*************************** *In most societies today, conspicuously including ours, there is a group of people for whon effective governmebt is the worst thing possible. Members of this noisy group are rich beyond reason, and Donald Trump is their posterboy. In fact, they do not need government because they are rich enough to command mercenaries for protection, legal and heathcare needs and to fuction as cannon fodder for their various get-rich schemes. Look at the multiplying criminal inquiries Mr. Trump’s private and public life have spawned.
There is a much larger group of people to be found close to the first group, supporting them and in fact enabling them to do their shady dealss and profit-making schemes. This group is made of not only the Michael Cohens of the world but every voter who happily votes for Trump, Cruz, Moore and company. These people do need the government when the naural disaster strikes, or their homes catch fire. No matter, they are certain that government is evil.
The Trumps of this world will get nowhere without the Nichael Cohens and the hordes of enabliers. It is not difficult to see why the Trumps do what they do – there are fortunes to be made. What, though, is there for the average Joe in it?
6
"It has taken the news media a very long time to appreciate the greatness of Nancy Pelosi, who saved Social Security from privatization, then was instrumental in gaining health insurance for 20 million Americans."
You mean instrumental in passing an unconstitutional law? Look how she dodged and weaved under questioning from David Gregory:
https://www.youtube.com/watch?v=gw3yoyIw3oM
That's how you define greatness, Paul?
2
When historians of the future look back on the rise of the far-right in the 2010s in the way we look back at the 1930s, austerity will take the place of hyperinflation as an economic philosophy so wretched and terrible that it led people to vote for people like Trump and Salvini. Ironic, given that the philosophical roots of the debt obsession are based in fears that inflation would lead to the rise of a new Hitler.
2
The question is, why do you still suport corporate Democrats? You want healthcare for all and a Green New Deal? Back the progressives you derided as BernieBros! All your economic wisdom shows that the democratic party is part of the same plutocracy the republitards hold dear.
3
It's rather like a yoyo. Dems save money. Repulsives come in and spend it and more.
3
It's way past time to call out the Republican lying machine.
They have zero commitment whatever to fiscal prudence or competent administration. They care only for power, unearned wealth and grinding down their opponents. The three touchstones of Republican governance are these: incompetence, graft, pandering.
And how about characterizing their "leaders" in the following ways in news articles:
Donald Trump, failed casino owner and football investor, serial sexual harasser and friend of sex offenders everywhere, spoke today at ...
Paul Ryan, pretend fiscal conservative and sycophant to the wealthy ...
Mitch McConnnell, multi-millionaire senator, obstructionist extraordinaire and connoisseur of cruelty in legislation ...
3
Dear NYT:
Given today's huge economic numbers, how can Paul Krugman justify his fact-free claim that the Trump boom is over? Oh that was yesterday's column ...
Krugman should stick with his assiduous political fawning, such as this puffery on Pelosi, and leave the economics analysis to experts who pay attention ot the data, and are willing to follow where it leads -- even if it makes Trump look good.
2
According to Goldman Sachs,
“Japan’s experience confirms that a debt crisis is difficult to imagine in a country that issues debt in its own currency, has a flexible exchange rate, and controls its central bank,”
Japan has double the debt to GDP ratio of the US. The U.S. numbers are high 106% but much lower than Japan. (230%) The way Japan manages briefly is to issue debt at low interest rates which the public doesn't want but the Central Bank Buys. All profits on this debt is virtually returned to the Japanese Treasury as profits of the Central Bank. This may have a cost to Japan. It is not discussed here. The Federal Government in short can pay the interest rate it chooses.
If the government brings our infrastructure into the 21st century, moving our primary and secondary education from 63rd to 1st in the world, our nutrition and basic medical overall from 30 to 1st as measured by http://www.socialprogress.org. the democrats would have a major achievement
Some of this cost may be met by spending less on our military and spending money on other social needs. Its dubious that spending more than our six nearest competitors combined has provided the country with the welbeing they should have.
2
All we know for sure is that while Trump remains in office we can expect two more years of absolute insanity in the government of the United States. Trump is about chaos. It is almost irrelevant to talk about sensible, practical steps that the Congress might take while we know that Trump can simply refuse to sign any bill for any reason knowing he will not lose any of his current support. There is nothing Trump can do that will stop any Trump supporter from voting him next year.
So forget about government programs to make America great again in the next two years. I'm curious to see what Trump is actually going to do now that he will be confronted with reality every day, but I remain aghast that so many people seem to not understand that Trump is planning devastating action which will make all this talk about infrastructure investment and sensible budget management simply irrelevant.
Trump is going to start an "election stunt" war with Iran within 12 months. His only strategy for re-election is to run as a "war president" and do everything he can to whip up enough "patriotism" with gun cam footage to get the 1 in 10 more voters he needs to win a second term. He has 39% support. If Jill Stein runs again, he will probably need much less than 50% of voters to win in 2020. Think about that. He is going to throw the world economy into total chaos and that will actually make him more popular.
Trump needs to be stopped! Now! Babbling on about bridges is just wishful thinking.
3
The really sad part of this article is the poll section where most people think the republicans are better at handling the economy/budget…with all evidence being the opposite. How could anyone miss the huge deficits under the GOP and the near total financial meltdown 2008.
https://despair.com/collections/posters/products/perseverance?
4
Pago is not the way to go, but its time for Democrats to wake up and face the fact that it’s a fool’s errand to pretend that people do not care about deficits and debt, and to try to convince the electorate that deficits and debt don’t matter.
A standard question in the annual Gallup surveys on the Federal Budget Deficit is: "How much do you personally worry about federal spending and the budget deficit?" From 2011 through 2014 the answer to this question has indicated that over 80% of the population worry either a "Great deal" or a "Fair amount" about this issue with around 60% or the respondents indicating that they worry about this a Great deal. Similar results have been reported by the Pew Research Center and, in fact, this sort of attitude toward deficits and the National Debt has played an important role in American politics since the 1930s and, undoubtedly, even before then.
Republicans continually beat the Democrats over the head on this issue, and they win every time. It’s time for Democrats to take this issue head on and explain the truth to the electorate, rather than continue to pretend that government is free.
We cannot have the government we want without paying taxes, and Democrats look like fools and lose elections when they pretend otherwise. Democrats are going to continue to lose elections so long as they continue this line of nonsense.
Been there. Done that. It doesn’t work!
http://rweconomics.com/Deficit.htm
3
That Republicans lie about deficit spending doesn't make it a good idea for Democrats to do the same thing. Yes, deficit spending has, in the past, been crucial to recovery from economic downturns, but how long can our economy support continuous deficits? Do we just keep going ad infinitum? The moment the Chinese decide to stop buying our debt, we'll suddenly see a huge increase in our borrowing costs, and have now way out but to print money. See Venezuela now for what this will do to us, or any of a dozen prior historical examples. I read that the Chinese would never do this as it would hurt them financially. Maybe so, but that's a lot of faith to put in an autocratic government, and a people willing to sacrifice their own comforts for the greatness of their nation.
Why isn't the Obama economic growth a result of the improved fiscal disciple of 2011-22015? see https://www.theguardian.com/business/2015/jan/06/paul-krugman-got-it-wrong-austerity-jeffrey-sachs
I’m surprised Two Santa Clauses wasn’t mentioned in this piece:
https://www.alternet.org/2019/01/the-gops-most-successful-scam-is-about-to-reboot-itself/
2
There’s every reason to expect that Pelosi will once again be highly effective. But some progressive Democrats object to one of her initial moves — and on the economics, and probably the politics, the critics are right.
http://www.siyasat.pk/
Tax the wealthy.
Problem solved.
www.InquiryAbraham.com
3
"Reality doesn’t seem to matter." Are we surprised in a country where so many reject the reality of human-caused climate change or the reality of evolution? https://news.gallup.com/poll/21814/evolution-creationism-intelligent-design.aspx
3
A better explanation of deficits can be found at
https://www.nytimes.com/2017/10/05/opinion/deficit-tax-cuts-trump.html
As usual, Democratic leaders adopt the Republican-lite strategy, meaning they will help Republicans and oppose progressives. I don't agree with paygo, but if they want to use it, state that it will only be implemented after the Defense Department passes a financial audit. The US spends more on its military than other nations combined and doesn't even know where the money goes. Fixing that problem would go a long towards showing fiscal responsibility. (https://www.nytimes.com/2018/12/01/opinion/sunday/pentagon-spending-audit-failed.html)
2
Since we cannot exactly balance the budget, if we do not have deficits, we must have surpluses, which pay down the debt. I would like to ask the question:
Has significantly paying down the debt EVER been good for our economy?
Here is the answer:
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.
That's 6 out of 6!
Now let's ask the question:
If we have a huge debt, has increasing it ever been good for the economy?
As a percentage of our economy, the largest the debt we ever had was in 1946. From the to 1973 we had deficits for 21 of those 27 years. The debt INCREASED by 75%. That period has been called the Great Prosperity. GDP growth averaged 3.8% and real median household income surged by 74%.
So the answer here is YES!
(If you want to raise the "Europe was Rubble Myth,". look at http://piketty.pse.ens.fr/files/capital21c/en/pdf/F1.1.pdf which shows that the out put of Europe was about the same as the US in the Great Prosperity 1946 - 1973).
So deficits have ALWAYS been necessary to avoid economic disaster although they may not always be sufficient to do so.
(Sorry if this is a double posting.)
Why not cutting the Military Budget and direct the Money into Job creating infrastructur work without increasing the debts? Even President Trump admitted that the Military Budget is crazy high.
US 640 $ BN, Japan 48.6, Germany 48.8 UK 57.9, France 61.2, Saudi Arabia 67, Russia 87.8, China 188 BN
https://en.wikipedia.org/wiki/Military_budget_of_the_United_States#Budget_request_for_FY2018
1
The income tax is outdated and unfair because the top 10% of wealth own 80-90% of American wealth pay 55% income tax. The income tax law gives numerous special tax benefits to the wealthy. Like capital gains, tax exempt bonds, dividends and depreciation, and many others. All this helps increases the wealth of the top 10%. I propose we change to a wealth tax. Much simpler, one page return, use current accounting rules to calculate assets less liabilities, no more deficits and wealthy would begin pay their share of cost of government. Example: family net worth 450K, total USA net worth $90T and annual budget$4.5B =$5,000 tax. (Math may be incorrect cell phone does not take trillions.} Pros: eliminates millions pages of tax law, opens up thousands to audit family net worth. Con: How to estimate complex financial assets & liabilities and transition. A wealth tax law would begin to give the elections back to the people and away from politicians financed by the wealthy.
1
Why not call deficit spending an investment? As a native New York Stater, I can remember, from Social Studies class 70 years ago, the history of the construction of the Erie Canal. It was called “Clinton’s Folly”, after Governor Dewitt Clinton. It became an economic miracle. Same with our Interstate Highway system. Why doesn’t the US have bullet trains? Another economic miracle was the post-WW2 GI Bill. Americans used to think big. Now we want preserve archaic coal mines.
2
A completely mechanical constraint to deficits may be much worse than common sense, but the simple fact is that common sense doesn't work. So a cumbersome limit may actually be good.
1
Austerity is the key to prosperity. In the 1990s taxes and interest rates were raised and spending dropped from 22% of GDP to 18%. The result was a massive economic boom. During the zeros, taxes and interest rates were cut, spending ballooned giving us a weak expansion, a housing bubble, then a financial crisis and very bad recession.
1
You seem to miss the fact that the House with a slim democratic majority can't pass all the progressive programs that we can imagine. The republican Senate and President must agree. Holding a line with Paygo might stop more wasteful military spending that republicans are planning.
3
i recall reading a Krugman editorial expressing concern that running a deficit during times of full employment and solid economic growth was not a good policy. so its kind of a surprise to read that a rule requiring a some fiscal responsibility is now not a good idea. cant have it both ways.
2
While I admire Nancy Pelosi, I am concerned that the intended effect of supporting PAYGO will be to constrain those who want to turn the Green New Deal from vague policy pronouncements to legislative proposals that the Democrats could run on in 2020.
2
The question before us is what do we value as a nation?
Is this country to continue to be a dog eat dog entity that fulfills the desire of the greediest among us or a place where the quality of life and human values direct our course of action.
Throughout human history, the rich and powerful have used their
resources to enrich themselves. The commoners have been peasants, serfs, and slaves. America has not changed this ageless predicament.
How can a more humane and benevolent country be created when corporations and the uber-wealthy have Citizens United to use as leverage to control politicians who pass 1.5 trillion dollar tax cuts for the benefit of the few and the detriment of the rest of us.
2
In the not so distant past, the Republicans were the anti-Russia, stop-the-deficit crowd. Now the Democrats are anti-Russia, and trying to control the deficit.
Did I wake up in the Twilight Zone or something?
1
The top marginal tax rate (income over 1 million dollars) in the 1950s and 1960s was around 80 to 90 percent.
This revenue from the wealthy was invested in low costs loans for housing, college and infrastructure (highways, sewer systems, hydro power, etc.).
This is what created the middle class that we have been losing since Nixon and Reagan started cutting taxes for the rich.
I say bring the top tax rate back to 80 percent, spend it on Medicare for all, renewable domestic energy, and that will make America actualy great again.
1
I thought we were supposed to spend, perhaps increasing the debt, when the economy is bad, and constrain spending and perhaps pay off some of the debt, when the economy is good.
I don't see how it makes sense to have a deficit in good times and bad.
