It's great to know that deficit spending is not a problem. For $3 quadrillion, every citizen could receive $10 million from the government and live happily ever after. Do Greece, Venezuela, and Zimbabwe have lessons to teach us?
4
I believe we have a responsibility to live within our collective means and not pass Federal debt to future generations. Call me old school.
4
Democrats have made a tactical error in not attacking Trump and the GOP from the right. That is their biggest weakness.
Attacking from the left will only solidify their base. They're not interested in liberal identity politics.
7
The problem we have as a country is that people exploit the fact that people have no clue what a fiat currency is. They think there is some limited amount of money out there and if we dont get it back from taxes it cant be spent. That is completely wrong. The Fed can create money with keystrokes and there is no problem with that happening as long as you dont inflation. We dont. The only think keeping us from fixing the problems in this country is will, not money. Not only that, but spending that benefits the lower classes is by far better for the economy and the effect on peoples lives than tax cuts. Until people take the time to learn how fiat currency works, they will always be open to snake oil like Paul Ryan sold, always.
3
Whether government spending decisions are smart or not depend on the ROIs from the investments, or money spent. Incurring a short-term deficit can be justified if longer-run income tax surpluses arise from this spending.
Investment in basic science research is a long run option with returns best measured in the long run. ROIs from government spending for education, so students can become more productive with higher ROIs themselves, seem to offer promising investment alternatives.
In these instances, the ROIs are high enough to clear many politicians' "hurdle rates" when these future ROIs are discounted back to the present. But, for rich taxpayers, reduced tax rates have the highest personal returns. 100% of a dollar not taxed, or saved by not being paid to Uncle Sam, can be redirected to finance a very good private education for their kids. Such redirection provides the highest ROIs for the rich; and, a collateral benefit is less competition from the other 99% of people competing for seats at the best US universities.
Surveys continually show that per legacy privileges and other devices, many elite universities have more students from the top 1% of family incomes than the bottom 50%.
[10/29/2019 Tues. 5:05 pm Greenville NC]
1
On pbs last night, the anchor did have that conservative bias questioning how Dems are going to pay for universal health care. It was creepy
2
30% of Public Debt is owned by foreigners. Insignificant?
2
"those who opposed austerity have been vindicated." Perhaps, but the Republicans have been playing the same tune since Reagan, cut taxes for the 1%/corporations and tax revenues will increase, but it has NOT happened. GOP are "Deficit" hawks only when a Democrat is POTUS or when opposing social programs as noted. What does occur is the endless flood of campaign funds to the GOP from the 1% donor class enabling Republican power and continued assault on and denial of progressive social issues to benefit Americans generally. Consequently, U.S. has become increasingly an "Outlier" compared to other advanced nations across the social/economic spectrum, well documented by the U.N. report on social inequality in America.
3
I have two comments on this. The first is that I believe that general economic illiteracy among people in general and among most journalists is behind the simplistic view of deficits, debt, etc. Without sufficient knowledge about such matters, people just do not know what is up and what is down with such things. Secondly, I am concerned whenever I hear Republican politicians make statements about financial or economic matters that are patently untrue or lacking of any evidence and journalists just take it in and move on. Why no follow up and request for evidence or even suggestions as to when and where such things worked? It seems like whatever falsehoods are being spewed and just taken as fact and that is it. No wonder Republicans can get so many to vote against their own financial interest.
3
Untrue, Mr. Krugman. Modern budget deficit hysteria began during the Reagan administration, when the Democrats were doing everything they could think of to discredit the popular President and Reaganomics.
The first and only trade deficit hysteria also occurred during the Reagan administration. No one really understood the significance of the trade deficit, but since it was at a record high it was the featured news story every month on the nightly network news broadcasts.
I remember at least one instance when one of the networks set up at a major port and showed live coverage of stevedores unloading ships while the solemn voice of the newscaster informed us that once again the trade deficit had peaked.
Conservatives favor 'starve the beast' small government, tax cuts that mostly benefit the rich, the least government spending on social insurance and infrastructure, and the most on the military. Their actions foster greater inequality, more misery for the poor and greater economic opportunity and security for the rich. Their policies can work only in Lake Wobegon where every man is above average.
1
Give Trump another four years and he will solve the National debt problem in trumpian fashion..... declare chapter 11, wipe out the debt and start in all over again.... his modus operandi. Never mind the small business owners( the U.S. taxpayers) that were owed the services (Medicare or repaired infrastructure) and weren't paid... small beer. Move on!
Remember history when you vote......The buck has to stop someplace. Might as well be the polls.
1
I feel like the attitude on the right side of the spectrum towards "social programs" is where it was post Great Society during the too-much-guns-and-butter 70's. There was a feeling that there was not way of tracking what the social programs were achieving.
I would argue that the left has done little to educate the public on the advantage of information technology in social programs. Just think of the ability today to monitor disease costs and outcome (through medicare data, say). Didn't the Clinton administration establish that people were dying too much of infection in hospitals and do something about it?
I see homeless people in the streets today packing up their sidewalk hovel before pulling a smart phone out of their pocket to start the day with whatever they use it for.
2
It would help, though, to discuss rationally the cost of deficit spending. Even if a 100% debt-to-GDP ratio is ok, 250% is less ok, and 500% is starting to be crushing, right? So at what point is debt a concern and what are those concern?
On the flip side, when I hear a claim that a certain tax cut pays for itself, I'd like to know what is an optimal tax rate. I'd imagine a 0% tax is unsustainable. So just how low can a tax rate go before we should get concerned?
The debt is far worse than portrayed by Krugman. In 2008, the US experience the largest financial collapse since the Great Depression. Since then, the FED has provided equity markets with nearly unlimited amounts of ultra-cheap money (ca. $ 5 trillion) for share buybacks, purchasing stock futures and to sustain [still] insolvent banks. This money has also inflated bond markets and trendy real estate in Boston, NYC, SF, Seattle, etc. Despite over a decade of Central Bank largess- debt levels have exploded- US government debt exceeds $22 trillion (does not include municipal, corporate or consumer debt) and increasing circa $1 trillion/year, while US government backed mortgage debt has ballooned to $7 trillion and global debt exceeds $250 trillion; the global economy confronts continuing stagnation/decline characterized by slack demand and excess capacity. Bottom line- since 2008, Wall St has relied on, and continues to rely on, what is effectively debt monetization by the FED. These policies have increased debt and uneven wealth distribution, where the wealthiest Americans aka, the top 1% have more wealth than the bottom 90%. Clearly, this is not how a healthy economy behaves.
2
@Paul
Is there a reason that you did not include tax cuts for Corporations and the wealthy as a contributing cause of "uneven wealth distribution?" I believe it is well documented how much taxes have been cut at the federal level, and at the state level to woo Corporations/jobs to the state, as Corporations pitted one state3 against another ("We'll put our plant in another state unless you give us tax breaks").
Though interest rates are low, when the deficit is this high, we are paying a lot in debt service. I'd much rather see some that money paying for universal child care and preschool, among other things. I'm not panicked, but neither am I happy with the current state of our deficit.
2
I'm waiting for the Republicans to claim that since the deficit is so large, they have to start cutting back on social security, medicare, support for education, and other public goods, and that there is "no money" for positive investments in a just society. We really need to claw back the tax break.
Disclaimer: I am reasonably well off. I can see how the tax cuts have benefitted me more than others at the bottom of a pay scale. If one thing, I always had hoped that Americans believed in fairness, but we have an exceptionally greedy president and his cronies.
2
Democrats need to start talking about what we are going to do with all the extra money we will have after they implement Medicare for All.
Yes, we know the Republicans are hypocrites, especially when it comes to more spending on social programs. However, deficits will matter because interest rates won't remain negative for much of the world forever. Additionally, if everyone agrees to abandon global or regional trade deals for bilateral ones, inevitably there will be shortfalls of energy, labor or materials, as we saw in the 70's. Whereas we can manage the current deficit at 2-3% interest rates, we will have to cut the very social programs that benefit us most should rates return to 10%+. That seems improbable now, but so did negative interest rates in 1977. Living within your means is still the best practice.
I admit I am actually concerned about the deficit.
It's been used to power a massive war machine with goals changed seemingly randomly for larger missions, and far too many deaths for my liking.
It's been used to power massive wealth gains for already-wealthy individuals.
It's been used as an excuse to slash programs that actually provide more long-term benefit than their costs, like education and food aid.
What it has not done is build and rebuild a more perfect Union, promote domestic or international Tranquility, promote the general Welfare, or secure the blessings of Liberty for ourselves and out Posterity--again, unless you're very wealthy.
This is not the America we were promised. Four decades of Republican promises have been little but very toxic smoke blown in our faces. They need to be called out more for their duplicity and their frankly anti-American attitudes. Thank you for doing so today, Paul Krugman.
5
This is how more Americans need to feel about their country, I believe.
The back story requires a motive to brand the GOP as American heroes and Dems as spendthrift charlatans. The deficit arguments described by PK conflate religion and politics leveraged by those that gain the most. The Prosperity Gospel is the foundation of GOP anti-deficit rhetoric. Like many religions, following consistent faith and belief system requires chutzpah. Fortunately for the GOP, if not for America, President Trump is well-qualified to bluff his first term of office into the Second Coming of Christ.
The man who can shoot someone on Times Square and not lose a vote is uncorked and ready to spin any policy to anyone, challenging a greater president's wise observation, "You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time." Regrettably, the last clause has fallen victim of Fake News and social media 'broadcasters' promoting their political brand at the expense of civility, facts and accountability.
If we are not done by continuing to ignore GHG emissions coupled with rotten political leaders who have difficulty thinking past the next election, we may find ourselves suffering in the Valley of Death. If we don’t address environmental challenges that kindle historic fires, floods and food-crop shortages, the carnage will require material debt financing to mitigate further global warming and restore civil society.
We all know the deficit is bad when it is a Democrat.
And the deficit doesn't matter when it is a Republican.
Deficits went up under Reagan and W Bush.
Deficits went down under Clinton and Obama.
Actually, the deficit went way up under W Bush. Bush took the balanced budget from Clinton and gave Obama a whopping $1.4 Trillion deficit.
Also the worst recession since the Great Depression.
The question to ask is what are we getting with the deficits.
The answer is tax cuts for the wealthy to be paid for by the 99% and our children and grandchildren.
But Republicans are way better at PR than Democrats.
Thanks to Fox.
And having no morals.
5
Clinton eliminated the defecit and left W with an actual surplus. Obama was profligate with debt initially - but look what he was up against. And as you correctly note, it served a purpose. He had the budget on a pathway to a Clintonesque fate - defecit eliminated, ultimately. But even his last year it was about 500MM. But that's better than the 1T he needed in 2008. We are seeing the opposite aporoach currently.
I wish to thank Dr. Krugman for his most recently newsletter explaining the relationship among debts, bonds and GDP. It did much to clear things up in my mind.
1
Paul Krugman says" "[D]eficit hysteria ... somehow kicks in only when a Democrat is president or progressives propose spending that would make American lives better."
Krugman is making up history. He forgets that, back in 1990 George H W Bush's presidency, "deficit hysteria" kicked in. That year Bush was forced to eat his campaign pledge "No new taxes" by Democrats who controlled both houses of Congress. They refused to agree to restrain domestic spending unless taxes were raised
The Budget Enforcement Act of 1990 legislated caps on discretionary spending and created constraints known as “pay-as-you-go” (paygo) rules: if Congress wanted to cut a tax or increase entitlement spending it had to pay for the cost in some other part of the budget.
2
The media leans conservative on budget issues because conservatives always present an un-nuanced, simplistic narrative, whereas the truth is complex and requires more context, which therefore often means it's too hard to explain by deadline.
2
Indeed, Japan's debt to GDP ratio is 2.5 times as bad as the U.S. A good explanation of how Japan handles this without disaster would be useful. A comparison with Japan on this score including Japan's successful spending on infrastructure would be useful.
1
Have to disagree on this one. I am very concerned about this enormous deficit, which unlike 2012 has no fiscal justification. Interest rates won't stay low forever, and the more the government spends on interest, the less it has to spend money usefully on myriad thing such as, for example, child care.
Yes, Republicans are hypocrites; all the more reason for Democrats to be the adults in the room and demand fiscal responsibility.
We need to claw back some of these tax moneys the rich have not been paying thanks to Trump and his groupies. And even the middle class will have to pay more for services we receive.
42
@Fourteen14
Bill White's comment is helpful, but you can also read the article Krugman linked to that he wrote in 2012, where he explains his opinion on why reducing the deficit shouldn't be a high priority. I want to note, this is an opinion, but I think we get a lot of bad information about what the deficit is, let alone how it impacts our nation.
All that side-steps your point. Yes, our legislators should be mindful of the budgets they create and their impacts. That debate has a huge amount of space though; what you think of fiscal responsibility might not line up with what I think, and thats fine. That's a conversation I want to hear, and be a part of.
5
@Bill White - here's a shocking proposal for you - Parents should pay for child care, not government. I know, revolutionary.
3
Thank you Dr. Krugman. I've seen this pattern for all of the last 40 years. It happened over and over again. I began to think no one else could track our history, because no one else seemed to see it. So I feel immensely better just to know I'm not crazy. Unfortunately I don't think enough people see it happening again to make any difference. We will continue to give the rich and powerful everything and deny simple help to the poor and powerless. I'm afraid it's who we are.
1
The other infuriating hypocrisy in the news media is how Democrats have to give every wonkish detail of their plans to improve American lives, including how to pay for it. People like Trump can run on fumes - he doesn't have to be specific about anything. He just says we'll have the best plan, like he's on crack or something ... it'll be a beautiful plan. So not only can the Trump tax breaks to corporations go to budget deficit, where taxpayers pay, but Medicare for All or Education proposals are not allowed to run up deficit. But why not? Why not just charge it on our credit card, like the tax breaks, if deficits don't matter?
2
The Rich own all the media. Those talking heads are all millionaires hoping for even more.
Of course they want their taxes reduced.
They do not care if the country suffers. They don't care if Americans suffer.
All they car about is that they get more.
1
Dr. K,
I agree with what you're saying about Republican hypocrisy. No doubt there's a double standard for debt and who's in the White House. However, I'm having trouble with your assessment that debt/deficits don't matter much. Are you assuming that we'll have super low interest rates for the next 20 years? Because if rates go back to 5% we'll be paying over $1 trillion in interest per year on the current $22 trillion debt. That's money down the toilet. Don't tell me $1 trillion per year down the toilet doesn't matter!
2
This is not your Father's economy. Particularly post Bretton Woods; anchorless currency. Different game, 99.9% global whether we like it or not. Abundant labor, goods. Demand - not so much. Huge competitive scenario as enterprise struggle for survival. Zero (or less) interest rates as far as the eye can see. New paradigm not only in econ but politics as well. What do people really need/want. What does "rich" mean. Interesting times - the kids "get it."
The worrisome deficit is not the deficit of money. After all, we invented money. The worrisome deficit is the deficit of resources which we are using faster than we are replenishing them. These include water, fuels, and agricultural land. We also have a deficit of human resources: education, experience, and talents that we are not maintaining or expanding.
174
@Bruce DB
We are also developing a deficit of good air, by which I mean good for the health of the planet. That deficit is expanding rapidly with no significant effort at correction.
20
This should be an easy messaging win for Democrats:
1. Republicans have slashed the effective tax rate on billionaires to a level lower than teachers & factory workers pay, and it has blown up the deficit.
2. Meanwhile, they've forced our roads, bridges, & schools in to disrepair.
3. We need to get taxes on the wealthy and corporations back to 1970's levels in order to fix all this.
1
You're 100% correct that previously hard-core fiscal hawks have turned tail once they had the control in their hands. That doesn't mean that the debt and deficit aren't problems, it just means that *neither* party is willing to bite the bullet and actually cut spending enough to even start paying down the debt.
"The Two Santa Claus Theory
The Two Santa Claus Theory is a political theory and strategy published by Wanniski in 1976, which he promoted within the United States Republican Party.[14][15] The theory states that in democratic elections, if Democrats appeal to voters by proposing programs to help people, then the Republicans cannot gain broader appeal by proposing less spending. The first "Santa Claus" of the theory title refers to the Democrats who promise programs to help the disadvantaged. The "Two Santa Claus Theory" recommends that the Republicans must assume the role of a second Santa Claus by not arguing to cut spending but offering the option of cutting taxes.[citation needed]
According to Wanniski, the theory is simple. In 1976, he wrote that the Two-Santa Claus Theory suggests that "the Republicans should concentrate on tax-rate reduction. As they succeed in expanding incentives to produce, they will move the economy back to full employment and thereby reduce social pressures for public spending. Just as an increase in Government spending inevitably means taxes must be raised, a cut in tax rates—by expanding the private sector—will diminish the relative size of the public sector."[15] Wanniski suggested this position, as Thom Hartmann has clarified, so that the Democrats would "have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections."[16]"
Wikipedia
Quite simply, the Republicans have effectively used the size of the Federal debt to weaken the Federal government and eviscerate social programs in their effort to further empower private capital.
3
Mr. Krugman, I agree with everything you say here. But it seems to me that we don't really know how much debt is sustainable. You are in the perfect position to launch an analysis of how much debt is sustainable. Perhaps it could be based on a comparison of how much interest we are likely to pay on the debt, and the increase in revenue from taxes on the investments made by the money borrowed. That's likely to be greatly oversimplified, but you get the idea.
Interesting. I remember taking a course and how to make decisions came up. You can think of the best case and the worst case in making your decision. I went out and bought my first house just before the economy blew up in the early 80's. My worst case wasn't this bad. I managed but I ate a lot of macaroni.
So Mr. Krugman, what happens went interest rates start heading up and your equity heads down.
"Was there severe market reaction? No — interest rates are substantially lower than they were before the deficit surge."
This really gets to the point. When the debt is going to the wealthy class, the wealthy class doesn't complain and everything goes along. When the debt is to provide for anyone other than the wealthy class, the wealthy class uses its power, markets, think tanks, etc. to say that this or that will bankrupt the county. "Was there severe market reaction? No — interest rates are substantially lower than they were before the deficit surge."
This really gets to the point. When the debt is going to the wealthy class, the wealthy class doesn't complain and everything goes along. When the debt is to provide for anyone other than the wealthy class, the wealthy class uses its power, markets, think tanks, etc. to say that this or that will bankrupt the county.
3
While it’s true the Professor defended deficit spending in this article his primary point is the hypocrisy of the GOP who suddenly become “Deficit Hawks,” and the “Sky is Falling Chicken Little” whenever a Democrat holds the White House, and at least one House of Congress.
It is only in those situations when the US escalating debt becomes front page news, and the dire circumstances of our “exploding debt” is shouted from the rooftops by our supposedly “liberally biased” MSM, yet under these same set of circumstances with the GOP in control, the only sound you hear from our “liberally biased” MSM are the “Sounds of Silence.”
2
"Republicans only pretended to care about debt as an excuse to hobble President Barack Obama" yes, yes, a thousand times yes. I've been thinking this forever and this is the first time I've read it. Sequestration was a cynical ploy by Republicans to deny Obama a strong economy. I consider it treasonous because it hurt our country, and for self interested reasons.
4
USA seems to be a different case in economics that we have not studied.
This country can break any records in indebtedness with no consequences, as it provides a safe haven to the fearful rich and crooks of the world. So, money flows continuously unbeknownst to investors of economic disorder in the government.
Reducing deficts and the total debt may not be necessary at this time; however it is a necessary message that wins politically. Alternative messages (such as "GOPers have selective deficit hysteria", or "in today's economy, deficits are harmless" or such) are NOT politically winning messages. So, what should the Dems message be?
Elementary, dear Watson: Our fiscal proposals will reduce the deficits and bring down the total debt by x% within y years.
Remember that deficits and debt can be reduced not only by reducing entitlement spending, but also by increasing taxes on the super rich and by revenue growth generated by stable economic and trade policies which were trademark of the Clinton and Obama presidencies.
You have to take the bull (and the message) by the horns and take it to the GOP. No other way to win the PR battle.
Herbert Spencer (1820-1903), a man with no formal education, wrote his first book in 1851, "Social Satics ".
He argued for the justified survival of the fittest (a phrase Darwin later adopted), in human Society.
This led him to oppose such things as goverment help for the poor, public health, and public education.
Those views were the theoretical bases of the ultraindividualist and conservative ideology that later become know as social Darwinism (although Spencerism would have been a more appropriate designation).
Trumpism is today´s Spencerism (or Social Darwinism).
I recall a great speach from Vaclav Havel:
“We live in a contaminated moral environment. We fell morally ill because we became used to saying something different from what we thought. We learned not to believe in anything, to ignore each other, to care only about ourselves.”
1
First,in simpler times, government computed an authoritative inflation rate and instituted COLAs. Soon politicians and bureaucrats noticed a benefit if the COLA was just slightly under-accounted. Then wage negotiators noticed that too. Though slight each year, a disjunction compounded. Corporate managers noticed labor slightly cheaper, profit margins slightly larger, and stock prices a little inflated - all by just a little trim-job on the authoritatively regarded official inflation rate. Now the disjunction has so grown that there are negative interest rates, homeless working people, runaway stock prices, and mass manufacturing of liquidity, credit, and money. A gradual slight reconciliation with reality would be smart. Something unfortunate is more likely.
1
Take out a $1,000 loan with the wrong people, and if you can't pay it back, they'll 'kneecap' you. Take out a $1,000,000,000,000 loan, and if you can't pay it back, they'll kindly write you another check. Who gets to decide who is credit-worthy, what process do they use, and who is looking over their shoulder to make sure they aren't influenced by graft? When Dick Cheney said "Reagan proved that deficits don't matter", I thought he was joking. Turns out the joke was on me. But, is it a joke? Some people, drunk on debt, buy multiple homes as investments, most of which sit empty. Other people, not so lucky, live in cardboard boxes. It is not at all clear to me that the U.S. government, the gold standard for credit-worthiness, is a good investor, what with its 'D-' rated public infrastructure, its military (read: welfare for warmongers) sized to take on the Klingons, and its blissful tripping along a climate-cliff. This situation reminds me of a Wallstreet 'version' of Stalin's famous observation: "A single death is a tragedy; a million deaths is a statistic."
65
@Phil
Wow, great post. Not your Father's economy! Thanks.
2
Dr. Krugman writes, “The problem is the selectivity of deficit hysteria, which somehow kicks in only when a Democrat is president or progressives propose spending that would make American lives better.” Why does it kick in at such times? As Krugman wrote in here in in 2015 (Slavery’s Long Shadow), “in America programs that help the needy are all too often seen as programs that help Those People.” It never had much to do with genuine deficit anxiety.
1
Does anyone really think that the Republicans really care or cared about deficits?
3
Dr. Krugman's observations on the news media underline the fact that there never has been an overall "liberal bias" in the media. The "liberal bias", to the extent that it represents anything real, is just the perception of very conservative people that anyone less extreme than they are is a liberal. Before the development of the internet, it took enough wealth to establish a large newspaper or magazine, or a radio or tv network, that these outlets covered the news with what tended to be a slightly right of center viewpoint (obviously there were, as there are, variations). The far right has taken advantage of the internet more effectively than the rest of the political spectrum. Even the "liberal" New York Times, although it has employed moderate liberals and progressives as op-ed writers, has tended over all to cover the news in a centrist way, now a bit to the left on certain matters, but quite often a bit to the right. The Times has covered deficit issues in the sort of way that Dr. Krugman describes, which is certainly rightist, just not far-rightist. And because the Times isn't far-rightist, the far right of any given moment perceives it as the second coming of Lenin's "Iskra".
3
During my lifetime......I was born in Akron, Ohio in 1944.....the Democratic Party has failed to convince the American people of the value of basic health and employment benefits for the entire population.
President Johnson originally intended that Medicare legislation in 1965 cover all citizens from birth to death. This was shortened to age 65 because congress thought the cost of the American war in Vietnam did not leave enough funds to expand Medicare for all.
Today in 2019 the democrats still have not made their case for a national health plan and America stands alone as the only developed country without a truly universal health insurance program.
3
The GOP hasn't been fiscally responsible since Ike, with the aberrant betrayal of his "read my lips" promise by GHW Bush. The beating he took in 92 taught Republicans that spinning about the budget while giving their benefactors what they want is the right recipe. So long as the electorate is susceptible to spin from Fox, Breitbart, Alex Jones, Limbaugh and the others, Democrats can never win the messaging war.
2
"Republicans only pretended to care about debt as an excuse to hobble President Barack Obama and slash social programs. "
Yes, and in the process they created the fertile ground of "victims" for Trump to capitalize on - the very people who could have benefited from infrastructure jobs during the Great Recession were ignored.
Republicans put destroying Obama above helping Americans who needed JOBS.
2
Mr. Krugman in his email feed said, as he has before, that debt can't spiral out of control when the interest rate is lower than the GDP growth rate. But instead of just the interest rate, shouldn't we be comparing the total rate of increase in debt servicing cost to the GDP growth rate? If political reality is that annual deficits are at a trillion (roughly 5% of the debt) and will continue to climb, then with 2% interest the rate of increase in the cost of servicing the debt is 1.05 X 1.02, which is significantly higher than the GDP growth rate.
If we don’t pay our bills, we default. It’s not like we can just keep printing money and introduce it into global circulation.
Investing in those aspects of society which will inevitably yield a positive outcome used to be the conservative approach, while the liberals were the ones characterized by unreasonable frivolity.
Prior to 2008, the word ‘trillion’ wasn’t even used in economics. That amount of money had always been referred to as a, “thousand billion,” because absurdity wasn’t quite as pronounced as it is now.
1
I'll just put in a plug for free, or nearly free post-secondary education - college, trade school, apprenticeship, whatever someone want to do. It pays back in spades. I went got a 4-year degree on an partial athletic scholarship, but tuition and school cost was also subsidized by the State, so was pretty cheap. I paid the balance with part time work during school and full time in summer. I came out without any debt. I got a great job in health care and have done that for 40 years working up from laboratory to management. Believe me, I appreciate the nearly free education I got. All the talk from right wingers about having to pay a lot out of pocket to "appreciate" it is total baloney.
Society is built on investment in people. That investment always pays off. Sadly, right wingers don't believe in investing in people.
5
Dr. Krugman, I disagree with your "hamlessness of national debt" proposition. Your article said: "This analogy, however, is all wrong. Debt is money we owe to ourselves — that is, for the most part it obliges one group of Americans, taxpayers, to make payments to another group of Americans, bondholders."
First: the one group of American taxpayers is virtually all of us - all who have a W-2. Bondholder on the other hand, tend to be the rich. So you're aggravating the transfer of wealth that has already, in my opinion, gone too far. Second, interest in a growing cost. Prevailing low rates have lowered the growth rate of this line in the federal budget; but the cost in moving inexorably higher.
IMHO, for the long term, ad for the next generations, we would be well served to run our government on a pay-as-you-go basis. There is no virtue in providing boundless spending money to our politicians in Washington who are, without exception, interested only in winning their next election.
2
It is odd we still argue over what pays back and what does not. The studies have been done, the real-world social experiments have been done. Tax cuts NEVER pay back (in the form or increased economic activity) what they take from the treasury. But social programs do. Early child care pays back 8-fold in later life in less crime and better employment and economic activity. Free, or nearly free college pays back 4 times, at least, in future economic activity . Adequate healthcare from before birth pays back in better performance in schools, better jobs prospects, less time lost from work, less time spent in later life for more expensive health care (50% of Medicare is spent on the 10% of the sickest people).
But right wingers are ignorant of economics - willfully ignorant because the facts are there for everyone to see but they just ignore it all. Right wingers ignore all this because that is not what they are really concerned about. What they ARE concerned about is that they keep ALL their money and that that NONE of their money goes to anyone else for anything at all. They are, in a word, sociopaths. They are not interested in a civilized society and so fight all attempts at building one. We just need to marginalize them so we can get on with building a civilized society. That is really the only answer to the issue.
7
Mr. Krugman - please devote a column to what "medicare for all" will actually cost. If we are headed here, we should know now what the costs could run.
Pres Obama wanted to increase the debt by improving our infrastructure to create jobs and end up with better roads, trains, services. We should not stop fighting for better infrastructure instead of tax cuts for the rich or another military plane, submarine or tank.
2
OK , we are up to our ears in debt, 22 Trillions, that is 22 millions of millions, and everything is fine. Really?
What if the world economy changes and interest rates go up a meager 1 percent point. Wouldn't our deficit increase then by 220 billions? Compare that with our meager allowance for education of 68 Billions.
And what if interests go up, not 1 point but 2? And if tax revenues go down lets say 200 billions on top of what Trump and the Republicans already left on the table with their tax cuts for the ultra rich, wouldn't that be a problem?
Is that our best strategy as a nation? Or the idea is to finally kill the Recovery that started in 2009?
2
I wish, since we're running up all the bills payable by the future generations, that we were getting something that would endure for those future generations. Higher corporate profits, funneled into executive bonuses and stock buybacks. I keep thinking those could have been rebuilt bridges, high-speed data networks, or a rebuilt and resilient electrical grid. Large increases in the military budget, when we already spend as much as the next ten nations combined... I keep thinking maybe we could spend some of that money on higher education for our population - and try to succeed by out-thinking the rest of the world, instead of saber-rattling them into submission. If we're running up Trillion-dollar deficits at a time of full employment, it would be nice to be getting something enduring. Even a few enlarged National Parks would be nicer than the way Trump is handing wheelbarrows of money to the already-wealthy 1% and above. Oh wait - that includes him... oh, I see the reasons, now.
"... progressives propose spending that would make American lives better."
This is the key. To right wingers ANY money spent on social programs is seen as lost profit to themselves. They cannot stand the idea of ANY of their money going to help someone else, even if in the long run it helps them.
The underlying cause is that right wingers are sociopaths, pure and simple. There is no cure for that.
1
The GOP talking points are simple, once you understand their motive. Powerful republicans don't truly care about deficits. They just use it as a means to keep programs that help poor people from receiving funds. Their arguments are disingenuous and used to create doubt.
1
Thank you Mr. Krugman. This one paragraph that you state should be cornerstone message for any democratic, "When progressives propose new or expanded social programs, they face intense media scrutiny bordering on harassment over how they intend to pay for these programs. Republicans proposing tax cuts don’t face anything like the same scrutiny; they are seemingly able to get away with blithe assertions that tax cuts will pay for themselves by boosting economic growth, even though every single piece of evidence we have says that this is nonsense."
4
Much of the problem is that we as Americans are quite ignorant of how economics work and we can be led into the wrong beliefs with simple slogans. We need economists to step up and educate us on how government and economics affect us and we desperately need ideas on how to reform capitalism so that we can harness its power in ways that benefit all of us and not just the wealthy.
1
And maybe reporters should have a better economic education as well. It is a mystery to me why they seem to fall for Reaganomics over and over no matter how often it is shown to be fantasy.
Dr. Krugman forget to mention that the real reason why interest rates are low and deficit don't matter, at least for now, is because the central bank is printing money at a feverish pace and buying US treasuries to artificially suppress interest rates.
Let the free market and true price discovery occur in the bond market and I assure you interest rates and deficit would matter a great great deal.
2
Republicans have not been serious about deficits since Nixon/Ford. Reagand and Bush taught us that. Clinton might be forgiven for thinking Republicans might be serious, but there's no reason why Obama was unaware. None.
3
I generally appreciate Mr. Krugman's insights on these issues, as he is able to explain complicated economic principles in a way that are approachable to non-economists. This article is one of his best, and in my view, most important.
As a Canadian, living in Alberta, we are in a similar situation...we just elected a conservative provincial government promising a massive corporate tax cut and the cutting of pretty much everything else, and yet everyone complains about the spending of the previous administration, and fails to identify this tax cut as spending...and it's worse because we (the majority of Albertans) will not receive anything in return, but will lose plenty. The media needs to be better at understanding these issues and communicating them and the Democrats in the US need to be better at communicating their message on this. it is about wealth inequality, but it is also about so much more.
Remember, decision makers (including the owners of newspapers and the funders of politicians) are wealthy and reap significant benefits from tax cuts. Since they, their families, and their friends do not rely on social services provided by government, they give little support to them. It is perfectly understandable why they act the way they do. Of course there are exceptions and George Soros and FDR come immediately to mind who see beyond themselves and work to support the common man but they are often vilified by the press and seen as "traitors to their class" rather than as the heroic figures they truly are.
