growth on average, going forward, servicing the national debt will become a bigger slice of the federal budget every year. It doesn't take many years for that debt growth to become completely unsustainable.
12
@Baron95
You may not think so, but I would say a 1% of GDP increase in the deficit is a pretty big number, especially over only a year's time. As they like to say, a hundred billion here and a hundred billion there and pretty soon you are talking about real money.
14
The U.S. voting populace as a whole is only moved, on average, by application of enormous forces, not by what a few million people per day (out of about 200 million adults) may be ingesting from Fox, Colbert or NYT.
These online NYT discussions etc. certainly help illuminate the forces at work, but do little to predict the outcome in 2020.
And Trump has strikingly illuminated a fundamental, unwelcome reality: the views of about 40% of Americans!
Good to know; forewarned = forearmed.
I think there is a 50% chance of horrendous U.S. political and societal consequences, indeed a train-wreck. Will the guns come out in force to support this demagogue?
Vote. Press your neighbors and coworkers to vote. This is really important. Only an overwhelming anti-Trump result will withstand the coming storm.
73
@SuPa
I like this well-written comment...
@SuPa
My neighbors are all rabid Trump supporters! I do not want them to vote.
(Being retired, I have no co-workers.)
@SuPa
It is indeed the best antidote for this trump-disease. Massive voter turnout for all good Americans who see trump fro who he it - a con man, demagogue who yearns to be like putin, kim, mbs and other "rulers" - this is a sick man who has conned 10s of millions with the help of FOX and their ilk.
Vote, America - Vote for America
Trump is running up the deficit during a strong economy, doing the exact opposite of what every economist since Adam Smith invented capitalism has warned is a disastrous mistake.
I'm no Krugman but even I know Trump's fiscal strategy is a recession waiting to happen.
27
@Philoscribe
"...every economist since Adam Smith..."
Nope.
Trump is applying a simple truism: if a tax rate is above the revenue and prosperity maximizing point, reduce it an revenue will increase.
This truism is complicated by the political necessity of reducing taxes for people of below average incomes.
So, in 2018, Trump reduced taxes for all families of four making $53,000 or less to zero. This enabled him to reduce the oppressive tax rate of 39.6%+medicare of 3.4% = 43% to 40%.
Did it work? Amazingly well. Despite that 100% tax reduction for families of four, and an overall modeled tax reduction of 14%, personal income tax revenues increased in 2018. That means an underlying growth rate of over 7% per year.
Here were the growth rates by calendar year of total federal revenues under Obama after his huge tax increase in 2012:
2013: 12%
2014: 8%
2015: 4%
2016: negative 1%
Death spiral
In an economy growing 1.6%, tax revenues were going down. Only solar, Amazon's, Googles and Facebooks were growing, outfits that not only don't have to pay taxes, they consume taxes.
The companies and people subject to these taxes were being annihilated while the California techies were drinking champagne.
There is more juice to be squeezed from the system. The revenue maximizing rate over the long run, the long run being the 75 year Social Security horizon is no more than 30%.
@John Huppenthal While I am flattered you read my comment and took the time to reply, you argue a point I didn't raise. All I noted is the absurdity of applying Keynesian stimulus when the economy is doing well. That's a dangerous thing to do and will be disastrous if -- when -- the economy falls into a recession.
2
Trump could keep the economy strong through rate cuts and dropping tariffs and claim victory. I wish the economy remain strong through 2020 and beyond. The question is will the country has the stomach to re-elect Trump? The American values and morality was never this bad in its history. America was great not measured by its economy but by the values it stood for. On that measure, we are at the lowest point and will only get worst since Trump will not change. For that reaso, he will loose no matter who gets the democratic nomination.
1
There's a neglected aspect re: 2020.
Trump declares: "America will never be a socialist nation." Does this mean that Trump will seek repeal of large, successful & popular socialism that's long been an integral part of the US?
Repeal Socialist Medicare -- single payer health care, like that of Canada, in which seniors choose their doctors, hospitals & other health professionals and facilities from a near universal list of participants.
Repeal Socialist Medicaid -- Federal & state paid health care for the poor and destitute in which those eligible choose their doctors, hospital, etc., from a more limited list of participants.
Repeal Socialist VA and the Indian Health Service -- Federally paid docs & others at government facilities provide vets and Indians on isolated reservations with highly rated treatment & care.
Repeal Socialist TVA and Bonneville Power Administration -- Federal government built & operated electric power providers for a large swath of the Tennessee Valley and the Pacific Northwest.