1
Give Pelosi and the democrats time to organize an agenda, a way forward on several fronts. Much needed infrastructure might not rise to the top swiftly.
1
He seems to be saying in his last paragraph that because the GOP has been profligate, that the Democrats do not need to act prudently. Either deficit spending is a good idea on its own merits, or it is not. I have heard numerous Democratic politicians complain on the morning news about tax cut driven deficits. Their tune will change, just as the deficit hawk Republicans will now find spending religion. I do think he is correct that infrastructure spending financed with low interest, long term debt makes sense.
3
We do not need to stir the pot on the deficit issue. It is an unnecessary distraction from identifying the means for our society to respond to emerging problems, old left-over problems, like health, education, politically acceptable distribution of income, and the increasing inefficiency of our aging infrastructure. As a result, we are increasing the concentration of wealth, and we are not as competitive in global markets as we could be. We have allowed the manipulation of government by vested interests to favor a drift to monopoly and oligarchy. This is what I and many others have observed since the 70s.
Some say, that we are the wealthiest country in the World with a high income per person but when you look at the distribution of income, the lower 80% of households have not faired that well. It may be integral to free-market capitalism but any society should try to take corrective action to invest in technology innovations where benefits can be broadly shared.
I remember a time when households did not have electricity and all of the labor-saving technologies like water heaters, supermarkets for food, refrigeration, HVAC, radio and TV, and the internet, so we have done well, however, innovation, inventors, should be encouraged to help our society meet the enormous challenge of shifting away from fossil fuels to new sources of energy for transportation and electric power. Not just any source but a source that will be cheaper and better than what the world has now.
2
@james jordan
I am becoming more confident in the future. Statements made by Speaker Pelosi, the new Committee Chairs of the House, and even the first H.R. 1 are very encouraging and the basis for optimism. The new check of the House, and the Power of the Purse under the Constitution are a great foundation for building a stronger economy and a much more egalitarian society.
I think the comments that I have been making about using competition to determine how we approach the next evolution of transportation and electric power generation will turn out very well for the economy and the future well being of Americans and all humankind.
I have been encouraged by the new interest in the late Senator Daniel Patrick Moynihan's 300 mph superconducting Maglev network for freight truck logistics as well as passengers that can be built on the rights-of-way of the Interstate Highway System that can carry trucks, delivery vans for only 10 cents per ton mile and create sufficient profit compared to highway travel to bond the national network and make our freight carrying a lot more profitable.
I strongly believe, like Senator Moynihan, that the government should test and demonstrate this remarkable technology, with seed capital at a facility similar to those funded in Japan, Germany, China and Korea.
The U.S. Maglev should be competed, Maglev Space Launch may be the only way that we will be able to generate, at scale, 11 Billion people, to replace fossil fuels.
3
Oh my. Congress has no need to issue debt, to borrow money, because it creates new money every time it pays a bill. It can do this because it has a Constitutional mandate to do so. It creates the currency. Same for national taxes. Congress has a Constitutional monopoly on both. The only fiscal rule that should be adopted is that Congress, through the Treasury and the Central Bank, spend into existence enough money to create full employment and stable prices. And if it wanted to Congress could at the same time allow existing debt to run off as it matures. It has nothing to do with funding federal spending. Stop pretending Congress must borrow money.
2
America is the richest country in history.
The country has the money to provide a wonderful life every citizen.
The tax rate is far to generous for the richest 10% and corporations, and punitive on the rest.
A more progressive tax structure will do the most good for the most people.
2
I agree that the minute a recession kicks in, PAYGo should be scrapped, but Dems should not be in the business of blowing up deficits during boom times. Even if the GOP has no problem with doing so, it's bad economics.
2
Dr. Krugman, you've finally authored a column I have to disagree.
I believe it is important for the Democrats to grab the fiscal responsibility mantle from the GOP. PayGo is but one weapon in that war to gain that title for the party of real fiscal responsibility.
PayGo will not necessarily be the fiscal straitjacket you portray. We had PayGo in the 90's during Clinton Administration and the rules restored the markets' faith in DC addressing the growing national debt problem left over from 12 years of Reagan and Bush I "borrow and spend" budgets. The result was a more balanced approach to expenditures along with targeted tax increases to pay for increased spending.
Will it work this time? I don't know and I know that we can agree that a certain mount of skepticism is warranted, But, I'd urge you to let this one go - you're a wizard at economics but this is more political and perceptions than economics.
I think there is a place for Democrats to have "qualified pay-go" where in they say "we will pay for many initiatives through tax increases and budget cuts, but that will not include infrastructure spending." I think including child care, nutrition and healthcare, while laudable and necessary, probably falls into the "those people" trap and needs to be covered with workable attempts to pay for it. But nobody is going to demonize infrastructure spending, and it has the added benefit of making it acutely obvious that Trump preferred tax cuts for the rich and "Tariff man" nonsense to helping the American people directly with improved infrastructure.
2
One of the main priorities of the new Congress should be erasing the totally unnecessary tax cut give-away to the wealthy. The "paygo" rule is actually an excellent tool to start this and shift any excess income or debt to its proper use for infrastructure rebuilding, upgrading essential social programs and enacting Medicare for all. Republicans will hardly be in a position to object to budget balancing efforts.
34
I had to go to the end to realize that Dr.K wasn't talking about ignoring the revenue end of the government.
Like a lot of folks I AM concerned about the ballooning deficits - and know that when budgets constrict, they choke the little people, not the defense contractors.
It is also a frustrating truth of government: to most voters, "reality doesn't seem to matter." They see what they want to see, and hear what they want to hear. Often times Democrats have relied on earnestness and reason in campaigns while the GOP goes straight for the subliminal , to motivate by eliciting fear and anger. How do you compete with that ethically?
SO - no there shouldn't be a "straightjacket " on spending for important programs and will affect our future. But -even in the often referenced enlightened Scandinavian countries, there has been a lot of work done to control costs, say, of healthcare, and retirement.
What this country has been completely unable to do is to first of all, reach agreement on goals for the country, and the role of government in achieving them.
22
@cheryl
There's a big difference between controlling costs and not spending on essential services and infrastructure. The first seeks to eliminate waste, inefficiency, and unnecessary spending. Neglecting spending on essential services and infrastructure results in poorer quality of life for voters and a less efficient economy.
3
@cheryl I agree. Its like getting into a car loaded with people who have no idea which direction they want to go.
Every organization needs a mission statement. It tells us what business we are in and what we hope to achieve. We are in the business of governance. We have a Constitution that helps to guide us in the direction of seeking the "common good".
Right now that car is full of people who don't agree on our mission and seek to sabotage it. Replacing those individuals with sincere citizens who believe in our government will help our country to achieve the "common good". I hope we are going in that direction.
Linda Selvia
4
No need to run deficits if the Dems have enough brass to tax the rich again.
So the Republicans have lied for decades with McConnell & Ryan as the most vile and evil;they have never represented The People, they represented themselves;neither Ryan or McConnell is very bright, so how are they millionaires wearing $12,000 suits; if you can't answer, go back to watching fox, the epicenter of fake news, created as republican news by Norquist & Gingrich, the masters of manipulation;the GOP is the Swamp, Democrats should spend in every area that is needed, universal healthcare, affordable housing, re-institute the ignorant administrations regulations eliminated to keep fossil fuel burning & addicting non-thinking Americans to bigger,faster,more gas guzzling cans;to update&upgrade our infrastructure which this Administration planned to sell to foreign companies to privatize everything so they could eliminate taxes and by eliminating taxes eliminating the federal government and its jobs and programs that help people;this is the long time Koch plan, their father worked for & loved Stalin who was happy to let Russians starve,they hate Democracy, they hate Social Security, they hate Medicare, they hate taxes, they hate anything that helps people;oh they will donate to museums but they won't help individuals;they are perverted and corrupt in their fossil fuel focus&have worked to eliminate credits for renewables;& 45's space force will do what,send the 1% to live on Mars while the Earth & its inhabitants burn up & die
1
Krugman's ignorance is on display in this column. For example "The economics of crude, mechanical rules about budget deficits are clear: They’re a really bad idea."
No, no, they are not. There have been seven significant reductions in National 'Debt' since 1776. The last was the Clinton surplus. The time before that occurred in 1929.
What correlates 100% with such "Fiscal Responsibility[tm"? These fits of "Responsibility" are followed by Great Depression-sized holes in the economy. (For a reference, see https://www.huffingtonpost.com/l-randall-wray/the-federal-budget-is-not_b_457404.html)
The truth is that National 'Debt' is nothing like household debt since the nation has a sovereign, fiat currency (with a floating exchange rate) and can make as many dollars as it needs. The Federal Reserve (our central bank) extended $16 - $29 trillion in credit to cure the frauds of the financial sector in 2007-8 (note: no tax increase, and no inflation, either!)
National 'Debt' is like bank debt. If you have a bank account, then your account is your asset...but the bank's liability. When you write a check, you're assigning a portion of the bank's debt to the payee. Currency is just checks made out to "cash" in fixed amounts. Clamoring for the bank to reduce its debt (i.e. the size of your accounts) is a ridiculous exercise that continues to be treated with respect.
Our government is not supported by tax revenue. It must spend before asking for taxes, otherwise, no dollars!
1
It has never been about the deficit, it is about who owns the cookie jar and gets to dispense largesse
There seems to be a problem with how people think about taxes.
Taxes on individuals were changed a little, somewhat fairly.
Taxes on corporations were changed in a way that boosts earnings and stock prices, benefiting big stockholders big time.
Follow the money!
1
It was my understanding that, because PAYGO is law, if the House doesn't comply, then OMB will decide what gets cut, which would definitely not be good. If one is against PAYGO, the statute needs to be repealed. Also, so long as the economy is strong, PAYGO isn't a bad idea. How about an infrastructure bill funded by reversing the worst of the Trump/Ryan/McConnell tax cut? That might get through to the voters.
1
I have to say I agree with Krugman on this. Why straight jacket the Dems, when the Repubs create the debt? Make it harder for the Repubs to give money to the wealthy.
3
The rules seems to be that there is a rule but congress can vote to not have it if they wanna.
How about 'pay-go' for this particular congress and review it at the start of the next congress.
I'd like to see dems push the idea of "Green pays for itself' and I'd like to see them argue that some programs will pay for themselves eventually although money is borrowed in the near term and therefore pay-go should be suspended in that case.
Consider borrowing money to pay Detroit to sell low emission (gas saving) vehicles. Presumably the money saved on gas goes to groceries and other consumer products which boosts the economy/employment which in turn will boost tax revenues by some multiplier. How is this computed in "pay as you go" budgeting in Washington?
Or are we going to argue about how many years of Trumps' tax return we want to see? He didn't pay any tax. There, I saved you 2 years of Congressional wrangling. CNN/Fox/Msnbc/Exxon/Koch networks must be devastated.
1
What rock have you been living under? Under Obama the debt increased by $9 trillion dollars. You can sugar coat and "yeah, but..." that fact all you want, but that debt and the deficit that caused it is President Obama's and the Democrats' to own. He racked up more debt than every single president in U.S. history. Combined.
Sure, Obama tried to clean up his nuclear-sized fiscal mess, but he basically applied a dish sponge to the Chernobyl sized mess he created.
To cry foul over an additional $2 trillion in debt under Trump is beyond hypocritical.
Further, Paul Ryan and his 12 percent approval rating did not come because of a media love affair with the former House speaker, it came because of relentless attacks against him (deserved or not.) To imply that Ryan was a media darling runs contrary to most of the headlines published about Ryan in this much-revered publication.
I'm not a Trump apologist. He's on pace to match the debt accumulated by the Obama administration, which is unconscionable. But you are being grossly unfair and misleading with the facts. Sell your revisionist history elsewhere.
Please stop confusing debt and deficit. The debt will continue to go up until we have a budget surplus, as President Clinton left President Bush, who immediately gave us a deficit again with his tax cut.
2
Spot on , GOP only cares about reducing social programs !
The democratic’s need to lead the way on infrastructure, education equality and healthcare for all.
1
"Reality doesn’t seem to matter." Probably the issue of American politics for otherwise Trump would not be in the W.H.! Trump supporters are apparently not aware of what is forthcoming as a result of the insane massive tax cuts given by Trump/Republicans to their 1% donor base! However, since at least Reagan the Republicans to the present have depended upon RACISM and the cultural divides as exhibited by the ignorance of the Christo-Fascist Evangelical Cult to secure their political agenda.
1
It's interesting about those deficit hawks.
Whenever Democrats are in power and want to spend money on programs and services that benefit ordinary Americans, the deficit hawks take wing. They circle around emitting ear-splitting squawks, peck everyone within reach, and unload massive quantities of reeking guano. But when Republicans are in power and want to balloon the deficit to give America's wealthiest persons (individual and corporate) a big tax cut, the deficit hawks sit on their perches, preening themselves and contentedly cooing.
One might call deficit hawks hypocrites. But since Fox News officially redefined that word, it only applies to liberals and Democrats. So maybe the deficit hawks are Chicken Little, who only see the sky falling when wealthy donors are offended.
4
“It’s almost as if their real goal was shrinking social programs, not limiting national debt.” Almost? We all know that shrinking social program was precisely the goal of the Republicans; and let’s not forget the mantra of the Tea Party hypocrites: “No compromise” — except when their policies are losing; then they are all in favor of compromise.
2
Yeah, but do we really want to base this decision on what the republicans have done? They have shown that, for them, responsible fiscal policy takes a back seat to the wants of their wealthy donors.