1
The growth of a government run by advocate groups and political contributors will mean budget deficits will continue to grow with little regard with what's in the best interests for humanity. No one in local, state or federal government has learned to say no to special interests. Grand schemes to improve life of the individual will be sidelined by the need for more money for a military expediency or tax cut. Fiscally conservative rural states rule the federal government which means deficit spending will always be an issue.
Not convinced that journalists have a conservative bias when it comes to deficit. In reality, most of us--including journalists--have little idea what economists are trying to tell us about economic policy. That's largely because economic theories as postulated by economists sound like a lot of space alien talk most of the time. Note to Krugman et.al. We need economics put into human terms. How, in fact, might massive deficits impact real people? Or non-massive deficits? Or surpluses (ha ha!)? The lack of ability of pundits and others to come down to earth is what enables people like Trump to pull the wool over our eyes.
I’ve learned Republican leaders are lower than I’ve ever though before and I’ve learned many of our citizens aren’t smart enough to figure it out. It’s depressing.
5
@Tom Kocis
I have to conclude the educational system has failed. My parents were educators and have had to watch the change. Last time I looked, the US secondary ed drop out rate was approx. 20%. I always think of what Plato said 2400 years ago re democratic republic (The Republic). Seems we haven't learned a thing.
1
One has to realize that Japan manages quite well with relative to GDP 2.5 times the U.S. average. Of course Japan unlike the U.S. has modern infrastructure. How this is done would make for an interesting and provocative editorial. Also the lack of Government spending in the U.S. aside from the Military has damaged the country. This is sorely in need of discussion. Live poorly, die young, you are expendable, this seems to the be American motto in practise.
4
Like so many others who comment, I am angry and frustrated that Democrats let Republicans win the messaging war of words to push their agenda of glorified greed and Darwinian capitalism. Decades ago, Republicans branded us "tax-and-spend liberals" and it has stuck in the heads of the middle class like a "Plop, plop, fizz, fizz" Alka-Seltzer jingle. They've even managed to make "government" a dirty word, not the agent of our common welfare, social stability and shared prosperity. We have a Donald Trump today because Republicans over the last few decades have planned and relentlessly executed a "hostile takeover" of our political language. Will it take a self-avowed "democratic socialist" or two to take it back?
3
A small business man once explained his theory of money to me: "Money is like manure. It doesn't do any good unless you spread it around."
The Republicans sold tax cuts for the wealthy and for corporate America on this theory, but they don't believe it, just look at Kansas. Trickle down is just another lie. The Democrats actually do ascribe to this theory and put it into effect, see the ACA. Vote Democratic, they will cut us in on our piece of the pie.
3
I personally would prefer less deficit for the future generations, they will be handed an empty bag and lots of debts and many environmental issues.
I agree that Paul Ryan was a phony to the nth power .
4
If our country is better run as a business, where are the calls for investment in both human and physical capital such as the types of programs Mr. Krugman suggests? A business that doesn't invest in its future is doomed.
4
@JAH
I'd say your last sentence is the whole deal. Period.
It is unquestionable that the media leans conservative and hypocritical on economic policy. The reason, no doubt, is that the media is expressing an underlying racial bias. The bias extends into the false equivalence that the media so obviously display.
1
Please keep sticking it to the Very Serious People. We have, by and large, a corrupt and historically clueless media who never met a Republican they wouldn't bend over backward to accommodate, no matter how absurd the politician's assertions. "Balance." Please. If Trump had been smart enough to play kissy-kissy with the Beltway corps, you can bet the coverage would be much, much less negative.
And why no howls of protest from Republicans about the President stealing money from our Defense to spend it on a project specifically rejected by Congress?
3
It would be great if Democratic candidates embraced this #1 issue. Instead, we get pandering of the worst kind.."open borders,homeless rights etc. etc." I blame the heads of the Democratic party for allowing these terrible talking points to be repeated across the nation. Trump picks up voters every time a Dem candidate speaks. Sad.
2
And more hypocrisy ... wealthy Republicans who "bankrupt" their elderly so as to qualify for Medicaid in old age to pay for nursing home costs ...
3
When this country finally collapses over the debt the 1% and their enablers, who have all that lovely money will just load up and move elsewhere and do it again.
3
I wish Paul had been specific when he said we need to call out the media for its sins in this matter. Lets name names
2
The GOP: Digging deeper holes since 1980.
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"The point is that the media clearly leans conservative in covering budget issues." LEANS Conservative? The paid-for Corporate Media (even allegedly "liberal" outlets like CNN) are all controlled by wealthy conservatives/corporations. Hence deficits only matter when a Democrat is in the White House. And by the way, Paul, the media doesn't equally assign responsibility on this issue. Democrats have been successfully painted as reckless budget-busters who want to take money away from hard-working middle class people and give it to lazy non-working/poor people, while the Republicans are presented as the party of fiscal responsibility, and restraint, particularly on taxing hard-working people and wasting money on the dreaded "government spending." This is one reason some blue collar Trumpers who haven't saved anything significant on their Federal taxes, say they have saved "several thousand" from the Trump tax scam, even though it didn't happen. And the irony is that neither of the media's Democrat or Republican fiscal portrayals are true. But as you said, the resulting damage has been and will continue to be enormous.
1
Mr. Krugman has perhaps found the key to justifying Democratic proposals for deficit spending:
“[P]roposals like universal child care are far more likely than tax cuts to repay a significant fraction of their upfront costs, partly by freeing up adults to work, partly by improving the lives of children in ways that will make them more productive adults.”
That’s a claim that has been tested and proven, unlike the Republicans claim of tax-cuts-create-jobs. Let’s use that idea going forward when Republicans challenge Democratic spending.
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@WestHartfordguy Indeed, demand-side policy stimulates spending and therefore business activity, job creation, rising incomes subject to tax. Surely there is research to prove what common sense tells us. Mr. Krugman?
3
@WestHartfordguy
Spending on childcare and universal pre-K, etc. are investments for future returns.
Instead of focusing too much on tuition-free public college education, taxpayer spending ought to focus on childcare and childhood education. Reduced class sizes as much as possible, and raising teachers' salaries as much as possible, to attract dedicated, competent teachers are quite important.
Universal pre-K, starting as early as possible is extremely important, especially in inner-city & rural white areas.
There has been a good deal of discussion about paying reparation for slavery. For whites it maybe fashionable. Even blacks don't really expect that to happen. But I believe, not that well-educated and not very skilled inner-city blacks' lives ought to be improved. Money spent on that can be seen as (quasi) reparation. That would reduce crime rates & spending on the penal system. If they are paid well, say starting with $15/hr. and rapidly going up to $20 will encourage them to stay at a job and become more responsible. Beautification of inner-city areas should be done creating jobs for unemployed youths. All with federal subsidies.
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@WestHartfordguy
“[P]roposals like universal childcare are far more likely than tax cuts to repay a significant fraction of their upfront costs, partly by freeing up adults to work, partly by improving the lives of children in ways that will make them more productive adults.”
This would not only free up adults to work but they could also go to college to become more productive citizens that also pay more taxes. It could also allow parents to start businesses without worrying about who could take care of their children.
4
I for one am willing to sound the alarm over large debt and deficit. Two reasons: First, Congress and the Executive Branch have lost all ability to restrain themselves, or correct course later. If we don't worry about deficit now, there will be ever-escalating deficits, and exponentially escalating debt, until the cost comes due. Second, we have a recession coming, and we will need some increased public spending when that happens. If we start in a position of huge deficits caused by corporate tax reduction, high spending, and low interest rates, then we find ourselves without policy ammunition.
But all of this is academic: we have one narrow chance to remove Trump, and it arrives in November of 2020.
77
@R.S.
Hopefully sooner.
6
@Rocky PELOSI 2019! No reconciliation without truth.
3
I propose that one of the biggest reasons for the difference is in the results of the deficit causing proposals.
People hear tax cut and they envision themselves and their fellow citizens keeping more of the money they work for. People hear social programs and they envision themselves and their fellow citizens keeping less of the money they work for. It is as simple as that.
@michaelscody
People hear social programs and envision keeping less of their money because they have been trained to forget that they too may need these programs in the future. Whose interest is served by them doing this?
1
The key question is what the "borrowed" money is spent on. Deficit spending on programs that have a long term benefit to society such as early child care and education will most likely be huge winners in the future. Borrowing for infrastructure is probably a safe bet, as is R&D, etc. Borrowing money for military activity may be necessary at critical times but needs to be scrutinized carefully so as not to become the ultimate in non-productive deficit accumulations as appears to be the case with much of our spending on wars starting with Viet Nam. Borrowing by the government, when properly invested may be especially important in balancing and mitigating the inevitable down cycles in the economy.
Businesses borrow money wisely when the dollars are invested in projects and products that return more than the cost of that capital. It's a bit more complex to measure the returns on social programs vs the military, infrastructure vs defense, etc. , etc. but the principles are the same. Deficit spending can be wise or completely stupid and lead to bankruptcy, whether personal or national. Witness Argentina, Venezuela, etc. In that sense I disagree with Dr. Krugman. It's not that we shouldn't worry about deficits. They can kill us. It's that we have to always think about what's the return on the resources we borrow and prioritize accordingly. Republican leaders have been horribly hypocritical in regards deficits, I agree, but Democrats have not been angels either.
2
@Mike Z It is not that they have "not been angels." In your framing democrats have simply been seduced more by the fear of media false equivalency regarding national security, i.e. defense and Orwellian homeland security spending. In other words to avoid the inevitable media "framing" of being "soft on defense" they never find the courage to actually cut where we can afford to cut to reduce the rate of increase in long term debt. Dems exacerbate their message on the budget problem by then employing, well, "me to" when awarding tax breaks to billionaires completely ceding victory on messaging to deplorable repugnant folk.
Since 2007, Federal revenues have increased at the same rate as inflation. Federal Expenses have increased at double the rate of inflation.
The GOP's tax giveaway was great for the rich and corporations, while the middle class got table scraps. Many are paying even higher taxes due to the loss of deductions.
How many times does "Trickle-Down" have to fail before they come up with something else? Republicans are devoid of ideas, so they simply reward their wealthy, powerful benefactors who laugh all the way to the Bentley dealership.
2
@Mark McIntyre Tax revenues rose after the tax cuts. The government simply spends too much money.
The only people paying more taxes are wealthy home owners in blue states. Their SALT tax deductions were capped.
Wealthy socialists in Malibu continue to send Democrats to the State Legislature, so they shouldn’t complain about high taxes.
"All you had to do was look at the actual content of his budget “plans.” But the media narrative demanded that there be serious, honest Republicans, so that blame for the deficit could be equally divided between the parties; so Ryan was slotted into that role even though he was totally unsuited for the part."
So how about it media, will mainstream news organizations begin to self police?
We are way past both sides ism, other side ism, what about ism, and the medias refusal to call up up and down down. The news media seems to be incapable of self awareness. And so as we move toward election day will the media make a hash of our democracy again?
2
Double standards? I’m a died-in-the-wool progressive Democrat, and I don’t support deficit spending by the government any more than I would advise someone to live on their credit card. Instead, we must pay down the debt by renewing the progressive marginal tax rates of the 1950s, and shrinking spending on the military-industrial complex. Even a trivial (LOL!) $700 billion annual addition to the national debt is a reckless sugar high that will rot the teeth of our children. Somebody has to pay the piper.
2
@Craig King: you wouldn’t advise someone to live on a credit card, but the truth is we all live on our mortgage, car loan, student loan, home equity load, etc.
And what could the answer be to these supposed ravings about deficit spending from the media? The fact that these media sources are all owned by people in the 1% class could have something to do with the conservative slant.
Or it could have everything to do with it.
I keep reading, and hearing, that Warren's proposals to insure all Americans against a health care calamity is just too costly, it will not go over with the "moderate" voters, or that it is just plain too socialist. But I hear not a peep about the costs to republicans who have been running, and will keep on running, on the idea of abolishing health insurance for millions. I have also heard from only one person, Bernie Sanders, who has put forth the fact that premiums will disappear offsetting the added tax.
If the U.S. put into action a real infrastructure rebuild it would cost trillions, the naysayers keep saying. But they omit the fact that if millions of US are put to work in real good paying construction jobs, and engineering jobs, and manufacturing jobs (Caterpillar, John Deere, Kenworth come to mind since the repair is going to need machinery) those jobs will pay income tax. A lot of it.
(Not to mention that when all those t rumpists come home from a hard day's work on the crew they are going to be too tired to go to anyone's rally. Or to beat up some black or brown skinned person.)
3
The GOP, like the guy in the White House, understand that people are essentially concerned only with their own self interests. And since they (gop)have been incrementally chipping away at safety nets, they succeed in encouragining people's fears of financial insecurity,thus the people believe anybody who babbles about "jobs". The great "job curtain" hides all the damaging details.
2
Noam Chomsky, a very brilliant man, calls the Republican Party "the most dangerous organization on earth."
I note that you repeatedly show how the media promoted the idea of a horrid budget deficit that would destroy the country. Is that the job of the media? To promote a republican story? Yes,is the unfortunate story.
Recently Chris Cuomo appeared on the Bill Meyer show to state that the dems should stop promoting their "socialism," obviously not understanding that word at all and reinforcing the idea that the media speaks for the Republicans and the wealthy/elite of the country.
2
"Whistling past the graveyard," is such a charming expression particularly as we move toward Halloween. I believe anyone NOT hysterical about the national debt, and the implications of this impending fiscal catastrophe on future generations as well as on our viability as a nation, has failed to glance up to notice the hanging sword.
3
IMHO, our grandchildren are much more likely to be incinerated by the legacy of national debt that we are leaving them than by rising CO2 levels. And if not by the taxes, then by the inflation that is likely to be caused by the $1T coins that some have advocated to pay off that debt.
3
Trump has managed to push the budget deficit to $1 TRILLION without spending a dollar to repair the crumbling, obsolete infrastructure, improving health care or public education, mitigating (not worsening) climate crisis or protecting the air, water or environment, or invest in the research and development of technologies to preserve the United States’ global leadership and economic advantage, or do anything to protect against the worse effects of the inevitable economic recession – and this despite (what we are constantly told) is the biggest economic boom in history, in short, without doing a single thing to improve the lives of Americans.
Remember how the Republicans scrimped on Obama’s Recovery package to shield Americans from financial disaster and save us from a Great Depression, which nonetheless put into motion the longest economic recovery in history? And how infuriated they were over the roadside signs, “this highway improvement paid for by the Recovery Act”?
8
...at 22 trillion dollars (and growing), the US government has borrowed around $66,000 for every man, women child in the country.
So the government owes $230,000 for just my family of 5.
The average white household net worth is $157,000.
The average black household worth is $3,000.
Baby boomers are retiring in droves increasing the draw on federal programs.
Krugs can say it's not a problem, but every bone in my body and brain cell in my head says that it is a huge problem that doesn't end well.
2
And you fully missed the point of the article.
Worry or do not worry that is up to you however you should not have double standards i.e. you worry only when the deficit is “allegedly” due to social programs from democrats and not when actually driven by republicans tax cut on the highest earners and business.
I have never been too much worried about the governmental deficit. Credit card debt, on the other hand, is a class killer. Not just because of usurious interest rates but because the use of credit, however expensive, is the only way a lot of people in this country can get by. That is wrong and it is now starting to haunt us. The GOP cares not a whit about these people; although they will gladly welcome them to their rallies.
2
Also what does this say about the Democratic opponents of spending on human needs, Medicare for All and the Green New Deal who continue to tell us that these are impractical and we cannot afford them?
Well Mr. Krugman I admit that I have been hoodwinked into thinking that the deficit being greatly expanded by the massive Trump / Republican tax cut would lead us into a recession by driving up interest rates. Should it not eventually lead to higher rates just through basic supply and demand for debt? Or is it that the crazy trade wars that have led to slower growth and possibly recession in our trading partners and that is keeping rates down? I do remember your strong voice against austerity in Greece and how it was actually exacerbating the problems in the Greek economy. But I wonder what is the limit of debt because surely there is one. I actually thought recession was the price we needed to pay to get Trump out of office, but the economy is perhaps the only thing helping him now.
2
Well Mr. Krugman I admit that I have been hoodwinked into thinking that the deficit being greatly expanded by the massive Trump / Republican tax cut would lead us into a recession by driving up interest rates. Should it not eventually lead to higher rates just through basic supply and demand for debt? Or is it that the crazy trade wars that have led to slower growth and possibly recession in our trading partners and that is keeping rates down? I do remember your strong voice against austerity in Greece and how it was actually exacerbating the Greek economy. But I wonder what is the limit of debt because surely there is one. I actually thought recession was the price we needed to pay to get Trump out of office, but the economy is perhaps the only thing helping him now.
Paul Ryan was a phony! Shocking!
@terryg There is a long list of phonies in the Republican party.
This is all true except for the part where these same biases and hypocrisy somehow don't apply to the Health Care debate. I suppose that line was inserted by the NYT editorial board's committee for allegiance to the for-profit health care industry.
It always comes back to IOKIYAR.
(It’s OK If You’re A Republican)
1
Besides bigotry and obesity, hypocrisy is about the only thing Republicans are good at.
3
Trump has done the USA the most enormous harm, as a Russian asset. Putin has chortled nonstop since 2016 to see how easily his Anschluss of the stupid Americans was...and we have yet to see the chaotic end of the Trump regime, that will certainly not be pretty to one's pocketbook or investments. Better learn some Russian.
3
The whole deficit scold charade would not have been possible without the collusion press outlets like the NY Times which credulously printed and supported every Republican lie.
4
Totally agree. And let’s start with this Newspaper. Every big and little news org has a financial section. No labour section, only make the papers if on strike or being shot at.
Parasites are the Republicans.
2
@Dwight McFee
Great observation!
Spot on!!
1
So here we are with a Trillion dollar debt and maximum employment. So all the poor people are paying taxes and it is not enough to run wars and the government. I might note that the Times is one of those "media" that didn't laud this deficit. There is no Federal money to assist California with its fires. Given all the other problems this country is facing, I will be surprised if we even survive until Nov. 2020
3
It's always fun to read Krugman op-eds and then parse through the comment boards because it's such an echo chamber. There's nary a opposing view shared here, or at the very least opposing posts are drowned in a sea of hyperbolic and overreaching statements about the 1% and corporations stealing from the masses on a scale never before seen in the history of humanity. While this is not surprising, it objectively limits the value of Krugman's observations and gives just about everyone here a false sense of "unified and uncontested purpose".
The truth, at least from this registered Independent voter's perspective, is much more nuanced. Arguing that the public shouldn't care and challenge Democrats on how they will pay for massive social program challenges because the same challenge may not exist around tax cuts is a red herring. Both deserve to be challenged, debated and discussed.
2
@John
What he said is that less scrutiny is given to "flood up" tax cuts.
@John Krugman’s columns aren’t for anyone interested in truth or even a left of center analysis of macroeconomics or politics. His columns are meant to be a pacifier for the far left.
1
"The point is that the media clearly leans conservative in covering budget issues. Progressives face intense grilling over the cost of fairly modest social programs, while conservatives get a virtual free pass on budget-busting tax cuts."
The media doesn't care about budget issues and called Paul Ryan a policy wonk when he was clearly a fraud and it is also responsible for Trump becoming President since they harped about Hillary's emails ad nauseam. Gone are the days of Walter Cronkite and real news.
3
No one can possibly make the case for perpetual debt escalation. Yet a case can be made for indebtedness not being an issue as long as inflation remains low and stable. A pertinent question might be, "What makes sustainable debt escalation feasible at all?" Certainly household indebtedness has an inevitable term, why not national debt?
Many economies have eventually run up against the debt wall. Clearly, and eventually, the US may as well. Perhaps, our debt elasticity has to do with something we might call "faith". But faith has its limits and may ultimately be turned adversely upon itself.
The era of "Trumpanomics" may be such an inflection point, but a graceful recovery remains possible -- especially if a more progressive view of wealth-sharing and environmental-caring comes to supersede the current pernicious era.
I'll bet most Americans don't even know how much a trillion dollars is. If you had a dollar bill and it's value was one million dollars, a trillion dollars is a million of those bill. A million times a million. Now that's a lot of jack. Ned
2
I don’t know whether it’s NY Times policy or whether Krugman doesn’t have the time or inclination, but every time he writes a column like this he generalizes about media hypocrisy. I wonder why he doesn’t have a graduate student investigate the work of the business press going back a decade or so to identify the perpetrators of this double standard in the New York Times, Wall Street, Washington Post, NPR, etc. He’d be doing a service for his readers and he just might change the habits of some economics reporters.
1
So name names.
Reading Krugman is even better than hearing a crowd yell, "lock him up!"
2
Hey Mr. Broken clock—what happened to, “Trump’s boom goes bust”? Oh, by the way, how much has the DOW increased once President Trump’s election? Someone predicted a 3,000 point drop, was that you? Yeah I was!
1
Why stop there, Paul? We see now that the entire Tea Party movement was a complete sham - just a cadre of racists using the deficit to cloak their bigotry and hate.
trump has run up a $3 trillion Republican credit card - during supposedly sound economic times! Where is that Tea Party now??
1
This just in...
According to a double-secret whistleblower somewhere deep in the Treasury – Secretary Mnuchin acceded earlier today to President Trump’s dictum to designate a section of the Princeton campus as the US’s first double-secret opportunity zone...
Recalling a call that could only be described as half-coherent and double-threatening, this loyal lucreist conveyed Trump’s dire diatribe directed at President Eisgruber – blustering about withholding so much of the PPPL’s current federal funding that the only thing left they’d be able to work on this Winter was cold fusion – if he didn’t go along with the rezoning of the campus within 1000 feet of Marx Hall...
“And if that doesn’t include Krugman’s office, we’ll make this hellish circle even biglier” were Trump’s final words, before slamming his cellphone down on his desk...
Details:
Apparently, any current or former hedge-fund head not named Romney would be eligible to bid on flattening this area, and building a parking garage – for coal-delivery trucks...
If same said investor were to hold the investment for 10 weeks or more, not only would all taxes originally owed on their carried interest be zeroed out – they’d get an IRS refund check equal to that amount...
Signage on all roads entering/exiting would highlight this special status – including the President’s name:
In 30-foot tall capital letters...
(no, not Eisgruber – other President)
Good evening Dr. Krugman. You know me, I'm the village idiot who continues to raise my hand in patient wait of being believed about a conclusion I've reached based on education and events. The Republicans are robbing the nation and are fully prepared to live elsewhere as they have moved their businesses and manufacturing to other nations in anticipation of the war they are sparking. They are taking the money and running. They have secured the oil rich south and leaders of the revolt mostly reside there, most famously former Republican Speaker Gingrich who declared the Republican Revolution in 1994 following many events that disturbed the nation.
Now after a crooked election, tilted by the military police psychlops television industry which "Devoted" a billion dollars worth of free airtime to Trump, General Hague is in control, just as his symbolic reality has been since WWII.
The civil war threat is not only a real threat, it's a message.
You're the financial expert. You should know that first industry migrated to the sun belt states, and then out of the country. Republicans have made Russia allies. Russia is now militarily in Venezuela. American wealth has left the country and the Republicans plan on leaving in the chaos they spark to evade justice in the matter of the Kennedy's and other politicians.
Who was Sirhan Sirhan? Why did the C.I.A. asset Bin Laden attack the twin towers? Why wasn't Russia defector Oswald punished?
Why doesn't anyone believe their own eyes?
If only hypocrisy were against the law. I can see the headlines now! “Lindsey Graham was arrested last night for felony hypocrisy in regard to the ongoing impeachment investigation, blah blah”. Of course, both sides of the aisle would probably wind up wearing ankle bracelets.
The 0.1% Welfare Queens - also known as the Republican Party - has been spectacularly successful at duping the masses into aborting their own futures with Guns-God-Greed, Grand Old Pigmentation and the finest industrial Grand Old Propaganda TV-radio complex that the Grand Oligarch Party can buy.
Having purchased Congress a long time ago to pass 0.1% campaign finance laws and voter suppression laws, right-wing American oligarchs also by extension own the court system that would normally be responsible for invalidating this rampant 0.1% corruption of Congress and the Presidency.
The truth is that a relatively small number of greedy right-wing billionaires demand endless 0.1% welfare and modern feudalism.
These fine folks have more than enough money to fund masters of deceit, conspiracy arsonists and Grand Old Pyromaniacs like Sean Hannity, Rush Limbaugh and Alex Jones to sow 24-hour IV drips of constant chaos and confusion so that normal humans are reduced to a quivering pile of fear, loathing and irrational hate for decent public policy.
They happily morph from sober deficit hounds to wildly drunken Republican spending sailors once they find a new and exciting way to illegally rig themselves into power and start flushing the nation back to the 1880's Robber Baron glory days.
Republicans are the kind of people who really enjoy cheating at sports; they see nothing wrong with it...because there is nothing inside them except for primal greed and selfishness.
Nice GOPeople.
6
@Socrates
Kudos. This is among your finest.
Paul Krugman is to be commended for less than full-throated rage. The 1994 welfare-reform bill immediately tossed three-million poor children into even more desperate poverty. They later become what the judge in Bonfire of the Vanities described as "chow" for the court system, now savagely clogged by punitive and pointless three-strikes laws. Defendants awaiting trial on a nonviolent third offense would refuse to accept a plea and end up sitting in jail awaiting trial, forcing Los Angeles County to comply with existing laws concerning prison overcrowding by offering early release to some truly bad dudes. Overcrowded prisons are inhumane for the inmates and dangerous for the guards. ... Here's the short version: Three-strikes laws put violent felons on the street with impunity. In broad daylight.
All of this occurred during a Democratic presidential administration. Clinton loved to hurt criminal defendants. In order to prove he was tough on crime during the '92 campaign, Governor Clinton executed a mentally-retarded prisoner named Ricky Ray Rector. You can't do this, morally or ethically, because the prisoner must possess a basic understanding of the difference between right and wrong. He has to know why he is being put to death. What is often overlooked, however, is the converse of this maxim: If the state executioner does not possess this basic understanding of right and wrong, society faces a much greater problem than Ricky.
“There is a sucker born every minute”.
- the real Republican Motto
3
If its OK to label Democrats as "tax and spend Democrats" then it should be equally fair to call Republicans "borrow and spend Republicans." In the latter irresponsble scenario the rich benefit first from lower taxes and secondly from collecting interest on the bonds they purchase from the government each time it goes deeper into debt. The working class receives nothing in return, so it should be no wonder that the wealthy secretly like deficit spending.
2
This article is about the failure of the media to provide equal exposure to both political sides. WHO is responsible and HOW can the public conversation be made whole?
I said some things that night. Can you repeat them now? I don't remeber what I said. I need to see it again.
That the deficit is a tax on the unborn explains the Republicon position on reproductive freedom. A bountiful crop of future 99 percenters will be required to pay for the excesses of the current 1 percenters.
2
Republican’s pronouns are me, myself, I, and us republicans: OUR country means nothing to them, they are happy to encourage Russian interference with our country’s presidential elections, ignore —proudly—science on climate chaos and unleash the hounds of industries on humanity.
The continuous attribution of any, yes any, pro social motives or philosophical ideals to the new republican party is nonsensical. Their dictionary has 5 words: more, me, mine, republican, and power,
4
“The media are only as liberal as the conservative businesses that own them.”
3
Is Prof Krugman, a trade expert , sufficiently knowledgeably to comment on fiscal and monetary policy
1. Paul Krugman writes
“The Federal Reserve basically controls short-term rates, but not long-term rates “
Paul Krugman NYTimes Aug 15 2019
This used to be true but has not been the case since Nov 2008, when the Federal Reserve started QE (Quantitative Easing, the purchasing of assets to suppress long term interest rates)
2. From the Brookings Institution, Dec 3rd, 2018
" Economists from the Fed and elsewhere have estimated that the asset purchases lowered long-term interest rates by about 1.5 percentage points.”
The answer is NO
I am looking forward to the answer of Paul Krugman
“How did you go bankrupt?”
Gradually then all at once...
Perhaps on Halloween you'll print it. It's not spooky unless you want it to be.
Once more Republican hypocrisy is on full display. Remember GOP outrage over Benghazi? Seen any GOP outrage over Russian interference or Ukraine?
2
This isn’t a surprise. The liberal media is every bit as liberal as the conservative corporations that own them
3
Oh Paul, you always tell us you are always right. Where do you plot the measurement points?
I’ve heard the republican lies all my 64 years and no longer argue with republican voters, I dismiss them as not worth knowing. You cannot reason with someone that uses a brick as a brain.
Yeah! So take that you republican hypocrites. We see right through your ‘tax cuts’ bring profitability’ mantra of ‘supply side or trickle down’ economics hysteria. The bad boys of government, the GOP, get the pass on their anal absorption with tax cuts for the wealthy while the democrats, the parent who shows no favoritism to a select group, get no respect for their desire to improve everyman’s lot in life.
Ok, they won't say,
I was contacted by aliens.
It won't happen again soon, if ever.
It was kind of disturbing and kind of ok.
Watching american politics is like tracking a crowd that is enjoying a warm feeling in their britches while blaming the bad odor on strangers.
“ Deficits don’t matter, when it’s the GOP “. Classic GOP economic theory, right up there with “ trickle down economics “.
For actual proof of trickle down, see Kansas.
Lol.
Professor? Called out for their bias? Then please do - personally - and repeatedly. Please!
Amazing what a well-oiled right wing propaganda machine that owns virtually all talk radio and news shows in medium and small markets can do. Plus Faux News.
Can you repeat it to me? I'd like to read it again.
Because we are, at heart, economists. Nothing to worry about you say all time. So why are you still splitting hairs over a few Trillion $. If ever Elizabeth Warren, aka Mom, and the communist Bernie Sanders either get elected, you will have much more to write about. But I don’t think you need to sharpen your pencil because, as with Trump, they don’t have a chance. Or do they?
Nobel prize winning economists have been carrying placards that read ‘the end is near!’ and warning us that soon as we hit 1T, we were doomed, doomed for all eternity!!
Then we did.
Then nothing happened.
Where I work we hired 6 new people in the last 4 months, I have so many new import shipments and clients I am staying late daily to catch up, my bank account is doing well.
Maybe some day your dream of a crashed economy will come true, maybe someday you will be able to print a column reminding us you were right all along.
But not today. Or tomorrow. Maybe next day when you and your cohorts start again carrying your placards saying ‘repent! The end is near!’
Sorry.
1
Where does China fit into this picture?
deficits only matter to Rs when there is a Dem in the White House Rest assured the same people who ignored
the balooing deficits will be back bleating baut the
deficits and of course gut the social safey net.
I'm afraid you'll make me talk to them.
"Well, in MY household, we don't spend money on things we can't afford!"
Q: "Does your household make it's own legal currency that it controls the amount of that it can use to pay for things?"
I agree that DDS (deficit derangement syndrome) is rampant in even main stream media, and a purely political weapon in the hands of the GOP. I also agree that taxes desperately need to be raised on the wealthy and corporations, and deficit reduction is way down at about 9th or 10th on list of the reasons why.
The Democrats (and liberals and progressives) need to aggressively go on the offensive against this GOP. It means rediscovering sloganeering, the ability to convey complex ideas with clarity and concision.
One reason "Lock Him Up" lit up the news cycle was the magic of three syllables expressing a very clear point of view.
Progressives are the party of complexity and intelligence, and that requires applying it to actually communicate their ideas clearly for everybody else. Deficit. Social spending. Climate change. Environmentalism. And so on. Clarity and concision.
It won't stop the GOP from howling their propaganda, but hopefully, it'll get the ideas out there and past the mass media water bearers who so unevenly "balance" their coverage in ways that favor the GOP.
Why not repeal the IRS code and replace it with an automatic debit to the movement of, all money.,
at a level to balance the annual; budget and pay of the debt over 10 years. No more special taxa credits or Trust Funds.
1
Although high national debt (domestically held) is not necessarily harmful (it didn't hurt Britain in the 19th century nor is it hurting Japan now), there is no good reason why large deficits should be run at this stage in a record-length expansion period. The basic reason for the deficits is not war or depression or excessive social services, it is the low tax rates on high incomes. This is actually a bipartisan result, as Democrats passed the tax cuts of 1965 and acquiesced in those of 1981 and 1987. Later raises in upper rates and the latest cuts have had relatively less effect. As Krugman sometimes reminds, there is no evidence that flatter tax rates have improved economic performance. But what they have done in increase inequality, which itself has probably hampered overall economic performance, as there is an excess of capital and a deficiency of demand.