This not exhaustive list shows that socialism is very much alive, popular, and successful in the US, & as a result the country is not suffering, but doing better than otherwise. Nonetheless, a long-standing. often latent GOP policy because of its unpopularity with voters, is repeal of all this socialism.
Trump should be pushed to answer: Is he with the GOP for repeal; if so, replace it with what specifically? If not for repeal, then why not more such good socialism?
7
@JimPB Most people don't think of this, but the military might be one of the most socialist institutions in America. Does Trump want to get rid of that, too.
7
The deficits will eventually come home to roost. I do not pretend to know what that will mean to the market. We shall see before 2020 probably.
5
And then there's health care. Trump just lied in his NC rally: the GOP loves no pre-existing health insurance conditions, they will do a good job. The Dems just can't do it. All this while Trump's DOJ and GOP AG's are in court in New Orleans trying to go back to the good old days before Obamacare....when pre-existing conditions denied you health insurance.
This may be the real battle.
11
he's costing/failing us in the same way he shilled all his own failed projects: use someone else's money and who cares.
a doozy is using our money to shore up farmers whose trade he cut out from under them. it's too early to add up his contributions to global warming which then flooded and are now frying the planting grounds.
he must be made to pay the piper.
20
One of the ironies of the Trump tax cuts was that all the plutocrats prospered, not just the usual rogues gallery of GOP bankrollers. i didn't hear a lot of wealthy Democrats crying on their way to the bank, but now they have even more cash to throw at the corporatists in the race. Biden and Buttigieg are both leading in donations, large donations, and its no coincidence that they are the least transparent about their policies.
Biden wants to run on Obama's tepid record and Buttigieg is trying to capitalize on the same strategy as Obama: take an intelligent young man with an inspiring narrative arc and get him in the White House where he can give away the store to Wall Street. We all got to feel good about ourselves voting for a black man whose ultimate loyalty was to his Harvard buddies; now I suppose we get to vote for a gay man whose ultimate loyalty is to his Harvard buddies. In the USA, that's what's considered progress!
9
@stan continople Over here in the real world, SEVERAL prominent democratic party donors pleaded with Congress not to cut their taxes. I 'm sorry that's in conflict with the narrative of Chakrabarti-inspired Bernie bros, but cognitive dissonance is to be expected from those inspired by a Silicon Valley VC turned fake social justice warrior.
1
The economy was good when Obama left office, so this voter believes that the economy had little to do with electing Trump in 2016; but xenophobia and the toxicity of Clinton had a lot to do with explaining his unexpected victory. Trump will win in 2020 only if the Democratic Party fails to nominate a wise and decent person, a candidate committed to unifying our divided country, creating jobs that pay a living wage, and who, in the words of your NT Times colleague Tom Friedman, can "gain the support of the independents, moderate Republicans and suburban women who abandoned Donald Trump in the midterms."
4
Since we will have a recession eventually, I hope it happens soon, on Trump's watch. Much of the global economy is already worse off than ours, and negative interest rates are common. Fed Chairman Powell recently expressed concern about a recession. And research staff at major Wall Street banks are saying there is a good possibility of a recession before the end of this year.
If the economy does weaken, though, the prospect of war increases. That is a danger with Trump, Bolton and Pompeo at the controls. We will just have to deal with it.
5
Corporate execs will invest their tax cuts in the future by investing in expansion, r&d and employee raises. By the way would you like to see the bridge I just put on the market.
25
This was Paul Krugman on deficits in 2010:
""The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs." .... There's no reason to panic about budget prospects for the next few years, or even for the next decade." (Fiscal Scare Tactics, 2010).
Eight plus years ago, there was no reason to panic about budget prospects (and hence deficits...) 'for even the net decade'. Now the deficit is a huge issue.
Which Mr. Krugman is writing these diametrically opposed columns - the biased op-ed author or the so-called economist?
3
@Once From Rome He didn't say that deficits were bad tho, if anything just that this deficit could have been more effective.
6
@Once From Rome
perhaps you haven't noticed that the economic situation today is quite different - the economy is not in an economic slump - hence the different message re the value of deficits.
Is it possible that it is you who is a biased?
23
@Once From Rome
You are kind of underlining his point.
It's a huge issue because if growth is at 3.1 percent and unemployment is truly at historic lows, we shouldn't need the sugar-rush of high government spending, coupled with still-low interest rates, to keep things going (as we would have wanted to stave off a world-wide depression in 2008).
The fact that we are spending so much tax money but not getting enough tax revenue in return when the other fundamentals are as they are now should be cause for alarm.