I suggest that Democrats are right to take on the role of the adults-in-the-room when it comes to fiscal responsibility. This means that we, as a political movement, need to determine where the optimal balance lies and then muster the courage and the discipline to do the "hard thing". It's time.
1
It is time for a grand bargain. With annual deficits back to a trillion a year and debt increasing a trillion a year we need to save the republic. Clearly Trump-republican tax cuts alone aren't bring in the revenue to reverse the trend....
Addressing the quandary of "Pay-Go." How would something like Universl Health Care fair when in every case around the world where UHC has been implimanted has proven to be less expensive than our current "For-Profit" system?
Another clear area is the impending Green Awakening Economy verses the fossil fuel economy. The Fossil Fuel economy has been scienificlly proven to be determental to functioning Planetary Life Support Systems, where-as, even at this late date, the Green economy may still go a long way toward mitigating the worst of climate carnage? Please try to put a dollar savings on that reality.
Some years ago I read that the transition from night buckets out the window, to indoor plumbing, which the GOP of the era were also against, cost about the same % of GDP as the transition to the Green Economy. Who today would be against that transition? The stakes are much higher today. Functioning Planetary life support systems are not a Left or Right issue, but rather a Human Survival Issue.
IMO, Capitalism unencumbered by the requirements of functioning planetary life support systems = mutually assured destruction. A very large portion of our tax dollars directly or indirectly subsidize this planetary carnage. Why must "We the People" tolerate this atrocity? To enrich the already so rich Pollution Profiteers to the point that they can buy Government with pocket change is morally and ethically indefensible.
4
Great observation Leif! - but not to worry, since lessons not learned will be repeated. (until they are learned, or not...)
2
Agree on paygo — to go into effect once the Republicans have agreed on a plan to rescind the irresponsible unfunded $1.3 trillion tax cut for the wealthy that they recently passed.
1
"Yet polling consistently shows the G.O.P. with an edge on the question of which party is better at dealing with deficits"
Its quite simple, the GOP doesn't try to spend money on everyone and everything.
Only spend massive amounts of money on the few.
2
Paygo = Increase taxes. Makes sense to me.
1
}aul Krugman makes excellent and practical solutions. Somebody must force Trump tp read his comments so that his head can get something meaningful to act.
Republicans have shown that by electing Trump and passing his atrocious tax bill, they don't care about America and are only in government to enrich themselves.
When 2020 rolls around and the GOP is hammered into disgrace, expect Mitch [if he survives 2020 but he will given gerrymandering] to cry DEFICIT! And all on his sides are hawks again. As for the the GOP's ballooning deficit: Democrats spent us into the poor house. Pelosi = tax and spend. Liberal socialists can't run an economy. GOP things like that. Expect it all. Drenched in vicissitude and utter hypocrisy.
This will be the GOP in its time of opprobrium. A common thing. After each and every one of their ignominious debacles "running" the US of A.
The fraudulently misnamed ‘Tea Party’:
I have never heard a serious challenge in our newspapers or media concerning the congressional ‘Tea Party’, unfortunately. When looked at closely, it more resembles a British tea party rather than the Boston Tea Party! VP Pence led it and ran on a flat tax code. But this is Exactly the form of taxation that was the most incendiary factor causing the real Boston Tea Party! The ‘flatter’ the tax code, the more the commoner pays, and the less the wealthy citizen pays. But in a progressive tax code as we should have, the national tax burden is shouldered by those who can handle the heaviest weight, and the rate goes up with income bracket.
The leveling off of our personal income tax code, driven by the GOP and Trump most recently acts to debase our democracy. The way they accomplished it, through insincere rouses in the media such as ‘Tea Party’ that intentionally misled the masses about their true agenda, certainly qualifies as “taxation without representation”, and the tax code they espouse paves the way back toward two-tiered monarchy capitalism in form, if not in name, leading us further astray from the mixed capitalism set up by the works of America’s true founding fathers.
We should be running as high of deficits necessary to maximize the production of the economy without causing destructive inflation, period. Pay-Go is a mindless exercise by people too clueless about how economies work.
When we reduce deficits, we starve the economy of money, which is sometimes necessary to bring inflation lower and under control. But, when inflation is under control and low like it is now, then why would we want to reduce the growth of the economy by reducing the deficit? Deficit spending is an important lubricant to our economy, so much so that if we currently had a balanced budget, we would be in a massive recession. After all, just imagine our current economy less $800 bn sloshing around in it.
2
This is a fair debate, but I think it is the right thing for the Democrats to say that we will observe "pay go" at this moment in time. I do believe that it would be worthwhile for the Democrats to preach and practice fiscal responsibility, not just now, but always. Some times it makes sense to go in to debt, and other times it does not. This is not the time to increase the debt, or start some ambitious project that will require oodles of money only to have it half baked in the end.
An even bigger reason to practice fiscal responsibility is not to hand over the pulpit on fiscal restraint to the Republican Senate, who will assuredly try to rip it away as soon as they can with the same old bait and switch they've been using for years with the public falling for it all the time.
No, I think the Democrats need to point out the errors of the Republican's ways that were pursued over the last couple of years, and how they have basically gifted the wealthy and saddled future generations with enormous debt. The bottom line for Democrats is sooner or later, they have to begin talking about raising taxes on the wealthy, making our progressive tax system actually progressive, which it is really not at all, the rates having been compressed over the years.
The argument to increase revenues to repair, recalibrate, and make improvements in our infrastructure in order to move us in to the next Century is a winning argument. It may take a couple of years, but so be it.
2
Pay-go will be the latest reason why anything remotely progressive is "not politically possible." Unless of course, it has a significant corporate welfare component like the ACA. Most, as in nearly all, members of Washington political class work for the same employer.
I love that Alexandria Ocasio-Cortez is proposing a 70% tax on the top wealth earners. So exciting that this is the future for the Democrats! Thank you AOC!
2
@PLH Crawford.. Your post (like many of the political proposals) is premised on the supposition that our government (a currency creator) is just like a household (a currency user). So all government programs must be funded by tax revenue...
Really? And where do people get the dollars to pay taxes if government doesn't spend them out into the economy first?
Governments with sovereign, fiat currency (and a floating exchange rate) cannot be provisioned by tax revenues. They spend the dollars, then ask for some back in taxes. Spending *precedes* taxation. Taxes serve to make the money valuable--it retires an inevitable liability.
What is the common name for the dollar financial assets out in the economy? Answer: "National 'Debt'"!
Very much like a bank account is your asset, but the bank's liability (i.e. debt).
Until people get clear about this, we can expect more of the same.
And if you doubt government has unlimited money, I'd suggest taking a look at the 2007-8 financial sector bailout. According to its own audit, the Fed (our central bank) extended $16 - $29 trillion in credit to the malefactors who crashed the economy.
...but no, we can't have a green new deal!
I can't make this stuff up...
1
@Demockracy
I am being funny.
The budget deficit won’t get “real” to most people until the early 2030’s, when Social Security payments are scheduled to be cut by 25% under current law. The shortfall averages about 1.4% GDP per year over 75 years according to CBO, which is about $280 billion/year in today’s dollars.
Interestingly, that is roughly the amount of the Trump tax cuts, which cut revenues by about $270 billion in 2018 relative to what CBO forecast when Trump was inaugurated.
Removing the cap on the payroll tax ($128,700 in 2018) will affect the top 6% of wage earners and cover about 70% of the shortfall for that 75-year period. Raising the payroll tax by about one percentage point will cover the rest.
However, a better strategy would be to tax the top 1% and divert those funds into the Trust Fund. The sooner we act, the smaller the changes required.
1
@David Doney ... Another comment premised on the idea that tax revenue funds government programs.
Really?! Where do people get the dollars to pay taxes if government doesn't spend them out into the economy first? Taxes make the money valuable; they do not provision government.
1
"A majority of voters still believed that it increased the deficit. Reality doesn’t seem to matter."
This is an instance in which I think Elizabeth Warren may be able to correct the narrative - she's very good at describing the republicans' attempts at obfuscation and disinformation on fiscal matters, while demonstrating how this underscores growing inequality and affects middle class earners. And the narrative on the economy is the great debate in 2020.
1
These are hard times for this humble servant. I don't have the words to express how Canadian values aren't American values and that my being unAmerican is not antiAmerican. I wish America nothing but success but what is good for America is not necessarily good for Canada. We are 36 million and American trade policy and social policy can destroy my country in a moment. We are a trading nation and as long as we are a subordinate economy to the USA we cannot be the nation we are trying to be.
I heard yesterday's speeches and punditry but only David Brooks seemed to understand our dilemma. We wish nothing but success to the USA but the pluses and minuses of our relationship to the USA do not correspond to the pluses and minuses of our Canadian economy based on the society we are committed to creating.
We are a conservative nation and from the most committed democratic socialist to the most conservative conservative we reject the roller coaster ride that America seems to enjoy.
We are peace order and good government. The policies put forth by Republicans and Democrats are based on their beliefs as to what serves the interests of the American public but just like what is good for General Motors is good for America is no longer true what is good for America is good for Canada is not true.
Here in Quebec the talents required for the 21st century workforce sees more men being caregivers and more women in authority. We have ceased the debate that is our reality. Who is correct?
2
"Yet polling consistently shows the G.O.P. with an edge on the question of which party is better at dealing with deficits."
The "conservatives" propaganda machine has been much more effective these last 30 years than progressives/Democrats', mostly I think due to consistent long term funding by the oligarchs.
" does anyone still believe that the Tea Party uprising was a protest against deficits? From the beginning, it was basically about race "
Spot on. It was all about thwarting Obama.
2
A sorry consequence of dark money in politics. It allows the oligarchs to buy politicians in order not to rig the game, but to own it. It goes along with the placing of big business over evil, bad government, and crowning corporate citizenship over personal citizenship.
2
Dems need to win the center. Tax and spend liberals like Krugman are why GOP wins elections
Proving their chops on fiscal responsibility is a winning strategy
@GCM: Nope. It has always been the Democrats who had to clean up the economic and budget mess that Republicans made. Democrats are the fiscally responsible ones, no matter what Republicans bloviate. Same for patriotism.
And the stock market does better when a Dem is president. Taft data goes back decades!
Hey, the Country has some very big problems that require government action, and most of them aren’t funded sufficiently. The GOP is hell-bent upon billionaire tax cuts and billionaire boondoggle barriers precisely to jack up the deficit and keep funds from meaningful action.
“Pay-go” is a gift to the GOP in emasculating all meaningful attempts to fix things.
2
Just beneath THE NEW YORK TIMES masthead should be:
TODAY THE DEFICIT IS $_________. THANK YOU TRUMP AND THE GOP.
If the masthead is 20 point, the deficit info should be 40 pt. AND should continue to be published everyday that this wanna be dictator remains in office.
1
thank you.
First day and Krugman is back at it. Spend, Spend, and Spend, and did I say Spend. This is like watching reruns of Gilliagans’ Island. You know the one where they almost get resucued but Gilliagan screws it up.
@MiguelM: It’s not spending. It’s investing wisely in the future of the country, instead of giving away the shop to the 1% with huge tax giveaways.
1
I wish I could be as sanguine about our growing debt. You have argued in the past that we needn't worry as long as the economy is growing to keep pace. Can we be sure that it will? Can economic growth go on forever? Doesn't it depend on a growing population, to which there must be a limit? But isn't it really growth in government revenues, not growth in GDP, that is needed to keep up with the growing debt? That won't happen if the Republicans keep giving us tax cuts by borrowing more money. In the short- to intermediate-term, we can welcome more immigrants to help grow the economy. But this can't go on forever either. Sooner or later, there will be a day of reckoning. What gives you confidence that that day is still far off?
If the Donkeys do any mirroring of GOP tendency, it is a foolish step. The Conservatives operate without a conscience in all their discourse in government. The Democrats should not to be the balance against this republican narcissism but an original counterpoint that represents a positive for the voters.
1
As Paul has pointed out in the past, government programs like infrastructure, environmental protection, rehabilitation, child & elder care, affordable housing, health care, and many more are urgently needed and underfunded. If put into action, these programs would also provide meaningful work for many.
The GOP and their billionaire backers are opposed to all these efforts. They cannot cripple popular programs to their satisfaction with legislation, so their intention is to cripple government itself by inflating the debt and spending money on ridiculous boondoggles like a wall.
The Pay-Go idea is a gift to Republicans that would further emasculate any attempt to solve the Country’s problems now festering from inattention and lack of funding.
1
As much as I admire Dr. Krugman, I halfway disagree. Yes, budget straitjackets are stupid, and as a political message, PAYGO is pointless.
Yet PAYGO can be useful for dividing Republicans.
So PAYGO could be useful in budgetary negotiation, if the House Democrats are really going to try to pass something like an infrastructure bill in the next two years. Then they can toss it aside under President Gillibrand/Booker/Harris/Warren/Sanders/O'Rourke, and no one will care.
If I am going to impose austerity, I say do by directly punishing red voters for voting for Trump the way the Congressional Republicans punished blue voters with the cap on State and Local Tax Deduction. How would I punish Red voters? Cut the agriculture subsidies and the subsidies on oil and gas companies. Cutting the agriculture subsidies would have the effect of making Americans healthier by shrinking America’s collective waste lines making Americans spend less on health care and more productive. Cutting the oil and gas subsidies would make blue Americans less sick with less pollution AND be helpful in combating climate change. A win economically all around for us blue voters and maybe it will make red voters think twice before electing another unstable megalomaniac.