Yes, even the "liberal" media have a strong conservative (plutocratic, pro-CEO, anti-egalitarian) bias. In addition to raising false alarms about deficits, they have helped to impose an effective taboo on raising tax rates on upper incomes. This must be overcome not just to reduce inequality but to improve overall economic performance.
1
So much wailing about political correctness comes from the right-wing, whose cause has unfairly benefited from journalists' need to see both sides as intellectually and morally valid.
In the spirit of Fox News, let's join those like Laura Ingraham who could mount a multi-year campaign to "prove" that the Plague was falsely accused by partisans of good health who misinterpreted people passing away as an issue.
John Dillinger and Al Capone have been crime-shamed when they were merely other-moraled.
The deficit matters when the money spent benefits non-campaign donors.
However, when we carry on, the PC becomes cloying:
We did Iran a favor when we deposed its President and imposed a phony Shah. Lord knows why they're ungrateful lo these many years later.
Dotto Chile. Guatemala. Vietnam. The Congo. Remember Patrice Lumumba? He's the first famous person whose death I heard about on the radio.
Sadly, each time the press has agreed to lie in order for us to maintain our butter-wouldn't-melt-in-our-mouths image of ourselves, it has weakened itself. Over the years, the double standard became that crimes against humanity really weren't if they were performed by Americans.
Is it any wonder that our countrymen elected a liar? Is it any wonder that the press, weakened by its role as an accessory (see Times, Iraq War), can't tell the unvarnished truth?
Dare we hope for a different press reaction when President Warren is thwarted by the next generation of Paul Ryans?
2
It would help if every reporter covering government finance actually understood it.
The Petersen Foundation, Bowles-Simpson, the Grand Bargain and Boehner's tears were all for show. They ragged and raged to rile up the rabble in order get power. This trick has always works.
2
"But the media narrative demanded that there be serious, honest Republicans, ......are complete hypocrites when it comes to budgeting (and other things too, like patriotism, but that’s another topic)."
Does any Republican understand what the Prof Krugman is saying here? I am inclined for a negative answer and therefore I have to conclude that there is no room for dialogue in America's democracy!
So my question is if there is any room at all for dialogue?
1
Do the math. $300 Billion divided by 300 Million people means every person should have gotten a $1000 tax cut.
Multiply this by number of people in your house, including your children.
Was this the tax cut you got?
Or was it a few hundred dollars?
Well, that money went to someone !
(can you say Rich People getting Richer)
2
Just so you know, there was nothing intentionally spooky about it.
I woke up and said reported what had just taken place.
The Dems have pulled back the curtain on DT to reveal a spoiled 7th grader who will lie, distort reality and throw his mother under the bus to keep the mirror reflecting back that he is the Greatest of All.
But Trump has pulled back the curtain to reveal that most if not all of our politicians could care less about the plight of the struggling individual and the nation as a whole. They like Trump are in it only for themselves.
What to do?
First of many, many steps:
One term limit on H of R and Senate.
One 6 year term limit on POTUS.
1
"And those who propagate it need to be called out for their bias." I assume you're referring to "the news media, which on economic matters has a de facto conservative bias." Please begin calling them out. Especially writers from the NY Times. For some reason I don't believe you will follow up, Professor.
Paul's memory is failing him. In 2016, Paul was one of the leaders attacking Sander's Socialist proposals crying "how will it be paid for"! What happened Paul? Back then you were in Hillary's choir bemoaning the reckless Socialist Sanders, now not so much? Perhaps 2016 was a bad year for you? Perhaps just politics?
The funny part is the TOTAL lack of concern on the republicans side. Never Again!
Surely everyone knows who owns the media, pays their salaries, etc? It isn't the progressives
"Selective Deficit Hysteria" is a front for denying care giving funding for Americans as the Hoods are Robin' the nation of everything can get like the Locusts that they are. They have squirelled away billions and acquired foreign homes where they moved their businesses to support them. They are the Tories of old who bear no allegiance to others but themselves. It's the Great Brain Robbery.
Paul, Paul, Paul — can’t you see the difference between the Obama bailout and the Trump tax cut? I mean, really. Isn’t it obvious that a *black* President’s deficit is a terrible horrible no good policy, while a *white* President’s deficit is a brilliant courageous economic engine of growth? Never mind that the former policy saved capitalism and the latter was a sailor’s payday binge with zero lasting impact. To paraphrase James Carville: it’s race, people.
2
So what you’re saying is, that investing 10% of my net worth into cryptocurrency is really a smart bet after all. Got it. Thanks!
I should have cycle instead of countercyclicle. Whatever.
Mr Krugman: If not at $1 trillion, when should we worry?
Bravo!
1
When we consider selective budget hysteria, we need to look at motivation. The news media are central to understanding why we are routinely misinformed about the deficit. There we need to segment to understand.
Some media hew to the old school thought that their goal is an informed people who can make wise decisions in their daily lives. Yes, they need to have enough readers or viewers to survive, but only in service to the first goal. They are most conflicted when they get a story factually wrong.
On the other hand, partisan (particularly conservative) media seek to drive an agenda and will highlight what works to rile their readers and viewers to view the world through their lens. They are most pleased when they see the public polls shift in their favor. They see little or no conflict between the truth and their reporting when those number move.
Then there are those in the middle who want to fulfill the integrity of journalism while seeking the success of sensationalism. These tend to be news divisions embedded in larger media companies after their entertainment leaders have taken them over. Now driven by “the numbers”—viewers, retweets, likes, etc.—required by their entertainment division masters, they lose their journalistic independence to the dictates of the bottom line. We see their conflict daily between the chyrons and tweets and journalists’ fitful efforts to explain the news in 10 seconds.
No wonder we are ill-informed.
3
It is not just absolute deficits that matter, but rather how the funds that result from not taxing enough to cover all spending are allocated. Progressives believe that government employees are the best allocators of capital. Conservatives believe private citizens, particularly investors, are the best allocators of capital. Conservatives believe that government allocation of capital leads to a massive waste of resources, and therefore other than a temporary increase in consumption, little is added to the long term productive capacity of the economy from any government spending. Conservative believes that expanded child care, ever greater money for education, more money for government funded research, etc. is by and large all wasted. On the contrary, conservatives believe that tax cuts for the rich and successful create savings that is translated into investment via private market mechanisms. Conservatives believe such investment is the sole source of rising productivity in the overall economy, and thus the sole source of a long term rising standard of living and increased goods and services for consumption by all citizens, rich or not. This is so called trickle down economics. That is, the rich pay less taxes, save and invest more, inventors and businesses use these funds to create new products or services, or more efficiently and cheaply make current products. Everyone benefits and functionally gets richer. Conservatives are so silly !!
The budget deficit will come back to bite us at some point. Not in my lifetime, but maybe 20 years down the road. Right now we pay 6-7%, but as it grows it will be a burden. But the Professor is correct, the Republicans are true hypocrites on this matter.
Just wait until a Democrat is in the Oval Office and the Republican deficit scream machine will roar into ear-splitting high decibels that we can't afford health care reform, infrastructure repair, ad nauseum. Of course, we now know it's all hypocritical hyperbole, but Republicans just love to scream bloody murder and "deficit reduction" will once again be their new rediscovered religious mantra. The answer they'll get is elimination of the Trump $1.5 trillion tax cut for the rich which simultaneously robbed the middle class in anti-Trump blue states with its $10,000 cap on SALT, State and Local Taxes. And for good measure, they may be hit with a "wealth tax" and a stock "transaction tax." Then, of course, they'll scream "Retribution!" and "Class warfare!," when it will really be pay back, fairness, and reducing income inequality. So, let the hysterics rage while the country returns to some sense of economic balance and prosperity for all and not just the idle rich as it was under Obama and every Democrat who has to clean up the economic havoc of Republicans since The Great Depression.
1
And where does the money that flows back to our government in the form of taxes come from? I suggest to all a study of macroeconomics, say Modern Monetary Theory. The press, politicians and average businessperson seem to have a very limited and shallow understanding of macroeconomics. Moreover, the Democratic party has yet to provide an effective answer to the GOP's hypocrisy - I wonder why?
Speaking of hypocrisy, Trump in fact did adopt Krugman's position on the deficit and especially the need for fiscal stimulus. It was the one issue on which he had criticized Obama
Krugman's first response was that Trump's adoption of Krugman's program would cause a recession!! Then when Krugman's original program proved right, Krugman's position on Trump only became more negative.
Ah, yes, the tale of a serious economist.
1
Krugman omits that for some core GOP strategists, large deficits are part of a plan to justify massive cuts to Medicare and Social Security. Why they want to do this is elusive, but they have persistence and a leader who can be manipulated because of his vanity and ignorance.
1
I do not understand Mr. Krugman. What is wrong with a little bit of hypocrisy? I mean, so what if there is a bit of deceit by Paul Ryan in denouncing deficits under Obama, but rationalizing and defending them under Trump? I mean, do you really expect Paul Ryan to be consistent in his Ayn Rand rationales about the impact of deficits, or the long run impact, if any, of deficit spending?
Conservatives can and will continue to hammer Democrats over the budget simply because the Democrats have no spine whatsoever. It’s rare that a Democrat will ever call out one of their Republican colleagues over their utter hypocrisy regarding this issue. So be prepared if a Democrat actually wins in 2020, the deficit hawking will recommence.
This! Proof-positive that trickle-down economics were a sham all along. Under Reagan, under GW Bush, and under Trump. This time, the economy is close to firing on all cylinders. If tax cuts can't pay for themselves now, they NEVER will. The math was never there...there is not enough stimulus to offset the immediate loss in revenue. Taxes aren't a lever to juice the economy...they how he pay for government services...full stop. We can debate what we want to spend our money on, but we can't pretend that cutting "revenue" will lead to more revenue. And as Professor Krugman says, from the GOP...crickets. Shameful!
And the deficit hawks will return to roost in the capitol in 2020 when a democrat is elected. They will perch in the House and the Senate and screech about impending doom and blame the record deficit on Obama and social programs and blithely ignore Trump's tax cuts. Hypocritical Hawks!
You were wrong about the “stimulus” actually stimulating. You were wrong about the effects of the Trump election on the economy. And, here, you’re wrong both about deficits and the responsibility of the GOP therefor. Deficits are horrible policy and they are the exclusive property of the Democrats.
Since Trump’s election, the Democrats have repeatedly threatened to shut down the government unless they get more spending. And they’ve won those battles; just listen to Schumer crowing about the budgets these last few years. The recent deal to blow deficits through the roof sent conservatives voting en masse against the spending deal; just about every Democrat supported it.
Meanwhile, thanks to good tax policy, revenues are up substantially. We don’t know what they would have been absent good tax policy – that’s a counterfactual hypothetical – but it’s a sure thing that the economy would not be doing as well now if we hadn’t adopted good policy. Assuming that higher rates produce more revenue is just nuts.
It is impossible for governmental spending to stimulate demand; every dollar spent must be taxed or borrowed away from other spending or investment. As the “stimulus” proves, it’s nothing more than fraud used enact leftist policies. Or, in your word, “nonsense”.
In short, tax cuts don’t cost a dime; they produce revenue. Social programs cost trillions.
Leftism is an exercise in ignoring empirical proofs, as this column demonstrates.
1
@Michael - Everything you write is dead wrong, e.g.
"every dollar spent must be taxed or borrowed away from other spending or investment."
The federal gov can create as much money as it needs out of thin air. Read what fiat money is.
When the federal gov spends, it sends money to the private sector. When it taxes, it takes money out of the private sector. Thus net federal spending is measured by the federal deficit, i.e. the deficit measures the net flow of money to people, businesses and state & local govs.
Also here is what has happened EVERY time we did as you and eliminated deficits for a while:
The federal government has balanced the budget, eliminated deficits for more than three years, and 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, and 1920-30. The debt was paid
down 29%. 100%, 59%, 27%, 57%, and 38% respectively. A depression began in 1819, 1837, 1857, 1873, 1893 and 1929. This is ALL of our depressions.
You must learn that the finances of the federal government are far, far, different than your personal finances.
@Michael Krugman has never let facts get in the way of ideology. This is a man who said the Internet would be no more revolutionary than a fax machine. He advocated for the Fed to create a bubble in housing then lamented when it blew up. He said that Trump’s election would cause a global recession with no end in sight. In fact, he wrote an article a few weeks ago about a pending recession brought on by Trump’s “trade war.” He couldn’t predict a sunrise, but there are never any consequences for his failures because he provides the rabid leftist base of the Democratic Party with the red meat it dearly desires.
The cruel irony of Paul Ryan relates to losing his voice when he could have defended the GOP. To be fair he did not want the job of Speaker of the House. Thrust upon him mend splits in the Republican caucus not deal with Trump at the same time. His policies lost out, he lost out and when losing his gavel became obvious he blew town. Mulvaney another disciple of the Tea Party deserves mention as a hypocrite.
When a child heads down the road to heroin addiction, Krugman would say don't panic. Stay calm. But the history of the world is that deficit binging always ends badly. Ask the Greeks, or the people in Zimbabwe or Puerto Rico. Debt growth led to the great Depression, when the roaring twenties, which included easy money and easy social behavior, led to a decade of misery... for most Americans.
The problem with drug or debt addiction is that it feels real good, and the paid doesn't happen for while. So naysayers like Krugman or many Republicans say that debt bingeing is fine. Our kids will suffer from this naive, foolishness.
Like the children's story of the Pied Piper of Hamlin, the parent's promise of a payment for relief from reality couldn't be met, the children were lost. For those who have lost a child from drug abuse, they already know the real pain. The rest of us grasshoppers sing and dance the whole day long with Krugman. It summer and the living is easy... For a little while longer....
1
Fair point, but I think that you are overstating it. There was plenty of coverage of the likely debt effects of the tax cut perpetrated by the Party of Fools. I even saw more than a few negative references to Laffer and other jokers of his ilk.
Are the Republicans hypocrites? Absolutely, and in so many ways. Does the press have a conservative economics bias? I don't think so. And have deficits been proven harmless? I think the answer to that still depends on the situation.
So why does the media always seem to follow the Republicans’ lead on deficit hysteria when it’s a Democrat in control but completely ignore the Republicans’ rank and vile hypocrisy on the deficit when a Republican (see George W. Bush and now Trump/Senate) is in power?! If the Republicans start their deficit hysteria again they should have absolutely no credibility and the media should treat them as such. I mean the real media. We know that Faux News is the Republican propaganda network and will lie about anything. Why does the real media pull a Faux News in response to the rampant Republican hypocrisy? Is it because the real media is conservative too?
Dr. Krugman, you’re right but you also resemble these remarks. Just last week you were roasting candidate Warren over how exactly to pay for Medicare For All.
To be fair, that is a big proposal, not a small one, but the expectation that such details can be specifically hashed out in advance is not realistic.
Meanwhile, the thoroughly corrupt, dishonest and destructive Republican Party has become a cancer within our system of government. Let’s hope that impeachment and/or the 2020 election can provide a cure before the patient dies.
Republicans generally hold government in contempt and income tax as federal theft. They still want to shrink government so it's small enough to drown in a bathtub.
Democrats, Progressives, Populists and Leftists were the impetus for the 16th Amendment that mandated federal income taxes. Republicans eager for a military comparable to the formidable armies of Japan, Britain and Europe later came to support income taxes that would pay for an expanded military.
But GOP enthusiasm for federal taxes to support a massive military on closer look was self-serving as it was their rich patrons who got even richer feasting on military contracts swollen by a series of armed conflicts and a desire to have a "big stick" to menace and intimidate real and invented enemies.
It remains a festering fiscal atrocity that Erik Prince, Betsy DeVos' younger brother, made billions in federal contracts providing "security contractors" (hired mercenaries in plain English) for US personnel during the Bush/Cheney Iraqi debacle. (His sister's $5 billion net worth comes from Amway, her late husband's Ponzi scam.)
Republicans like deficit spending when it makes them and their ilk fabulously rich. A good federal deficit is what lands in their offshore bank accounts. A bad deficit is Democrats spending federal dollars helping working American survive GOP greed.
Patriotism may be the last refuge of scoundrels but economic hypocrisy is a Republican redoubt of self-dealing.
3
I own a small business (a one-man LLC). In 2017, I paid federal taxes at 39.4%. I was in extension for 2018, and on Oct. 15, 2019, I filed my 2018 return. Thank God for President Trump's tax cuts. I only had to pay 38.5% this time. I saved nine-tenths of one percent. What a SCAM.
Republicans are certainly hypocrites. That doesn’t mean we shouldn’t be concerned about constantly putting our obligations on the country’s credit card. It is unsustainable, no matter which party is in power or who argues stupidly that rising debt doesn’t matter. Eventually, something will give. When it does, it will make worries about climate change look like a joke.
The deficit hypocrisy is just one more instance of IOKIYAR (it's OK if you're a Republican).
But we wouldn't be so vulnerable to this hypocrisy if we didn't have several hundred years of Calvinist attitudes towards the poor influencing the American ethos, especially those of our libertarian leaning, Social Darwinist oligarchs.
Because, under that ethos, deficits caused by spending on programs for the poor--who, remember, are undeserving of that largesse under Calvinism simply because they are poor (they are not worthy of being considered part of the Elect, because if they were the evidence of that would be God's having allowed them to accumulate wealth)--are anathema. But deficits caused by tax cuts for the rich are fine, because the rich are truly deserving under God's favor of keeping every last penny they have "earned".
It's likely that a lot of our oligarchs have forgotten the religious underpinnings of these attitudes towards the poor--but they certainly act in accordance with them (the whole "if you're so smart, why aren't you rich" attitude is pervasive--and too many of the non-rich seemed to have swallowed it whole themselves, and are nearly as tax-averse).
1
Republicans are only deficit hawks when Democrats are in charge. All previous Republican administrations have balooned the debt, this time for no other reason than to worship at the feet of a naked emperor whose business acumen resulted in six bankruptcies and whom they're now allowing to bankrupt the U.S. Treasury.
"That selective hysteria has done enormous harm. And those who propagate it need to be called out for their bias."
Forget "calling" them out. Vote them out.
After all the Republican party and its media outlets nearly lost their collective mind when President Obama wore a brown suit. Meanwhile they sleep like a baby while ignoring huge threats like climate change or an emotionally unstable demagogue wannabe with anger management issues in charge of our nuclear weapons.
And then there is the selective memory of Republicans that allow them to forget things like the Constitution and their Oath of Office.
Just vote them out. Turn the Senate blue.
There are only so many Mitch McConnells and Lindsey Grahams any democracy can survive.
Yeah? Well which party generated the surpluses which drove the economy into recession in 2001? And which party put the surplus into a "lockbox" rather than into the economy via government purchases or middle-class tax cuts which would have benefited the average American worker? And was proud of it?
As Dick Cheney told Paul O'Neill now some seventeen years ago, "Ronald Reagan proved deficits don't matter." So don't complain if their Republicans are smarter than our Democrats.
Stupid is as stupid does, and with respect to deficits Democrats have proved themselves stupid time after time.
I loathe Republicans for many reasons but especially for their philosophy of trying to rid the nation of existing entitlement programs and kill any attempt to establish universal health care. But somehow they find trillions - that's right trillions - for their wars in Iraq and Afghanistan and their aftermath of thousands of dead and maimed soldiers and the deaths of tens of thousands of citizens of those countries. Hypocrites, yes, and killers too.
When Republicans decide that there will never be an increase in taxes, it is just more of style over substance. Government revenue through taxation, pays for a whole range of goods and services. It enables society to function, where those who need it, are able to receive government assistance.
One of the known results of Trump’s unfunded tax cuts, is that it would increase income and wealth inequality. Those who don’t really need to pay less tax, have received tax cuts in the tens of millions per year. The ability to pay principle and fairness, have been ignored, so that some billionaires pay a lower rate of tax on their Income, than their lowest paid full time employees. Social cohesion is threatened, as inequality worsens.
If the so called trickle down effects from tax cuts were a reality, the lower and middle class would be saturated from the flow of money to them from the mega rich. Instead as the mega rich receive more and more, the middle and lower class remain bone dry, as more income and wealth Is sucked up by the mega rich.
With apologies to Commodore Perry, ‘We have met the enemy and they are (us)!’
We, the voting public, demand spending that is not paid for and elect those that promise ir.
Democrats always propose vastly higher spending and would decry any attempt at debt pay off as ‘austerity.’
Republicans? Well, they just pay lip service to the debt while getting fat at the public trough.
I think we’re due for a reckoning.
Why does America, arguably the Nation that gave birth to first true instantiation of modern liberal democracy, so blatantly and vehemently hate, vilify, and/or maltreat the essentials of the fruit of its womb?
As a corollary: why does America, arguably the modern Nation that wins the award for self-professed love of JC, so blatantly and vehemently hate, vilify, and/or maltreat the essentials of his message?
Oh my I cannot resist another: why does America, the Nation that sacrificed so heroically, and mostly nobly/uniformly its most precious to fight the spread of authoritarian tyranny about my lifetime ago now seem to relish the same type of forces it once battled?
These musings not off topic to me. Why?
See Liberal Democracy then see correlation to essentials of JC's message. Think of the core and the role of leaders/government it more than implies. Its very liberal social contract, its emphasis on rule of law, its wariness about greed, authoritarianism, power concentration, non-secular control, and "majority" tyranny.
Read some 1930 history. Yeah I am going there! See the parallels re: phenomena and characters. Think about what we so nobly fought against. Look hard at us today.
It's this for me: sometimes Conservatives are right; sometimes Progressives are. Given common core of modern liberal democracy honest people in honest processes can sort that out as fellow Americans. GOP antithetical to our core; America's enemy; best vanquish it in 2020!
The Media doesn't so much "run conservative" as much as "runs stupid." And Conservatives feed stupid with simple equations: lower taxes on wealthy = everyone's better off.
Hey, that sounds good!
Democrats, as usual, message the nuances, the complexity. Bad. Then they confuse everyone with (often disingenuous) attacks on each other about those details. Worse.
Does one of those Republicans -- who know better -- ever attack the "trickle down" mantra? No.
When will the Dems ever learn?
The Republicans are sabotaging life saving health care, the environment, building up the military, sending their wealth outside the country, carelessly disregarding the budget deficit.
They must think it's the end of the world.
Only if they make it so.
Welcome to the new World of America ruled by the peace loving all caring Democrats after the Republicans have abandoned the nation with all the riches like the Locusts that they are.
A FRED plot of total U.S. public debt vs. time, starting about 1965: https://fred.stlouisfed.org/series/GFDEBTN Conspicuous is the absence of dips in the upward trend. We're not going to inflate our way out of this, so are we going to continue to spend 10% (and growing) of the federal budget - currently around $400 billion per year - to service this debt until the end of time? What could the U.S. do for its citizens with an extra $400 billion each year? Just asking.
The 2017 Tax Law was a payback to GOP big and BIGGER donors, not for the easily led and misinformed small GOPers. We know that all of these small GOPers are "voting against their own interests", and the reply and rejection of this idea by these folks is convincing proof that using racism, religious and cultural lies, and division works. Those who vote and support the GOP not only have drunk the Kool aid, they are making their own to share with others. Even when the economy continues to slow and they have had 2 years of the Tax Law's negative impact upon their lives, they will vote R because it is better that the winners REALLY win bigly, than it is to spread it around to all those "others" and their crazy progressive ideas about fairness, equality, and sharing.
Dr. Krugman:
Excellent article. You remained me of the Spanish saying "What in the rich is joy, in the poor is drunk"...
And, of course: Money to help the hungry, the poor, the old, and the sick is a waste, cutting taxes of the rich has "class"... "it will produce jobs"... Hilarious.
Oh, Dr. Krugman, how right you are!
I nearly pulled my car over yesterday to call NPR (yes, NPR!) and yell at them (yes, yell at them) when listening to this very story about the deficit hitting $1 trillion.
A VSR (very serious reporter) was actually saying that the deficit wasn't making much of a news splash because we no longer have "deficit hawks like Paul Ryan" in Congress anymore.
It's bad enough for average Americans to completely misunderstand how our economy works and how much one party is robbing them blind while lying outright. But for a responsible member of the fifth estate like National Public Radio to repeat these zombie lies is truly disturbing.
On second thought, I am going to call them--today--and refer them to your column.
1
What's really on offer here is an illustration of the hypocrisy of the modern Republican Party. Thank you for calling it out again, Dr. Krugman.
Can we make me feel better about this?
I'll communicate if I'm not so afraid.
I am sorry that any sympathy I may have had has been removed. Don't blame Ryan: I never attribute to malice that which can easily be explained by stupidity.
After writing Goldwater's nomination speech Karl Hess III hopped on his motorcycle and disappeared into the forest where catfish and squirrels awaited his predation.
When the GOP declared war on America everyone looked on the flag they wore and believed libertarianism was somehow compatible with America.
America is America by design not by the grace of God and my crystal ball tells me things are going to get a lot worse now that those possessing an understanding of how things work are relegated to expressing their concern and only the fools understand the horrors of chaos.
America flourished after the revolution because government of the people works. Government of tyrants, despots and greed will soon see the USA the new Russia with little if any poverty but no shared wealth.
Even the Bible tells us that Joseph told the pharaoh that austerity works wonders in the fat years and in the lean years it is time to invest in the future.
Hmmm.. the deficit is $1 TRILLION. That's about HALF of the tax break ( referred to by Republicrooks as "tax reform")
given to rich people and corporations, many of whom paid no tax, and are now receiving "refunds." Please pardon my non-reaction to the deficit.
Republicans to the bone are liars. They complain about the deficit but all through there terms in office they create deficits.
Look at their history, Constantly creating deficits and then saying when a democrat is president curtail spending.
Republicans don't care for people just care about being elected to another term.
Dump the Republicans in 2020, please.
Thanks for calling out Paul Ryan who is gloriously retired thanks to our tax dollars. Please do call out those current hypocrites too.
Krugman is incensed that Republicans changed their tune on the deficit. But politicians are in the business of changing their tunes. If you can't find dozens of examples, you're not trying hard enough.
Politics is the art of the self-serving. Both parties are expert at it. Most of us believe that the Republicans have been far the worse. But it is unconvincing, all the same, to be outraged by the Republican flip-flop on the debt.
Everybody paying attention knows what Krugman has helped teach us -- that the debt seldom much matters. And not much of anyone has been fooled by the Republicans, especially not Mr. Krugman. Republicans tell us one thing on Monday and the opposite on Tuesday. And everyone knows and understands that they are covering their behinds. The fact of the matter is that Krugman is too smart not to know this. And his outrage is posturing.
Krugman is obviously is an expert on matters economic. man. But that does not give him the right to treat us condescendingly. The Republicans flip flopped. And what happened next?
Absolutely, the Press is becoming as big a problem as the Republican Party. Their selective bias has become so obvious, that it is getting tough to keep reading the so called national papers. If we cannot count on the Press to keep things fair then we are truly in trouble. Might even lead to a horrible President being elected. Oh yeah.
It would be instructive for us lay people to hear from Mr. Krugman what levels of debt and deficits would cause him to worry. Clearly he isn't suggesting the Federal Government stop collecting taxes and just borrow all the money it needs. So where is your red line Mr. K.? What percent of GDP keeps you up at night?
The obvious and true answer is that Trump's actions were countercyclical, and because of that, harmful to the country over time.
No doubt, in economic terms, this hurt the country. That separates good presedents from bad: do you you economics for your administration or rather for the country as a whole.
Trump used it for himself...
There's no question economically what he did. Did he know? Who knows what he knew. In general the Republican party thought they knew, told him how to get votes, and that was it.
But are we approaching a time when we need to indict the entire Republican party for treason?
Possibly so. Our Senate Majority Leader sleeps with someone pulling for Chinese interests. This is not a small issue, even if it is legal. When taken on whole, it might well be treason.
I don't want to talk to them. It's my greatest concern, that I don't know how to talk to them. I just dont know how.
Paul,
Take a look at the IEA statistic on global (fossil fuel)energy consumption (https://www.iea.org/statistics/balances/).
Collectively will emit more carbon into the atmosphere this year then last, and we will set another record next year...and so on, and so on, until we don’t.
Deficits do matter!
We’ve been taking too much from the natural world. The cost we will pay for this is higher then most of us can admit. The recession we’ll face will be unlike the previous ones.
Go take a look at the natural world, I fear you’ve been blinded by the religion called “Economics”.
Anytime a conservative accuses someone or something of some form of malfeasance, it's wise to assume that the conservative is already engaging in exactly the same sort of malfeasance that they are accusing others of taking part in.
In this case, Dr. Krugman has pointed out what has been a bit of a blind spot in progressive thought. The conservative notion that the "main stream media / lame stream media" has a hard left bias has dug it's way deep into the thought patterns of the american voter.
But once again, we see that the accusations leveled by conservatives actually point to exactly the sort of thing that they've already managed. Namely, that when they accuse the media of a left wing bias. They actually point to the fact that there is an ingrained right wing bias to budgetary reporting. A bias that for some reason we have all missed.
And if we are being honest, the New York Times remains one of the bastions of this kind of thought. Hopefully this article by Dr. Krugman will manage to move the dial a little in the correct direction.
This is a green-light for Democrats to spend bigly on big programs. And the GOP can't complain a single bit about it.
Because budget deficits are not about economics. At best, they’re about class, at worst, they’re about race. It’s OK for the Republicans to spend more money on rich, white people. It’s not OK for Democrats to spend more money on people who “aren’t like us”. Even when the spending, in fact, mostly goes to white people, too. That’s all. For more on this, younger readers can look up Lee Atwater.
You are going to see flying pigs before you see growth caused by tax cuts.
The only thing we do see is the 1 percent stuffing money under their mattresses
AND huge increases in inequality because
We can't afford a livable minimum wage, health care for all and a rational defense policy.
Vietnam Vet
“You All Just Got a Lot Richer...” sums up Trump's economic prowess - too bad he was talking to the one per-centers and not to the nation. Deficits well spent aid not just the less-well-off, but the nation as a whole. Unlike the trickle-down approach - investing in education, health and infrastructure - actually does trickle-up...and makes everybody 'a lot richer.'
The Republicans double standard on the national debt makes more sense when you view it through the lens of political gamesmanship. They don’t actually care if the debt explodes. It’s a tool to win elections; nothing more.
.
When a Democrat proposes a new social program, Republicans do everything they can to block it, and if they can’t block it, they sabotage it. We saw this with the Affordable Care Act. A favorite way to sabotage Democrats social programs is to go after their funding, and a well placed sob story about the deficit is a powerful tool to that end. When the over-scrutinized, under-funded social programs fail, the Republicans can then go on the attack and point fingers at the authors of the programs.
.
That’s how Republicans win elections. It helped put Donald Trump in the White House. We can only hope more Americans wise up to it.
The current occupant of the White House shares a common refrain with Congressional Republicans- they both frequently become the boy who cried wolf. The Donald uses it- Lord knows how many times now- when he screams (in all caps, no less) "WITCH HUNT!" And Prof. Krugman rightly notes that Congressional Republicans scream "DEFICIT!", but only when they are out of power. Perhaps they will face the same fate on November 3, 2020. Our battered union deserves no less.
1
As one of the greatest leaders of the 20th century noted, “socialism fails when you run out of other’s people money.” The federal government can get away with running eye popping deficits so long as demand for US Treasuries remains high, but state and local governments have not such luxury. The socialists in The People’s Republic of Chicago have run out of other people’s money. (By the way, how are their strict gun control laws working?).
Socialism appeals to the poor, uneducated masses that make up the key Democratic voting blocs because they think they are getting a free lunch. It also provides wealthy San Franciscans with catharsis. Socialism is the intellectual glue that holds together this volatile alliance. Democrats really aren’t much more than a collection of the aggrieved. They have an unquenchable thirst for taxpayer dollars and no matter how much they get, they will always need just a bit more. The fiasco taking place in Chicago, as the teachers’ union demands more from their bought and paid for Democrat flunkies, is the natural consequence of socialism. The problem is that’s the wells have run dry, just as Ms. Thatcher so presciently pointed out. Chicago is failing it’s children, who could have predicted it?
Ryan IS still a phony.
Trickle up economics. How much more can the average American be squeezed to give the .05% more?
Still waiting for Krugman to explain how his demand that Big Government spend trillions on preparing for alien invasion would impact the debt and deficit
If you can help me, I'll run. But I'm certain I can't win.
“de facto conservative bias” should be “de facto Republican bias” towards economic policies.
"Over the course of the next decade, that would amount to something like $3.8 trillion — substantially more than, for example, the combined cost of all of Elizabeth Warren’s proposals other than Medicare for All...."