The Administration is trying to juice the economy to hit that 4% growth target. It looks like we won't hit it with all the stops out. That means when we tap the breaks, we are going to hit a wall. Take a look at how Japan's economy is doing... that might be our future if we aren't careful.
32
The irony is that the one thing that would probably help Trump and Republicans the most in this arena, the 15 dollar minimum wage, is DOA in the Senate (like pretty much everything else).
Clearly we need a decent wage increase to get us back to some normal inflation territory, give us some wiggle room to fight a recession by letting us raise interest rates now, and put some money in the hands of working people.
The wealthy have tried raising the tide by putting their yachts in the water - it hasn't worked in 40 years. Let's actually put some money in the hands of working people and put some pressure on wages from below. Heck, even an regionally based, inflation indexed minimum wage would be a start.
64
Paul, you would be more convincing if you would go back over two years of doom and gloom forecasting and tell us all why we aren't already in recession, if not rebellion, over the economic damage this administration has wrought. Don't get me wrong, I am not at all pleased with much of anything that has been 'done'. But it IS hard to argue with low unemployment and success of the DOW and S&P, the two biggest numbers our Main Stream Media like to crow or fret about.
2
@David Greenspan
I remember people in 2006 crowing about the Dow at 14k. Best economy ever, blah blah blah. Two years later it was at what, 6.8k? And unlike the 90's boom, we weren't banking anything toward the deficit or national debt.
Now, those new jobs are mostly low wage service jobs. The participation rate has barely gone up from its lows (the thing that Trump cried about what BO was President). Interest rates are so low, that if we do find ourselves in a recession, we have very little leverage to get out of it (not to mention the debt leaves us little room to finance a war or spend our way out of depression). And these tariffs are increasing costs (no wage increases) while the corporate welfare queens of the Midwest get our tax dollars (also, no wage increases). The manufacturing job gains are a drop in the bucket. There are more employees of Arby's than there are coal miners in this country.
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What's troubling me is the assumption that the main issue is the economy. OK, yes, income inequality is so bad that most of us, actually most of our children, are destined to be serfs in the coming economy.
We only have so many years before the changes to our climate separate the rich from the poor through ownership. The richest will own the safe havens, the shares of crops, the means of production, the land, etc. The rest of us will either work for them, attempt to emigrate to better climates, or die. Mostly die.
There's a really obvious reason that the field has been tilted in favor of the richest: in the coming feudal society, most of us are either going to be working for the wealthy, or dead.
Sorry if you didn't realize that.
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@Incontinental ~
Add ownership of water to your sobering list. That will be a huge issue in the not too distant future.
4
Remember when Al Gore lost to George Bush? The Dot Com bonanza had not yet crashed. The Debt was being paid off. Yet, in a photo finish, the Supreme Court handed Bush the election. Between Nixon, Reagan, Bush and Trump America has proved, numerous times that we are willing to choose white resentment above anything else. We have also shown that it is a nearly evenly balanced teter tower between the forces of progress and the forces of raging resentment. I still refuse to believe that America will choose a second act of Donald Trump's raging racism. I'm praying for that anyway.
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"Many Americans don't feel that they're sharing in the benefits of a growing economy." That's it in a nutshell, Paul. And they're right, of course. Those benefits have predominantly flowed to those who are already very wealthy. Which is the part of the story that Trump and his cohort won't mention, and that doesn't get enough attention from the media and pundits. But I believe people are sensing it, and that could be a real problem for Trump's campaign...I hope.
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@Debra Petersen Debra Peterson
Thanks for your comment " Many Americans don't feel that they' re sharing in the benefits of a growing economy." Also "they are right of course"
You may be correct however all americans who like to have a job have one. Americans who have a job and do not like their job can apply for a better one. Good chance when on lunch/dinner break can find a better one.
While most americans may be satisfied with their life style there there are many who feel the government ( both former and present are not doing enough for them )
Most illegal immigrants also feel they are not treated with respect , do not have good food, housing high paying jobs etc.
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Interestingly, I was in 2 executive meetings at growth companies this past week where the CFOs said they were "planning for a recession next year." What this meant was they were going to exercise tighter control over infrastructure spending (read: people) ahead of sales. It's not that they 100% believed there would be a recession, it's more like they were going to wait until they had the cash before they invested.
People aren't worried yet, but they are cautious. There's going to be some turbulence.
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Help me understand one thing. Why don't these talented writers ever ever talk about one of the key differences between running an economy and running a business? When revenues are up a government can pay down debt, and when revenues are down a government can boost the performance of the economy with deficit spending. The day that American was sold the idea that there is a "surplus" so we should give it back to you as a tax cut was the day we lost our way. For example, our looming budget debates are all about cutting spending because of the debt.