1
Dear Nancy, That big blue wave didn't happen because We the People want the Democratic Party to once again try to be republican lite. We want Big Stuff. We want a New Deal. We want a Green New Deal. We want infrastructure spending that will put Americans back to work in good paying construction jobs. We want the tax rates of the koch bothers and their ilk to go sky high. We want their hatred and enmity, just like FDR said.
Prof. K is right. Most Americans are not paying attention to the details. So let's go for the gold ring and put the austerity of republican rule permanently into the trash bin.
Love,
Bob
1
So, ten years ago, deficits meant nothing, and continued to mean nothing until ... curiously, 2016. Then, they became important again. And, now that socialism again rears its ugly head, but socialists don't actually want to pay for the things they support, deficits suddenly don't matter again.
Meanwhile, Norway. the left's darling, increases spending by a princely 1% and uses its kicking sovereign wealth fund -- aka privatized social security -- to fund it.
Be of good cheer, folks. If you don't like what PK says today, he will say something precisely the opposite tomorrow.
Let's face it, Republicans have been excellent at branding. They have branded Democrats as "tax and spend" liberals and themselves as party of balanced budgets and fiscal responsibility. It is a lie. It has always been a lie. It always will be a lie. Deficits and debt ONLY matter to Republicans when Democrats are in office. Otherwise their only priority is tax cuts for the wealthy and benefit reductions for the poor. So, how stupid do people have to be to keep believing tax cuts for the wealthy pay for themselves and benefit everyone? IMHO, the very first thing Democrats need to do is have a massive, national reeducation program. Drive home the truth about Republican economic policy. We need to take a page out of the Republican playbook and brand Republicans for what they are - ATMs for the wealthy who do not care one bit about ordinary, working class Americans.
quote: It’s almost as if their real goal was shrinking social programs, not limiting national debt.
uh NOPE that is actually their goal
Would be interesting to see the progression of the deficit of 22Trillion..both sides blame the other for causes...10Trillion Obama 6 Trillion GWB...when Clinton left office, there was a BUDGET SURPLUS.....so here we are.
PAYGO absolutely needs to be implementer at DOD.
2
Very refreshing to hear a progressive opinion from Krugman, an old Bernie scold. He may not feel the burn, but he is getting more and more Bernie all the time.
1
Paul you have the memory of a mouse. Deficits by the republicans are bad, deficits by the Democrats are going to be good? God help us all
You missed the point. Deficit spending is needed when the economy is struggling (Most of the Obama year’s) and then deficits need to be paid down during boom times when tax revenue increases.
1
@Bascom Hill....And by the way, Obama inherited a budget deficit of $1340 billion and reduced it by $800 billion during the course of his administration. In his first 2 years Trump has already increased the budget deficit by more than $250 billion.
@W.A. Spitzerand bla bla bla. And bla
What the heck did 9 trillion dollars get us one could ask? It’s all debt added to all the other debt we have accumulated before and since. Let’s see where we are in one year from now, once all the super rich and moderate rich get hammered with the new tax bill approach. The Paul Krugman of the economic world will bury us in debt
I think Democrats need to forget "paygo" and use Repubs line when spending money of policies they like: "The will pay for itself!".
This whole OP-Ed assumes the GOP never gets back into power again and runs up the Debt.
What about the overwhelming interest payments on the debt?
Did I miss this in the OP-Ed?
These columns get more partisan with each rendering.
Deficit talk is predictable: each side blames the other. No truism could better explain the silly talking points made in articles like this, not to mention the disappointment coming from an economist with a byline in an influential liberal leaning newspaper.
Dr. Krugman makes some fair points, but angrily blaming republicans entirely for our deficit, particularly when most of our national debt has accumulated over the last eight years, is ironic at best.
Alas, it is the opinion section after all.
Pelosi's supporting PayGo is patronizing of bad and hypocritical Republican pretense of fiscal responsibility...
The Democrats need their own real fiscal platform not adopt this fake one..
Perhaps the Democrats might want to subtract what the Trump tax cuts added to the deficit as a way of determining how much leeway they have in planning for universal health care and social safety nets. It will have no other effect than to show the world how much and where the Republicans have really cost.
Most of us will miss Paul Ryan because of the pseudo intellectual arguments he gave for following Trump. At least Ryan made an attempt to sugarcoat the raw s..t that Trump served unabashedly. His solidification of Ayn Rand’s thinking was as entertaining as was Ayn Rand’s fiction
A more balanced article would have discussed the negatives of our ballooning debt, and the cost of repayment as a percentage of annual spending. The idea that borrowing at 1% is "free money" seems naive to me. If I borrow $10 billion and spend it on infrastructure or education, whether its at 1% interest or 0% interest, it becomes an obligation that must be paid back in the future. Nobody likes the real answer - setting spending priorities and keeping the annual deficit low. Everyone likes the easy answer - interest rates are low, lets spend above our means.
@Chris....But what if the interest rate is 1% and the rate of inflation is 2%, what is the "real answer" then? There are several things to consider, and the situation is not always as simple as you propose.
1
Simply find the money , pay the bills and stabilize the deficit. The money is there - reduce the bloated military spending and pass the Inclusive Prosperity Act advanced by Senators Sanders.
My guess is that the "paygo" policy is not a settled matter. Speaker Pelosi is pretty shrewd, and I don't think she thought it worthwhile to spend political capital to suspend the policy at this time, and then have to defend it, during a shutdown. Time will tell, but I have confidence that once the shutdown is over the House will start to mull over repeal of the 2017 tax cut for corporations and the wealthy.
Candidates and present incumbents need to learn how much, and how little, the voters know about government at the municipal, state, and federal levels. Any of those politicians who are serious about their jobs likely would be very surprised about the extent of voter ignorance (let alone the ignorance among those who rarely, if ever, vote). The stuff I hear "educated" people say about what they think government does, or what it should and should not do, often brings me to laughter or tears. All too often those folks believe that everything good about their lives happens "naturally," without having any connection to taxes, laws, regulations, and people on a governmental payroll.
It is up to the Democratic leadership to do a better job in trumpeting the irresponsibility of the Republicans in handling deficits which have been created? Yes. But, Americans need specific examples with names to cling to, because they are very short-memoried people. Mr. Krugman, your statement "Is that a signal the party should really be sending?" re: budget deficits over other goals. These very, very large budget deficits are indeed worthy of attention. And the fact that many Americans don't seem to care is related to the irresponsible message of Republicans when they are in control. If you are advocating that we spend a lot of money on infrastructure and educational goals, then we need to cut programs like our Military budget and also raise taxes. With these large deficits, that is the only responsible way to do it.
Nancy Pelosi is no angel, and Paul Ryan is no demon. Both are famous and once leading politicians working for the people.
Pay/Go policy must stay. The law exists for a reason. If any leading politician embarks on a spending spree using deficits financing and also suffers no immediate consequence, then every politician will do that. Our budget will be busted, and the deficits will be paid for by our future generations.
Our nation is the wealthiest country on earth. There are plenty of money flowing around. It should be able to support funding for every needed projects. It is up to wise leaders in our government to decide spending priority. If it comes to deficit, then a cross-the-board cut is a wise decision to balance the budget.
Thus, I do not agree with Dr. Krugman's suggestion.
@Usok
"Nancy Pelosi is no angel, and Paul Ryan is no demon. Both are famous and once leading politicians working for the people."
Is this satire?
"If it comes to deficit, then a cross-the-board cut is a wise decision to balance the budget."
What are you proposing that you specifically give up?
How can an across-the-board spending cut be “wise”? It’s anything but. In refusing to make choices, it’s intentionally stupid.
Republicans didn’t pass an across the board tax cut, you’ll note. 84% went to the 1%. (We don’t even have to say “top 1%” anymore; the meaning has become obvious.)
Cross the board cuts are mindless and harmful to the good and mY or not punish the bad
Looking forward, two issues connected to current federal government spending and the level of the federal government debt.
1.Too little spending has been on infrastructure and related government investments, limiting the potential growth in the economy.
2. Rising interest rates causing an increase in interest payments at the expense of needed government services.
"True, we no longer have a depressed economy, and austerity is a lot less destructive when the unemployment rate is less than 4 percent than it is when unemployment is more than 8 percent."
I see Krugman still has no clue about the state of the US economy: it' horrid for 3/4 of workers.
Clearly Krugman has no idea why Trump won, still.
Maybe this would fix include the government taking from each family and amount equal to $68,750 per family member next years and the debt would vanish! That's for each family member.
After that they can start on taking the next $100,000 per person to pay for medicare for all for the next 10 years. That would be $500,000 for a family with 2 adults and 3 children.
Do you think someone is not telling the truth?
@Matt You do not understand money. It *is* debt!
If you have a bank account, that's your asset...but the bank's liability. When you write a check, you're assigning a portion of the bank's debt to the payee.
Currency is just checks made out to "cash" in fixed amounts. It says it's an IOU right on the money ("Federal Reserve Note" -- a "note" is an IOU).
So...what's the common name for the dollar financial assets out in circulation? "National 'Debt'"!
National 'Debt' is nothing like household debt; it's like bank debt. And the con game operating all over the place is to persuade people to go down to their bank and protest the bank's debt (i.e. the size of their accounts)!
I couldn't make it up.
2
Suggestion (as the Military is being send to the southern borders to protect us from brown children, etc) Have infrastructure improvements paid for out of the Military budget. This is national security! and as I recall, the Interstate highway was a defense project.
Therefore, the Democratic can increase defense spending and target the money for infrastructure, education, etc.
2
I can remember many years ago when Republicans worried about deficits. Remember the 'deficit hawks'?
They're extinct.
The deficit and accumulated debt will just keep growing and growing now, faster than our economy, until there is a US government fiscal crisis. (Herb Stein's Law)
And when that occurs, it will make the financial crisis of 2008 (remember that?) look like a tea party.
It won't be pretty, and it will economically hurt all Americans.
What has delayed the crisis is the dollar's continuing status as the world's reserve currency and currency of trade.
Or am I missing something here?
1
Some time around April 15th would be a good time for the House to vote to repeal the 2017 tax bill, right about when most folks see that the tax break doesn't really apply to them.
Then they all can see Individual 1's twitter response, and watch it not be brought up for a vote in the Republican controlled Senate.
3
@Logic Dog
Psst: Almost all workers pay taxes long before April 15th.
This has been true for 70 years, and back then it was March 15th.
K-12 education is funded 90% at the state and local level. The 10% contributed by the federal government in grants to education costs huge amounts of effort in grant applications and doesn't even cover the unfunded mandates of the federal government. Since the founding of the Education Department, state funding on education has grown at higher than the rate of inflation. Little of that money has gone into the pockets of teachers, but education administrators have experienced a huge windfall. California and NY had public education systems that were the envy of the world. Although they maintained their spending levels, they have bifurcated systems today, with good schooling for the wealthy and pathetic levels for everyone else. Get the federal government out of education.
Roads are on average financed 70% by state and local governments. If the federal fuel taxes were used exclusively for roads, they would cover an additional 25%, with federal general revenues covering the balance of current spending levels. But if you compare states, NY covers only 50% of its road infrastructure with state and local funds and TN covers 85% because its federal fuel tax is diverted. Road infrastructure is a local interest.
Water and waste treatment are local interests. NYC, for example, collects sufficient revenue from users to build and maintain modern systems. But after diverting money to other uses, they dump one million gallons per year of raw sewage.
1
@ebmem ...and Federal grants to higher education have declined 55% since 1972. Gee! I wonder why tuition is on the rise!
"Revenue sharing" -- recycling tax money through the states -- has been declining for some time now. In the last decade, for one example, the state of Oklahoma has reduced its funding for education 37%. Oklahoma legislators are discussing ways to stop teachers quitting and leaving the state.
Worst of all is the deceptive notion that the Feds must raise taxes to produce enough money for the programs they've previously funded. Really? Where do people get the dollars to pay taxes with if the federal government doesn't spend them out into the economy first?
Any notion that we're short of money should be laid to rest by the action of the Fed in 2007-8, when, according to its own audit, it extended $16 - $29 trillion in credit to the same financial sector whose sub-prime / derivatives frauds were crashing the economy. For only $9 trillion they could have paid off everyone's mortgage.
Apparently saving the banks is the primary mission of our government.
2
However you measure it, the deficit is high and destined to get higher without significant changes. In addition to drawing real lines of distinctions with hypocritical Republicans, the Democrats seem to be serious about governing. I would like to see some of our bills get paid so that we do have flexibility if a future crises occurs. Besides, why lay unprecedented deficits on our children, tempt inflation, etc.? That is good government.
“The problem with ideology is that it try’s to answer a question before its been asked” - Bill Clinton to Jon Stewart on the Daily show.
What Clinton was saying about ideology, which I believe is self evidently correct, is also true about Pay/Go. Context is everything.
It seems to me that if you borrow money to invest in America, on things like infrastructure and education, things that will improve and enhance economic performance and make America more competitive, then that borrowing has a way of paying for itself in increased returns on the investment.
It also increases employment and wages because construction jobs are unionized, which means it also reduces inequality.
1
Why we should balance the budget:
The captains of finance and business who make up the upper 1% of the nations wealth are truly more brilliant and gifted than the rest of us.
They should control all aspects the government not just the large percentage they already control.
They should receive bailouts (which is really their money anyway) and tax protections to insure their wealth is secure!