Uh, you 'yada yadad' something mighty important, since according to the liberal-leaning Urban Institute, Medicare for All will cost around $3.5 trillion/year, or more than 11 times the size of Trump's tax cut.
your bias is increased giveaways. the Republican bias is increased givebacks. there is a difference and that is why the narrative morphs.
Simple fact of history: Every crash, panic and depression since the civil war came to us under a gop president
This is not politics - this is history -
I find it really strange that the media’s conservative bent on financial issues, as we read here, are equally quiescent when combating the president’s “enemy of the people” chorus.
A healthy democracy—which certainly concedes—or should—a free press, seems now content to allow a propaganda arm—chief among them Fox News—to dictate the terms of citizen engagement. When a dubious and intellectually deficient “news” organization like Rupert Murdoch’s empire is allowed the ballast and gravity that rightfully belong elsewhere, we, as a nation, are allowing the daily sullying of honorable and thoughtful inquiry.
The Republicans have ridden the demagoguery gravy train for half a century, sopping up all the grotesque lies and harmful distortions because, at bottom, we’re comfortable with half-truths which the Republicans use to play upon groundless fears.
We’re just not very smart. Republicans tell millions of us what to think—and these folks allow it—there’s little to no critical thinking in the GOP. Witness Donald Trump. And Mike Pence. And...
1
First we should try making sure half our Representatives and Senators are women and see if that makes a difference.
There is only one inference to draw from the hypocrisy referenced in this column. Elizabeth Warren should respond to all questions about payment for her plans by putting her tongue firmly in her cheek and answer: why... I’ll cut taxes of course!
Hey Paul, wasn't it funny when you went out to dinner lately with whoever's mother?
I think it was a play on you and me. It was verbatim stuff. I know it was strange.
Why did that happen?
It is hard to say. I understood your postings and tried to lead you into new ideas.
However, I was suffering from alcoholism. Then that skit made it ok to some extent (not totally).
It is what it is, I often say.
I don't need to meet you, and I often disagree with you. Have a good life, sir!
Buttigieg can be lumped together with the Republican hypocrites. He whines about Warren’s excellent plans because they enjoy strong support and he has none.
I don't know what was said, it came off the tip of the alien's tounghs.
It wasn't a joke and it isn't a joke.
I think it was real, genunine contact. I didn't want it.
NM, I like your idea of referring to Republicans’ recent tax cuts as ‘a deficit raising gift to the wealthy; but, it's a bit wordy. How about Wealthfare?
Your'e right Paul. Even now, republicans can say white is black and black is white and get away with it. Democrats stutter and make excuses and hash things out and continue to bungle. America has a huge number of non-voters who don't pay attention anyway and those of us who are democrats prefer to have well thought out answers to issues that matter to us as citizens. The republican base tend to be zombie-like and believe everything that the focused republicans who are actually running the party tell them.....no questions asked.
The typically US citizen is a good serf and dares not ask the masters for more. It doesn't matter how much the republicans lie or how many times the US citizens are apparently duped, the people will never demand justice. They are too well "educated".
Honestly, the majority of people probably don't deserve better.
I understand why you want us bound.
I also know why you wanted to hear what I said recently (within a few years).
I want you to know, I didn't make it up. It really happened.
Nothing has happened since. But if you're a believer as I am, maybe they'll contact me soon again, or someone else ( I hope ).
What made me so sure it was aliens?
Nothing. It might have been imagination.
But I'm pretty sure it was real.
The entire media in the USA has no idea what a social democracy is, or how the rest of the world functions.
Considering the mess the world is in, politically and otherwise, it is obvious that the stock market is being boosted to “bigly” levels by the crooks in the WH, so the stock market is hardly a gauge for any economic measure anymore, and nor is the deficit . It seems like you can manipulate anything the way you want if you are crooked enough. But ultimately the laws of nature wins and gravity will pull everything down to where it belongs.
Paul Ryan: Crickets and moths. It's all of a sudden no biggie, he's now tucked in on the Fox board dispensing propaganda to the peons. He's good at that.
If you think we're presenting a front that looks uniform, we're not it.
Your points are way over due. If I wrote this narrative, it would have read. "Fiscal Conservativism, and the Tea Party, both dead".
Todays trillion dollar deficit points to the unwavering failure of the Tea Party and GOP economic policy. The GOP was unable to deliver one vote in the House to approve the 700 billion dollar TARP program in Obamas first year. A plan hatched by Bush Treasury Secretary Paulson to rescue the economy.
This GOP failure was followed by the Tea Party's movement into the House in the first off-year election. Tea Party GOP politics required any Democratic proposals to be revenue neutral. A dollar spent had to be balanced by a dollar saved. This movement plagued the Obama era and evolved into numerous budget show-downs and threatened government shut-downs. These scrimages became a regular fixture.
In 2015 the Tea Party morphed into the "Freedom Caucus", noted as being the furthest right wing of Congress.
Fast-forward to 2017 and the Trump administration and his tax bill. It enjoyed support from the GOP / Freedom Caucus / Tea Party remnants.
Here we are today with Trillion Dollar deficits, as the trickle down aspect of the tax bill never worked.
Former Tea Party people Mulvaney, Pompeo make it into the administration leaving their failed congressional snake-skins behind, along with their once stance of fiscal conservatism.
Oh my, what was it all about?
Possibly, it was just racism wearing the cloak of fiscal conservatism. Yes, I think so.
It doesn't seem to me that economists have done a very good job of explaining the federal governments economy so that most people can understand it. First, the national economy is not like your household economy nor like a State economy. Here in Indiana our economy is run much like a household although on a much grander scale. The federal government's economy is not.
When attempting to find on-line articles that would explain the differences, I was frustrated to find nothing published on a US website. Although I was able to find 6 or 7 available on British websites. Seems BREXIT is prompting many questions and much curiosity.
So here's what I considered the best of the lot. Hopefully easy to understand and answers most questions.
https://www.newstatesman.com/politics/2015/03/nation-states-arent-households-debating-their-economies-if-they-are-stupid
Nothing unusual here, folks. Just another case of “It’s OK if it’s done by a Republican to benefit the rich.” Just don’t raise taxes or give money to poor people.
By itself, government debt isn't necessarily bad, but there is a threshold somewhere, and if we cross it, it will be painful.
It's a classic economic pattern: Poor people borrow to get by, rich people borrow to speculate, and everyone believes that the debts can be paid. Then some event causes faith to crumble, and the system comes crashing down.
Maybe we can defy gravity and avoid the mistakes of the path. But we need to keep a pace on debt, not keep piling on more and more. Yes, we need to borrow money to get things done, and yes, the interest on US bonds is an integral part of the economy, but let's not kid ourselves. There is a limit somewhere, and if we exceed that limit, it will be painful.
How much has NYC changed. When Cuomo Uno was governor he made a great deal to build West Way. West Way was show case NYC as an architectural marvel. It would have been an eight wonder of the world if the people didn't vote against it. It was budgeted for a billion dollars but you know it being NYC it would have gone up to 10 before it was finished. The voters didn't want to be ripped off and even in NYC there must be some true believers in balanced budgets. Fast forward to the Amazon deal. How unjust it was?
You're right tax payers and politicians are particular about what they throw their money at and not always wise when doing so.
1
Krugman still wants to use "kitchen table economics" to explain "how to pay for Warren's proposals."
The fact is that (through the FED) the federal gov can create as much money as it needs out of thin air. Because of this fact, the gov does not need your money to pay for gov operations. It has an infinite supply of the stuff.
We do have to be careful since too much money chasing not enough stuff will cause prices to go up. We may get excessive inflation.
One way to avoid that is for the gov to take some back, to tax it back, but we may not have to have high taxes. It is true that prices are proportional to the amount of money in the economy, but they are also inversely proportional to the amount of stuff we can produce. If we spend the new money in a way that facilitates more production that will yield more money chasing more stuff which does not lead to excessive inflation.
Why is this important?
Using the "kitchen table" ideas , if we want free child care & it costs $X, then we have to tax $X dollars to pay for it. If we use the way the finances of our gov actually work, we have to see how much it would increase production which is probably quite a bit since it would allow more people to work.
When we do the figures, it may turn out that if we have to raise taxes at all, it may be a lot less than $X. The point is that "How do we pay for it?" is the wrong question. The right question is "How much will it increase production?"
4
"And the truth is that proposals like universal child care are far more likely than tax cuts to repay a significant fraction of their upfront costs, partly by freeing up adults to work..."
And people for whom recovering child care costs would mean more than just saving pocket change are highly more likely to plow the savings back into the economy. Just as giving them a bigger tax cut than the fat cats would do the same. If they are freed up to work more, it's even more so.
Trickle down never works because the people who would be proportionately more useful to the economy with more cash - the ones who actually drive the economy - are the ones getting the least benefit from the policy.
4
"Deficits are bad" is an easy narrative for the masses to understand, especially when most people are struggling with debt.
On the other hand, ideas like deficit spending is good during a recession, and a national budget is not the same thing as your personal budget are much harder for most people to wrap to their heads around.
We truly need to raise the level of basic education in this country. But an uneducated electorate is easily led by the Republican propaganda machine.
3
I'm hearing more economist talk about Modern Monetary Theory (MMT) as a way to reconcile high government debt with good economic policy. I don't know if it has merit, or if it is akin to trickle-down economics, as a way of justifying tax cuts. I would love a Krugman take on the issue.
@edv961 -
1. We need money to conduct commerce.
2. As the economy grows we need more money.
3. Money can come to the private sector from 2 places--the federal government or from a favorable trade balance.
4. When the federal gov spends, it sends money to the private sector. When it taxes, it takes money out of the private sector.
5. Thus net federal spending is measured by the federal deficit, i.e. the deficit measures the net flow of money to people, businesses and state & local govs.
6. But the money has to be useful in commerce. It has to go to the people who need it and will spend it, not to those who do not need it and will speculate with it. This is why Trump's tax cuts have not helped the economy.
7. So in order to get the new money the private sector needs, the federal deficit must be larger than the trade deficit. We have a large trade deficit. We need a large deficit that sends money to the non-rich.
8. If the above is correct, periods of negative deficits, surpluses, which pay down the federal debt should lead to a bad economy. They have. There have been 6 such periods that paid down the debt 10% or more in US history, They have ALL ended in a real gut wrenching depression. In fact this accounts for all of our depressions.
9. On the other hand, in 1946 we had the largest debt ratio in our history. The public debt ratio was 45% larger than today. We had deficits for 21 of the next 27 years. We increased the debt 75%. And we had Great Prosperity.
@edv961 - Krugman has. He's against it it, but his all his complaints show is that he has not taken the effort to understand it.
Here are a couple of comments to show you the basics of MMT.
And here are some references:
https://www.nytimes.com/2017/10/05/opinion/deficit-tax-cuts-trump.html
http://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-consider-the-deficit-in-isolation
http://www.slideshare.net/MitchGreen/its-what-you-know-for-sure-that-just-aint-so-11872791
And you you want to really learn all about it, there is a new big introductory textbook - "Macroeconomics" by Mitchell, Wray & Watts.
@edv961 The idea that the federal gov has to pay for things, good & bad, with taxes or borrowing is just plain wrong.
The gov doesn't need your money. It can (thru the FED) create as much as it needs out of thin air. Just think about where money you pay yourtaxes with came from in the first place. Unless you have a printing press in your basement, it originally came from the federal gov.
But there's a catch. If the gov needs to create too much money to do the things we want it to do, we may not be able to make enough stuff
to soak that money up & will have too much money chasing not enough stuff, i.e. excessive inflation. This is rare & is usually caused by shortages, e,g, of oil.
But that's easy to solve & where taxes come in. Taxes allow the gov to take back the excess money & prevent inflation. The purpose of taxes is to adjust the amount of money in the private sector. The more we
can produce, the lower taxes can be.
So the way to run things is to spend money to facilitate production. Tax cuts do this, but in an inefficient way. If we cut Daddy Warbuck's
taxes, he does not need to spend the money; he uses it for financial speculation. If we cut poor Joe's taxes, he spends the money on stuff--food, house paint, etc.etc. This promotes production of food, etc.
Even better if we pay Joe to fix a bridge, the money still gets into the economy, AND we get the bridge fixed.
Just remember, the federal gov will run out of money when the NFL runs
out of points.
"Republicans only pretended to care about debt as an excuse to hobble President Barack Obama and slash social programs."
This is worth repeating, because they will do it again the second a democrat comes into power.
7
Well, which is it professor? First you argue (correctly in my view) that too high deficits & the debt are nothing to worry about. Then you pillory the Republicans for driving up the deficit. I understand you are opposing their hypocrisy, but why not explain why deficits are necessary (but not sufficient) for prosperity, indeed, to prevent economic disaster. Why not explain why the Trump deficits do not help the economy? I'll try in the 1016 characters I have left.
1. We need money to conduct commerce.
2. As the economy grows we need more money.
3. Money for commerce for bank reserves so they can make loans comes from the federal gov.
4. When the federal gov spends, it sends money to the private sector. When it taxes, it takes money out of the private sector.
5. Thus net federal spending is measured by the federal deficit, i.e. the deficit measures the net flow of money to people, businesses and state & local govs.
6. But the money has to be useful in commerce. It has to go to the people who need it and will spend it, not to those who do not need it and will speculate with it. This is why Trump's tax cuts have not helped the economy.
7. We need a large deficit that sends money to the non-rich.
8. If the above is correct, periods of negative deficits, surpluses, which pay down the federal debt should lead to a bad economy. There have been 6 such periods that paid down the debt 10% or more in US history, They have ALL ended in a real gut wrenching depression.
5
@Fourteen14 - But your sentence ignores the 2 ways the finances of the federal government differ from personal or business finances.
It can create as much money as it needs out of thin air and MUST create that money so we can use it to buy & sell goods & services and so that banks can use it as reservse to make loans.
2
@Len Charlap
But isn't "money creation" secondary to "demand creation"? Increased demand induces businessmen to borrow money from banks. When the bank makes the loan, money is created. While it may be true that a portion of this new money must be held with the FRB as a reserve, that fact doesn't imply that the federal government must supply that portion via deficit spending.
When speaking of deficits I think we should stick to the tried and true formula: GDP = C + G + I + NX, or (consumption + government spending + investment + net exports).
And point out that Clinton's surplus and Gore's "lockbox" drove the economy into recession in 2001 -- and lost us an election which should have been a slam dunk.
The point about the Trump tax cuts costing more than all of Warren's programs sans M4A was eye opening.
I have an intelligent, left-leaning friend who swears up and down that her programs are all completely unaffordable. These progressive pipe dreams will hamstring our economy by destroying the ability of capital to fortify itself. Essentially, he's gone in on the myth that taxes on the rich are bad.
It's funny that we could simply go back to the tax situation from a couple years ago and we'd be able to pay for a huge chunk of what Warren wants to do.
I’m especially annoyed that every debate poses a question to Elizabeth Warren asking her to admit taxes will go up, never once asking why Medicare for All is her preferred solution. They ask, triumphantly, about taxes (which must rise) and never about benefits.
The debates would be very different if candidates had 2 (or 3!) minutes to answer, and questions focused on what the government could do instead of who’ll have to pay.
Dr. Krugman-
I am a regular reader of your column, and a real fan. But in this case, are you not ignoring the intergenerational wealth redistribution that takes place when the government runs deficits? Are deficits not a transfer from future taxpayers to today's (rich, and old) (non)-taxpayers? Even if that deficit has little effect on employment and inflation, it's still taking wealth away from the young and giving it to those who will be dead before payback time. No?
1
I seem to remember plenty of media decrying the increase in the deficit from Trump's tax cut (some from Paul Krugman). Also, the cost of Warren's Medicare for all plan is projected to be several times that of her other programs.
1
@Steve: I'm not entirely confident in your memory. Could you please link to a column of Paul Krugman's in which he criticized Trump's tax cuts solely on the basis of their effect on the deficit? For example, apart from being hypocritical, unfair, unhelpful to the vast majority of Americans, and ineffective apart from serving to transfer more wealth to the wealthy. I seem to remember that Krugman's position has long been more or less consistent with that expressed in his current column.
We need an ethical and progressive version of Carl Rove to undo his and other Republican's mislabelings and mischaracterizations and provide some clarity of thought.
And Dr. Krugman, you should become President Warren's Secretary of the Treasury.
2
I don't disagree with your argument (although I still think deficits and debt matter -- or will, some day), but I will point out that increased spending requires (at least in theory) tax dollars that come out of my pocket, while tax cuts typically mean that I get to keep more of my own money. An awful lot of money has been wasted over the years on social engineering projects foisted on the public by Democrats. To be fair, Republicans have fed the Pentagon cash cow way beyond what was actually needed to provide for the national defense.
Given current low interest rates, I would certainly support borrowing $1 trillion or more to rebuild our infrastructure. I would also be willing to pay to expand Medicaid so that every citizen can obtain health insurance. A lot of that money could be found by simply cutting the defense budget by one-third, which would still leave us quite secure. (We would of course have to scale back our global commitments, i.e., our empire, fairly drastically.) And the mass of boondoggle programs pushed by both parties would, if eliminated, come to some real money as well. Increasing taxes on the very wealthy would do no real harm. Oh, and by the way, Social Security needs a patch again, or will within ten years. The two parties need to come together on this issue at least.
Republicans are the bigger hypocrites, no doubt about it. But Democrats too must change their ways if we are to moved forward economically and socially in a constructive way.
2
When I hear "tax cut" I immediately wonder "what will this cost me AND society". Any thoughtful person knows that deferred maintenance is always far more expensive than timely maintenance. True with cars, gutters and roofs. Also true with highways, bridges, airports. And (I believe) a moral obligation with early childhood education, nutrition and education in general. But timely responses to ongoing challenges requires long term thinking, anathema to our me, me, me...now, now, now, consumer driven culture.
5
"Entitlements" , the word, should only be used when referring to the tax breaks and the structural benefits to the rich which the Republicans are so generous in dispensing.
7
This is a tax cut deficit, not a spending needs deficit.
It is a step in a long term program, meant to kill off programs by first eliminating the money, then bemoaning the lack of money.
No, the tax cuts were not done as stimulus. They were very ineffective for that, and were known to be ineffective for that, on a scale of 10:1 for other ways to do stimulus. That was excuse, not motive.
Democrats may have taken what they could get, but what they got was poison pill, not recovery.
3
The mothers and fathers of Congress should have had a bill on the floor years ago protecting the wages, rights, and retirements of childcare workers.
1
Great article, but calling Republicans out for the selective bias is meaningless. It will accomplish nothing and change no one's mind. Much of what we are all doing is no more than tilting at windmills.
1
Hi Paul - I noticed you didn't say "the debt" isn't a problem but rather the deficit. Do you think the $375B we spent in 2019 on interest payments, or the $22 trillion in debt we hold is an issue? Seems like that $375B could come in handy for more productive uses besides debt payments.
2
If $375 billion in interest payments could be better spent elsewhere, would, say, an additional $375 billion in principal repayment (from higher taxes) be the best use for those funds?
In other words, your point is pointless. All debt service comes from funds that could be used for something else. All borrowing is “found money” magically available for highest and best immediate use. If interest payments are bad, how is repayment better?
@James K. Lowden
It was an honest question, snarky response seems unnecessary. (sigh) The internet.
Is it possible, even reasonable to think of the federal deficit as a collective mortgage on our country? Borrowing for an extended loan on home ownership is considered a prudent investment in current and future stability and a ticket to middle class security and community development.
Home maintenance, plus occasional renovations and additions i.e. capital improvements, are often necessary or desirable, (a new roof, security cameras, a swimming pool) sometimes requiring a home equity line of credit-- a euphemism for increased debt to the mortgage deficit.
Nothing political here, just civic responsibility.
It is never-ending class warfare and the people are on the losing end, always. With a few exceptions, Democrats are not any better than Republicans.
1
The dollar along with the stock market are held up with nothing but human confidence. They aren't backed with anything else such as gold. One day we will reach a tipping point and both will come crashing down. Wonder when that will be? When it does Krugman and others will no where to be found.
1
There will be no solution to budget deficits and devaluation of the currency, as long as the politicians, of whatever color, do not free themselves of the tenets of the Keynesian inflationary economy.
The conservative bent of the news media about economic issues is certainly descriptive of the Times' political editors, who seem determined to "out" Elizabeth Warren, but who barely bothered to analyze the negative impact of the much-ballyhooed "tax reduction" plan.
In fact, if you revisit Trump's 2016 campaign, he proposed all sorts of things -- a wall build by Mexico, major infrastructure, middle class tax relief, ad nauseam -- without ever bothering to even provide a wild guess as to the costs of his promises. He got away with it, but Warren does not.
If there is a conservative economic bias, I'd say it's mostly the result of a pervasive lack of news media understanding of government budgeting in the political context.
3
In a lifetime of observing the difference between what Republicans say and what they do, I have learned that Republicans are in favor of 1. Low taxes for rich people and corporations. 2. Lax rules for rich people and corporations. 3. Low wages for working people. 4. Strict rules for working people and the poor. 5. High levels of government spending that benefit corporations and rich people (defense contracts, construction contracts, "school choice" contracts, "privatization" contracts) 6. Low levels or preferably zero government spending for working people and the poor (public schools, environmental protection, worker safety etc.) 7. Wars that force other countries to yield their resources to U.S. corporations. 8. "Patriotism" which is defined as fealty to numbers 1 through 7. 9. Blind respect for authority unless the Democrats happen to have won an election. 10. "Fiscal responsibility" which has the same definition to them as "patriotism".
3
They were arguing for budget cuts when we had a net surplus under Clinton. Bush gets in says he wants to return the Social Security surplus to the tax payers. The operating budget was still in deficit.
The wealthy now have so much money that they do not know what to do with it while Social Security is in peril, certain people have crushing debt and child care is affordable among other economic issues.
Even though the 1% got everything they wanted in Trump they are not satisfied. Our problem not the 1%, but the people who vote based on white ethnocentrism.
1
Mr. Krugman has been proved right, thus far--and there's no doubt about GOP hypocrisy--although the bill will come due at some point, especially if interest rates rise.
Plus, just interest on the debt has become a major component of the budget, slowly approaching the amount of the deficit itself, squeezing out other programs. In other words, we're paying a ton of money now for spending that's already occurred, almost all of it for transfer payments, not "investments" as most people would see them.
There is also a fundamental difference between people wanting more spending on things they want paid for by other people, and those would-be tax-payers resisting paying taxes to benefit other people. This spending is almost entirely on "private goods," benefits that accrue to individuals (social security, medicare, etc.), and not for public goods like roads, clean air, etc.
There's nothing unusual about people wanting stuff paid for by others, but that is far different from people wanting to keep there own money. This is a fact almost universally glossed over in the media, which undermines the argument.
Sadly, our only fiscally conservative "Republican" president in the last 3 decades was Bill Clinton. Under his watch, the ratio of national debt to GDP actually fell.
2
Economics, like statistics, can create the "facts" that suit one's personal point of view. Republicans, in office, in think tanks, in media, and in churches, mindlessly recite their talking points like it's revealed truth.
Deficits bad! Defense spending good! Pain and suffering OK as long as it is for others! I got mine through my own hard work, never good fortune or luck. We owe the rest of you nothing! It's every man, woman, and child for himself! Bootstraps! I like my health insurance, yours is not my problem! But I don't like to pay deductibles, co-pays, and the medicines, or being told I can't see the doctors I want, when I want, or get the latest drug that late night TV said I should "ask your doctor" about.
Sure, I had a public education that others paid for, but why should I have to pay for someone else's children's education? Or pay teachers' salaries, health insurance, and retirement plans?
The best anti-poverty programs are stable jobs that pay living wages. After paying for life's essentials: food, clothing, transportation, and shelter, all of which we purchase from others, healthcare insurance that we all need, putting some money aside for future needs, "rainy day" "unexpected expenses" "higher education" and even retirement someday, there might even be enough for a vacation trip now and then.
Money in the hands of people with "needs" pays someone else who in turn pays another and another in a virtuous economic merry-go-round. Even "talking heads" have needs.
3
Difficult to write about macroeconomics, politics and media communication all in one piece of opinion.. But here Mr. Krugman has done it with a clear line of thought through the tangled mess.
Whether one agrees about your conclusion or not, Mr. Krugman, isn't important. Your clear summary of the issues is appreciated and will help guide discussion among those with differing perspectives. Thanks.
3
While I do not disagree on the 'double standards' being shown by 'apocalyptic' Republicans, I do not share Mr. Krugman's casual attitude on our enormous deficits. In the immortal words of Senator Everett Dirksen, "A billion here, a billion there, pretty soon you're talking real money." In fiscal year 2018 the United States paid close to a five hundred billion dollars in interest alone (alone!) on our over 18 trillion dollar debt. And that is with current interest rates. Interest rates will rise, no question about that, it is only a question of when. So it is not inconceivable that in time interest payments will rival our budget for the military. The country could buy a lot of health care or infrastructure with 'real money' like that. Perhaps a little less theorizing on the part of economists like Mr. Krugman and a bit more real world money management and all of us might be better off.
3
The finances of a monetarily sovereign nation like the US do not work anything like your household finances, full stop. Here’s a question you might want to ask yourself before opining further, why does the only source of US dollars in the world need to “borrow” them from anyone in order to spend them?
@Steve Bruns
Then why do US Treasuries offer interest, if not to attract buyers? If the government can 'borrow' from itself, why print up debt instruments at all? Unless of course you are suggesting that the US just prints up paper and we end up like Venezuela.
Americans do not like imposed taxes but like programs like medicare. This leads to a love / hate relationship with medicare that they agree is needed. If Elizabeth Warren were to ask americans if health insurance reform is needed the crowds would certainly agree that it needs changing...that is the good news. The bad news is that a government organization of health care funding means taxes and no matter how worthy the cause , americans will see it as an imposed burden.
It would be nice if americans could see taxation from the perspective of the services they make possible . It would be nice if politicians focused on social needs but it is difficult to do in electorate conditioned to believe, that social programs only benefit the poor, unwilling to work and parasites of the system. The discussion on taxes too easily deteriorates to the "we and the them", "the we" that pay the taxes and "the them" that get all the befits. In short the subtext to objections to taxes is that it all goes to help the undeserving others !
"Who is going to benefit from new taxes" rather than" how will we all benefit from the new program" is the real Republican / Democrat divide . In health care for all democrats must make clear that "we " will all benefit, and that "all" Americans deserve health care as a right and not a privilege, They must not allow hypotheticals about future taxes and deficits to derail the central message , and it is "health care is needed now"!
1
The public’s perception of where tax dollars go determines the degree of hysteria over the deficit. If the money appears to be going to lazy, chronically unemployed moochers, then deficit-hysteria is high. If the money appears to be going to productive, job creating captains of industry, most people don’t flinch. Since the reason rich folks support the Republican Party is that the Republican Party supports the idea of the trickle-down economy and believes the rich always deserve to get richer, they are happy about a government that doesn’t “waste” money on moochers. But, there is a vast middle class, Republican and Democratic, that has the same economic bias as the rich. They abhor the moochers just as much as rich folks do—even if they themselves are the “moochers” and depend on the social safety net. There is an almost universal disdain for those who appear to get something for nothing. As long as the Republican Party can promulgate (or even suggest) the idea that the deficit is the result of moochers with their hands in the cookie jar (especially those of ethnic origins other than their own), hysteria will be high. When rich folks put their hands in the same cookie jar, Republicans naturally look the other way, and a large swath of middle-class society is, at worst, ambivalent. Hysteria over the deficit is a question of perception, not economic reality.
3
Social programs like the Affordable Care Act help people. Tax cuts help corporations and wealthy Republican donors. There's far more people who aren't super wealthy or in corporate ownership, so why do Republicans win elections... ever?
It's because they lie. I'm finished being nice about it. They LIE. It may not be a vast conservative conspiracy to spin the lies often enough that they're believed, but it's pretty close to it.
3
I'm reluctant to ask this question being a hayseed with a third grade education and not a member of either team. I know this article is about the double standard between the teams but I dont understand the idea that the debt isn't a problem.
If discretionary spending is 1.7 trillion and out of that the military gets over 700 billion and interest on the debt is around 350 billion is seems not a lot is left for other services. Can't we find something better to do with 350 billion?
2
I hope the news readers on TV and poorly educated news writers take Krugman's words to heart. The constant shrill voices asking how can we afford this program and that program were silent when McConnell lied about how the tax cuts would affect the deficit. And the nonsense yammered by Republicans about families doing their budgets without debt when almost every American family finances everything from homes, cars, education etc by taking on debt. Using a credit card is taking on debt.
Krugman is spot on with this column.
1
I doubt that billionaires are really worried about their taxes I think it's all about impoverishing the government and impoverishing the electorate. Poor people can support politicians. Recessions work for the ultra-rich. Not only do they maintain their living standard, they seem to take pleasure in the sufferings of the rest of us. The lazy, God-forsaken rest of us. It must be fun looking down from their penthouse or house on the hill and watching our scufflings and sufferings. It all confirms their low opinions of us and their exalted opinions of themselves. Krugman is right about the dangerous acceptance of tax cuts and debt-how soon we forgot W's tax cuts and recession! Recession has been the GOP pattern going back to the 1880's. Our lost lives and suffering mean nothing. Like I said, it works for them. Krugman said it: sado-economics.
4
Don't worry, the debt hysteria will come roaring back as soon as a Democrat sits in the Oval Office. And when the Recession comes (if it hasn''t arrived before that), you can be sure that the GOP (if it still exists) will take no responsibility for all the loose credit that inflated the gigantic corporate debt bubble now looming over us. No worries, says Trump, just lower the Fed rates another half point, the economy is doing really great, it just needs another hit of speed.
2
Very well said, Mr. Krugman, and I agree with the vast majority of this article. However, I take exception with your statement, "I’m not complaining about the lack of panic over our trillion-dollar deficit. We shouldn’t be panicked."
Why shouldn't we be panicked? Is it becAuse we receive an annual trillion dollars in free government benefits that we don't have to pay for? Is it because the very nature of our accumulated debt is someone else's problem? Perhaps it's because we just don't give a rip about our children and grandchildren who will pay the bulk of the interest, if not the principle.
There is no excuse for running a trillion dollar deficit with a strong economy and no major military action. By doing so, we are poisoning our own future. It's the financial equivalent of global warming. But don't listen to me. Listen to the non-partisan Committee for a Responsible Federal Budget.
This should not be a partisan issue, but a question about how the deficit impacts the economy. If we are creating a huge deficit, which is covered by the Fed printing money, and there is no measurable improvement to the economy, then that deficit is a problem. Trump’s tax cut went on the pockets of the wealthy and did nothing to improve the economy. The American people will be paying for it in the future.
1
I recall VP Cheney speaking on "Meet the Press" back in 2003 saying "deficits don't matter" when questioned by the late Tim Russert regarding the long term costs of the US invasion of Iraq. Bill Clinton left America with a budget surplus after eight years in office, which the Bush/Cheney administration proceeded to destroy with tax cuts, deregulation that led to the 2008 economic crisis and an unending, unnecessary invasion of Iraq, which cost us ( and Iraq ) lives, treasure and the long term medical costs of US veterans' health issues, not to mention the destruction of Iraqi cultural art and civilization. This is the GOP way.
4
Let our debt creating expenditures work for the advancement of productivity econometrics and advancement of families. Great observation and so timely!!! "And the truth is that proposals like universal child care are far more likely than tax cuts to repay a significant fraction of their upfront costs, partly by freeing up adults to work, partly by improving the lives of children in ways that will make them more productive adults."
3
I also think we need to look at another departure from reality. Our politicians are always running on promises of either cutting taxes or reining in tax increases. For the period of roughly 1935-1980, our tax policy was actually a sane policy where, for instance, income taxes were actually progressive in nature. Nowadays, the income tax is almost regressive in that the upper income brackets, due to deductions, capital gains, etc. are able to lower their rate from what the marginal rate is. And, given today's incomes especially among the top 1%, a high marginal rate (say 75%) will raise enough revenue to reduce the deficits. On the flip side of tax policy, our politicians like to make noises about cutting programs, but never in the right places. The offsets from a 15% cut to the defense budget would free up money for things like infrastructure spending. Both increased taxes on the wealthy and realignment of spending priorities will have 2 effects: discouragement of the hoarding of wealth, which actually removes money from the economy, or artificially restricts its deployment, and reduces the amount of money going to the average Joe. Under a sane tax policy and spending realignment, the money would then go to job creating activities like infrastructure spending which would create both a massive cash input into the economy and a stimulus for job growth in places other than the minimum wage sector. I know this analysis is oversimplified but that's for reasons of brevity.