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@PJM
This comment should be the headline.
People don't realize that the national debt is a promise to pay on goods and services we have already received! Until that is paid off entirely, there is no surplus!
Right now when the economy is good, we have a large deficit and run up the debt. When the economy is bad, we have a larger deficit and run up the debt even more. Add a couple of wars in the Middle East and...
4
Well, when the economy fails to bear out his rosy predictions and 65% of the nation is willing to see him for exactly what he is, what then? How about a lovely little war? At least this time Barbara Lee will have the Squad to join her in lonely opposition, so there are 5 votes against a Congressional authorization.
Sweet Jesus, I hope I'm wrong.
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You're probably right. My data shows Trump is doomed—and not metaphorically— but I'm often wrong. Nevertheless, this time I'm going with the data.
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From where I am observing the upcoming US presidential election, I cannot see that the US's fortunes will change with a democratic president. Bernie Sanders and others talk of the corruption of the US congress due to all the "dark" money flowing into candidates coffers, but how will they change things when the Supreme Court will undoubedtly block any attempts.
One should not wonder that countries around the world are looking for alternatives to US hegemony.
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And if we added 1 % to the interest rate, what would happen then with the deficits, the debt and the market?
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@Leon - Lol a financial apocalypse. Like Trump's finances...scratch just below the surface of the economy and you'll discover it's all a house of cards.
The market is expecting a 0.5% interest rate DECREASE at the Fed's meeting in July - normally a drastic move reserved for recessions. If they don't get it, they'll implode.
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@Leon Stock market gets rattled, but after that not much. 1% doesn't change the picture very much, either way. My first mortgage was at 16.5% when it dropped to 9% and the 7% and then 5% that changed a lot of things. It increases the value of the dollar so it hurts trade and also raises the hurdle rate on cap X. But not by that much.
@rgoldman56It would add one percent of 18 Trillion, the Debt to the annual Deficit.180 Billion. To me that´s a lot.
2
Deficit Man is a terrific description. It worked for Republicans in the middle of a near-depression, so it's amazing Democrats are not hammering the President for his soaring deficits. Democrats are going to need something, because while the economy may be softening as the effects of the tax cut fade, there is a jobs program tailor made to boost the economy coming in 2020. That jobs program is called the census, and as soon as Republicans realize how it will help their 2020 prospects, they'll go from under-funding the census to over-funding it regardless of the effect on the deficit.
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@Bob - "…it's amazing Democrats are not hammering the President for his soaring deficits."
Amazing, stunning, gob-smacking… How can the (D)s be so perpetually inept at messaging - both for themselves and against the (R)s?
The real unemployment rate is far higher than the government or Paul Krugman are willing to say it is. There appear to be tons of jobs going begging but that's not the case. If it was far more people would be employed including those over the age of 50. Second, Americans have a fanatic belief in tax cuts even temporary ones. We seem to think that paying less in taxes will improve the economy when it doesn't. What happens is that programs are cut across the board, user fees increase, and other important things like basic scientific research go by the wayside. Local taxes increase as well.
Trump and the GOP have been wonderful stewards of their economic lives and futures. Our economic lives and futures are of little concern to them. Our rights as citizens and employees are of no concern to them except as they can use it to get themselves re-elected.
I remember Reagan and voodoo economics. What Trump and the GOP are doing now is more of the same. I remember hearing how wonderful greed was and seeing the results: corruption in the finance industry, deregulation with no concern for consumers or citizens, and the inevitable, though late recession that hurt everyone except the richest.
I think that Mr. Krugman owes us a look behind the rosy figures on unemployment. I think he owes us more of an explanation on why tax cuts fail and why Americans love them. He would do us a favor if he tried to increase our economic literacy.
7/18/2019 6:55pm
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@hen3ry
Well said. there are various ways of calculating unemployment levels and , since the figure published is always better for the government in power if it is lower, there is probably a tendency to choose the method of calculation that produces the lowest number.
To get a relatively objective view one would have to seek a calculation from a source other than the BLS and compare.
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@hen3ry
You're right. I'm over fifty, and while I'm working, I'm making far, far less than I used to. This means I have virtually no disposable income.
A lot of people are making less than they used to.
"Full employment" doesn't begin to cover the situation.
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@hen3ry Sorry, I just can't blame Paul for this sorry mess. Love the guy. He's been prescient about so many (economic) issues I care about.
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