We on the mid and lower rungs of the economic ladder should very grateful the wealthy choose to stay in America and give enough of their money to make life bearable for them and in turn for some of the other 99%.
There are far too many unproductive citizens in the USA that drive up the deficit and really are simply a drain on the well being of the wealthy.
Therefore, it would be best to release the safety net and balance the budget in order to better insure that the wealthy will not be encumbered by the debt.
I believe this should, over time, take care of the ridiculous abundance of those who depend on some aspect of America’s “safety net” such as social security, medicare, medicaid, food stamps etc.
In this time of great technological advancement the unproductive “safety netters” are just too many, and are therefore expendable.
Balance the budget! We must be willing to pray the ultimate price to insure the power of the United States wealth is never ever compromised again.
1
Aside from his ad hominem attacks on what Krugman claims to be his opponents' motives, he makes a good point about voters being largely unconcerned with "government debt."
Promoting education is very dear to me. A vitally-needed long-overdue reform is exempting teachers from taxes. Products and services cost more due to taxes embedded in them, including the higher prices due to Trump's evil tariffs.
If, on the other hand, all teachers could swipe their teacher's card at the check-out, paying only the real price, this would help incentivize teaching so vital for the future success of humans.
2
Maybe the slogan of the Democratic party should be "Investing in America". Short, catchy, and encompasses pretty much everything progressives aim to do. Moreover, by pitching things as investments, you assume a return on your investment, bringing in additional revenue and eventually addressing the deficit.
2
The biggest con job is that we still run the economy like we are on the gold standard. We have had a fiat system since 1971 but have seldom used the power of the system. Republicans have said when they are in power that deficits don't matter. The government is not a household and can create its own money. Our biggest problem would be inflation.
We can afford anything we want but have to be careful about creating inflation. That's why we have taxes. They are used to drain money from the economy when it's overheating.
Now we need a president and congress who will govern for the people. That rules out trump and the republicans.
2
When the Republican tax cuts for corporations were put into effect, none of the corporate deductions were taken away so that the corporate effective rate is probably close to 3-5%. All that is needed is to take away the corporate deductions that lower their effective rate of taxes so that they pay their fair share. Oh and also any money earned in America is taxed in America.
3
Nancy Pelosi's policy allows the party in power to say that tax raises or readjustments are needed, that we need infrastructure repair (or whatever) and so taxes must be raised. After years of big talk, the Republicans have shown no respect for living within our income. Pelosi now has a big stick to brandish.
Krugman doesn't notice, or fails to note, the real purpose of paygo. It is intended to do for Pelosi and the Democratic establishment what Mitch McConnell's domineering has done for Republicans—to prevent dissenting voices within the party from getting traction for any proposals which the establishment disapproves.
Paygo is not a fiscal rule, it is a parliamentary rule, allowing any member to object with a point of order to any proposal contrary to paygo's ostensibly fiscal principles. But what it does, pure and simple, is muzzle progressive Democrats, who will never get any of their agenda onto the House floor. It's a proposal to make Pelosi the Mitch McConnell of the Democratic Party.
I have no problem with PAYGO as long as taxes are raised on the rich and their corporations to pay for our initiatives.
I get the whole Keynesian 'we need to be able to run fiscal deficits' argument, really I do, but right now? When we've already had 8+ years of economic expansion and job growth??
At this point, we should be increasing spending on infrastructure, shoring up the ACA (and/or phasing in 'medicare for all'), funding ineffective / under-staffed regulatory agencies, as well as a host of other priorities that Americans strongly support, and **increasing tax rates on the wealthy** to pay for them.
1
It makes no sense to advocate deficits when we are already 21 trillion $$$ in debt. However you finance it now, eventually interest rates will go up. At 5% (not unheard of) the debt service will be over 1 trillion a year -- which would make it almost impossible to meet anything but basic spending requirements.
Krugman's argument is like a family that has huge debt that gets a credit card with no limit and minimum introductory interest rates that then goes out and then maxes out the card.
What we really need is a plan to reduce our debt which is a combination of GDP growth, spending cuts and if necessary, increases in revenue -- not a call to increase the debt which more deficits will do.
The Republicans drastically reduced revenue and exploded the debt/deficit when they passed Trump’s tax cuts for the uber-wealthy like himself. No matter how you try to dance around it, those are the simple facts, and according to St. Reagan, “facts are stubborn things.”
1
"Yet polling consistently shows the G.O.P. with an edge on the question of which party is better at dealing with deficits."
That's only because polls involve putting questions to people who are clueless about economics and wouldn't know their own best interest if it bit them on the nose.
1
The article should have avoided pitching its concluding thoughts into a game of "what about-ism". Nothing wrong with the principle of "Pay-Go". But everything wrong to straight-jacket Congress with a self imposed rule to deal flexibly and effectively with a complex, dynamic US economy. No need to pillory the spendthrift GOP as a basis for action. Democrats must stop worrying about sporting a bigger badge of fiscal responsibility and just move forward with Pelosi to dump the badge, revamp Pay-Go, and make Congress work for all Americans.
Persistent deception. "Reality is what we say it is." This is what the Democrats have been bad at, while the Republicans have been masters of the game. Doctor Krugman is a man of passionate reason, but most voters are busy watching reality television. They do not see reality through data and consistent theories. Rather, they see reality in terms of confirmation bias. They see reality as they wish it to be rather than as they are living it.
Republicans have been both brilliant and ruthless at exploiting this reality gap. There is no real difference between Reaganomics and the Trump tax cuts. Both have exploded deficits. Yet Republicans keep claiming that Democrats are the party of tax and spend and that they are the defenders of budget sanity. Republicans likewise claimed that government programs are a horrible waste of money. Because voters want to believe those things are true, they end up voting for such falshoods even if they are living off of government programs while tax cuts quadrupled the deficit as Reagan's did. People do not want to believe that they have been persistently wrong in their voting even when it is true.
1
The term "austerity" is used twice in the article and is ambiguous. There is high-end austerity which the US used to get through the depression and WW II and continued to 1970 producing a prospering middle class. Then during the 1970’s and 1980’s high-end austerity was replaced by low-end austerity producing a declining middle class and a few very rich people. Equating austerity with low-end austerity muddles thinking since austerity comes in two different flavors. One flavor taste good to the middle class and the other tastes good to the rich.
I agree with Professor Krugman on most topics but not on this one. I recall Paul saying “now is not the time to worry about deficits” back during the financial crises. I agreed with him but Imalso recall him saying that we should do it during healthy times. Ok; so why not NOW? If not now, WHEN? He rightly points out right wingers as being inconsistent but it seems to me that Paul is being inconsistent.
- Larry of SF
"It’s almost as if their real goal was shrinking social programs, not limiting national debt."
What do you mean, "almost"?
1
The media is the primary problem when it comes to the public believing against all evidence that the Republican Party is the party of muscular defense and fiscal responsibility. This is a fantasy the media seems to push upon the public over and over again despite massive deficits created by Republican tax cuts cheered in the Rose Garden and some recent Putin smooching done by Trump in our Oval Office. The truth is that Republicans only care about being in power for the sake of being in power and arrogantly strutting across our National Mall. Paul Ryan ducked out the back door after overseeing the reckless ballooning of the deficit as the Republicans served their donor class a big windfall. The media could inform the public better but that would mean criticizing Democrats less and the Republican would not like that.
The Democrats are coming back. These are the people who started the inflation, then inflation-unemployment, then the massive unemployment misery of the two decades 1965-1985.
It began with a Krugmanesque insouciance: deficits are no big deal and indeed sometimes help. Done right, the 1930s, this is Keynesianism and a paradoxical but vital truth. Done wrong, 1945-2019, it is Pseudo-Keynesian vulgar economics, and a terrible bit of misinformation.
In a non-depression situation, the last 74 years, deficit carelessness is a recipe for inflation. Much of this long period has seen such inflation. The misery of the two decades 1965-1985 is the best example of the costs of monetary indiscipline.
Since "deficits don't matter, or can help" was the popular conception, it was convenient to finance the Vietnam war with deficits, instead of taxes.
By 1970, we had significant inflation. Then we temporized with controlling it by jumping back and forth between inflation and unemployment, via easy money and tight money.
By 1980, inflation was preparing to blast through the 10% barrier. The swings in unemployment were as bad.
So, we got the man on horseback, Reagan, to undo the crisis begot by the liberals. He did this with massive unemployment, during the intentional and unprecedented recession of the early 1980s.
And, he undid the Keynesian Revolution, turning the liberals into neoliberals.
We risk seeing such a time again when we start being careless about deficits.
@alyosha......Democrats???? When Obama took office from Bush he was handed a budget deficit of $1340 billion dollars. When he left office the budget deficit he handed off to Trump had been reduced by $800 billion dollars. For all the Republican noise and silliness that "Obama double the National Debt", they conveniently fail to mention the fact that the budget deficit under Obama was very significantly reduced. Two years under Trump, and budget deficit has already increased again by 50% and will have doubled by 2020. Democrats??? You are drinking the cool aide.
These young progressives better be listened to. They should not act as a crimp in Ms Pelosi’s agenda, but neither should they be ignored as neophytes and obstructionists. Progressives of all stripes have an opportunity, bestowed by Trump’s incompetence, to reshape our future and save this Republic.
Republicans - Cut taxes but keep spending.
Democrats - Raise taxes, but spend more than you raise.
Thank you, Nancy Pelosi.
Wow, and I thought PK had a sizeable amount of of fiscal conservatism in his wallet. Learn something each day. Those in the EU, except for those exceeding their budgets, seem to think 'old way' thinking is still prudent, at least Germany does. Because the GOP knows how to shamelessly exceed targets and then expect the Dems to come up with the funding, doesn't mean we should play follower the leader. I still maintain a nation that overspends modestly is prudent, and will be respected for it by its peer nations. There is no respect for USA today, inside or outside its borders. Besides, the electorate does expect to see some fiscal responsibility by the Dems, and you, PK, should not be telling your readers that following the Greek gov't and built deficits that will never be repaid, it truly pitiful on your part. You just slipped one giant step down the pole.
Need to, selectively, raise taxes and find another name for them. Estate tax = 'death tax'? OK, higher taxes = 'life funds'.
1
Where in Keynesian theory did he argue for deficits in time of full employment? I agreed with this argument when you presented it at least 2 years ago. But that was before the ill advised tax cuts. We need to finance the infrastructure with a tax increase. Before the election both parties were talking—in my view irresponsibly—about further tax cuts. We need an increase not another decrease!
The Democrats are the party of good governance. This includes the responsible oversight of fiscal policy. We should not adopt recessionary policies in a period in which there is no recession. In a better America, the Dems could just drop the budget-busting tax cuts for the wealthy instituted by the fiscally irresponsible Republicans, but that is not possible. So, we should rebuild our transportation infrastructure and pay for it with an increase in the gas tax. We should reinforce Social Security by raising the salary scale that pays the SS tax and perhaps increasing the actual tax by a quarter percentage point. Etc. If we get hit by a recession over the next two years then, of course, pay go should be put aside, but for now we must govern responsibly.
2
Nancy Pelosi was a mistake. The same people keep calling the shots, the optics are bad. Watch how Republican’s refusal to cooperate will reflect negatively on “Washington” as a whole.
We needed a fresh face and someone who is willing to confront big pharma, Wall Street, insurance etc. That is NOT Mrs. Pelosi and not Dr. Krugman, who is too embedded in Democratic establishment circles.
Trump will be re-elected.
1
This makes sense if it is part of a larger plan to sway public opinion about which party is recently most fiscally responsible.
The Democrats need to run on sound policy. The GOP controls the message about sound policy due to lies from their pundits and the legacy of Paul Ryan's voodoo budget. If the Democrats can steal back the message through an expansion of corporate support for Green energy and creation of jobs that will help fight climate change, they have a chance to really change the course of American politics.
A large Federal deficit is a tax on cash.
3
Surely it would make some difference, whether spending is productive or non-productive? There's a difference in the impact to the economy between spending $1B to produce bombs or missiles that never get used (or if they do get used, are used for purely destructive purposes) and spending $1B to repair and improve infrastructure people use every day. Paygo isn't itself as much an evil as the incredible drag that military spending puts on our economy.
1
Servicing a giant debt drains the country and limits its ability to respond to economic crises. Yes, a balanced budget is not manditory. However, without any restraint from either side this doesn't end well. Dems need to learn that the GOP has been successful at punishing Dem presidents with the budget stick. Time to return the favor. Medicare for all will have to wait for a Dem president.
Why wouldn't the government buy cheaper debt to pay off the more expensive debt and interest payments from the past. Set aside a slice in the budget just for this purpose. Seems the dollar is quite robust and could sustain itself in this low interest rate period. Does anyone in Washington think beyond the next quarter or election?
Democrats have a message problem. Dating back to the Truman Administration Democrats have a slightly better record on GDP growth, a slightly better record at keeping deficits under control, and a much better record on job growth. Certainly there are many uncontrollable things that go into that mix, but Democrats simply don't talk about it.
Pay-go is an imperfect tool, but does one important thing. It forces critical thinking about spending.
I think we have a revenue problem. I agree with others who have mentioned that. But, even with increased revenue there will still be a need to force critical thinking. The lack thereof over many years coupled with our polarized politics is why we are having this discussion.
2
The gush about Pelosi aside the Republican strategy to starve necessary gov't spending because they have recklessly driven up the national debt needs to be vigorously opposed.