3
Funny how the tax cut for the wealthy actually raised my taxes this year and I’m on a fixed income.
2
On many levels, as thoroughly noted in the comments, the Republican Party is the biggest threat to the United States. Not only on the Federal level, but State and Local government as well. Congressmen are cheap to buy if you're a corporation or super wealthy individual in respect to return-on-investment. Even cheaper are state legislators, city and country officials. American wealth is a perversion of democracy, and that should be the focus of "the media", not spurious selective hysteria.
3
“The point is that the media clearly leans conservative in covering budget issues.” I would argue that there is no such thing as liberal mainstream media that would be the equivalent of Fox News or the multitudes of radio shows with hosts like Rush Limbaugh and Alex Jones. Even the NYT is “liberal” only on some social issues like religion or abortion. When it comes to politics or government, the mainstream is decidedly conservative/Republican. A truly liberal media would report the benefits of a progressive policy like universal healthcare (and the fact that every other developed nation has it and seems able to afford it), but instead they focus only on negative headlines and stories about how we can pay it and how taxes will increase. Those are Republican talking points. And as we remember from 2016, the mainstream media focused almost entirely on Clinton’s emails and failed to report her policies while giving Trump’s history of business failures and cheating workers and contractors a pass. When will media truly own up to their role in electing Trump, the most destructive president we’ve had.
5
The reason Republicans hate the deficit (when they are not in power) is because they want to defeat any possibility of new government programs and spending. If they can lash us, and the federal enterprise, to the mast of fear the national debt, then they can stop any additional effort to help ordinary citizens. In turn, this means they don't have to fight tax increases on the upper 10% of income earners quite so hard. Fear of taxes is behind their phony love affair with fiscal responsibility.
The ultimate goal of Republicans is to weaken the federal government in every way they can imagine. Why? Because it is the only force that can actually counter massive corporations and have any chance of reining them in when they act as predators against the interests of citizens and, in terms of matters like climate change, humanity's survival. Without federal power, corporations can rule everything and everyone.
The Republican swan dive they've taken for Trumpism lays bear the ugly truth: they stand for nothing save protecting the interests of the wealthiest, the merchant, ownership class, the stockholders and the interest collectors.
Without balance against corporate power, we become property, subjects of corporate rule, hoping to survive but unsure of everything. That's the goal.
453
@Doug Terry
"The reason Republicans hate the deficit (when they are not in power) is because they want to defeat any possibility of new government programs and spending."
The republicans are fine with government spending and don't want to defeat anything they like and will increase spending accordingly. They only want to defeat any spending the dems prefer.
17
@glennmr
What you say is true, but overlooks the fact that the top 10% has had a major increase in its income over the past 30 years, more than 250%, while the income of the working and middle classes has remained stagnant -- through the Clinton-Obama years, which saw the repeal of the Glass-Steagall act of the '30's during the Clinton administration (allowing banks to take enormous chances) and allowed those banks to give enormous bonuses to management at the end of '08.
Democrats must scrutinize the candidates very closely this election coming up, and be sure we choice a candidate who, in his agenda, truly represents the interest os the people.
19
@Doug Terry
Corporations do rule the government. The government does not dare to put the financial sector in its place. One example is our health care system. In order to make health care affordable, the insurance industry must be regulated, controlled to reduce the costs of health care to less than 18% of GDP. Only Bernie and Elizabeth touch the subject, all other candidates fear any meaningful change and oppose @Doug Terry
Corporations do rule the government. The government does not dare to put the financial sector in its place. One example is our health care system. To make health care affordable, the insurance industry must be regulated, controlled to reduce the costs of health care to less than 18% of GDP. Only Bernie and Elizabeth touch the subject, all other candidates fear any meaningful change and oppose it.
16
I find it odd that we rail at spending for social programs and revere tax cuts at a national level while reversing things in our homes. For most of the late 20th century, families would save and cut corners so they might send their children to college or enjoy a family vacation. Now we want to trim SNAP payments so those who have plenty of food can get a third house or a new yacht.
We strive to make our children’s lives better than our own while conniving to make so many other children’s lives worse. A rising tide can lift all boats, even the small skiffs, but only drowns those struggling to make way on foot through the muck.
We can do better except when covert racism trumps empathy.
4
We need to take a different perspective on the national "debt." Deficit hawks worry about the day when no one wants to lend the US Treasury the US dollars it needs to fund the federal budget. This fear is unfounded. Just as we don't expect the sun to borrow photons from another star if it wants to keep on shining, the US gov't. will never have to rely on a source other than itself for all the money it needs.
But hawks will argue that the gov't. essentially creates money out of thin air and then gives it away for free every time it runs a "deficit." True, but so what? After a rainfall, farmers never think that they'll have to repay the heavens for the water they've received. Of course, too much of a good thing can turn out to be very bad. Just as a vicious rain storm can cause destructive flooding, too much free money will eviscerate the value of the dollar. A rising inflation rate tells us when money is flowing too freely.
But how can we keep paying the interest on our massive $23 trillion "debt?" Think of a basketball game. The Knicks score 2 points a mere 10 seconds into the game for a 2-0 lead. At halftime the Knicks lead 52-50. Notice that 100 points have been added to the scoreboard, but the VALUE of the lead is still 2 points. Interest payments on the debt really amount to "wealth maintenance payments" that guarantee this $23 trillion in SAVINGS isn't whittled away by inflation, however low that rate might be.
1
From the Book: The Triumph of Injustice.
Should billionaires pay 23% of their income in taxes, as they do in today’s America, or closer to 50%, as they did around 1970?
Should corporate profits be taxed at 52% as in 1960 or 21% as they have been since the 2018 tax reform?
These are not questions for economists. These questions will never be settled by data or science. These questions can only be settled by the voter.
1
So many of us have been brought up on the myth of 'American Exceptionalism' that we really face a tough time in creating a just and equitable society.
Good column on deficit and Professor Krugman is right about GOP massive hypocrisy about deficit.
Until we recognize the .001% of our citizenry is running a neo-serf state and we are all suffering we will never achieve social justice in our country.
We need education not PR, courage not fear. We need to vote in true public servants at local/state/federal levels and - most of all - to create community in the villages, towns and cities we live in.
Remember the great Jessie Youngblood song, "Come on people now, smile on your brother, every body get together and love one another right now".
Government for the people, of the people and by the people - vote out the puppets, stooges and opportunists.
1
From the Book: The Triumph of Injustice.
Should billionaires pay 23% of their income in taxes, as they do in today’s America, or closer to 50%, as they did around 1970?
Should corporate profits be taxed at 52% as in 1960 or 21% as they have been since the 2018 tax reform?
These are not questions for economists. These questions will never be settled by data or science. These questions can only be settled by the voter.
1
Modern Monetary Theory seems to say spend all you want, or perhaps need. But unrestrained spending would cause a perturbation in our economic system that may lead to weaknesses and unexpected consequences, just like Credit Default Swaps may have done in the last 20 years. Being frugal is not a vice, but lying about spending is. Your analogy of Universal Child care is a deficit expense that is worth taking if it actually makes lives better. Deficit spending on billionaire's investment return is not worth it.
@William Trainor MMT does not say spend, spend, spend without constraints. Of course there are constraints. Educate yourself and quit spreading disinformation.
1
@Tfranzman
https://nyti.ms/2Xpz2oj
You seem to be an advocate. I may be uninformed but budget deficits are part of the theory and I didn't say unrestrained, though there are advocates that seem to imply this (Kelton?). I am only suggesting that, it is not, like all economic theories a complete all encompassing explanation of economic or forecasting but like weather has surprises in store. The more important issue is what do we do with our "deficit spending", universal child care or investment return for billionaires?
Republicans "were and are complete hypocrites when it comes to budgeting (and other things too, like patriotism, but that’s another topic)."
Who is more patriotic in rhetoric but less patriotic in deed than Donald Trump? As Paul has pointed out, about 1/3rd of the benefit of the huge corporate tax cut went to foreign holders of U.S. stocks, while American taxpayers undoubtedly will be responsible for most of the revenue shortfall. The Trump family cheats on their taxes, as detailed in a NY Times investigation. The Trump organization has hired illegal immigrants instead of American workers and has even helped them with phony citizenship documents. Trump branded consumer goods - made in China and other foreign countries.
Our current president's allegiance leans strongly toward his pal Vladimir Putin and other dictators and autocrats, not our people nor our long-standing allies. He demonizes the media as it lays bare his crimes, his corruption and his multitudinous lies and deceptions. He is waging a war on decency and morality, on American institutions, on our own government, which he derides as the "deep state," the press, our own CIA and FBI and, most devastatingly, on truth itself - all while deliberately dividing the country. One could make a very strong case that President Bone Spurs is among the least patriotic public figures in modern American history.
28
A refreshing topic on a serious subject.
The United States government increased spending by 50% during the Great Depression to pay for the New Deal and increased government spending by a 1000% during World War II. Consequently, by 1945 the national debt was at a all time high in comparison to the GNP. And these expenditures were followed by the Marshall Plan, the G.I. Bill, and the Interstate Highway system, all funded by Uncle Sam. Despite all this spending, the United States had more balanced budgets in the late 1940s and 1950s than any other period since that time. These were also the most prosperous years of the Twentieth Century, when millions rose from perpetual poverty into the Middle Class.
Government spending creates jobs in the government sector as well as the private sector through the multiplier effect, making it possible for poor people to buy manufactured goods and pay taxes. Tax breaks for the rich are used for speculation on Wall Street and real estate, neither of which creates jobs any more than speculation on art creates jobs.
6
If deficits and debt don't matter, why bother having a budget? Why collect taxes? Let the government keep borrowing to spend as it sees fit (to get votes) and we will all be living in a tax free paradise.
4
@rational
Note that Krugman is not in this article nor elsewhere an advocate for even one of those positions.
15
@rational Please don't misrepresent what Krugman is saying. Of course deficits and debt matter.....just not in the way so many in the media and on the right would have you believe.
1
"Leading economists" did not have a clue about the financial meltdown of 2007 to 2009. Their forecasts are like weather forecasts. Their value degrades to almost zero after a week.
2
But when you spend more than you take in, the results are predictable. This isn’t about predicting recessions. It’s simple math. I’ve said it before. I’ll say it again. The Republicans say they want to run government like a business. And then they reduce revenue but not spending. (And now for sarcasm) What a brilliant business model. Of course, if Democrats do it, the Republicans freak out.
Just remember, the Republican goal is to create deficits to justify the end of Social Security and Medicare. Think of the tax savings.
5
@James Ricciardi Krugman did and warned us about it. Blanket statements will almost always gets one in trouble, especially if you want to be taken seriously.
@Paul Mueller No one who wishes to be taken seriously should be using 'checkbook' economics as the basis for their argument.
Because, of course, GOP rhetoric about the budget deficit and national debt has never been about repaying the debt, balancing the budget, or future generations. It has always been about permanently shredding the social safety net: Social Security, Medicare, Medicaid, supplemental food assistance, etc. Hence the derogatory term “entitlements” and the demonization off those who live paycheck to paycheck (or worse).
It’s always been bait and switch, with the goal of continuing the upward transfer of wealth.
611
@deranieri you are correct. It's about stealing from the 99% and "donating" to the 1% who are in excellent economic condition. Then it's about blaming us for what they've done to force us to make bad decisions to survive.
18
@deranieri
What I don't get is, say the GOP somehow get their eish and get rid of Medicare and Social Security ( which recipients pay into to recieve ) snd the rest, how do they foresee people surviving?
Or is Charles Dickens story of Ebenezer Scroogr snd his view " are there no prisons? No workhouses? If the poor would rather die than go there then let them do so and decrease the surplus populstion. "
They want the poor, sick, elderly and anyone who for whatever reason needs help to just die and stop costing money.
Have I got that right?
23
@deranieri
In reality, Social Security and Medicare are entitlements. Entitlements are such because workers and employers have been paying into these for the employees' entire working time. Medicaid, SNAP and other programs are benefits, providing an income-based social safety net supported by tax dollars.
Republicans like to confuse the two because they want to slash SS and Medicare as well as social safety net programs.
I do not want any of it slashed - but I think it is important to make the distinction. Social Security could be solved by taking the income cap away (after the first $125,000 or thereabouts, you do not pay into SS anymore for the year).
19
There are a few other things we need to start worrying about and they are being done by Trump and condoned by the GOP. The "tax overhaul" took money away from the government which in turn is leading to cuts in social programs that benefit many Americans. We aren't funding basic research the way we ought to. Our infrastructure is crumbling but there's no big really, really great infrastructure project being discussed. People are still living paycheck to paycheck, overusing their credit cards, and unable to save for the inevitable job loss or medical emergency/job loss that will occur.
These are things that our politicians try to blame on us. In a way they are right. It is our fault because we vote them into office and don't hold them accountable for the shameless way they support the richest with government handouts called tax breaks, deregulation, rollbacks on safety regulations, and all sorts of discrimination. It always costs too much to help out working Americans but our politicians, especially the GOP, bend over backwards to help out the richest corporations and families at our expense.
Here's the real double standard: poor people and middle class people or 99% of us are supposed to work and be grateful for whatever we get while the richest get whatever they want. What's wrong with this picture?
10/28/2019 7:13pm first submit
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@hen3ry
No, not we. I did not vote any of the debt exploders --Reagan, Bush II or Trump or their collaborators in the House and the Senate --into office. Blame the people who did.
I agree with the rest of your comment, in fact I generally agree with your comments and find you among the most thoughtful and accurate of posters, but I am not taking responsibility for any crimes I did not commit.
29
@hen3ry
When people live paycheck to paycheck, and overuse their credit cards, then they are having to borrow money and pay high interest rates to the banks. So keeping the population poor is very profitable for corporations.
37
@hen3ry: "It is our fault because we vote them into office and don't hold them accountable..."
I've been looking for a way to do this for my entire adult life, and I can't find it. If you have any ideas, I'd like to hear them.
When the Democrats I vote for win, it gets a little better for a little while, but the fundamental problems remain in place and the trends continue. Then the Republicans win one and the damage accelerates.
It's easy to list the sins of the current system. Can someone list the ways it might be fixed by voting?
18
Democrats for Medicare for All need to to start selling it by saying: "Yes your health care bills will be paid and you AND your employer will no longer have to pay insurance premiums." Taxes will go up slightly to pay for Medicare Premiums (currently $135.50 per month).
2
Here's my platform:
* Health care for everyone.
* Daycare so young mothers can stay in the workforce.
* Infrastructure (wish Obama had focused on this).
* Increased funding for basic research.
* Alternative energy (think solar). Without this, we are all doomed.
* Higher density housing in urban areas (which will need to include public transportation).
* Legislation to allow cities and states to move mentally ill or demented homeless people off the streets.
But I'll vote for the democratic candidate.
4
@Kay Tee Obama did focus on infrastructure but McConnell never passed a single Obama proposal to address infrastructure. He did this intentionally to cripple him in 2012. He's still doing it as every 'Pelosi" bill is treated the same way. McConnell's in-tray is overflowing
I received a flyer from the DNC soliciting opinions and soliciting contributions. It was very interesting. It had a list of things that a Democratic Congress and President should work on, once elected. Raising taxes on the wealthy was there, reducing taxes for the middle class was there, and, no mention of climate change as an early issue to confront. There were numerous spending proposals. I do not pretend to know how big a deficit the country can tolerate. But, it was quite surprising that tax decreases were on the table, and that climate was not seen as important. What I fear is that there will be all sorts of new spending which will crowd out the ability of the country to deal with environmental issues. There must be a point where the level of deficits matter, and, we need to face the most important issue first.
3
While you've stated that Republlicans always say that tax cuts pay for themselves. What you fail to realize is that this answer works, regardless of it being true or no. People like the answer because it means they get more money while solving the problem. No pain plenty of gain! The recent increase in gasoline taxes in California to provide additional money for road infrastructure has been met with substantial distain and attempts to overturn it, through the initiative. Probably only a matter of time until it is on the ballot and overturned. Afterall, why should, we the people, have to pay for any of the services?
1
@Michael A But even Rush Limbaugh and Dick Cheney have said deficits don't matter.
Blaming the media is a scapegoat. This is all about what the average American can easily consume, digest and understand. People understand tax cuts because they can do the math, period. If my income tax rate is 30% and it gets knocked down to 28% that means more income in my pocket (note I am not saying I agree with this line of thinking, just pointing out that it is easy to understand).
Compare that to a new or expanded social program, like free childcare. How does that benefit equate to real dollars for people? Which people will benefit from it and which will not? How would it work? Would I submit bills to the government for reimbursement? How long would it take? What if there is a problem with my claim.....etc, etc, etc. This is hard to understand and yet easy to see how it could get messy very quickly.
So sorry Krugman, I'm not buying the selective hysteria argument. If Democrats want to really sell big social programs, they will need to do a much better job synthesizing, condensing and conveying the FACTS in a way that people can consume and understand. Short of that, they will continue to get pushback from the media and average Americans. And no, Elizabeth Warren's "plans for that" don't meet that standard, in my opinion, since she hasn't explained how she will pay for any of it aside from a wealth tax that won't raise enough revenue to cover 1/2 of the cost of her programs before we even get started on medicare for all.
2
@John You mean like the FACT that tax cuts spur economic growth and activity and lead to deficit reduction? That is very easily consumable and understood, but it is wrong. FACTS can be very complicated. It’s why you should choose leaders capable of understanding them, whether you do or not.
2
@John: a few facts, if I may.
If your taxable income (married filing jointly) were $1 million, your income tax rate would indeed be about 30%, assuming that all that income were from wages, salaries, and tips. But if your taxable income were, say, $500,000 (again all from wages, salaries, and tips), your income tax rate would be 25%. And any of us who have prepared our own tax returns know that taxable income is substantially less than our gross income, or our adjusted gross income, and that the tax rates on income from capital gains are substantially lower than the tax rates on income from wages, salaries, and tips.
And Krugman is right, in that Republicans have never explained how they are going to pay for $3.8 trillion in tax cuts over the next 10 years.
2
@John What you're saying is just camoflage for selfishness.
So long as Conservative Republicans are elected, this is what we will get. They have proven over and over that they are bad at being fiscally responsible. Their idea of fiscal responsibility is to give to the rich and take from the rest of us.
The entire tax system needs to be reformed, not in the manner it was just done, but in terms that helps All Americans, not just the precious few.
Where are the Infrastructure programs that Trump promised us? That alone could lead to good paying jobs.
No matter how much discussion takes place abut economic issues, nothing will be done while this Administration and the GOP are in charge. It suits their purposes to keep us all "barefoot and pregnant" to borrow a phrase from someone else.
5
Aren’t deficits are problem when they run unnecessarily high during good times, depleting the necessary resources for downturns?
4
@Michael No they are not. Government doesn't run on a checkbook. Macro economics is very much different than the microeconomics of a checkbook economy.
The deficit is $984 billion - Does anyone know how much the government has taken in from the import tariff/ taxes it has levied? how much has this reduced the deficit? When the tariffs are lifted, what will be the effect on the deficit?
My guess is the deficit is no well over $1trillion. The tax giveaways have cost way more than expected because none of the "growth" materialized.
We are at an all time low unemployment and the Fed is still trying to stimulate the economy by cutting rates. God help us all when the recession eventually hits.
5
@MrC The tariffs took in $70 billion in fiscal year 2019
@tanstaafl And how much as been paid to its victims? Farmers, etc.?
@tanstaafl And how much as been paid to its victims? Farmers, etc.?
I think that this selective hysteria has historically been especially strong when conservatives and the media talk about climate change. For how many years did we hear that it would “cost too much” to save the only planet we have?
803
@E We are still hearing it and the media continues to under report the economic benefits of switching to green projects instead of subsidizing big oil.
42
@E - Sigh. Anyone want to come look at the flowers and herbs that are STILL growing in my garden as November 1 is just around the corner? Climate change is coming faster than I believed it would--I thought we still had some time if we could just buckle down and get to work on some of the things that could make a difference. Now I'm not so sure. And the Republicans still have the White House and the Senate. It's looking pretty bleak.
40
@Annie "Biodiversity loss, ocean acidification, deforestation, pollution — every area of planetary life has been affected by decades of rapacious fossil fuel and mineral extraction. And none of us are on the side of the angels. You cannot walk into a supermarket, fill up your tank or put on a winter coat without getting blood on your hands. We are all embedded in a civilization that wreaks havoc on the planet." https://www.nytimes.com/2019/10/28/opinion/extinction-rebellion-london.html
10
Democrats need to win the PR battle.
When people hear ‘tax cuts,’ those words generally sound appealing.
So how about referring to Republicans’ recent tax cuts as ‘a deficit raising gift to the wealthy?’
We have truth on our side, but we need to master the spin.
977
@NM
Better yet, these tax cuts should be referred to as tax increases on our grandchildren.
178
@Mike remember that statement from W's administration that they make reality? This is a perfect example.
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@NM
Call it a tax holiday. The personal income tax cuts expire in 2025. That'll annoy people when they realize the corporate cuts are permanent.
44
"Let me be clear here: I’m not complaining about the lack of panic over our trillion-dollar deficit. We shouldn’t be panicked."
Anyone under about 50 years old should be a bit panicked as the debt just keeps increasing faster than the ability to service it. The deficit/debt is uncontrollable at this point due to the GOP fiscal irresponsibility. That will not be corrected by any dem that gets elected in 2020 and will get worse if Trump remains in office.
The tipping point on debt may have been during the last recession as government revenue dropped about 4% of GDP causing the first trillion dollar deficit. There really has been no effort to fix anything since that time and politics is keeping any future fix from being implemented. That is panic type of stuff.
Add in corporate debt, student debt, credit card debt, car loan debt, homeowner debt and there would be one huge problem if a recession hits. Lots of underwater home loans could again occur along with numerous defaults across all sectors of the economy.
Only the next time, there are no interest rate cuts or tax cuts available to stimulate the economy.
5
@glennmr You're running on a lot of economic disinformation e.g. fake economics. This is what Krugman is complaining about in his column. We are not a checkbook economy. Maybe this will help.
https://www.newstatesman.com/politics/2015/03/nation-states-arent-households-debating-their-economies-if-they-are-stupid
@Tfranzman
Sorry, but the last recession was not "fake economics."
Your citation did not really say anything except governments are different from households…with no supporting data.
That type of economic “analysis” is naïve. The last recession came close to breaking down economic viability across many sectors. More debt is more risk and that is not going away.
The fact that childcare is an election year issue in 2019 shows the level of ineptness on the part of our politicians, and the people for that matter. Just spoked to a grandmother who was appalled her daughter and husband were being charged $80 a day for two children, including transportation to and from a two-hour preschool. I guess the grandmother believes only her children are entitled to a nice life? Some people!
Paul Ryan was one of the many who found Ayn Rand's books must reading. That Alan Greenspan was her early devotee said a lot about those who followed. Why? To prove their GOP credentials were that strong? Ryan was underqualified. They, the GOP, got rid of Cantor, smarter but not their boy. Lots of hysteria in the wrong place, as Krugman points out. Michelle Goldberg's piece this a.m. is a must read to follow this. Or vice versa.
3
@Katalina
Greenspan merits my eternal hatred when he went to congress and lobbied for tax cuts to reduce the surplus rather than to fund social security back in 2000.
Ever since then, Republicans have been arguing to cut the social safety net because "we can't afford it", when clearly we could.
7
@Mitch Lyle
"Greenspan merits my eternal hatred when he went to congress and lobbied for tax cuts to reduce the surplus rather than to fund social security back in 2000."
Agreed...it was just irresponsible when Greenspan pushed the tax cut...and also when he adamantly claimed that the market forces would take care of any type of excessive risk. He could not be more wrong.
The problem is we rely on a "consumer" model to grow GDP and get us out of the hole we've dug. The baby boomers are retiring without pensions and with such low interest rates on fixed income instruments that you need 3-5 times more capital to generate the same secure $30k-$60 income you could get during almost any other time in history. This important demographic's contributions to GDP growth will prove to have been hollowed out by the global central banks' desperate attempts to import inflation from each other.
The fundamental problem is our economic speed limit. Our growth trajectory has clearly moderated. We have no clear idea how to restore the growth rate. The least we can do is have the growth in the interest burden grow slower than the GDP. For political reasons this burden will crowd out beneficial programs.
2
Didn't I just hear that Paul Ryan recently moved back to Washington? Sitting in the bullpen waiting to be called into the game. Wonder if he paid cash for his new house or took out a huge loan? I think I see the manager with his foot on the top step of the dugout. Waiting to head to the mound to pull Trump out of the game. The big right hander from Wisconsin all warmed up and ready to go. But the hitters have all seen his stuff. The second time around, they are wise to what he is trying to get them to swing at. And when one of them hits it out of the park, ole' Paul will wonder how they figured out what he was about to throw. He will accuse them of stealing the catcher's signs. Because it couldn't possibly be they've seen what he has to offer before. Come backs never work out as well as the first time. Unless your name is Pelosi.
3
It's pretty clear that by anyone's standards America is headed in the wrong direction and no one in the running for 2020 other than maybe Mayor Pete gives me any hope. Running trillion dollar deficits is not a good strategy in any way. A "wealth tax" that will be contested in every court in the land, that has already been tried and failed in Europe in multiple countries will not work. We all need to pay our fair share from those of us who make $20K to those who make $2B a year. We all need skin in the game. And please quit offering all this free stuff that we have no money to pay for. That never works either and it won't ever make it through Congress.
1
Agreed. The reality is eventually taxes have to be raised on EVERYONE. Bill Clinton did so before republicans got into Congress. Things worked really well.
But the debt will matter, eventually. As soon as a Democrat is elected president it will matter.
15
The budget doomsayers have the memory of a goldfish. But all those cuts to social programs are needed to keep the point one percent happy. But what about the effects on other government agencies that keep getting cut so that government no longer works. The prime example for me is what has happened to the FAA. Cutting budgets and deregulating safety has cost us as a country dearly, not just Boeing. The FAA has been cut so often they are now barely a shell of their former selves. To make sure Boeing could continue to sell planes (and help our export numbers), the safety oversight kept moving more and more to the company wanting to sell more planes. But at least the .1% are happy in their private jets.
7
The "tax cut" raised my taxes by about $2500 per year. If it went to good things like fighting climate change or health care or child care that would be fine. But it goes to make the rich richer and so I join those who booed the president of the United States at the World Series game. The only thing the crowd got wrong is the they should have chanted "lock them all up".
I like what is happening in Chile. People marching.
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“In this generation, a defining responsibility of government is to steer our nation clear of a debt crisis while there is still time.”
How about dealing with global warming while there's still time?
17
Mr Krugman makes in passing the startling assumption that “universal child care” would necessarily lead to “improving the lives of children in ways that will make them more productive adults.”
Understanding “child care” to mean care furnished for free to a child’s parents by government hired care workers, and by “productive” to mean productive of good things rather than bad ones, I still find this assumption unwarranted.
If Krugman had said such care would improve the lives of a good many parents, above all in the sense of making them more “productive,” I would have no grounds for disagreement. But how good such care is at improving children’s lives is a darker and more difficult question than Krugman’s quick answer to it makes it seem.
4
Head Start, to name one modestly priced, but oft maligned as a taxpayer drain, has been consistently shown to improve the learning ability of children.
14
@PL - you are right, it is a more complicated question, but I think there is a case to be made, #1) that any child who's parents have to work to get by, and who are in paid child care, would benefit from the financial security their families would derive from such a program, and #2) "universal" in the American context would never mean mandatory - families who can afford to have only one parent work and who want care for their young children at home would be free to do so.
6
@PL
Ahh, the evil specter of “government hired” case workers, presumably incompetents, unlike line workers in munitions plants, one supposes. Oh wait, aren’t they, too, government hired in the same sense?
The problem here, Mr. Krugman, is that the deficit wasn't enacted to make American lives better, but to enrich the already wealthy. The focus was not on infrastructure, medicare, or the American health industry. It was on corporate tax breaks and tax cuts for the one percenters. This was another looting of the Government coffers to benefit the few at the expense of the many.
18
The only spending Americans have no problem with is on the military. The enormous sums do not register a glance from either party. It certainly is not a topic of the Democratic candidates nor Trump. Saving lives should be the main point of ending forever wars. It also should be accompanied by budget reductions. Not on the table.
10
The Good Professor is completely correct on this one.
If you watch and read a lot of news, one thing that becomes apparent is that many so called "journalists" just repeat what other "journalists" say. They want to tell everyone that journalists are out doing investigative reporting and producing hard hitting news stories. A few reporters are digging for stories but most are just repeating what they have heard.
That is not something that just started; I noticed it during the Clinton years. The President or the press secretary would say xyz; then it would be reported and in short order would be conventional wisdom. No one ever asked if xyz made sense, or was it accurate, or was it true, etc.
They did the same with people like Paul Ryan (the former speaker of the House). He identified himself as the "serious policy wonk." There are probably reporters who still think of him as a "serious policy wonk." People who checked Paul Ryan's numbers about deficits quickly found out that they did not add up.
There are a lot of gullible and lazy people in the press and elsewhere who just accept what they are told.
20
The difficulty with the Democratic mantra of raising taxes on the rich is the questions it raises as to whether higher taxes on the rich and/or wealth, etc. will adversely affect the economic welfare of people of lower income and welfare. If the Democrats can show
substantial evidence that their soak the rich schemes would not increase unemployment and reduce real incomes, that would be an excellent thing. So far we haven't heard any solid scientific evidence from Elizabeth Warren on this crucial issue. Absent this scientific evidence that a wealth tax, etc. would not hurt the entire
economy the political rhetoric about soaking the rich is just prune pits baffling brains.
1
@David
Other than the fact that the highest marginal rates were much higher in the past, like 70% in 1980. Note that all this talk is about marginal tax rates.
We also are quite sure that supply side economics is not part of reality so it also seems unlikely that increasing marginal rates will kill the economy. The great tax cut certainly did nothing more than allow massive stock buybacks. No flood of investment making America great again.
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@David
You make a good point especially in light of what Krugman says. My belief and my inference from Krugman is that it’s more important to change the tax system in a revenue neutral way than just to look at the wealthy as an endless supply of revenue since the deficit is not that important. The present suggestions don’t do that. The wealth tax is a great idea if it spreads to those whose wealth is not taxed by the US and can be spread to people who make money here with other countries. It could enable us to capture some capital gains and be traded for a drop in CG and corporate taxes to more competitive levels. It also would naturally increase revenue as wealth of country increases.
The point is every well will run dry.
@David
My very very limited recollections of the late 1960s, when taxes were very high for high income earners and American wealth inequality was at or near a historic low (i.e., wealth was well spread among people):
1. High income earning doctors I knew took Wednesday afternoons off, to play golf, as further income gave them essentially no greater gain after taxes;
2. Middle and lower-middle income people (my position at the time) lived well - houses were affordable, joining tennis clubs, etc. was within their means.
Apart from the great disparity caused by those who bought and kept their houses by then vs. those who could not (including Blacks in red-lined areas) or did not by choice, with astronomic house price increases since then, lowering taxes, starting with Reagan, in the name of trickle down economics, IMO is the greatest cause of current wealth disparity.
Raising taxes on the wealthy could lead them to spend more rather than work more.
It's certainly worth a try given that lowering taxes has not been kind to the majority.
1
So, what level of federal debt will count as a problem? When we pay off existing bonds by selling a year's GDP in new ones every day, will it be a problem then?
1
Paul,how are you so comfortable with high levels of government debt and deficits? A cynical view would be that you have to be now, because you were before, and maintaining your position is necessary to allow you to call Republicans hypocrites, which is the goal of your article. I don't believe that to be the case however
I think the merit/lack of merit in deficits and debt resulting from collecting too little in taxes vs deficits and debt resulting from overspending on social programs is a question on which reasonable people may differ, and that there are times when one is good and the other is bad and visa versa, and there are times when both are wrong.
Deficits and debt at the astronomical levels the US has reached are sustainable only as long as confidence remains high in the US economy. When you say you are comfortable with the current levels this means you have that confidence, but on the other hand you have been critical of the Trump economy. Can you be right on both fronts? There are some potential big adverse consequences here: runaway inflation, the collapse of the currency, a Japan-like zombie economy. I am not sure you have this right.
2
@gbc1 Careful, Len Charlap, debt lover and defender extraordinaire will get you for suggesting that debt is bad
It's all politics.