I am a little confused by Mr. Krugman's argument. In a few years, the interest on the debt will be greater than the defense budget. Shouldn't something be done about this?
3
Since "paygo" is the law, why not use it to undo some of the damage done by the deeply inequitable 2017 tax-cuts? Since the wealthy make direct use of, eg, infrastructure (unlike, say Medicare-for-All), they should pay their share of it, rather than cut social benefit programmes or borrow yet more money to finance it.
You're an economist, Paul, so please focus on the economic consequences of high and increasing government debt rather than on the political consequences, which I can read from any of the other NYT columnists. At some point the public debt-to-GDP ratio get too high and can lead to economic issues such as slow growth and or financial crisis--this is the contention of Rogoff and Reinhart, for example. How close is the U.S. to this point? After all, government borrowing is increasing fast at a point in the business cycle where standard economic theory says it should be declining. Anyway, this is where your economic expertise can be handy, but instead we get liberal politics from you.
4
Given that the Federal government has not balanced the budget in the last half century no matter which political party is in control, with only had two years in that time span where there has been a budget surplus, it is hard to see why the Republicans are seen as the fiscally responsible party. Also this implies that the Democratic Party has not done well in balancing the budget.
@J. Mike Miller
Actually, the budget was more or less balanced during the last three years of the Clinton administration.
@tanstaafl
Only two of the last three and the Republicans controlled the legislature. This was the only time in the last half century where we ran a surplus
Claw back the tax cuts. That is also a Pay Go option.
Respectfully disagree with Dr. K on this one. The Dems must demonstrate to the US Voters (and effectively message) that we are the party of grown-ups who are looking out for the best interests of the nation as a whole. Not for the best interests of the 1% and the Corporations, unlike the GOP.
Given the $800+ Billion annual DoD budget and the recent $1.5 Trillion tax cut, there are very viable funding sources to identify cost savings and implement "Pay-Go" processes to fund needed investments. Even Dr. K points out the US Gov't can borrow at 1% for 10-year inflation-adjusted T-bills - this is virtually "free money".
And this same Pay-Go process will help tamp-down some of the fiscally-loonier ideas out there, e.g. free college for all.
I applaud Speaker Pelosi for her courage, her mature understanding of how to get things done in DC, and in her willingness to teach and mentor the next generation of Democratic lawmakers.
67
Government-supported education is an investment, not an expenditure
56
@GTM.....if free or low cost education was so loony, why was it common at state universities, as a centrist, accepted policy in past generations? It was tax supported.
It was one of the main builders of the middle class.
As an investment by society, it led to grads entering higher paying occupations than their parents. With rising salaries over years, with jobs that stayed here, they paid back in taxes the money that had subsidized their education.
This enabled new generations to graduate and go into their own professional jobs. This led to home buying, upward moblity, and secure retirements.
See how that works? A positive cycle.
Today, with tuition being a profit center, grads start their adult lives with huge debt, and can't qualify for a home mtg, or afford to buy and start marriage and families.
Many ripple effects.
59
Yeah, public schools, public colleges and the GI Bill...what spendthrift waste.
49
My layman's reply to Professor Krugman's question is, "Only died-in-the-wool Keynesians and leftist radical Democrats believe in the good of budget deficits and ever increasing indebtedness".
1
Each option to spend should stand on its own merits in terms of what it will do to provide value in balance to the cost, however you want to measure value.
One thing that has to be addressed, however, is the recent tax cut for the wealthy and corporations, all paid for on the nation's credit card. I've not read of any material benefit from that act, nearly in relation to the $1.5 trillion in new deficit it caused.
You can invest in a lot of infrastructure and human benefit with that sort of money, and that will pay off in improved productivity and quality of life.
107
@MassBear
"Each option to spend should stand on its own merits in terms of what it will do to provide value in balance to the cost, however you want to measure value."
From a business standpoint, taking care of retirees is a waste of money. There are things we do just because we are decent human beings.
5
@MassBear
I've yet to hear who benefited from the $1.7 trillion Obamacare added to the national debt, other than the increased profits of big medicine.
As long as government sponsored projects are not subject to proper management, it is inappropriate for the federal taxpayer to contribute to local projects. How did that Big Dig work out for Boston. Was the inflated cost worth it in increased productivity?
@ebmem
I hope you're joking. First of all, I'd strongly dispute that Obamacare added anything to the national debt, much less 1.7 trillion - the same about, incidentally, that the GOP did in fact add to the deficit by cutting taxes last year for the wealthiest people on the planet.
Even if Obamacare did add what you say to the national debt, the obvious beneficiaries are the people living paycheck to paycheck, and the people they support, who, with the help of the government, could now obtain some security for their healthcare and hospital debts should something happen to them.
I really have to wonder about your priorities. Either tax cuts for the wealthiest or health care for working families? Hmm
16
Very well said.
Now, which Presidential hopeful is offering a MASSIVE investment called The Clean Energy Revolution?
They’ll get my vote.
39
or a tax break for middle class Americans like sen. Harris
Ronald Reagan showed that the GOP did not really care about deficits. He may have labelled Democrats as "tax and spend", but his own approach was "spend and borrow". Since the GOP has never gotten over its Reagan fixation, the trend has continued.
The Democrats have a steep hill to climb. The GOP has been successful in persuading the American voter that taxes are in effect theft of their money instead of something necessary for the functioning of our government and society.
As to Paul Ryan, he showed his true character at the very end. He had the House pass a funding bill that was pleasing to Trump, then promptly left town. The GOP was in charge of the House, Senate and Executive branch until yesterday, yet did nothing to resolve the shutdown. Ryan proved that the GOP simply cannot govern. Let's hope this charlatan stays in Janesville.
2
Why not make paygo work for us by using it to justify repealing the Republicans' disastrous tax cuts?
1
The straightjacket has some expandable sleeves, however. The top fraction of 1% may not be too happy, but I fondly recall the Clinton administration days when the Federal government ran a surplus, the national debt clock was shut-off, and the 30-year Treasury bond was retired.
I remember thinking at the time of all the great things that can be done for the country -- education, healthcare, infrastructure, military. The nation could have experienced a renaissance...
...and then W became President, and the estate tax was renamed the "death tax", and bundles of money in tax cuts were reaped by the wealthiest people on the planet. Meanwhile, the rest of us either funded ill-conceived wars in the Middle East, or fought in them, or both...
250
@BD
The federal debt increased every year under the Clinton. The national debt clock never stopped ticking. When Republicans took a majority in the House for the first time in 40 years, Gingrich was able to slow federal spending as the Clintons were gleefully squandering the "peace dividend" from the fall of the USSR.
Too bad the Clintons did not see fit to redesigning national defense for a world where terrorists posed a threat to the sole remaining superpower, replacing the threat of the USSR. Instead, they saved money by eliminating all human intelligence in the Middle East despite the bombing of the Twin towers, the attack on the USS Cole and the bombings of American embassies. [But, "What difference does it make" Hillary sees ambassadors as disposable.]
If you want tax reform, how about eliminating the ability of Buffet, Soros and Gates to deduct charitable donations of wealth that has never been taxed? That is never going to happen, because the 0.1% want their foundations and heirs to control their wealth in perpetuity, and there is no need for the uberwealthy to pay taxes.
@ebmem, while I'm not a Democrat, I did quit the Republican party because of their complete fiscal irresponsibility - what George HW Bush called"VooDoo Economics". But you are correct in that the "debt" clock has always risen, even during the Clinton presidency, when the budget deficit was knocked way down. But somehow Bush II and the far right Republicans managed to start 2 wars off budget and on credit while pushing through a huge tax cut skewed favorably toward the wealthy. And Trump and Republicans have managed to raise the deficit even higher with their fabulous tax cut, again skewed toward the wealthy and this time huge corporations. What part of fiscal irresponsibility don't you understand?
20
@ebmem,
You are correct the debt clock was still running during the Clinton Administration, but it was running in reverse as surpluses were used to prematurely redeem Treasuries. Recall Allan Greenspan's "warning" to the W Congress that the continued paydown of the federal debt at the rapid rate at that time would rob the Fed of a fiscal tool. [At the time of his testimony all but the 10-year and shorter term Treasuries had been retired, with the remaining 10-year instruments soon to be retired, also.]
6
Agreeing with all the reasons Dr. K. puts forth as to why pay/go is a needless restraint on Dems, we wonder if perhaps Pelosi had to include the provision to attract enough votes to regain the Speaker-ship.
If that's what it took - a sop to some stragglers - then we're glad she did it, as this is one of those cases where the end might just perhaps justify the means; especially since pay/go is a rule so easily set aside.
We still have an issue with 'investment' in infrastructure, education, and proper levels of medical care being lumped together as 'spending', but that's a battle for another day.
This is a day to celebrate the restoring of law in our country following 2 years of midnight.
129
With this Senate, our national nightmare is far from over.
2
I'd be thrilled if Speaker Pelosi used paygo to reverse the Trump tax cut for the wealthy, end the cap on the SALT (state and local taxes) deductions, and used the excess to fund Medicare for All. I'd also be very happy if she proposed a transaction tax on stock trades that would fund an infrastructure bill that would fund a national high-speed rail system running on a new 21st century green energy grid. So, the Democrats can use paygo to show some prudent, progressive responsibility in governing that seemed to escape Republicans.
494
@Paul Wortman
" .. I'd also be very happy if she proposed a transaction tax on stock trades that would fund an infrastructure bill that would fund a national high-speed rail system running on a new 21st century green energy grid .."
There's not one large, diverse country in the world that is doing that. Period.
To the Krugman crew -- talking is easy. Doing is hard. When y'all start businesses, that's when you'll get real attention. Not one second sooner.
Your pals at Apple, their 401Ks just dropped 25% in a month -- looking forward to y'all, actually doing something. Have a day.
2
@Paul Wortman
Get rid of carried interest and whatever laws enable vulture capitalism of the Bain Corporations of this world to take healthy corporations and drive them into bankruptcy.
36
@Urko Your reply confuses me. Although Europe is not a single country, it is large and diverse, and there is indeed high-speed rail serving much of the continent, and efficient, convenient rail serve throughout. (I'm not sure what diversity has to do with a rail system or energy grid anyway.) And there is a huge investment across Europe in green energy (wind, solar and -- to the extent that it is green -- nuclear).
In the past, the US built a coast-to-coast rail system, electrified the country and built a national interstate highway system. There's no reason -- including size and diversity -- that we couldn't do a project on the scale of national high-speed rail.
We just need to rid ourselves of the GOP talking point that government is bad, and that government spending is wasted (aside from military, which is apparently limitless). If we just allow ourselves, we can afford to build a rail system, provide healthcare and college educations, upgrade infrastructure and much more. We just have to prioritize the wellbeing of all Americans over the wellbeing of corporations and the very wealthy.
62
" . . . . . reflect what seems to be a persistent savings glut — that is, the private sector wants to save more than it’s willing to invest, even with very low interest rates. . . . . . "
Japan, with an aging demographic, has a very high debt-to-GDP ratio for this reason, access to seemingly endless supplies of money at low cost from conservative retirees.
As long as the country is, by-and-large, borrowing internally from it's citizens, it can get away with it.
The problem I see with huge federal deficits is that once one passes about 100% of GDP in the size of the federal debt it shrinks the room for fiscal maneuver in the event of a downturn.
I had never thought of the Tea Party as a racist movement, but Professor Krugman's point makes sense. Many Tea Party types also would like to deport Latin Americans.
I agree with the professor that the congress slowed the recovery by tacking the wrong way fiscally after the shock of the 2008 collapse had passed. But Trump's tax scheme is ridiculous. At the current there will be so much American treasury paper on the market that buyers on the margin will begin to resist it. The tax giveaway to the wealthy (which benefits Trump significantly) is silly. America flourished during the 1950s when the top marginal federal income tax rate was about 90%. I am not suggesting going back to that, but a total top rate of about 50% (inclusive of federal, state, and local income tax) on high incomes is how the government can pay its bills. In addition, there are many government services that are already funded by user fees -- sewers, water, toll roads, airports -- where construction is paid by bonds backed by those fees. I think that such a method of finance for capital expenses should be expanded.
America needs a Green New Deal, and Paul Krugman, being an award winning economist, columnist and a Democrat, would be a great champion for this cause. It's the kind of "big idea" thinking we need. Nancy Pelosi could help save the country and the world by helping raise this idea into the general consciousness. So get to work wherever you are. Put pressure on opinion makers and politicians to get this movement to the forefront. The establishment responds to pressure from the outside. Change rarely comes from within.
Paygo is a negotiating leverage point for Democrats same as the Tea Party. When Democrats have full control of government again, the principle is immediately dropped from the party and the law is waived. Why would you even worry about cornering yourself on deficits? Republicans have already established the practice of "deficits matter only when you're in charge." Democrats are simply borrowing from the same playbook.
Also, I'm not sure I would characterize Nancy Pelosi as the "best House Speaker of the modern age." Democrats have spent a lot of time in the wilderness and Pelosi deserves a considerable amount of blame. Moreover, comparing any House Speaker to Paul Ryan is going to present the person in a favorable light. Paul Ryan is the most who squeaked. My Bob Ross Chia Pet would have made a better House Speaker. Actually, I'm think of putting him on the ballot for next election.
An effective means to curtail a Republican majority in The Senate and A Trump White House veto. Dem's in the house will use this as necessary when it pertains to selected legislation/policy/programs of fiscal concerns. No one is being put in a fiscal straight jacket here. Have faith in your Speaker, not the new minority wing the progressives who feel their agenda is the one that is being curtailed. It's been two days and the rules package vote is coming. Bet Pelosi wins again! The new guard's day will come one day, but not tomorrow.