Republicans crave nothing except power. If railing against deficits will get them power then they rail away.
The same with tax cuts. Republicans play on the most base of human frailties - self interest. I few more dollars in my pocket means another month of Netflix. If it means someone's else's child goes hungry, well then so be it. They must pull themselves up by their own bootstraps.
I am not my brother's keeper.
1
As one who has worked in news at a small local newspaper, the type that most Americans read, the reporters are not very smart or well educated to start with, become deeply cynical watching the sausage machine of democratic politics, and ride to be editorial writers and columnists by holding the political line of their owners. This is what keeps us from being a more equitable society and in constant wars.
1
@Dan Small Massachusetts paper? Pointing out that about half of us are below average is no way to make friends. A regular intellectual third rail. Too bad you're right. Have you contemplated maybe branching out into pedagogical activities?
Modern Monetary Theory (which is essentially what Krugman is supporting here with his "deficits don't matter" rant) is a fairy tale. The don't matter until they do, and then as Thomas Pickety showed, when they do matter there is no bottom. The fundamental problem with debts is that they must be repaid, even if it is through inflation and other types of value destruction. There is no free lunch!
4
Well, government spending is really a conversation about return on investment. Universal child care would provide a great return on investment. You're not only freeing up working age adults. You're also freeing up disposable income.
Even if Uncle Same reclaims some amount in taxes, the total value is likely less than what you would pay for private child care and the worker is in a better position to negotiate higher wages and benefits. You're generating consumption in both directions. Added bonus: there'll be a much greater demand for child care providers along with all the administrators and nurses who support them.
Tax-cuts for the wealthy are a terrible return on investment. What did $300 billion buy us? Modest growth in a weakening economy. Stock buybacks for the rich don't do anything except enrich stock owners who, not coincidentally, lean heavily Republican. Stock owners are also not surprisingly a minority of the US population.
This isn't really about selectivity or hysteria. This is about selling policy agendas designed to help two very different demographics. The policy agenda isn't really hypocrisy when the outcome is intentional. The problem is the GOP marketing campaign is one big lie. Everyone knows it but somehow people still vote for it.
Stepping on yourself is apparently more appealing to some people than admitting they'll never be as rich as they think they are.
6
The childcare issue is a 50 year-old+ problem, ignored by politician, male and female, over and over again. And, now with hardly a young girl believing in staying home and raising a family, we have a crisis on our hands. No one is home to raise the children. And why should they be, they never get any credit? But, some did it, and lended a hand in caring for others. And, stepped up as grandmothers, too. (We have grandmothers flying in to places to provide summer care, nowadays!). So, why Mr. Krugman isn’t there a piece of legislation out there, protecting these people in their retirement years? I cared for nephews, friends, grandchildren, and even one girl, who, unannounced, dropped off her child to me, knowing I would be there. It’s time to protect those who provide childcare and I want my Social Security record to reflect the many years I have been helping make it all happen — for others.
8
The blame game needs to take a back seat to the reality we face as a nation when it comes to our profligate spending. Demographic reality must be addressed. The baby boom generation is rapidly leaving the ranks of taxpayers as they age and retire. And they are lining up demanding their entitled benefits - Social Security and healthcare. If you add in the cumulative future obligations of these benefits owed, the deficit becomes a truly staggering number. Honest politicians and responsible leadership and citizens need to understand this is not a drill.
2026 is the year the current tax "reform" law sunsets. Congress will not have to lift a finger to raise tax rates. That will be only the beginning of tax rates rising. How else will we fund our entitlement spending, never mind the balance of government operations? Prepare for much higher taxes..
2
The bias towards tax cuts and deficits is the media and it reporters are large corporations. Deficits in theory out to pay for infrastructure which really does pay for itself.
1
Don't worry - deficits will matter again. All it will take for the Republicans to start screaming about deficits is a Democrat winning the White House.
7
Um, the GOP tax cuts and budget deficits serve another purpose-- to justify cuts in social services and shrink government. Of course, the GOP won't cut social services when they are in power, because that would be unpopular. So, instead, that hammer is reserved for the Democrats.
What is amazing is that this game plays out repeatedly and the media fails to call our the GOP for its phony budget concerns.
7
For all those who strongly argue that deficits DO matter in the comments: will you hold trump to account?
And history teaches that under Democrats the deficit goes down, and under Republicans it goes up. Way, way up.
If you reject Dr. Krugman's downplaying of 'deficit hysteria,' then your choice is all the more clear.
trump has been the worst disaster yet, measured by the deficit alone. Epic fail.
10
Well Paul, I hear you,but on the other has I am not so sure.
At the heart of it this is about freedom. Subject to the criminal laws and the obligation to pay taxes, and to other regulations subject to a constant fight to keep at a minimum, Americans are free. This freedom precludes a deep social safety net, With freedom comes independence, which means self-reliance, you look after yourself and your family, your responsibilities to others are limited.
So when it comes to taxes and deficits, a balanced budget and no debt is best, but if there is to be debt and a deficit, better it be caused by collecting too little in taxes than by over-spending on social programs, because the former adds to freedom (subject to repaying the debt) and the latter undermines freedom by increasing the obligations of all Americans to look after other Americans, and to repay the debt.
And it is one thing to fix a problem of too little taxes being collected - you increase them. Too much socialism is another thing, however. To fix that you must take away the programs, rip them from their cold dead hands as Charlton Heston famously said on another subject, which is not easy to do.
I live in a country with a deeper social net than the US has, and I prefer it, but i respect the choices that America has made, they are the central theme of your politics. But is there hypocrisy in it? Seems a little strong to me.
1
@gbc1
Do you make your statement categorically?
Here's one case to consider: the worker who is not free to change jobs or start a new business because of the likely loss of employer-supplied healthcare benefits.
We are not cats. We need to live in a society, and liberty in a society demands certain baseline conditions that do not appear to be included in the "liberty" you describe.
@Robbie J.
None of my statements are categorical. This is about choices, trade-offs. It is a zero sum game. If you opt for any course of action, there are things you gain and things you lose. The point you make is a good one, it is part of the trade-off, and perhaps it is a bad trade, a mistake, but it is all part of the debate.
@gbc1 Is there hypocrisy in it?
During the time of President Obama, he "bailed out" the auto industry and saved thousands of jobs in the mid west. Of course the republicans became hysterical about "socialism" and the increase in the deficit. Deficits mattered at that point.
Then this year after the Chinese (in reaction to tariffs placed on their products by The Donald) placed tariffs on American farm products, The Donald gave huge amounts of aid to the farmers who many times vote republican. The amount of farm aid is much larger than the aid given to General Motors, etc. Of course republicans think this is entirely appropriate.
Aid to General Motors by President Obama = howls by republicans about deficits.
Aid to farmers by The Donald = approval by republicans.
Can you see any sign of hypocrisy?
1
It bothers me immensely to think that Dr. Krugman is not being completely up front in his apparent unconcern about an ever increasing federal deficit in face of an ever increasing federal debt (let alone household and corporate debt) which is doubling every 8-10 years while GDP doubles every 24-30 years. The tax cuts increased the debt but have not trickled down into the GDP enough to bring the debt in line with the ability pay for it.
Seems to me Dr. Krugman has no appetite for discussing a progressive federal income tax which will move tax payers' dollars to the lower end of the income scale into production providing the needs of citizens rather that into the higher end of the scale hoarded away in idle, non-productive, asset bubbles.
2
@Martin Byster Or perhaps we could - you know - cut spending. Start with a bloated military budget and an equally bloated (and corrupt) welfare starte.
1
An individual cannot run up debt as the government does. It is a good thing for an individual to have little if no debt. It is smart to avoid that day of reckoning in foreclosure, stress, limited options and the like. Debt should be viewed as a special tool to be used as little as possible and reserved for special circumstances.
Why, or how, is government debt different? Certainly the day of reckoning can be delayed, but indefinitely? Our problem is that the focus has shifted from common sense debate on beneficial use of debt (social and infrastructure programs, necessary wars, emergencies, etc) to it being in integral part of our way of life. Are we just too clever and deluding ourselves?
1
@A Centrist
It's not so binary, I don't think. Corporate debt, for example, can be good, it enables goods to get to market before they can be sold and revenues from them generated. Which is why there are corporate bonds, factors, etc. That's not to say that government debt is good, just that there are shades of gray.
@A Centrist
I’d say that government debt differs from personal debts in the same way that government is different from those it governs.
Governments can arrest, try, convict and punish malefactors; when citizens do those things (with the exception of “citizen’s arrest”) they commit a crime (at its extreme called “lynching”). Governments can lawfully compel those they govern to pay taxes; when the governed do that to each other it is the unlawful thing called robbery, theft or extortion. Governments can wage lawful war; gang wars are rightly considered criminal. Etc., etc. etc., …
The notion that Government and individuals should be entitled only to the same rights and subject to the same duties is the radical fallacy of both philosophic Anarchism and the extreme forms of Libertarianism. Chomsky and Rand Paul are brothers under the skin.
Today we live in a political world of double standards. Deficits are bad if Democratic presidents run them, but apparently no problem if Trump does. “Bailouts” were bad when Obama did one of the auto industry, but its fine to bail out soybean farmers with billions (mostly to keep their votes) after the Republican president starts a trade war. According to Republicans, the Fed played a key role in keeping Democratic presidents in check, but according to this Republican president the Chairman of the Fed is terrible, is slowing the economy and should be fired. Democratic presidents like Obama were accused of hurting the manufacturing sector, but its decline and lack of investment under Trump due to his chaotic economic policies have far outstripped that of the first four Obama years.
That’s just economics. Don’t get me started on Republican hypocrisy about social issues, what ‘freedom” really means or the definition of “judicial activism.”
30
Presently we spend 10% of our budget on debt service. I don't like spending 10% of my tax dollars on paying interest. I am not sanguine about our debt, which is similar to our GDP. It bothers me that our debt is so high. I feel that we are generally wasting money and that our financial foundation is too weak. When I read Mr. Krugman's attempts to theorize why we are okay, I don't feel any better. When I read that the dollar is the basis of the world's economy, I think we have some breathing space which we are squandering on providing yachts and islands to the 0.1%. When I think about cryptocurrencies, and the aging population, I buy more real estate, canned foods and solar cells. That is to say, I think that when the camel's back breaks the economists will switch theories and we will be up the creek.
9
@Wavesandbeaches You just dont get it, do you? Where were you when the foolish tax cuts (under GWB or DJT) wrecked fiscal balance and ballooned the debt?
It is somewhat refreshing to see Krugman writing on economics instead of areas where is knowledge is clearly deficient. But here is the thing, deficits do matter. If we are paying billions interest that is money that cannot go towards national defense or social programs. That is also money that is not in Jane and Joe Averages paychecks.
It is time for new and sustainable economic policies. We have needed them for 20 years or more. Instead the economic geniuses give us the same old failed policies and throw their hands up when the next depression/recession hits and cry 'this was not supposed to happen'.
7
The republican congress and senate gave a massive tax cut to all corporations. When first announced the CBO said the deficit will rise. Corporations like AT&T responded by giving employees a $1000 bonus. This year these same corporations are not giving these employees $1000 bonuses but instead increased stock buyback options, raised CEO pay and shareholder dividends. The middle class worker is once again getting the short end of the stick here. When this economic boom goes bust, Wall Street is going to go after the middle class worker with massive lay offs and attack civil service workers who have government pensions. Wall Street along with there republican backers in government are going to go after government programs such social security benefits and Medicare in the name of fiscal responsibility. And once again the middle class worker is going to suffer. And when this happens, we the middle worker can
only look in the mirror and blame ourselves for not holding our elected officials accountable for this mess we allowed them to cause in the name of economic growth. During good economic times government used reduce the deficit. not increase it and save extra money for a rainy day.
12
If Trump is reelected, the deficit hysteria will go into overdrive to finally achieve the GOP dream since Reagan.
The destruction of Social Security and Medicare.
As sure as the sun rises.
77
@David Henry
Or maybe unessential tasks performed by various cabinet departments will be dramatically trimmed, huh...
Until then, conservatives like me will continue to search for cliffs to throw more grannies off. Wouldn’t want th disrupt a ‘progressive’ theme.
@David Henry
Please tell this to every middslesex, village and farm....
1
@EGD And who defines "unessential?"
Can you be more specific?
1
M. King, former head of the Bank of England, has claimed that the US dollar is overvalued. So running big deficits, printing money, etc. is one way to lower the value of the US dollar relative to that of other currencies. Trump would be happy to do this, since it lowers the balance of trade. But what is the downside? Prof Krugman should spend a column discussing this.
5
Mr. Krugman,
I understand you want to be validated for "being right" about the deficit not ushering in an inflationary spiral.
However, neither you, nor I, know what the wavelength of the impact of the debt is, or will be.
What any reasonable person knows, economist or not is:
1. Excessive debt is, in fact, not a good thing. You defended it during the Obama administration as "necessary" to revive a dead economy, but, that dead economy was not necessary.
2. In Sophomore Economics at Cornell University one of the exam questions on a recent exam was: "What happens to the currency of a country with large debt?". In fact, the correct answer was that the currency declines (or collapses like it did in Mexico in 1981).
3. The United States remains the world's reserve currency, somewhat insulating it from normal economics like the question in the exam. But, that, like everything else, won't last forever.
4. Lastly, every rural farmer knows that the bank has to be paid back. Or, you will lose your land. So it will be with US Debt. If the Chinese, who own a lot of US Treasuries now, want their money back, and, we can no longer borrow to pay the interest...
What do you think they WILL want Paul? Your house? New York Harbor?
So, Paul, I really think you should get past "being right" and start really thinking about how debt will affect the future of America.
Lastly, yes, Republicans are hypocrites. Nothing new about that. Let's move on.
21
@Michael I think you missed his point.
I fear Mr. Krugman is correct about what has happened. But worse, that neither the media (in general) or the electorate still hasn’t learned the distinction thus doomed to make the same mistakes.
8
Once again Krugman vacillates between misrepresenting facts to flat out lying. There is literally nobody that is saying the tax cut impact anywhere near $300b. Even the most dishonest put it at $150. Of course in reality, revenue is up in one with overall economic growth. It’s clear the deficit is a spending, not revenue problem. As to social programs, there’d be less resistance if they shifted with need. But we live in a world where smaller growth immediately generates headline of starving kids. One would think that smaller growth or contraction of welfare programs in in a growing economy would be celebrated.
4
@Tim Kulhanek
I am concerned that your MAGA hat may be restricting blood flow. I have never known Mr. Krugman to flat out lie or intentionally misrepresent the facts.
The economic growth to which you are referring began in (and continued from) the last administration. And from that growth naturally comes (some) revenue growth.
I am curious as to what external event would you attribute the ~+$300B deficit delta vs. the 2017 pre-tax-cut CBO projections?
47
@Tim Kulhanek "Even the most dishonest put it at $150." I assume you mean $150 billion. How about citing some evidence for your claim. Since the "most dishonest" put it at $150 billion, I assume the "honest" say there is NO deficit created by the Trump tax cut.
You may disagree with Paul Krugman, but calling him a liar is unfair--and the comment you would expect from a Trump supporter.
3
@Tim Kulhanek
I express the cold blooded lack of caring for you as you express your cold blooded lack of caring for others who will be affected by Cold blooded spending cuts and theft of Americans wealth on a mass scale to benefit the wealthy.
3
I'd like to run. But I can't win.
The time to reduce deficits is during economic booms, not during recessions. Expanding a deficit during a boom makes it all the harder to deal with the end of that boom.
As for coverage, the "common wisdom" is the conservatives' line, not just about deficits but on many things. 61% of Americans support abortion in most cases, according to Pew; 81% support requiring background checks for gun purchases and majorities support other gun restrictions (Gallup); 60% support universal government health care (Pew). All of these issues are considered far-left when in fact they are centrist.
Journalists are humans who make judgments; most try to make fact-based judgments but they include "facts" that are really opinions, like deficits are bad or tax cuts spur economic growth. (As you point out, these "facts" are in fact erroneous.) They are told conventional wisdom over and over by their sources, who are put forward as wise men in lofty posts at think tanks, many of which are funded by billionaires for political spin. Eventually they swallow it.
13
Yes but conservative Republican Party Saint Ronald Wilson Reagan prophesied that America can cut taxes and increase spending on the military-industrial complex and social welfare programs forever.
Because we are Americans and deficits and debt don't matter.
Akin to going to heaven without the inconvenience of dying and living a humble humane empathetic moral life.
21
I think that it's not just the annual budget deficit, but the cause. (tax income - government expenditures = deficit or surplus) The "media" obviously has a bias toward reducing taxes because nearly all of these people earn hundreds of thousands of dollars or more annually and have large investment portfolios. Raising or lowering taxes on the rich affects them directly. Consciously or not, most are biased by greedy self-interest.
6
Nearly all media people earn hundreds of thousands annually? That’s real news to me and my friends who’ve spent decades at newspapers and broadcast stations in major cities and who never saw 80 grand in a year, much less the fantasy you describe. Are you aware of the drastic cuts in print media over the past 20 plus years? Very few earn big money in journalism, and those who do tend to be more entertainers than reporters. Spend a bit of time in the real world before popping off.
7
@Mark s
Good point. Thanks for correcting me. It's the infotainers that I was referring to, and their outsized influence.
I'm certain it was real. I wouldn't had said anything otherwise.
1
My concern is about the next recession. The two ways to short circuit a recession are to reduce interest rates and increase govt deficit spending. We are now doing both in a period of ec expansion. This seems like we are living in a fool,s paradise to me.
16
I'm wondering if you realize that the rich power brokers essentially pay for our elections. Why would they pay for something that would produce no profits for them?
12
I agree with you Mr. Krugman, for the most part. But I won't be alone in pointing out, to be clear, that there is panic about the debt. Maybe you're shields have been up for so long that not all of the news gets through.
“It’s (deficit/debt) disappointing but it’s not a Republican problem,” Senator McConnell said. “It’s a bipartisan problem: unwillingness to address the real drivers of the debt by doing anything to adjust those programs to the demographics of America in the future.
“I think it’s pretty safe to say that entitlement changes, which is the real driver of the debt by any objective standard, may well be difficult, if not impossible, to achieve when you have unified government,”
Any citizen is either very naive or a fool if he or she believes that simply because Conservative leaders are currently "quiet" on the subject they don't intend to enact cuts to Affordable Care, Social Security, and Medicare.
Trump supporters believe what they're told to believe. Deficits and debt will become a problem again as soon as Fox and other outlets are instructed to make it so. The Conservative masses will embrace what they're told to embrace, and know this, in that script all of the debt will be the fault of Democrats.
19
@John F McBride And note the use of the term « entitlement » rather than social safety net. And the unwillingness by McConnell to acknowledge that perhaps taxes may need to be raised on the billionaire class...
6
@LeeMD I prefer to call Social Security and Medicare 'earned benefits'
10
@John F McBride
Very perceptive. The republicans are much better than the democrats at "framing" the discussion about government policy. As we know the republicans added greatly to the deficit by passing the recent tax cuts.
But then later Mitch gets into his "bipartisan" mode and says that deficits are everyone's problem and naturally the way to solve that problem is to cut "entitlements." Implying that if the deficit "problem" is not solved it will be the fault of the democrats.
Never mind that people who work pay taxes for social security and medicare.
About half of the electorate has an attention span of about 10 minutes. Combine that with the fact that many of The Donald's faithful get all of their news from Fox, Rush, and company -- so it is a tremendous problem.
Why don't the democrats have candidates who can run on sensible issues such as the economy, defending social security, medicare, etc.?
Best wishes and stay positive.
3
It is easy to understand that programs and services must be "paid for" with taxes, but how do you "pay" for cutting taxes? It's a mind-boggling question for most taxpayers, especially the ones in the middle and higher who see no personal benefit from their taxes. The ones who proudly declare, "I never took a government handout" and imagine all their taxes going to lazy, shiftless folk. Reporters should ask the tax-cutters, "So where are you going to cut spending?" and not let them off the hook until they answer specifically. Social Security? Medicare? Education? Law enforcement? Disaster relief? Highways? Parks? The federal workforce? The military? All government spending of taxes impacts the middle class one way or another and the tax-cutters must be forced to tell them where the ax will fall.
9
@abigail49
We agree that honest communication between citizens and their elected representatives is needed regarding taxes and services. However, I strongly disagree with your statement that taxpayers "in the middle and higher who see no personal benefit from their taxes." Public schools and other services (e.g. roads) are much better in middle income and higher income cities and towns." Well to do citizens benefit from the protections our military provides to all of us, federal highways; I won't go on. But my question for our lawmakers are how much are you willing to raise taxes on Corporations and the wealthiest citizens to pay for improved/increased services? They benefitted most from the tax cuts over the past 40 years. I want to see some equity returned to the tax system. I will then ask, with you, where will taxes be increased on the middle and lower income citizens. BTW: With respect to public financing for healthcare, we need to understand that taxes may increase, but insurance premiums and out of pocket expenses will decrease much more than the increase in taxes. People will have more in their pockets as a result. We need some honesty in that debate, which we have not seen from right wing Republicans.
1
As Krugman points out, the media narrative demands that there be serious, honest Republicans so that blame can be evenhandedly distributed between them and the serious, honest Democrats. Not to do this is certain to bring accusations of bias. So the media evenhandedly invents the Republicans it needs to run the story it prefers because in reality they have ceased to exist. Republican cries of voter fraud are taken seriously even though only a negligible amount of the sort of fraud Republicans focus on has ever been found. Republican warnings about the deficit are taken seriously even though their behavior shows that they are not worried at all.
The result of media evenhandedness is that propaganda is treated the same as careful scientific or economic analysis, and budget spreadsheets that do not add up are handled the same as budget spreadsheets that do. Since propaganda does not have to worry about the truth, it is not surprising that it is able to win.
17
Ronald Reagan spent eight tears screaming for a balanced budget amendment ... he submitted eight budgets to Congress, none close to balance, and tripled the national debt in that time. Hypocrisy goes way back
Of course, Republicans get away with things particularly exploding the budget while Democrats are hounded about it. It is wrong. Republicans run up budgets for selfish reasons, Democrats to help everyone. Democrats are always better at handling money than Republicans but the Media and legend is that Democrats spend too much. Krugman is correct, where is the Media? Why is it so slavish to Republican ideas?
19
@getGar
I agree with you. The republicans yelled so loudly and for so long about the deficit that somehow too many people just accepted it as fact.
Than all of a sudden Trump talks tax cut for the wealthy and suddenly there were no complaints about the deficit and they began to promote yet again the trickle down theory.
Who can trust the republicans now? They change their view of economics according to who is president.
13
@getGar Republicans run up budgets for selfish reasons? Where do you get this stuff! You can’t possibly think Dems don’t pander to their constituents. How have you decided Dems are better at handling money? It was Obama who got us to $20 trillion.
@getGar
It started with Reagan repeatedly saying, “Those tax-and-spend Democrats...”
The repo market is crashing, the Fed has restarted non-QE, they're just about to cut again in the greatest economy ever, while the stock market is melting up. And Krugman is (not?) worrying about the deficit.
2
@Phobos
Sorry, this isn’t the “ greatest economy ever”—the 1990’s was better, and with a BALANCED budget...
Reverse professor Krugman’s formula. The Koch brothers in 2016 committed $400 million to supporting Republican candidates expecting a $2 billion return on investment. And they got it.
19
Endless borrowing, endless creation of money, creates inflation. On a large enough scale, you get hyperinflation with money continually losing buying power. Hold onto cash and you will see it become worthless.
But hyperinflation here will be very different that past episodes around the world.
The US has benefitted from its status as the world's reserve currency. Enormous amounts of $US are held all over the world, in cash, in banks as electronic $US or as $US denominated debt.
Facing a dramatic drop in the buying power of the $US, foreign holders of $US will seek to exchange paper dollars for anything with tangible value. A $US may not be worth anything outside the US at that point but it WILL remain legal tender IN the US.
So foreign holders of $US will buy US farmland, companies, raw materials. Better to get something of value than hold onto worthless paper.
US citizens will see their nation sold out from under them and starve - unable to buy food with worthless dollars.
Am I wrong?
4
@cynicalskeptic - yes, quite seriously wrong - because your "analysis" is based on confused facts and irrational fears. What Paul is talking about is Federal government budget deficit and Federal government debt. Of course, the Federal government needs to be able to service its debt for it to retain its credit rating; that, more than anything else, is necessary to ensure the continuance of the US dollar as the preferred currency for global trade. The doomsday scenario you pain is pure fiction
@cynicalskeptic Yes. Where do you see hyperinflation? Venezuela.
@cynicalskeptic
Yep, you are. Everyone else is doing it too.
I still need to wrap my head around how money is not considered part of the social contract and seeing as a thing that exist by itself. Same thing for debt as a derivative currency.
It is all a total immaterial thing that exist as highly codified good will. Get a society to collapse and property rights, local currency all mean nothing. That is the reason people from less regulated and stable economies want to buy dollars or debt in dollars. How attractive our debt is, is quite relative. At this time we can load up on more debt. This may not be true in the future.
In any case, if we dig a hole with spending outstripping government revenues at least we should be investing in keeping the society and markets attractive to foreign investors. So infrastructure, education, healthcare .... Not so much tax cuts.
Military spending seems more like enabling racketeering if we need to move from carrots to sticks to prop our unsustainable live styles. With international economic, logistics and social interdependencies it is not really a credible tool. We would never attack China for example.
In any case, I agree double standards hypocrites should not have a megaphone. They just happen to have money to buy one.
9
Deficits and debt do not matter as long as others are willing to accept $US in payment for goods.
Trillions in debt CAN be paid off by printing more money. But when that occurs a loaf of bread here will cost billions of dollars. Zimbabwe provides a good example of this.
You cannot expand a nation's money supply at a faster rate than the economy expands. If you do so, the money loses value. This HAS happened in the US. One cent in 1913 bought more than a dollar does today. Inflation has been far worse than our government admits.
The US seems to have forgotten that there are real consequences to endless deficits and ever growing national debt
6
@cynicalskeptic Can’t wait to hear Lizzie’s plan for reducing the debt.
Republicans should be called out to demonstrate that their tax cuts for the wealthy have actually improved the economy in the way they said they would. Republicans should also be called out to prove that the rest of us got the tax cuts they promised we would.
When Republicans are completely unable to do either of these things, Democrats should lambaste them by pointedly asking why the GOP thinks it has a leg to stand on when disparaging social programs proposed by Democrats.
And why we should assign any credibility to Trump and his Republican enablers when they say that they have "better and cheaper" healthcare for us after they "repeal and replace" Obamacare.
Now that would be something for both the liberal and conservative media to cover, in full force.
8
Thank you Paul. Trump's tax cut will not pay for itself but it will pay for his upcoming presidential campaign.
15
Elizabeth Warren should simply declare that Medicare for All will pay for itself through increased economic activity. Major corporations will be relieved of the costs of providing health benefits, freeing billions of dollars for investment that will stimulate growth and increased productivity resulting in higher wages and tax revenue. Using dynamic scoring, the CBO will be able to show that the federal deficit will shrink. This is the Republican response on costs every time they propose a tax cut and though it never bears out as promised, they get away with it again and again without any serious questionjng in the media. Dr. Krugman' s point both about the Republican Party and the media is well taken.
11
The deficit, and therefore the debt, may be more worrying in the future.
Over the last two years, the Chinese have been slowly reducing their holdings in U.S. Treasury notes. This most recent year began with a Federal government shutdown, where the willingness of the United States to pay its debts was once again brought into question.
I suspect that there is already a small risk premium being built into U.S. interest rates. Small, because over a 10, 20 or 30 year period, the U.S. government will likely return to normality, but also small because the U.S. can “borrow” by reneging on commitments like Social Security, while still paying the interest on its loans.
2
The problem is not the deficit, but what causes it: a trillion dollar tax cut for the wealthy (both foreign and domestic) and a bloated military. The problem is a corrupted political system that has created a disconnect between the common good and the government. Bernie is right to call for a revolution.
10
@Tom Miller
Government has been commandeered by the super-rich as a method of enriching themselves further, as well as controlling the masses.
3
I am not an economist, but it seems to me that unnecessary budget deficits like this one will have severe economic consequences in the future. The Trump tax cut for the corporations which is causing the drastic increase in the budget deficit, contributes to building bubbles in the economy through the share buy-backs by big corporations. Bubbles have a tendency to burst.
5
Exactly so. The world is big, so the deficits are bigger than they used to be.
When it comes to bettering the lives of the lower and middle classes by simply supplementing contributions to Social Security and Medicare so that the elderly can live comfortably and contribute to the churn of money through the economy, the Republicans with long, sad faces say how we can't sustain these "entitlements" because of the savings deficit.
Simple economics says spend today to build future good. Educate a child and he or she is a future earner returning many times the cost of the education which adds to the country's wealth. Build a new bridge and future value of commerce and efficient traffic flow contributes to the wealth of future generations over the life of the bridge as well as value from the construction.
Deficit spending makes sense when those who benefit pay the cost from their increased potential earnings. What doesn't make sense is to go into debt without investing in the future. Those crumbling bridges and uneducated children are a liability now, not an asset that grows in value.
Giving a tax break to a corporation that doesn't have consumers who can afford to buy because they haven't the skills to add value to the economy is shortsighted. Without people with resources to purchase, businesses logically won't invest in domestic enterprise.
To preserve capitalism, the country needs some of that pseudo-socialism that spooks the Republicans because they know it works. maybe works too well for their liking helping minorities move up the ladder.
8
National debt. When is it due? What is the interest rate? What is it denominated in? Who creates the denomination? Who owns the debt? When was the US without debt? Answer these and you might have a better understanding of the National debt.
2
In the end, the deficit is $1T or about 5% of a 20T economy. The growth in the economy has been about 2-3% so at most 600B/year. W/ an aging population it seems hard to believe we can out grow the deficit because more people leaving the work force than entering it. So it would seem that the service of debt, even at 2% interest rates start becoming one of the largest items in the federal budget.
So to me this seems like the story in the book “Black Swan”. The turkey sees the farmer as someone who takes great care of him. Thanksgiving comes and wack! I don’t buy that growing deficits faster than the economy is good. We are being lulled into a bigger and bigger problem. Just like ignoring CO2 emissions over the last 20 years because extreme weather events had not happened yet was a mistake too.
The argument that republicans are irresponsible so why should democrats be responsible is like saying “my brother got away w/ it so why not me?”. Two wrongs don’t make a right.
Personally, I would expect more from the esteemed author.
4
And the 'family values' of the conservatives can also join their trillion dollar deficit hypocricy.
15
Whether “spending that would make American lives better” is politically acceptable depends on which American lives you are talking about. If you are proposing to improve the lives of the working poor, nobody is interested, not even the working poor. Any number of recent articles in the New York Times have illustrated this fact, and various explanations have been offered, each suggesting that Donald Trump is going to be with us for a long time.
Tax cuts for the rich and income inequality in general seems to mainly bother liberal intellectuals, not the lower middle class. That said, a way must be found to improve the financial situation of the 40% of the population who cannot afford a sudden $400 expense, or we will be dealing with nihilism on a grand scale and Donald Trump will be just the first of many. Academic economists have nothing to offer here. Their advice over the past 50 years has ranged from the irresponsible to the catastrophic. Whether it’s financial policy, social policy, or any other kind of public policy, anybody but them.
5
@kbaa
What you propose may be true, but income inequality has been the precursor of just about every revolution in recorded history. Therefore, even if everyone around is shortsighted enough not to be bothered about, it is no reason not to be concerned.
In other words, it is not about political leaning as much as it is about foresight. Those with foresight are concerned, those without foresight never will be, but they are usually the ones arouse when things go south.
7
The “measure” of the economy that resonates is the stock market, the other metrics are interesting to economists, for investors and the public the Dow is a simple metric, a few thousand points down would be catastrophic... at least for the administration.. a trillion dollar deficit is simply a yawn .. a thousand points in the Dow, you start hiding cash under the mattress resulting in a second thousand dip ... and chaos at 1600.
1
Again, the Cambridge Dictionary defines bias as "an unfair personal opinion that influences your judgment."
The reason I continue bringing up the issue of bias in my comments is because cognitive biases impair people's critical thinking. Cognitive biases impact all of us and, left unchecked, they cause us to distort information or not hear and consider it at all. The less information we hear and consider and the more distorted the information we do hear and consider, the more impaired is our critical thinking. It's really very simple.