Government revenues always go up. Government debt goes up. It’s not complicated.
Given how Republicans keep blowing holes in the budget with tax cuts, Democrats need to show how they've been fiscally prudent. This does not mean we stop investing in our workforce.
The current most expensive estimate for additional government costs for Medicare for All--which includes vision and dental care as well as medical care for all--is $34.7 trillion from 2022-2031. The most optimistic was $24.7 trillion.
The current CBO projections for total healthcare spending in the US--including the fact that we are not covering 30 million people--is roughly $46 trillion dollars from 2017-2026.
Assuming modest take-home income of 3% per year and corporate profits increasing 2% per year, my back-of-the-envelope math suggests that increasing the Medicare tax to 8% on both employer and employee side, taxing unearned income the same as earned income, and putting a 5% corporate profits tax would completely cover every listed projection to cover Medicare for All.
Most individuals and companies would save money under this kind of plan. If we are worried about job displacement, the numbers could be lowered somewhat on individual income and raised somewhat on corporate profits. The point is, even with the devils in the details, single payer is more affordable than most Americans might think.
1
What about the "big picture" of DEFICIT in world economics Mr Krugman ......surely it will effect the US ?
The worlds largest banks,although now "holding" DOUBLE the capital...held before the 2008 crash.......are VASTLY indebted and inextricably connected to each other like dominoes,because predatory mergers have made ,ALMOST ALL the largest banking conglomerates.....TOO BIG TO FAIL !
Furthermore,the institutions holding the trillions in "potential wealth"of the stock market......with matching capital held by the worlds banks.......are also tied to the stability of this GLOBAL bank DEFICIT.
Meanwhile ,since 2008,the worlds largest corporations,have TRIPLED their corporate debt.....in continued worship of DEFICIT spending and debt capitalisms "cheap"printed money.
With the above mentioned "delicate" state of WORLD DEFICIT.......Were an economic crisis,consumer confidence,or stockholder selloff....cause world financial panic and instability.........the "subprime DEFICIT" DEBT holders.....would be the worlds largest "global,debt capital" holders ALL, to a one,.......TOO BIG TO FAIL !
This "designed deficit" system always effects,most tragically ,the "capital creating working class" as the bursting inflationary "DEFICIT BUBBLES"......periodically deprive the poorest of food and shelter .....and usually lead to an ,"obfuscating economics" war !
Straitjacket? Straitjacket? You have the nerve to mention Pelosi and straitjacket in the same article? Putting Trump in a straitjacket, that I'd read.
Hold on. Is “fiscal prudence always necessary?” Even when we are at the zero lower bound, in a Keynesian trap, facing a greater risk of deflation? When “vice is virtue,” as it were? I think not. Even you say so. Did the editors mis-edit you, or have you changed your analysis and conclusions from the Great Recession?
These two next years should be used to discipline government on spending. The house is master over the budget. A next president could start from an improved and responsible situation.
The US are on a road to an Italian kind of financial situation, as soon as a next crisis appears.
1
Another example of Washington Democrat insider stupidity.
This is not why they were put back in charge of the House by the voters.
Pass bills that help ordinary Americans.
Investigation, oversight, and be a check on the administration.
3
Really curious about your thoughts on that missing money at the DOD Paul?
1
"Democrats shouldn’t put themselves in a fiscal straitjacket" PK
The Dems put themselves in this straightjacket along time ago, via losing election after election, sleeping at the wheel & allowing the GOP to gerrymander the country, being GOP-lite, losing their roots to the middle-class for the donor class, getting rolled by the GOP over and over again on tax cuts for the rich & allowing the spending to continue at the same time, & just run-of-the-milll folly
Our national debt is directly caused by the GOP's plan to make it so high that they will be able to convince Joe-idiot-public to cut the social safety net. The final results of such cuts are anyone's guess
Dems caused this by their incompetence which walked us right into the GOP trap, moreover, until 1 of 2 things happen nothing can be done, i.e., a total collapse of the economy, or the Dems obtain control of all 3 branches of the gov't and 60 seats in the Senate, whereby they can rework the US tax policy
The former is highly probable and the latter is as close to an impossibility as one can get
Had W kept his father's and Clinton's tax brackets & estate tax etc. as they were, we'd be awash with cash
The Cheney school of economics says "deficits don't matter", that alone should make any thinking person suspicious
They matter, if not economically, then politically. If you're not willing/able to change tax policy, the only way out of the debt is to inflate (Piketty), and our debt is now too big for even that
3
Here is your Corporate Democrats.
They get elected and punch the middle class in the gut the day they take power.
Banks need trillions Washington dumps it at their feet.
Progressives want Medicare for all Washington kicks you in the stomach and tells you to shut up.
1
I would like to know why the fact that the House has passed both major funding bills to open the Government and that is not headline news?
There is no fiscal responsibility with Republicans. Their whole philosophy is government is bad, a necessary evil. They can’t do what they want so Republicans/neocons are little trumps swaggering around pretending they know something when all they know is rationalized immorality.
I like Nancy Pelosi and I'm glad to see her in charge again in the House, if anybody can geld Trump Nancy can.
But I'm glad that she's agreed to limit her own terms too.
I want to see the US commit to an energy program that defangs the oil, coal, and other energy vampires who now run the govt courtesy of the republicans (who can only see the next dollar) and the democrats who allowed corporations to steal democracy.
Plus, having Nancy Pelosi in charge ensures that the blowhards who equate guns with freedom, money with speech, and deregulation as progress will be outmaneuvered. Watching them tinkle on themselves silly will be a lot of fun, too.
"For example, does anyone still believe that the Tea Party uprising was a protest against deficits? From the beginning, it was basically about race — about the government spending money to help Those People."
Every time you write something like that, you should print out 100 "Trump 2020" bumper stickers and hand them out, because that's the effect you're having.
The Tea Party was about ignorance, misinformation, an ossified ideology. It was not about race. You have let yourself slip into a toxic illiberal echo chamber, and it would behoove you to claw your way out as soon as possible. Because you're not only helping to get Trump re-elected, you're destroying your own credibility.
2
To put it simply: we are getting sick and tired of Republican lies and hypocrisy on just about everything, and especially spending and deficits.
Repeal the Republican tax giveaway to their owners the Koch Brothers and the rest of the oligarch class. (This is still a democracy, GOP: nothing is "permanent" except the Constitution you regularly trash.)
Tax the uber wealthy at 90 percent above the marginal rate, just like under that Great Socialist President Dwight D. Eisenhower. Add a stock transfer tax to reign in computerized speculation at the casino called Wall Street.
Restore moral hazard by finally putting crooked bankers and hedge fund managers behind bars where they have long belonged.
Tell the GOP to go take a hike and start rebuilding the country they have spent 40 years trying to destroy.
And get rid of the rest of Republican criminals, liars, saboteurs and seditionists in 2020. All of them. Each and every crooked one of them.
The reason "paygo" is a good idea is because, unfortunately, it is now necessary. The Republican corporate tax cut busted the budget, and it is time for adults to clean up the country's fiscal picture. If there are no adults on the Republican side of the aisle, then the Democrats need to do it.
This is unfortunate. This is not how we should have spent the dividends of our current prosperity. This is not what should have been done with the country's tax receipts. But it has been done.
1
Hearing the words "tax cut" creates an almost Pavlovian response in American voters. They just start salivating in anticipation without even bothering to learn who the cuts will benefit (not them). Promising a tax cut is the cheapest way to get votes.
So, republicans cut taxes on the wealthy and wreck the economy. Democrats get elected to clean up the mess and then get blamed when the recession doesn't end quickly enough. The economy finally recovers, republicans promise new tax cuts (because it's the voters money after all), get elected, and we start the cycle all over again. When will the American electorate ever learn their lesson? Answer: never.
2
Although your critiques seem destined to spoil those complacent enough with the current awful status quo, they are 'waker-uppers' to get out of our indolent passivity...and speak up for those left behind by this capitalistic system, rendered invisible for all intent and purpose. Capital trumping labor consistently, allows our odious inequality to persist undisturbed by it's injustice. Ought we surprised not finding peace in society? Listening to our new social democrat in the House, Alexandria Ocasio-Cortez, it reminds me of Louis Blanc's phrase (often attributed to Karl Marx): "From each according to his/her talents and resources, to each according to his/her needs". Socialism? Yes, similar to our Social Security system, Medicare and Medicaid, the VA, etc. That is what government is for, to enhance societal wellbeing...and keep avarice in check.
The Tea Party formed in November of 2008 in response to the election of Barack Obama. As Obama had not taken office the Tea Party could not have formed to oppose Obama's policies but rather to oppose Obama, it was personal. Or to put another way, the only real unifying theme of todays Republicana is a hatred of all Democrats. Therefore it would be really weak to allow Republican criticism to slow Democrat policy because it makes no difference what Democrats do, Republicans will hate and oppose any and everything. Over 70% of those gaining healthcare thanks to Obamacare are Whites with a high school diploma or less living disproportionately in the South, or as the media calls them, the base of the Republican party.
1
Why not go all out for a huge infrastructure rebuild?
I see a lot of "we should take like Europe" comments.
Sure. If you want Trump to be re-elected.
Denmark, the darling of many Progressives, taxes income of $50,000 at 60%. Meanwhile in the US, the majority of Americans tax filers do not pay federal income tax. Heck, automobiles have 100% taxes in Denmark. That is not a typo (that's why they ride so many bikes in Denmark). European countries, by and large, have much more regressive tax systems. Middle class pays. In the US, not so much.
There is no system where "tax the rich" (already pay 90% of federal taxes) remotely pays for the Left's agenda. Let's ignore what quasi-open borders would mean for Medicare for All.
$8 gasoline went well in France though.
1
@C. Childers that's "tax" not "take" though I guess it's the same
Worth remembering while we have three branches of government, the branches are not equal.
Sadly, as one ages...the mind begins to go.
As is the case with Mr. Krugman.
Congress has a 12% approval rating.
Of course, so do our public schools.
Any institution not holding up its end of the bargain is destined to be despised as an institution worthy of being respected.
Yet Mr. Ryan kept winning re-election...as do 95% of the incumbents each year.
Democrats should adopt PAYGO. It will allow Ms. Pelosi to neuter the nut-job wing of her party like Mr. Ryan was unable to do with his.
Unless and until we get moderates from both sides of the aisle cooperating again..this is going to get messy for this nation.
In just 25 years the population of the U.S. is going to begin declining and while more women working and having less kids is a sign of a healthy nation, it's also the fuse that will light the final bomb that blows up this nation; the bomb being a metaphor for $25 trillion in debt with over $200 trillion in unfunded liabilities unable to be met with a declining population.
That's the problem with Ponzi Schemes (Social Security). They always end up being exposed once the pyramid starts falling apart; which for us is 2040.
2
The Republicans don’t manage deficits they create them. And economic slow downs, and a depressed housing market through Loss of deductions. MAGA - “ma gad” America on the skids - and Trump thought the shutdown was a win! All he got was two whole weeks in the White House! Finally!
Asking how programs will be paid for. Like so many articles, this op-ed generalizes. And in doing so, allows Repubs to once again define the issue. No new taxes; get the government out of my pocket; state limits on tax increases, tax bills.
Duhhhh. Start differentiating between progressive and regressive taxes. Start linking any proposed tax legislation to what it might be dedicated to financing. Start talking taxes- not just new programs.
A tax on all those stock market automated transactions- might finance....rural Internet availability. Estate taxes, a return to and/or increase of- could go towards a small farmer/organic farm program......and on and on.
Pay as you go has two sides; talk taxes- The who and the why. Repubs want you to see it as just one big ‘take’ while they use avoidance loopholes to make sure it doesn’t ‘take’ from them. There are dozens of tax possibilities out there- start discussing them.
No one in Washington is afraid of budget deficits. The political rulers and their cohorts in the media have totally and completely betrayed the American people on this extraordinary issue. 22 trillion dollar debt and climbing.
As an economist why not discuss what it would take to address this pending catastrophe? Outline the potential currency crisis facing our country?
Financial straightjacket? You have got to be joking!
1
Pay-Go No, Green New Deal Yes. Nancy Pelosi has the priorities reversed.
Since Nixon declared the War on Drugs (largely a politically motivated racist ploy to disenfranchise blacks and poor people) we have vaporized over a trillion dollars of taxpayer money. No one seems to have a response to over 59,000 Americans dying in one year from opioid related overdose or from heroine deaths resultant from opioid addiction. These are deaths largely created by free market private pharmaceutical enterprise.
No one seems distraught over runaway education costs that drive a peonage society of deeply indebted college students.
No one wonders why it is that wage increases for 90% of America remain stagnant (despite current high employment) while the 1% leeches virtually all the wealth being created. And of course they must have less taxes to pay.
I suggest Ms. Pelosi and the “blue wave Democrats” quit playing cards with deck stacked in favor of billionaires and instead examine where are real priorities as a nation like.
...wait a minute. Maybe there are things that the US Government does - that we do need to do. .....the US "war" or defense department which cannot even conduct an audit of itself meaning no accountability burns through 2 thousand million dollars a day meaning 2 billion dollars every day forever or until the sun explodes. Why can't the country even look or talk about this?....that inability is a definition of psychosis.
1
The audacity of debt.