We really need to have the humility to accept our humanity and that the way in which our brains function causes them to be susceptible to a great many cognitive biases. That humility is emotional self-awarenss, which is the very foundation of emotional intelligence and the means with which we calibrate our moral and ethical compasses. The various aspects of emotional intelligence are skills which must be learned and developed. Unfortunately, they aren't learned and developed because they are considered "soft skills" and they are perceived as "feminine" skills in a society that has serious problems with toxic masculinity. FYI, toxic masculinity, which can and is taken on by members of all genders leads to self-righteousness, which is the opposite of emotional self-awareness.
3
That is spot on. Republicans yell and scream about deficits when is a democrat's administration, but demure when is a Republican administration the one causing deficits to soar. Same with 'Patriotism'. The name of that phenomena is "Intellectual dishonesty". I am a fiscal conservative and I believe in social justice (Like they say about French people: They have their heart on the left and their wallet on the right). It pains me to no end Republican posturing and falsehoods regarding fiscal policy....
9
Short of war and disease, nothing on earth makes people as miserable as money, and fear of losing money, so it's no surprise deficit hysteria is always an easy sell, even among people who know better.
The question is, when will mainstream economic concede that its models are wrong and stop giving comfort to these deficit mountebanks?
And when will the Times and WaPO stop quoting the likes of the "Committee for a Responsible Federal Budget" as authorities on budgeting?
Is it news to everyone but the news media that this and related organizations exist to cut SS and Medicare?
3
For once, I agree with Krugman. And I love that he calls out Ryan as the phony he was.
6
For what the tax cut saved me, I'd rather it have been spent on something useful.
10
So, is the answer to spend like money is free and appears out of thin air? Or will a crunch come, and what will it be like? An uncontrollable explosion of inflation and a corresponding collapse of all financial contracts with stated values? Like, cash, home mortgages, bank deposits, insurance policies? In the end only companies that have stated their terms in sliding scale fashion will survive, and they'll own everything, everyone else will have gone broke--good work deficit doves! What will you propose then, revolution? You won't need to, it'll happen on it's own.
@Ronald B. Duke Republican's have been practicing voodoo economics since the Reagan administration. They worship Tax cuts for the wealthy and any other members of the Republican campaign donor class. They purport to hate government spending but only when that spending doesn't flow to their donors in the arms, oil, energy or coal industries. They are happy to subsidize farmers, ranchers, loggers or rent seeking real estate scammers like the Trumps. Republican donors have long since figured out that the return on investment of buying legislatures is much better than investing in plant and equipment or worker training. The only big idea that seems to occur is to pay for the tax cuts by cuts to Medicare, Medicaid and Social Security.
4
I followed the rant on deficits closely and I can vouch for the accuracy of your history of the political concern about the deficit and the history of media coverage. I concluded that the hypocrisy gene is sympathetic with the self preservation gene.
This statement in this column is profound: "The problem is the selectivity of deficit hysteria, which somehow kicks in only when a Democrat is president or progressives propose spending that would make American lives better."
My thoughts about debt in both the private and public sector is if the investment returns to the taxpayers and the larger society much more than the investment, it should be made.
E.g., one of the greatest policy initiatives in the history of the United States was the social security insurance program. When one compares the before and after of this program it really made a huge difference in the American standard of living. Similarly, Medicare insurance has made a major contribution to society. Most people don't realize that if they are employed they are contributing to these two progressive policy initiatives. I know that Social Security Insurance is the main reason that I tell my grandchildren that they should vote for Democrats.
Progressives and moderate Republicans usually can agree on infrastructure investment like highways, bridges, tunnels but seems to have balked at acting on investing in developing solutions to global warming. Even though it could give the U.S. a global market advantage.
7
Paul, this defensive vitriol is getting exhausting. The fatal flaw in your reasoning is that you view the budget as an ivory tower type, where actual spending and tax cuts (that you mislabel as tax expenditures) are equivalent. An extra $1 on a social program “costs” the same as a $1 in tax cuts, right? Wrong. Tax cuts allow people to keep more of what is rightfully theirs - what they earned. Spending, especially on social programs, redistributes other peoples money. These are not equivalent, morally or otherwise.
Conservatives believe in small government and personal responsibility (no, Trump is not a conservative). Cutting taxes is inherently a good when government is as bloated as it is now. Balancing the budget is important, but striking the right balance on the size of government is more so. Once the government retreats to its core functions of infrastructure, military, basic regulation, etc and gets out of the redistribution and social engineering business, we will talk about the deficit. Until then, game on.
1
@DRS . We have the largest economey in the world and there seems to be consensus that it is necessary fo us to spend multiples of what the next largest nations spend on the military. Given all of that and the influence of the USA around the world the idea we can be, currently, the only superpower and have a small government is nonsense.
@DRS
Ba-loney.
Prof K writes: "the news media, which on economic matters has a de facto conservative bias."
Historically, from Malthus and Adam Smith through the years that has been generally true. The K Marx exception proves the point. Marks fled his country for the highest crime: challenging aristocracy and capitalism. As a self-governing discipline the 'dismal science' of economics in the West has mostly been run by academics beholden to the support from the rich and from mostly conservative governments. Leftist economists have won few Nobel Prizes.
Like Newton's physics did, econ depends on math and simplifying assumptions to develop its calculus of money and value. That works well much of the time, but since Rachel Carson et al. we keep learning the hard way that there is more to life on this planet than money, and that value can be measured many other ways.
The key simplifying assumption of econ is that money represents a uniform standard of value. Ain't no such thing. Money is a tool, like a hammer or scalpel. Value is the real key, but that is much harder to quantify, because it varies by person, nation, or situation. Value is non-Newtonian.
It's not that the GOP's deficit dog don't bark, it's rather 'That Dog Don't Hunt'!
3
All that the Republicans are doing (besides being sinister) is trying to use the Reagan years as their mantra. And they have been doing it ever since 1980.
The reality is, the 1980's were a long term disaster for this country. Anyone who was there and honest knows it was termed "smoke and mirrors." When Reagan left our budget was a disaster and our infrastructure began it's long term design. And so did the social fabric, although the GOP will deny it forever.
25
Imagine the number of new bridges, roads, high speed rail lines, water systems and other infrastructure we could have paid for with the tax cuts.
20
Most people don’t seem to understand that.
When “conservative” voters cheer on hundreds of billions more for the military, they don’t seem to understand who pays for that. Meanwhile, the Republicans starve the IRS of funds necessary to enforce the tax laws—I wonder who benefits from that.
1
So, Paul, if the deficit doesn't matter, doesn't that mean that the national debt doesn't matter either. I'm a very simple man. I know that if I spend more than I earn, I can use credit to cover the difference...until I use up all of my credit.
Sooner or later, you reach the point where your debt service costs exceed your income. When that happens to an individual, you head to bankruptcy court, wipe the slate clean and start over again.
People tend to forget that there's only around $1.7 trillion worth of actual legitimate U.S. currency in circulation but our national debt is now $22 trillion, which means that the national debt is 13 times larger than the money supply itself.
We both know that the rest of that debt is stored in variety of notational instruments and, as long as other countries and private parties continue to buy American debt instruments, we can keep the party going.
When they stop buying, everything collapses.
3
@Alan M. Milner
Does the Federal Reserve control the money supply or just the rate of currency flow? Trump demanded the Federal Reserve lower the interest rate to buoy up the stock market,, and possibly re-finance and his family's own debt. Those on fixed income whose savings are in banks will suffer. Givng tax breaks to the top 1% does not "trickle down" to the rest of the populace and contributes to the national debt. An individual's household finances are not comparable to the government's debt, which also includes payments like Medicare, medicaid, FEMA outlays for natural disasters and child assistance programs.
3
@Alan M. Milner Money isn't real. That's why it works.
Dr. Krugman certainly hit the nail on the head regarding "Doomsayers and Double Standards." Yet, I have a strong feeling that our nation's deficit really does matter. How much it matters is dependent on a number of issues.
For instance, with interest rates near historic lows the cost of financing the country's deficit isn't a problem. If interest rates rise and eventually they will, the cost of financing the deficit may become intolerable.
Governments increase spending during recessionary times to help the economy and fund social programs. Keeping a lid on the deficit when the economy is booming provides the funds necessary to invest during recessionary times. Should those funds not be available, millions of families will suffer from an economic point of view.
There is also a direct relationship on how the borrowed funds are used. If they help the country become more efficient by investing in R&D, infrastructure, education, etc. the return on the borrowed funds will be vastly greater than their cost.
On the other hand, If the funds are used for an economically useless border wall or the like, their will be no compensating growth in the economy.
I was never one to worry over our deficit, concerned, but never worried. Now that Trump is in the White House with his history of bankrupting virtually every business he started and Congress has no desire to control the purse strings, I'm worried about the development of severe economic problems sometime in the future.
1
OK, but what about the debt? Isn’t it much higher and a greater percentage of GDP than the deficit?
You state essentially that other pundits/journalists have been biased in favor of Republicans when it comes to failing to hold them to account for deficit-exploding tax reductions vs Democrats’ proposals to spend on social programs. I’ve read that sort of allegation in many other places. The problem, you and others never name the guilty pundits/journalists. Maybe they are supposed to recognize themselves in your description and better themselves. Wouldn’t it be more honest, productive to name them? You would need to give the evidence, they would need to explain (or fail to do so).
1
@Tom Jelliffe
Rush Limbaugh for one, most commentators on Fox, most Republican Senators. It’s easy enough to do the research on this. In fact it’s hard to think of conservative Republicans inside and outside government who didn’t do a 180 on this after Trump was elected.
You say it would have “more honest” to explicitly name names. There’s a (important) difference between being uninformative and dishonest, no?
1
Maybe the lack of public concern of tax-cut-driven deficits is caused because we are literally being paid off. We all get a little slice of the pie, albeit slivers so tiny they barely jingle in our pockets. But we are being bribed to accept the logic behind them.
And secondly, the public might be weary of the hysteria because, so far, these huge deficits aren't actually causing us a problem. It's surprising to see Dr. Krugman soft-pedal his past concerns about the debt. He was right to say it didn't matter during the Great Recession. But he did say that once we were sustainably growing GDP again, we should try to shrink the deficit, not grow it. And yet today he's saying "never mind." When experts like Krugman say that, he's reinforcing the public's "so what" attitude.
I'm concerned that we're not on a sustainable path, and no new Modern Monetary Theory can explain this problem away.
2
@Ken L That's not what he is saying at all. Dr. Krugman based his statement on something like not having Trump in office and destroying progress. Your comment seems incomplete.
I still think I'm right that we're nearing the end of a roaring 20's, big business having a party and telling us no worries, tariff wars, copper mines in Wyoming, insider trading, corruption Washington rampant,...... the FDR plank was a balanced budget and nobody knew for sure what to do next.
I was recently among Euro friends and they said we sound crazy.
4
Thank you Prof. Krugman for reminding us of Paul Ryan - the once upon a time GOP policy wonk who couldn't offer policy, sound governance or for that matter basic moral rectitude.
10
@SB Ryan is an unspeakable individual. Untruthful and basically abusive to his own constituency. He lied constantly.
Republicans in power shamelessly loot the national treasure for personal profit as if it was their perfect due for winning elections. The Trump/Republican tax cut for corporations and the wealthiest was sold in part by with the promise its trickle down effect would surely lead to years of plus three percent growth in the GDP, wiping out the deficit forever and making America great again. Same old story, the deficit now verging on a trillion...
8
"Debt is good" sounds to me a lot like the Wall Street 1980s cheer of "Greed is good". Of course it's not good; we are simply robbing our future. Add this debt to the litany of burdens we are leaving the younger generation with -- a polluted planet, expensive education and health care, and unaffordable housing.
6
@RSSF I don't think you understand how the national debt works. It's not like a household.
“Every single piece of evidence, shows that tax cuts do not boost economic growth”, really? Growth under Trump has been quite good and you yourself attributed the tax cuts in past essays as a “sugar high” that would quickly wear off to be followed by a crash that 3 years into his presidency still has not happened. The tax cuts and other policies have led to excellent markets, wage growth for all segments, and record low unemployment, especially for minorities. Being opposed to Trump does not mean you need to abandon reason, logic or evidence. We are all patiently waiting for your essay when you admit just how wrong your economic predictions for Trump’s first term in office have been. A strong and confident person admits when he has flubbed it, and flubbed it you have.
2
@michaelf
Growth has not been reached the levels promised by its proponents and the fact that it is contributing to our escalating debt levels leaves the FED, and Congress with less tools to handle the eventual crash. It took 6 years for W's fiscal irresponsibility before the excesses caught up to the overall economy, when the current GOP's "low tax, high growth" plan crashes once again, as history has demonstrated it will the result will be 2008 on steroids.
6
You seem not to have noticed another article in this edition contradicting the assertion that the stock market has done wonderfully. And you seem to selectively ignore some of Dr Ks articles on the economy recently.
2
@michaelf Show us how trends in median family income compare with trends in the costs of housing, health care, education, transportation and other essentials. This of course would be a much prettier picture if you use the income of the top 1% instead.
Do you suppose all that meth and opioid abuse is a sign of good times?
4
This takes us back to Jude Wanniski's 1976 "Two Santa Clauses" theory. Democrats try to increase government spending on things that benefit little people. Republicans, the party of the power land wealthy, he said, should cut taxes when in office, because, hey, who doesn't want lower taxes and more stuff. So, two Santa Clauses.
But as Thom Hartmann explained, Wanniski the Republicans really intended to hobble Democratic majorities by running up deficits themselves while in office and then howling about deficits when Democrats took over. We saw this clearly when Republican legislatures held back recovery from the Great Recession to cripple Obama's efforts to get the economy back on the road to recovery.
Democrats
11
@Charles Tiege. Excellent call. A short summary is included in Wanniski's Wikipedia biography:
https://en.wikipedia.org/wiki/Jude_Wanniski
For the long read, here is Thom Hartmann's discussion:
https://www.commondreams.org/views/2009/01/26/two-santa-clauses-or-how-republican-party-has-conned-america-thirty-years
Despite I agree with the comment on the double standard, as a mere mortal non economist, I still like to ask the question if deficits don't matter, may I ask who is going to pay the national debt down, let alone off? Or does it mean it never has to be repaid? As the debt accumulates so will the interest payment. Are we assuming the GDP will always grow fast enough to cover the ever increasing interest payment? What happens when the economy turns into a recession? Or when will it become a concern, when the interest payment consumes 80%, 65%, 50%, ... of the total Federal Budget?
3
@Notmypresident Opinion from a mortal economist: it doesnt ever have to be repaid, like refinancing a mortgage over and over. But the cost of servicing the debt shouldn't grow as a percentage of the GDP, or debt, or deficit; because that crowds out expenditures that are likely (much) more productive.
2
@Notmypresident Interest rates are now very low. And they're not variable. So I wouldn't worry about that.
@Notmypresident
It is worth pointing out, as it is often overlooked, that all that interest is going to go to whoever owns the debt at the time. They will then no doubt use it for something or other in their own interests.
Dr. Krugman has helped partially cure me of deficit hysteria over the years, but I fall off the wagon sometimes.
I recall seeing the 2008 movie "I.O.U.S.A." which made quite an impression. I suspect a lot of others mentioned in the article saw it too and began to worry about national debt. Even Warren Buffet participated in a live discussion after the August 2008 screening, so there was a lot of attention on this right before Obama's election.
Then of course CBO predicted in January 2009 that the budget deficit would be $1.2 trillion in fiscal year 2009 (which ran October 1, 2008 to September 30, 2009), assuming continuation of Bush's policies.
Obama took it seriously and by 2015 we had a budget deficit below historical average as % GDP. He put a cap on military and domestic spending. He also raised taxes via the ACA and partial expiration of the Bush tax cuts for the top 1-2%, raising the average tax rate for the top 1% by almost 5 percentage points, from 29% to 34%.
And in 2015, we had 2.9% GDP growth despite a falling deficit. This is the same rate as 2018, which will likely be Trump's best GDP growth year, and he bought a lot of that growth with debt.
What should be done? I'd like to see our policy makers apply some science here. Tax hikes on the rich can get our deficit down to a sustainable level with minimal adverse impact, as the Obama lesson showed us.
4
Neither political party behaves responsibly with respect to the national debt.
2
@Robert Broun
That's why under Clinton we ran budget surpluses. In fact, as a former Federal employee, the GOP talked a good game, but after Carter, we almost always received bigger pay raises under a GOP Administration than we ever received under the Dems.
8
Bill Clinton had it right. The party that believes in government should favor balances budgets and in good times surpluses.
4
Reality
There are only 4 nations that run a larger deficit, as percentage of the GDP, than the US
Not a good company to be in.
Yet leading economists claim that the debt does not matter as long as the GDP growths at a higher percentage rate than the interest rate of the debt.
Notably , Oliver Blanchard
The concept that the debt can grow forever under such circumstances was endorsed by Krugman in the NY Times
Melting Snowballs and the Winter of Debt
https://www.nytimes.com/2019/01/09/opinion/melting-snowballs-and-the-winter-of-debt.html
The concept that such the National debt can grow forever comes close to MMT (Modern Monetary Theory) beloved by the left wing of the Democratic party - should it win the next election further increases
Both Blanchard and Krugman overlook omit that the lower the interest rate the more it flows into dubious investment. Known as good bad and bad debt . This truism applies to both private and government debt.
As to the state of the Blanchard/Krugman Analysis
GDP growth rate US 2019
1st quarter 2019: 3.1 percent
2nd quarter 2019: 2.0 percent
It is slowing down
Current interest rate on 10 year T bill 1.77%
So what will happen if the current expansion ends ?
2
@Woof So you are saying it was utterly irresponsible to pass that last three tax cuts almost exclusively benefitting corporations and the über wealthy. I agree.
10
Krugman is wrong. The deficits and debt matter. The market may not price it correctly today but it will eventually.
Krugman has a Nobel prize but unfortunately allows his politics to win out over common sense. He should consider the burden we are placing on our children and not worry about demonizing a political party.
4
@USNA
Where does he say that deficits and debt don't matter? He says they are not a crisis. An analogy would be: yes, we need safe and secure borders, but immigration is not a crisis requiring a stupid wall to be built.
It was Darth Cheney, in 2003, who said "Reagan proved that deficits don't matter." Pretty much gave away the RepubliCon playbook right there.
The entitlements will sink the deficit even further in the next few years. Medicaid, a government healthcare program that serves 75 million for no premium for any one them is set to run out of enough money to pay all the bills in less than 3 years. This program covers most nursing home residents, the poor, the middle class with lots of children, and 9 million undocumented children. It is a federal state partnership that is affecting the bottom line of most state budgets each year. The same with Veterans, Medicare that serves over 60 million will run out of money for Part A Hospital in less than 7 years, and Social Security in 10 years. Waiting to shore those programs up with tax increases, is only postponing the inevitable, and serious shortfalls, Think that those on both sides of the aisle will ignore this then, think again, they will be forced to face it. Remember that paying $400 billion in interest each year on the $21.9 trillion debt and growing, starting in 2020, will itself add $1.2 trillion to the debt every 3 years alone. The fiscal cliff is here, however it is like the erosion of the cliff at the ocean that goes so slowly, that when it washes away the buildings on it, it is only then, that the reality sinks in.
8
@MaryKayKlassen
I agree, we should go with the GOP agenda and eliminate these entitlement programs, especially since a large percentage of their constituency depend on these very programs that ideologically they despise. Let's give them what they want.
3
You forgot the military bottomless money pit.
The central point of this column is so important. Republicans have zero credibility on economic matters, and the media needs to smarten up on the economy and fiscal matters. If only more journalists and opinion leaders would educate themselves. I recommend they start by reading Mr. Krugman.
75
@Gepinniw
My 1st response not critical to a post, because I agree 100% with what you posted.
1
Excellent article! It seems like the majority has bought the idea that tax cuts leads to growth, but it has been proved to be a fallacy!
18
I wish Dr. Krugman & other pundits would measure the $3.8 trillion of additional debt placed on American taxpayers to create a tax cut for Don Jr. and his cohort in terms of cost rather than cash flow.
I appreciate Dr. Krugman here contextualizes the tax cut in terms of percentage of GDP and scales it in comparison to Warren's proposals. Still, I would rather see it expressed as the additional debt put on each American income taxpayer. That number is:
$3.8 trillion ÷ 138 million income taxpayers = $27,500 of NEW DEBT per income tax payer. $55,000 of new debt for joint filers. Thanks-
Quite an accomplishment to so harm the country in just 3 years while riding an economic boom created by Obama. All while contemporaneously stripping the US of any claim of honor or democracy.
It is consonant with Trump's bankruptcies and inability to distinguish between debt and income.
32
I'm just thinking there must be some reason for my pain.
But after listening to "Carry On Waward Son" for years I thought there'd be a cure.
I think the cure is just better communication with you're children. Not that my parents were aweful, but they weren't ideal.
1
We should panic.
The economy is growing less than 3% per year. The debt is growing close to 5% per year. The second figure needs to be less than the first, esp in a time of low unemployment.
29
This is hardly a surprise. It's a very rational and explicit strategy. When in power, cut taxes, boost spending on military stuff, get the political benefit of growth. When the downturn comes, scream about belt tightening, cut social spending, cut taxes further (relief!), intone seriously about debt and deficits. Over the long term there's zero downside to this strategy. Dems have not formulated a decent retort except to whine about the GOP's hypocrisy, which their voters don't mind.
23
Professor, kindly explain why we ought not to be panicked. From my humble corner, you should balance your budget.
The only enlightenment I have heard to date, offhand or otherwise is 1) the Republicans are waiting for the tax cuts to become embedded so we think there are part of the firmament and proceed to declare an emergency to the effect we need to cut “entitlements” to sustain the Nation and 2) we inflate our way out of debt.
Neither seem swell. So would someone give me the skinny here, begging you!
4
@John McMahon -- Of your two suggestions of how we will "pay" off the debt:
1. the Republicans will cut Social Security, etc.
2. inflation
I expect they won't be able to do #1 and so inflation it will be. It's not desirable, but the country lived through the inflation of the '70s, and it will probably survive the inflation to come. Hard on some of us, retirees like me, but we'll manage.
It would be nice if we were getting something worth while in exchange, like some of Sanders's and Warren's policy suggestions. Instead, we are just making the rich richer, moving us closer to the world of corporate feudalism seen in science fiction books and movies. As Dear Tweeter likes to say, "SAD!"
5
@John McMahon
Yes, you should balance your budget, because you (and I) are currency users.
The Federal Government is the issuer of the currency. Thus it stands in an entirely different relation to US dollars than we do.
The Federal Government cannot run out of US dollars. So it can never have any difficulty paying off any amount of debt. We could "pay off" the entire US debt tomorrow, with a few clicks of a keyboard. So you can relax.
Does this mean the US should run up any amount of debt or print/create any amount of money? Of course not.
The deficit should be large enough to accommodate the trade deficit and the private sector's savings desires. But it should not be larger.
2
@John McMahon
"Balance your budget."
Um, because our finances aren't the same as a household or business?
1
None of these policy stances are ever about their relative merits. They reflect "my tribe, right or wrong' and 'whatever they're for, we're against" thinking, pure and simple. How else do you explain people who gripe about health care, yet favor the party that has ignored the problem over the party that has actually addressed (and continues to address) it.
6
The United States has always been the land of debt. Our nation was built on indentured servitude. Corporate and consumer debt are still the norm. So, why would any voter, Republican or Democrat, care about debt?
2
@Nick R
You almost got it right.
America's wealth was built on 250 years of chattel slavery; highlighting despotic systematized excessive indulgence in physical cruelty & racial terrorism. Cotton exports alone put the United States on the world economic map. On the eve of the Civil War, raw cotton constituted 61 percent of the value of ALL U.S. products shipped abroad. Cotton was KING. The Mississippi Delta was the economic engine and the 'Wall Street' of the United States at that time.
1
Look, get with the program. The government is there simply to ensure a large-scale tradition of the country's value creation to the very wealthy, done on the nation's credit card, which the wealthy will never have to pay off because - they don't have to pay taxes (if they play the game right)!
The job of the rest of us is to shut up and bear the debt burden until we drop and our children have to take it over. The Uber-class at the top 1% are the new royalty and we didn't even notice the transition to a monarchy.
17
"Selective hysteria" and "deficit hysteria" are no mystery. Its pretty obvious that these are generated as ways to manipulate the public in accordance with right wing goals of impoverishing everyone else while enriching themselves. In social relations when one person takes what is wanted at the expense of another, who gets little or nothing, this is called abuse, cheating, or robbing. Its really no different on a larger scale when selective hysteria is employed to mislead the public.
11
I think it is time you (Mr. Krugman) start calling them out by name. I hope you will be more pointed in naming (and shaming) the institutions, periodicals, television programs and notable voices who keep falling for (or actively promoting) the false debt narrative. It's time to name names.
13
@DSM ,
In a certain sense, we all already know the names, just-about-all-of-them (JAAoT) is a good pronoun.
Subscribing is a way of getting leverage; cancelling your subscription is what you can do if you're ignored.
Flash boycotts of advertisers' products also seem to get publishers' attention.
Let's stop waiting for Dr Krugman and other good guys to tell us what to do.
Actions are available to all of us. We need to take them. Calmly, quickly and massively.
JAAoT will respond to socio-economic pressure because it's in their self-interest to do so.
2
"The point is that the media clearly leans conservative in covering budget issues."
So true. It's not just the Republicans who pretend to be fiscal hawks when the Democrats are in power; the media is right there backing them up.
Why?
Could it have something to do with the media being owned by a small number of corporations and families who want their big tax cuts from the Republicans?
Keep calling them out, Dr. Krugman.
37
@JediProf. As a lifelong educator I can tell you that our education system also leans conservative on economic policy. There is very little criticism of it in the pedagogy and hardly any exposure to the alternatives in public school curriculums.
15
@JediProf
The answer is YES. Thanks for stating it explicitly! A huge amount of so-called free media is owned by a small number of the super-rich who don't their power and influence limited by higher taxes, nor their ability to further consolidate the media to be limited by regulation.
6
@Frank Lee
I totally agree.
Krugman, your article confirms what many people believed: the "revenue-neutral" requirement for changes in the Tax Code is fiction. Quantitative financial analysts use something called "forward back-testing". To wit, the gap between projected (by Ryan et al) and actual revenues should be reported every year. This way we might learn a thing or two about creative accounting.
6
"And the truth is that proposals like universal child care are far more likely than tax cuts to repay a significant fraction of their upfront costs, partly by freeing up adults to work, partly by improving the lives of children in ways that will make them more productive adults."
There we have the most important phrase for the well being of our country or any country "improving the lives of children" and it comes from a well respected economist not any of the the Democratic presidential candidates, any moderateors in debates and of course any Republicans (who seem to care about children only before they are born). We have one of the highest rates of child poverty in the industrial world, close to 4 million children without health care, millions who are abused physically, sexually, and psychologically, many children who do not experience early education or quality education at any level and more and more. Children and youth are all but ignored it terms of direct discussion of the importance of improving their everyday lifes as children. Many problems of the environment, health care, inequality, education and are being addressed and of course like everybody else these things affect children. But of all demographic groups in the US and globally it is children that are most important and should be the center of every debate discussion about our political future. When will Democrat progressives ever wake up to this fact and make it the center of their policies.
20
@BC I was a public school teacher most of professional career and I think our education system infantilizes children. Children are capable of much more complexity than we allow for them to understand.
9
@Frank Lee As a professor of sociology I established the field of sociology of childhood and studied young children in preschools in families in the US, Italy, and Scandinavia for 40 years. My major findings are exactly in line with your comment. Children with their peers are innovative, creative and active in their lives and constantly contribute to their societies as children with a great deal of agency. I should also add that teachers at all levels but especially of young children are dedicated and important but can especially in the US be limited by educational policies they must follow that like you note infantizes children and turns them into constant test takers. My respect for teachers of children and youth is profound.
6
@BC
"Respect for teachers"? You must be a Democrat ;-)
1
And yet I seem to recall a certain economist incessantly asking Bernie Sanders "how are we going to pay for it?" during the 2016 election.
And this same economist is just waiting to ask Elizabeth Warren the same thing - thus ensuring that she won't get elected.
Nothing will change until the Left recognizes the truth of MMT. They are the only ones who tell the truth about money. None of it has ever been refuted, because it can't be refuted.
The Federal Government cannot run out of dollars. It cannot become insolvent.
And yes, MMT economists are aware that there is a foreign sector, and that the US trades with other nations.
MMT economists are also aware that too much money creation can lead to inflation.
That's why no MMT economist is saying that the Federal Government should endlessly print money.
What we are saying is that printing money (and btw all US dollars currently in existence have been created from nothing, and surprise there's no problem) by itself does not cause inflation.
Inflation happens when demand outstrips supply.
If supply increases with demand, there is no inflation.
If you think that money creation or deficit spending will lead to inflation, then you are saying that the US economy is at full productive capacity and could not produce any more than it is.
Which is absurd.
7
A sovereign government is fiscally responsible when it provides enough sovereign currency to employ all the resources available without inflation.
Inflation is low and we have a lot of unemployed resources. More dollars are needed and they should be provided. The deficit isn’t the issue.
6
The deficit not being a problem today is deeply connected with secular stagnation. Global interest rates are low not because central banks have forced them down but because there's a persistent shortfall of demand, the flipside of which is a global savings glut. And some of the biggest global savers are multinational corporations who have become expert tax avoiders using accounting tricks to move their profits to low tax countries. That's one major reason the corporate tax cuts predictably did not boost investment spending: After-tax profits, at least for US corporations, reached a record peaked as a share of GDP in 2012. well before the corporate tax cuts took effect. As a result government deficits in today's world are not going to crowd out private investment or cause interest rates to spike higher as was the case back in the 1980s. Nevertheless, there's still a good case to be made to finance new government spending with tax increases on the wealthy and the corporate sector. Taxing the wealthy to finance spending is better than simply issuing more debt because it serves the important purpose of restoring tax fairness as well as addressing income and wealth inequality.
7
Mr Krugman,
You might be right about the deficit hitting $1 trillion isn’t a priority right now, but what about when the next recession hits and tax revenue plummets?
When the next recession cycle hits, we will want to take steps to lessen the blow of the downturn with interest rate cuts on the monetary side and fiscal stimulus on the fiscal side and as it stands, neither our monetary nor our fiscal situation currently is prepared. There is little more to cut on the monetary side and is continually made worse by further cutting in vain attempts to avoid a recession. The fiscal side is looking even worse. We are running $1 trillion deficits in an economic expansion that will quickly balloon as tax revenues drop in a recession. Will $2 trillion deficits matter? How about $3 trillion with stimulus spending?
The cost of servicing this fiscal irresponsibility in good and bad economic times is bleeding us out and will prevent us from using our fiscal policy for the good of our nation, at least on any sustainable level. When the economy is securely expanding, we need to be fiscally responsible so we can use our fiscal tools when the economy turns sour and right now we aren’t doing that and at some point, this will become apparent to everyone it is unsustainable and require extreme measures everyone should want to avoid.
6
This has been the Republican game plan at least since Reagan.
And they are more than willing to take advantage of any and all who trust them.
It’s called a con, and Americans keep falling for it over and over again.
Americans love to hear “tax cuts”, and the Republicans keep promising them.
What Americans haven’t figured out is why they don’t feel any relief considering all the tax cuts that keep passing with Republican majorities.
Don’t worry people, someone is getting thst money.
24
Welcome to the grand illusion come on in see whats happening, pay the price get your tickets for the show.
4
PK notes that the media leans conservative when reporting economic issues. One likely reason for this that readers and advertisers of, say, the Wall Street Journal and the New York Times business section are largely corporate managers and Wall Street types. It's also in the interest of the writers and reporters to be circumspect about "anti-business" and pro-regulation or pro redistribution stories since they want access to sources and want to cultivate a following.
15
@JNC
Not only that, but look at all of the featured attendees at, I don’t know, the Times’ moneyspinning Deal/Book or Tommy Friedman’s Next New World conferences.
Andrew Ross Sorkin plays the left winger on CNBC’s morning Squawk Box, but is only providing convenient cover for Trump cheerleaders Joe Kernan and Jim Cramer, not to mention Cramer’s former broadcast partner, now Trump’s non economist Economic Advisor Larry Kudlow and frequent cosseted guest Peter Navarro.
1
I disagree with your promoting the concept of free universal child care, but it doesn't much matter because with the current (and growing) deficit there will be no money to pay for it...we will need all the dollars we can find to deal with climate change and are aging infrastructure...hopefully there will be some way to make health care, health insurance, child care, college, housing, etc. more affordable, but, please, stop with the "free" and "cancelling" student or medical debt...
5
@Jim
You are right that climate change is a huge challenge. I'm not sure how (if?) we will get through it and Krugman doesn't speak to it much. But the rest of what you say is playing into the modern Republican cry of "CUT GIVEAWAY PROGRAMS (so we can give the money to the rich instead)". Read what Krugman has to say a little more carefully and pay attention to how Republican policies (starting expecially under Reagan) have turned a prosperous nation with a large middle class into a nation with a rapidly shrinking middle class and an increasing split into the rich and the poor to very poor. Republican greed is paid for by making enough people angry about racial, religious, social policies, etc that they will vote Republican even though they are being robbed blind. I am very sad for what was once a pretty good country.
35
@Jim What are our priorities? Policies to help ALL children, or tax cuts for the super wealthy?
3
Then let’s boost the minimum wage enough so people don’t need the free stuff.
1
Keeping Americans poor and in debt is a core Republican value. Social programs are not denied due to lack of money. They are denied because a well fed, well educated, healthy population would have time to look up and see the Republicans for what they are. Mean spirited, anti-democratic power-hungry individuals who never cared two hoots about them. Democrats are no angels either but at least marginally better.
266
@Anish This is the most important comment that I have read here today, because it cuts right to the very basis of republicans' attitude toward social programs, and so clearly shows what republicans think of their fellow Americans.
16
@Anish I really hate it when a relatively benign comment is spoiled by the "bothsidesdoitism" thrown in at the end.
If you feel that the Democrats are nearly as bad as Republicans, make your case with facts rather than such a bland insult.
I simply do not see anything in Democratic policies that intentionally harms people, the environment, or national security. In the big picture, at least, the Democrats are on the right side of most arguments.
6
@Anish
Except their supporters just don't care, which is why they are supporting an actual traitor who now sits in the White House. Even their poor supporters don't care.
1
As many predicted, the 2017 GOP tax cut has had little effect on most Americans. My back of the envelope calculations (I'm not an economist) is that the tax cut came to about six thousand per taxpayer. How many families have gotten their 12k? How many realize that if they didn't, the difference went indirectly to those with much, much larger incomes? I guess it has become standard that when a Republican becomes President, there will be a transfer of wealth from the US Treasury to the few. The GOP clamors to pay for the subsequent loss of revenue by cutting programs and benefits for the many and less fortunate. Selective deficit hysteria indeed.
49
It has had a big negative effect on those of us in many of the blue states, local and state tax payments were no longer deductible from federal taxes. Most of my family were hit by the removal of those deductions.
In the future (if we survive this as a united country) any Republican, except John Kasich, talks about the deficit reduction, their words will mean nothing to me. They have proven themselves to be not worth listening to.
18
@don healy $6000 per tax payer? $12,000 per family? Post a scan of your back of the envelope calculations somewhere so that we can study them. True for a very small number of tax payers, false for most of us. Of course we know where the money went. To the Trump family, Mnuchin, DeVos, the Kochs (dead or alive) and their friends etc. More yachts, more private jets/helicopters, more apartments/flats in NYC, Paris or London. And ranches in Southern Chile or New Zealand. Safe places to observe the coming Armageddon in a detached and bemused way. Nothing more than the proles fighting each other Dear.
For the rest of us:
"Venez orages désirés" (Chateaubriand)
(Come wished for storms)
3
@don healy
Even in newly deplorable states like mine, PA, taxpayers took a huge hit. My federal income taxes have gone way up, not down by 6K, and I am sure there are plenty of us in that boat.
4
The national DEFICIT is now approaching twenty TRILLION dollars! That's nothing to get hysterical about, but at some point, don't we want to work on reducing that?
The VAST majority of the federal budget is basically NON-discretionary: Social Security, Medicare/Medicaid, unemployment insurance, etc. Add in the interest on the federal debt, as well as the fact that the military budget is considered sacred (although it is in fact discretionary), and you have maybe 20% of the budget available for things like foreign aid, education programs, housing assistance -- the things that many Americans assume are eating up the budget.
The amount of money to be saved in the discretionary portion of the budget (referred to as nondefense discretionary spending) is for all practical purposes insignificant. Actually, it's only about twice the amount now being spent on servicing the debt.
We have more wealth than any country in the history of the world. To be squabbling over how to pay for things is a political argument, not an economic one.
9
@Miss Dovey
What about closing loopholes for the rich and corporations, as well as corporate subsidies, which in 2018 were 100 BILLION dollars. No one talks about those, because most are jammed into the budget when congress needs to take some money back to their state.
If you instituted a more progressive tax, then ended the loopholes, and ended the corporate welfare, there would be more than enough money. As a citizen I deserve to get a return on my investment in this country via the taxes I pay, at all levels. Look at your cell bill, or your cable bill, there's a federal tax levied there, gas it's .48 cents per gallon.
The thing you list are the items they want you to list because those are the programs they keep hammering on, forget the 3 trillion dollars in the social security trust fund, yes it has a 3 trillion dollar surplus.
There are literally hundreds of billions in lost revenue just from making sure the rich, and corporations pay their fair share of the tax burden. As I said 100 billion last year alone in corporate welfare. What that means is, we spend 59 billion a year on social programs, we give corporations 100 billion in subsidies. I think that's a little too much, they want my tax dollar, but get 100 billion MORE. To run their company.....amazing.
6
@James
I don't disagree with anything you said. I'm for all the things you suggest. For that matter, why not cut the defense budget? Every year, the Pentagon gets MORE money than they requested. Why? The Congress critters want to bring the pork home to their districts. My point is, we ALREADY have more than enough money to pay for social programs, but due to the rigged tax and budget incentives, we are forced to squabble over a few crumbs. Power to the people! Vote!
1
@Miss Dovey
Sorry, obviously I meant national DEBT, not deficit. I get so riled up, I confuse myself sometimes!
1
The question, professor, is when will deficits become a problem in your opinion?
The republican tax cut was hypocritical, but the problem is there is no political will from either party to cut spending and/or raise revenues. So deficits and the debt will continue to grow to unmanageable levels pretty soon. If we happened to live in any other country whose dollar wasn’t the global standard, then our debt to GDP level would be catastrophic.
No one here will argue against the necessity of deficit spending in tough economic times, but we should at least have balanced budgets in periods of bounteous growth. We haven’t done that, and future generations will therefore suffer.
10
Last time I checked there were several candidates who were proposing raising taxes on the wealthy.
26
Yet interest on long term government debt is at historic lows. The market has made it’s judgement.
2
@Old Max
It's not the market but the FED that is keeping rates low.
According to the FED, “During the 2007-08 financial crisis and subsequent recession, total assets increased significantly from $870 billion in August 2007 to $4.5 trillion in early 2015”. Under the subsequent normalization program “between October 2017 and August 2019, total assets decline to under $3.8 trillion. Beginning in September 2019 total assets started to increase”.
Not much normalization. Those assets primarily reflect bonds purchased by the FED to lower interest rates and provide liquidity to financial markets. It is the FED not the market controlling rates. And now, after jawboning by President Trump, they are un-normalizing and lowering rates.
3
"partly by improving the lives of children in ways that will make them more productive adults."
Please sir! Our concerned, friendly Republicans can't delay gratification much longer than a daily options trade!
Politics is vying. To them it is war, and
their moral leader appears to be Shih Tzu who stated that, "All warfare is based on deception. "
Roosevelt referred to the Judeo-Christian ethic as our political ethic. But, it was trumped in recent years.
26
Krugman makes an excellent point here: Democrats should use the tactic that Republicans use to justify their tax cuts: social programs pay for themselves. And with a straight face. Over the long run they give society the economic benefit of a healthier, more affluent population.
Take social security for example - what would society be today if it had never been enacted? If we did not have Medicare? Imagine the costs of having millions of sick, desperately poor elderly people.The economic absence of their income spending alone would be severe.
There is no doubt that social spending pays for itself, both economically and morally. And the claim that it does is not mythical, it is real and measurable.
216
@Paul W. Case Sr.
People can get a sense of what society was like before Social Security by watching Hal Roach's "Our Gang" series from the 1920s and 30s. It often featured widows on the verge of starvation or losing their homes.
11
@Paul W. Case Sr. A year ago my 88-year-old father fell down the stairs in his home. He survived with 11 broken ribs and a fractured pelvis and femur. Four days in the hospital cost $68,000; a month in rehab another $12,000. My sister and I, who live/work out in different states, had to take 3 weeks off from work for the initial event and have since incurred thousands of dollars of hotel/airfare expenses getting Dad situated into assisted living in one state while selling his home in another, and attending to subsequent health setbacks. Had it not been for Medicare, Medigap, and paid family leave, we would all be broke.
9
I forget, does the Fed print money for the government to borrow or does the Fed print the money which the government has already spent?
5
@Milo , Probably both.
Well stated, PK.
In fact let's start framing progressive social programs in terms of their residual benefit to the one-percent. Using the inverted pyramid as a model we'll refer to the effect of social programs on the one-percent as trickle-down socio-economics. A rising tide lifts all yachts. We'll point out how social programs create countless administrative, legislative and lobbying jobs.
11
@Aristotle
Good idea. And we can talk about how it is all about providing a healthy labor supply for their businesses.
But perhaps we should differentiate the approach and call it trickle-up economics. Then we don't have to invert the pyramid - I am sure they want to stay on top
2
@Rocky , Metaphorically, gravity causes trickle down.
By putting them at the metaphorical bottom, they get a better chance to catch the drip.
Much of the media fails to understand both economics and history. The Great Depression was started by bank failures but fed by conventional wisdom balancing government budgets which dried up necessary liquidity. The 1937 slump was caused by FDR taking his foot off the gas too soon. The Very Serious People deliberately ignore this.
10
@Old Max
For the only state that I have studied in this regard (Louisiana, because I was born and bred there) agriculture was in a deep depression before banks started to fail. In Indiana where I now live the state parks and forests were begun because the areas had been logged off and farmed out so the state bought the land to rescue the farmers. I have also read about a "dust bowl" further west, begun before the banks started to fail.
It's too complicated for me to understand the depression, but banks failed after other failures, not before.
4
The agricultural depression contributed but was not the major cause. The lack of liquidity sucked the oxygen out of the economy.
@Old Max
Absolutely right. Thank you!!
A trillion $$ here, a trillion $$ there, pretty soon we are talking about real money. With this now so easily the norm, Several economic and political events will sooner or later occur: interest rates will rise, causing ever more borrowing to cover the debt; federal spending will never, ever be reduced because politicians are not in the scrooge business of denying that to which people are accustomed; tax increases on the rich (Hip Hip Hooray) will always be eaten up by more government spending (See National Security Needs, People Needs, or any Elizabeth Warren post-it note); a recession/depression will make the debt unserviceable because spending will never, ever be reduced; abrogation will begin with debt held by “foreign interests” because they made us borrow the money; partial abrogations will further increase interest rates, adding to the difficulty of rolling over the debt; in the end game the Grim Reaper of debt abrogation and financial collapse will come for thee and me. All of the above have happened in many places in many times.
6
More spending isn’t always bad. Spending on the right things can actually stimulate the economy and bring in more tax revenue.
8
@Smilodon7i Unfortunately, more tax revenue will guarantee more government spending, not moderation or debt control. Will not matter which political party is in “control.” There is no constituency for budget restraint in the United States.
2
We can’t simply slam the brakes on all spending. That will tank the economy quick. So we should spend on that which we get more bang for our buck. When we spend on social programs such as social security and Medicare and Medicaid, not only does it help our own citizens, but that money stays right here. It gets spent in our own communities. This is good for everyone. And it’s good for the government too.
While I agree with most of the article, particularly how two-faced conservatives use it as a whipping boy to flog proposals to spend more on social programs, I disagree that the size of our debt is benign. It now exceeds our annual GDP.
Our economy is healthy, but only with substantial expansionary monetary policy and fiscal policy – low interest rates and the huge budget deficit. What happens when a crisis, say trade issues, a war, or some other unforeseen crisis arises – arises? We have no tools left to counter it.
Interest payments in FY2018 were $393 billion, or 8.7% of Federal outlays, with an average interest rate of only 2.5%. With the Federal debt now at $2.3 trillion, each 1% increase in debt increases the budget deficit by about $230 billion. If the interest rises just to 5%, certainly a possibility, that would add another $575 billion per year to the budget deficit, compounding the deficit and budget issues.
Further, the increased borrowing would likely increase borrowing abroad which keeps exchange rates down and costs jobs.
Finally the large amount of debt held abroad, by China and others, over $6 trillion, presents a real national security issue. They have the power, which hopefully will never be used, to bankrupt the United States.
The huge budget deficit compounds the issues of protecting the economy, increased deficits and debt from higher interest rates, the loss of job, and national security. It is not benign but a cancer.
16
@Rocky
I agree, but Krugman is not saying the deficit is not a problem; he is saying it's nothing to get hysterical about. I actually don't know what his bottom-line opinion about the deficit / debt is.
10
@Rocky
P.S. I think you meant the national debt is now about $22.3 trillion. About 10% more than 2018 GDP of about $20.4 trillion.
1
@Rocky If we, the USA, go to war with China and defeat them ... are we then largely out of debt. Voila ... problem solved ... right?
"When progressives propose new or expanded social programs, they face intense media scrutiny bordering on harassment over how they intend to pay for these programs. Republicans proposing tax cuts don’t face anything like the same scrutiny; they are seemingly able to get away with blithe assertions that tax cuts will pay for themselves by boosting economic growth"
The answer seems obvious. Progressives should simply state that their new programs will "pay for themselves". Let the other side prove otherwise.
76
@oldchemprof This is essentially what Bernie Sanders says when he talks about single-payer health care. The argument is that the increases in taxes to pay for universal health care will be balanced by the reduction in health insurance expenses most Americans now pay.
18
It also improves productivity and consumer spending.
8
@oldchemprof
This happens because so much of our media has consolidated around a few conservative corporations dedicated to limiting taxation, PLUS the fact that those same media giants don't dare cross their white working class viewers who only approve of government spending when its heaped on the military.
8
Yes, but everyone knows deficits are caused by welfare programs like social security, medicare, medicaid, etc. It's time to get serious about some serious cuts--smaller government is the best government (except when we need it to bail out the banks and needy rich folks).
4
@JB No, our current deficits are not caused by Social Security, or Medicare/Medicaid. Those programs are funded almost entirely on payroll taxes and earned interest and their trust funds will be solvent through 2034 and 2026 respectively.
2
They’d be solvent a lot longer if there wasn’t a cap on income subjected to the payroll tax.
6
@JB , "(except when we need it to bail out the banks and needy rich folks)." Your point is right on.
1
My face has turned blue, not because I need oxygen, but because I've railed against the double standard until now I am blue in the face.
It's not just the tax cuts, which were rammed through Congress so fast that there were handwritten notes on the bill. Or Merrick Garland. Can you imagine what would have happened if the Democrats did that? I'd hear the screaming here on the West Coast. And I have bad hearing. All the years I heard the Republicans say the Democrats are soft on communism (now calling them socialists, but Socialized Defense is just fine), when under DJT roads and a few flyways lead to Putin.
HRC's email server when uh Ivanka and Jared had email problems.
Calling the House Investigation illegal, when DJT violates Artilcle II every time he fails to enforce the ACA, a law of the land.
Thanks, Dr. Krugman, for calling these people out. It's been long awaited.
409
@Mike S. Yes Dr Krugman called them out but the American people must apply the real cure by voting to defeat as many GOP members as possible.
17
@Mike S. The Merrick Garland saga was a slap in the face of the people. However the people were OK with that and voted the party back in come Nov 2016.
Till the people do not respond appropriately these are ultimately their fault.
7
The deficit doomsday crowd may have been mostly right for the wrong reasons. One of the few ways we have to restrict government bloat or worse is to insist things be paid for contemporaneously. This also prevents endless pandering by politicians to cut taxes or give away free stuff by borrowing, painting their opponents as Scrooge for saying such generosity, almost always targeted at loyal or swing voters, is a bad idea.
In a recssion, a major war or other emergency, this is not always possible, but it should be a goal for the sake of our political system.
Some of our "well spent" tax dollars are circulating passenger-free diesel buses and providing rebates to buyers of luxury cars in the name of environmentalism. Many of those luxury car buyers just got a giant tax break just for being rich. More pressure to balance the budget might have prevented or at least reduced both of these abuses.
6
@Alan
The deficit doomsday crowd is a bunch of hypocrites. How do you deal with that?
One of the things you need to do when you mention "government bloat" is to point to it. A few million dollars here and there, as you seem to be saying, don't amount to a hill of beans. (Quotation.) I don't know what "circulating passenger-free diesel buses" are, and I'm not sure what legal provision gives rebates to buyers of luxury cares, but these seem small. You could start by mentioning a trillion-dollar military boondoggle, if you can see it; that would be helpful.
1
You suggest that tax cuts and spending are much the same thing. In budget terms they are. Yet they are totally different in how they impact people and impact the economy over time.
Tax is a personal issue whereas spending is a societal issue hence in constant conflict. Tax is a moment in time while spending typically goes on and on.
The next Democrat President will raise taxes and increase spending. Once done it will be easier to cut taxes than reduce that spending.
In Australia we have lots of free stuff and subsidised stuff like health, education, child care, pharmaceuticals, maternity leave, national disability scheme and on and on.
Yet people still complain, while taxation goes through the roof with a highly progressive tax system at low thresholds. The spending never stops and while we're promised tax cuts they're 4 years away and our economy is in worse shape than the US.
Mind you, fortunately I guess, we don't have Trump.
5
They all spend. They just spend on different stuff. Republicans spend on defense while Democrats spend on social programs. The difference is the Republicans refuse to raise taxes even on people who are very wealthy, putting everything on the national credit card. So when the Dems get in to office and the Republicans start screaming about the deficit again, they have to raise taxes to help cover both parties’ spending.
10
@Paul
None of your comment means anything without numbers. If you can find me 10% of Australians that ever thought their taxes weren't going through the roof (or already on the roof), I will consider that phrase might begin to be meaningful.
2
@Paul
Borrowing money to spend on tax cuts is no different to borrowing money to spend on infrastructure or improved education. It still increases the debt.
In Australia, we had the same ranting by conservatives about the debt and deficit "crisis". Then the conservatives doubled the debt and suddenly there was no problem.
Then recently, the conservatives gave Australians tax cuts (from borrowed money). They were supposed to stimulate the economy and pay for themselves through increased investment but did not.
The Australian economy is tanking because the conservatives now insist on government budget surpluses. The Reserve Bank of Australia has warned that without government stimulus, the economy will go even lower but the conservatives somehow think that a budget surplus will solve our problems. It seems that the conservatives want to create surpluses now so they can better deal with the recession they are causing now by insisting on a surplus(?????).
So, in Australia, the conservatives are just as muddled and duplicitous about debt and deficits as are the American Republicans.
If governments are going to borrow, then they should be borrowing to benefit society and the economy. Spending on social programs and infrastructure are much better for both than unproductive tax cuts.
9
Budgets and deficits are about priorities. Borrowing does require using budget dollars to pay interest to the holders of Treasury notes.
If the debt is incurred to invest in a future good like infrastructure or renewable energy that will generate a positive return, then it is good debt. If debt is incurred so that corporations can buy back their own stock to reward their investors rather than investing in growth opportunities, it is not good debt.
It is becoming clear to me that so much money and power centralized in Washington DC is having a corrupting effect on government. The absolute best investment today anywhere based on expected return is buying a US politician.
This is the trajectory of all great powers in history. But the United States does have a structural advantage in avoiding this fate, in the powers granted to states by the Constitution.
Devolving more power to the states and reducing the centralization of tax revenue by the Federal government could make a difference. Both Red and Blue states have good ideas for programs like Medicaid. And states like KY and WV that become overly dependent on Federal transfers never face the weaknesses in their own governance.
If this can be done be done peacefully, instead of through another Civil War, we might survive longer as a country.
7
I doubt that will help. We will just have the same thing happen in 50 states. And some stuff really can’t be done well on a state level. You end up with fifty different solutions to one problem and those solutions won’t always work well with one another.
6
@Look Ahead
Gotta disagree. Many states are gerrymandered so heavily, and have the wrong partly so entrenched, that giving them the money back will only lead to the oligarchies there becoming more unassailable.
Concentrations of wealth and power DO corrupt, but Madison was right--smaller governments are more likely to become the scenes of oppression than larger ones.
The country has experienced a loss of morality in the last 40-or-so years because of the efforts of corporations, the wealthy and mainly conservative lobbyists to hobble the powers of the federal government--and because conservative politicians (and "new democrats") have enabled them. The corruptors are actually the same people trying to DIS-empower the federal government, NOT those seeking to empower it.
But because of the heavy skepticism about the federal government, even Clinton and Obama seemed radical and dangerous to a lot of Americans, even though they didn't (or weren't) actually able to do much to limit the hobbling of federal power.
But you're right in a sense, because my argument doesn't stand a chance of winning over people in the Red States.
Having said that though, I would argue that if you give places like Texas the direct control of a portions of federal revenue, they just MIGHT try to secede (again). Federal power over the purse may be one of the view things that still holds the country together!
2
It's politics, not economics. Republican strategy is to slash social programs to create malaise which gives them an opportunity to cast blame on minorities, immigrants, secularists and various "others". They claim that voting for the GOP will cure their ills though the magic of the marketplace because the marketplace is what built America.
Democrats attempt to create programs that will help those who are suffering, which the Republicans then always oppose. They oppose them because they are afraid that any improvements caused by these programs will cause people to vote Democratic. The age old excuse of socialism is used and voters interpret that as a reduction of freedom, regardless of the anticipated benefits.
So far, the Republicans have been winning this battle. The press is caught in the middle and keeps talking to whomever is the hottest talking head at the time. The public? They are too busy with Facebook to get interested in macroeconomic policy.
96
@Bruce Rozenblit
You're repeating the obvious, as you know, and it is apparently hidden from most of the people, as you also know. Why is it necessary to repeat the obvious for decades? One reason is that the press is not in the center. It is slanted towards "free enterprise", by which they mean government that aids business (and that means big business, mostly) instead of people.
6
I wholly agree with you but let’s make it clear that Dems are both caring and also “buying” votes with their programs.
@Doug Stone
People who promote programs that do good for the people are naturally going to gain votes. Calling that "buying" is confusing the issue.
6
The observation by Paul Krugman is true that there is a media bias by which reporters readily accept budget deficits caused by cutting taxes, although the same reporters ask tough questions when deficits are planned to pay for social programs.
Putting aside the equally true perception that there is a selective hypocrisy of Republicans who only oppose budget deficits when Democrats are proposing the shortfall, how do we explain why moderate reporters and journalists feel qualified and compelled to treat taxes and spending differently?
The only explanation is that even apolitical people like the idea of reducing taxes, and they buy into the old trickle-down argument. The same people, however, believe that government spending is wasteful, until proven otherwise.
Putting it another way, a tax cut and the pleasure of it occur immediately. The dreaded spending bill gets enacted, but any benefit from it is delayed, or limited to one sector of society or arguably of marginal social value.
Republicans play the voting public and non-expert reporters like cheap violins on these issues. Democrats have to do better.
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You're so right Paul. The "DEFICIT" is a monster made up by Republicans to scare Americans, and justify their slashing social programs. And thank you for calling out the MSM as complicit in these "Grim" Fairy Tales.
"When progressives propose new or expanded social programs, they face intense media scrutiny bordering on harassment over how they intend to pay for these programs."
In fact, the MSM is pretty much clueless about anything regarding the economy and its impact on most people. Their continued use of the "unemployment numbers" as an indicator of how well the economy is working for the middle and working class just underscores how clueless they are. As I've often said: the "unemployment" in the South was almost nonexistent prior to the Civil War, but how well would you say the workers had it? When will the MSM - including the NYT - start reporting on the wages and benefits, and hours worked, and length of employment? These are better indicators of how well workers are doing. We've transitioned from steady, reliable, 40 hour/week jobs that had pensions and other benefits, to at-will employment, having to work several part time jobs, no pensions, no benefits, and if you don't like it, there's the door. Meanwhile the "unemployment numbers" are at an all time low. What could be wrong?
Sadly, since this has been going for 40 years, there are a lot of workers who don't realize what they're missing. It's up to you and others in the MSM to clue them in. Thanks!
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@Kingfish52
Almost every state has always had at will employment. However pensions and steady hours have been drastically slashed.
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As a Canadian who knows that our health care costs (public+private) run about $5K US, and that your equivalent is $11K - for worse outcomes - I have a proposed answer for Elizabeth Warren on that Question of Questions:
"Wrong Question: you should be asking me, 'What are we going to do with all the extra money?'"
When challenged on this being unresponsive and debatable, she can haul out their non-response to Ryan's budgets and say she'll answer the question completely to any reporter that did ask about how tax breaks would be paid for, and pressed upon it - but the question will be answered privately, so that the diligent reporter can have an exclusive scoop.
I wonder if anybody will be able to claim the scoop. Anybody.
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@roy brander - If Canadians paid a bit more per capita for their health care, it most likely would not have some of the problems it does have. But, yes, I'm tired of the fact that whenever Warren is asked about how she proposes to pay for her health care plans, everyone--including apparently Krugman--speaks as if we aren't already paying more per capita than any other country in the world, with--still--millions uncovered and, in many cases, poorer outcomes than those other countries. What we need to figure out is the transition from how it is done now to a modern universal health care system. The money is there because it's already being spent by the bucket load. Now how do we proceed?
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@Annie
" Now how do we proceed?".....
First, simply by not calling it "Medicare for all", at least in its current form. We spend $268 for Medicare Part B premiums, $62 Medicare Part D premiums, and purchase secondary insurance for $730 month. Despite this, there is still a copay for virtually all services and prescriptions while, combined, both plans do not pay our family doctors and specialists enough. This is not what we want.
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@roy brander Brilliant! Thanks
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This is a GREAT article and Paul is right, the problem is selective hysteria about deficits.
There is obviously a powerful need to start taxing the 1% properly, as America did in the past (hello Elizabeth Warren). But, there is an equally important task which must be addressed - restoring strength and integrity to your IRS!
Even if it proves impossible to restore tax rates to where they were in the past (when Americans were both fully employed and wealthier) you can and must staff the IRS adequately so they can go after the rich. This is a simple administrative matter that an incoming Democratic President could do immediately.
Then the IRS could re-start serious audits on rich American citizens (the 1%) - and raise billions.
This is a simple, cheap step in the right direction. An incoming President could send an unambiguous message to the tax dodgers and start repaying debt by this one simple measure.
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@Elder Citizen Its a good symbolic move. But it won't make much of a dent in the deficit.
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@Bananahead
That may not be true. All we know is that tax cheating (this includes marginally "legal" evasion) by the billionaire class is rampant.
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It’s still the right thing to do. Why should wealthy cheaters get away with it while the IRS audits the poor?
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No one has mentioned that the interest on this debt will be significant. We must pay the interest and that is real money. Our ability as a nation to borrow depends on meeting our financial obligations.
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@Jerry Place
And the interest on the 30 year treasury bond--the rate the government pays to borrow--is what, exactly? Oh, right, 2.15%. And current GDP growth would be? 2.3% annualized for the most recent figures could fine. Since government income growth should match GDP growth, all other things being equal, this would mean the government is getting paid .15% to take money. It is, in other words, basically free. If I offered to pay you .15% to take my money, so you could invest it in productive activities like education or infrastructure, would you turn it down? Really?
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I agree that the media takes a conservative view on budget deficits. That same media is largely white, raised in middle class or higher homes, and skews male: a group that is broadly conservative on financial issues generally.
We need a more diverse media, with a multiplicity of experiences and perspectives. It would make for better reporting that offers more voices and enriches us all. (And it's the right thing to do; Paul Ryan is proof positive that mediocre white men are celebrated for too little, too long.)
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@Jennifer - Perhaps. But don't forget that "tax cuts" are celebrated my most Americans and promises of cuts have played a large part in the election of Republicans. It isn't just the politicians who are responsible--it's also we, the people, who elect them.
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@Jennifer The media are also employed by big corporations who love their big tax cuts. If you don’t believe the news is censored I have a bridge to sell you.
"...But the deficit wasn’t a crisis then, and it isn’t one now. In fact, leading economists are now telling us that concerns about government debt have been greatly exaggerated all along..."
Paul, seriously? Did you really write the above? Where does this end? the trend in our deficit spending can only end in bankruptcy or a total implosion to a failed state. Even I know that that this is beyond voodoo!
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@jwillmann Sorry (not) but you know no such thing. The country paid off huge debt after World War II by taxing the rich and improving the productivity of the population with veterarns benefits and government spending to improve infrastructure. We can survive the Trump deficits in much the same way.
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@Steve Norski: This reply and jwillman's comment say it all. We are presently in a political crisis where Congress and the President don't make responsible fiscal policy. If these deficits continue and are covered by debt, we will pay for this debt in the long run as payments become a larger and larger slice of the federal budget thereby crowding out important budgetary items. So the U.S. is racking up this debt with the "HOPE" that we will be taxing the rich enough to cover the bill. Unless Bernie or Liz can become the dictator that Trump wants to be, that is not happening anytime soon. Stop fantasizing about how you wish our system would work and observe reality: Without political compromise, taxing the rich to make a dent in the debt will not happen. Both parties have been taken over by ideologues--and there is a substantial risk that these problems are among many that will not be solved.
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@Steve Norski
The country reduced the debt rather than paid it off after WWII.
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Re: Paul Ryan. There's something seriously wrong when supposedly serious people take Ayn Rand seriously.
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@CJ Ryan bailed on Rand on account of her atheism. Too bad he didn't bail on her notions of economics.
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@CJ
Rather than taking my political and economic philosophy from Ayn Rand, I prefer Clive Cussler. Equally as relevant and much easier to read.
Paul Ryan, if you are reading this, try Alastair McClean.
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@CJ Especially if they're over 25.
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Great Article Professor. You are my favorite writer.
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So then when should we care about the deficit? Should we just ignore it entirely? Does it not matter that we spend more than we receive?
How will we ever be able to take on mass infrastructure projects if we are already trillions in debt? We need to watch our spending now so we can spend more in the future.
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@JMA Domestic debt is mostly money owed to ourselves, as Professor Krugman has noted.
Foreign debt is a bit different, but the US isn't Argentina or Greece, no one is going to be able to threaten us militarily into paying, and few countries would want to cut off trade ties or other such measures to do so.
Basically, the US Government is the borrower that can beat up all it's creditors when they come to collect, for better or worse.
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@JMA Krugman has made this point over and over again. If you want to work on deficit reduction, you do it when the economy is growing and unemployment.
If the republicans were serious about deficit reduction, they would have done this when Trump came into office instead of introducing gigantic tax cuts for the wealthy and corporations, justified by a supposed need for economic stimulus when in fact no stimulus was needed. The tax cuts predictably ballooned the deficit, as Krugman pointed out. Instead, as soon as Barack Obama came into office, when the country desperately needed economic stimulus the republicans whined and moaned about the increasing deficits - almost all of which were caused by automatic responses to unemployment (increased unemployment compensation, social security payments and applications for supplemental food assistance). That was the correct time for fiscal stimulus. The fact that all of that was political is obvious from the comparison with the situation today with a republican president, but also from the fact that McConnell and other republicans made it clear - I mean they said it out loud to the press - that they would do nothing to help Obama get anything accomplished.
It's hard to believe that you don't understand this. This is why the Fed had to step in with extraordinary measures like quantitative easing and Bernanke said at the time it was because further fiscal stimulus was unlikely to be forthcoming (obviously because of politics).
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This is elementary. worry when times are good. eg. Trump squandered the best time to address the deficit will a tax giveaway to those who need help the least. But Trump is now asking to lower interest rates from the feds, something's ng for only when times are tough. Bluntly, Trump does the opposite of what's indicated to try and cover for his mistakes and give our chance at getting something from the recovery from the great recession to the wealthy in yet more tax cut proposals and cutting the safety net.
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Not a tax cut, if costs / budget deficit increases. In this case, we are dealing with a gigantic loan taken out and given primarily to the wealthy and corporations, who in turn will continue to bribe politicians so that they continue to pay less and less. It’s a horror story for the middle and upper middle class.
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It’s not fun for the poor either. They don’t get much from tax cuts while they see services they desperately need get cut. The only ones who benefit from this are the wealthy.
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