Once the hooligans are ousted a couple years from now, how about Paul Krugman as Secretary of the Treasury! Rock on, Paul!
1
Not to worry...Speaker Pelosi knows what she is doing..What we need now is a mixture of symbols---the Republicans emptied the ATM machine---and, at the same time, pass some middle class legislation---fix the ACA. And, I am ok that some progressives vote no ---this is a healthy change from a party whose only goal is more money for my friends and keeping the gavel in the hands of feckless speaker.
Too bad that "paygo" was not a law when Krugman's sainted President Obama ballooned the federal debt from less than $11 trillion to $20 trillion in 8 short years. Believing that paygo is anything more than a slogan to make Pelosi and the new Democrat House appear fiscally responsible is simply stupid. These are the same people who never met a government spending or social program they would not endorse, starting with the Great Society of Johnson in the 60's, and ending with the fiasco of Obamacare in 2009. Tax and spend is in their DNA.
Here is what I would like from the NYT. A new way of discussing the employment rate and perhaps a series illuminating the reality of work for most Americans today. My 70 year old father who still receives a pension from his 20 years on the police force has what can only be described as outlandishly dated ideas of what work is today. And he reads the paper daily. Too many older Americans and too many wealthy Americans don’t get it. A 4 percent unemployment rate doesn’t mean the economy is working for the average American. But newspaper headlines constantly paint the picture that times are good.
1
Yes, the Republicans are the offenders when it comes to managing the federal budget and deficit. Dubwa's two credit card financed wars and tax cut, followed by Bone Spur's unpaid for huge tax cut for the wealthy and corporations is all the proof one needs. However, there is so much fat in the sacred military budget, if only trimmed, would fund all of the Democrats programs with much left over. Let's change course, spend where there is legitimate need and eliminate the waste from supporting a military that has lost it's way, lost it's purpose.
1
Excellent column Paul. One thing I would like to have you think about. Infrastructure/water. Water supplies a deep concern due to climate change. In many areas water tables are dropping as rainfall patterns show declines. Much of our water is used on green lawns - so landscaping needs to be given a very hard look. But, huge amounts of water are used in our cities and suburbs, then flow to sewage treatment plants. Treated there then released into rivers and streams. Would love to see an emphasis on tertiary treated water, with that tertiary water injected back into ground water aquifers. Think about it. Add solar and wind power to help run these treatment plants - some are already doing that. It's called recycling.
3
Too many people connected to the government in one way or the other through business or lobbying are becoming wealthy at the expense of our grandchildren and great-grandchildren, and I don't like it one bit.
Deficits do matter when they lead to squandering hundreds of billions of dollars on stupid wars and what was at one time called "Pork barrel" spending just to keep the economy looking good on the surface that keep the middle class seeing things through rose colored glasses.
Spoiling the middle class to garner votes is no way to run a country unless you want to run it into the ground.
Ronald Reagan proved deficits don't matter -- either economically or politically.
And anyhoo, where would the wealthy invest their tax cuts if the deficits weren't there producing all those lovely USTs?
I appreciate the article, but the bottom line is, our country appears headed towards bankruptcy, and has been for quite some time.
Not enough people may understand why and plenty of those that do argue why it doesn't matter, some out of genuine ignorance, and others out of mal intent, but that's where the train is headed.
The Reps crippled the federal government with the latest tax cuts, yet now we are to believe that the Dems should ignore the deficits and feel free to propose new spending? They have been set up to fail politically. They will be forced to either curtail any new spending or restore the tax cuts. Either way they get politically destroyed. The pendulum has been preset to swing radically back right as soon as the dems move in either direction. Starve the beast is alive and well.
1
The Republican Tax cuts under Trump were only half about giving their corporate and wealthy donors a gift. The other half was about running up the deficit so as to force reductions in what they call entitlement spending, namely Social Security, Medicare and Medicaid. (They and the Democrats by the way, never talk about Defense spending cuts to balance the deficit.) The Republicans have only half succeeded. They raised the nations debt by increasing the annual deficit but now will be stopped in their tracks by the House Democrats from cutting those critical social programs.
So we are left with a ballooning National Debt produced by an ill conceived Republican tax cut for the rich and powerful. And we are left with a deadlocked Congress with the Republican Senate under Mitch McConnell allowing the ill-prepared and ill-informed and ill-tempered President to call the shots. Talk about a revolting development.
No reason to worry about borrowing, everyone knows that people will always be willing to lend us money at low interest rates. While the USA only owes 22 trillion dollars, total American debt is only 72 trillion dollars. All we will need to do is devalue our money. My pension will be worthless and a slice of pizza will be a billion dollars. No problem. Minimum wage will go to a thousand dollars a hour but workers still wont be able to pay their rents or buy food. Fiscal responsibility is for losers.
All very true, and thank you. Spending, taxes, and deficits are all a reality that we deal and work with in our nation. However, for decades the Republican party has been using these issues as a cudgel with which to beat up on Democrats and our sabotage our policies. Republicans couldn't care less about the deficit. If they did, they wouldn't be stealing trillions of our taxpayer dollars to hand over to the wealthy and corporations. They don't care. It's just like their endless posturing on abortion and reproductive health while utterly refusing to fund public health initiatives, contraceptives, and child care.
Adopting "paygo" is not only counterproductive but politically pointless. I'm afraid some of our Democratic leaders have been used to cringing and cowering in front of "tax and spend" accusations for so long that they're doing it as a reflex at this point. Enough. We have many issues that require spending- actual spending, not more "tax cut" nonsense of any kind- including healthcare, infrastructure, the environment, and education. These things are worth spending on, unlike "trickle down" scams and more slop into the military trough. At some point, we need to stop being afraid of what some grumpy Republican on television might say about our spending and point out what is worth investing in, and what is a colossal waste.
From the article: "Yet polling consistently shows the G.O.P. with an edge on the question of which party is better at dealing with deficits."
At the moment, the Republican Party is living off an image of what it once was. It no longer stands for much of anything. In its current incarnation, the party is nothing more than a booster club for Trump, who at one time would have been considered a budget busting, commie loving, immoral flim-flam artist by the Republican Party. The current Republican Party cannot last very long as it is, but it's hard to determine in which direction it will attempt a recovery.
1
It has been said by many and many, many times that Democrats need to learn from the Republicans the art of framing and promoting who and what they are! That such a large segment of the population don't get that the party of real
fiscal responsibility is the Democratic party is very troubling.
1
the pay off of keeping us alive longer is an uptick in the rate of births over deaths and with 7.7 million of us (and growing) I see death to many other life forms in the near and far future. where's the natural balance?
It's time to frame the debate as "how do we use what belongs to the public to benefit the public"? For this is bigger than money, although how the federal government spends our common financial resources labels whom it considers its master.
Get the numbers out there. Show the voters balance sheets. Having informed them, ask them if the money that's taken from their paychecks wouldn't be better used to fix roads and bridges and sewage systems than for another foreign military adventure or to pay cronies to steal food from detainees.
Frame the fight. Repeatedly demonstrate the fiscal irresponsibility of those serious faces (think Paul Ryan) who deplore spending on poor children and clean energy but can't wait to authorize Superfund spending to clean up exploiters' messes.
Money comes in. Money goes out. Show us the details. If Trump wants to remove our military from Asia Minor (about ten years too late), how can such a pullback not reduce our military budget? Why do Americans seem satisfied that any money spent on military adventurism is well invested? PR.
The likeliest way to thwart looming fascism is to combat fantasy with truth. Recently, the press has shown some backbone in the immigration fight, when certain people labeled a ragtag band of Pilgrims escaping murderous tyranny as terrorists, a charge that was less true than the headline in the 1620 Native American Enquirer warning that the boat just off Plymouth full of stern savages would end a civilization.
Bill Clinton left a $5 trillion surplus to help pay for the Baby Boomers retirement and healthcare. George W. Bush promptly spent it on tax cuts for the wealthy and a stupid, fraudulently promoted Iraq War. Republicans cannot be trusted to serve the nation beyond a relative foursome of billionaires. I say crush them, enough is enough, and Trump is their final insult to America. Why should Democrats be held to some standard of performance that Republicans cannot fathom or follow. McConnell, the freedom caucus and the rest of their phony "conservatives" are the enemy Trump always finds elsewhere.
5
Whatever the Dems do for the economy will require an aggressive communications package that explains their actions to the masses and that is repeated regularly and someone to deliver it who will counter Fox, McConnell and Trump's lies.
Obamacare was passed and then immediately not supported with any positive messaging from the Dems and was allowed to be defined by Republicans. Lesson learned?
This is a situation where Democrats are arguing publicly about the policy. The leadership of the Democratic party is concerned about the politics. If the House passes a rules package without PAYGO, every time a budget/appropriations bill is debated, the Republicans can grab headlines and time on Fox with this simple line, "The Democrats changed the rules and do not care about fiscal responsibility". The House leadership understands this and will simply waive the rule when needed. Is it hypocritical? Yes, but the Republicans are both hypocritical and shameless. Adopting PAYGO is smart politics and will not stop a progressive agenda.
1
This is now proof. PK shows his true stripes as a prolific spender, regardless of consequences. What a joke. How many trillions have been wasted by the Dems over the past 70-plus years on “high return” social programs? And to what effect - except greater poverty and dependence. And immense debt.
The simplest answer to this $5 Billion Debacle that Trump is acting out is the NO which is the only sensible reply. It is not almost as if Trump is the only juvenile in his clubhouse, it is that the spending of other's monies especially tax dollars ill-gotten is the thing that is the only reason this fat cat spills his bile.
1
The huge tax cuts for the wealthy and corporation has taken the republican fiscal responsible label and thrown it in to the garbage. The people clamor for benefits of some kind from the government then refuse to pay for them
Fundamental to GOP politics and the political base is race and racism. The one good thing about the Trump years is that it has finally pulled off the fig leaf. The GOP base is no longer bound by political correctness to shy away from name calling, discrimination and other forms of bigotry.
GOP deficit hawks want to cut benefits for Those People. The deficit worries were a fig leaf. But you can't cut spending on those people whilst it is still affordable so they have to blow the budget to create another fig leaf.
So there we have it racism and fog leaves. Who'da thunk it
Jas2200--I don't think Bernie Sanders is going to be a threat in 2020 because the novelty has worn thin. The Times has been investigating claims of sexual harassment which went ignored during Sanders presidential campaign. Hopefully the progressive Democrats will wise up and support the Democratic presidential candidate, warts and all, to defeat Donald Trump. This reminds me of a line from the Hunger Games--remember who the real enemy is.
1
As usual the good Doctor brings up several good points and manages to look at the details and the big picture at the same time. With regard to the big picture, I will continue to mention that the Republican play book being followed for the last 30 years is "The 2 Santa Claus Theory" as first proposed by Jude Wanniski. This is so obviously the MO in play. It's cynical and disingenuous, and, my I remind America that, for all of Bill Clinton's flaws, he left office with a surplus.
Dr. Krugman"
Are you telling us that only dudes like Trump have the right to play Russian Roulette with the deficit, like cutting taxes to the rich without caring for the budgetary consequences?
Democrats should go about Medicare "Te Dude way", without seeing the financial consequences; why not?
the fashion is "go ahead, let the Chinese finance our financial follies."
Republicans didn’t secure funds for their wall when they were supposed to: by voting for it. They lost the vote, and now Trump is proving once again that Republicans despise democracy—if you don’t get the result you want from voting, just refuse to do your job. If the democracts cave here, Trump will shut down the government every time things don’t go his way.
The Democratic Party has been successfully marketed (by the Republicans) as the "Tax and Spend" party. As with all good propaganda, the more the phrase is used the better it sticks. So since Reagan's days, every reference to Democrats has been spot welded with the "tax and spend" descriptor. It's been effective too, in an almost Pavlovian way.
The Democrats need to quit fighting this smear and own it proudly.
There is no need to ask "how things will be paid for". The simple answer is "reverse the tax cuts". Krugman's last column explained how the latest round of cuts utterly failed to do what was claimed, but he can't bring himself to say that taxes have to be raised.
It has been clear for a long time that there is too much capital that is not being invested - the "savings glut". The main reason that there is not more investment is that wages have scarcely risen and demand is not growing fast enough. Also, due to very low tax rates, those who have the money would rather speculate to get a quick windfall return rather than invest for the long term. More progressive tax rates would directly address wealth inequality without causing a shortage of capital, and probably shift incentive toward longer-term investment. Why ignore the post-WW II economic history?
More spending on infrastructure and conversion from fossil fuels is certainly called for, but the tax structure must be reformed.
3
The progressive show I watch daily on youtube, the Young Turks pretty much laid out this same point these past few days. The Young Turks is quite a progressive network that should be put on everyone's radar.
2
I'm not an economist BUT, doesn't the basic Keynes idea that Government should borrow money to spend during a recession to boost economic activity only really work if Government also pays that debt down during an expansion? Am I missing something or did we just "forgetabout" the latter part of the idea? Where were the calls to pay that debt down during the last five years?
2
The Republicans abandoned the idea of fiscal responsibility the moment they gained absolute power. While they should indeed have been paying down debt against the inevitable rainy day, they instead kicked the economy into overdrive with unneeded tax cuts that only benefited the wealthy and corporations. And now, instead of having money to spend on infrastructure (which should have been the FIRST thing they did after comprehensive immigration reform), the debt is ballooning in GOOD times. Now the most we can hope for is a Dem in 2020, who will of course have to dig out from yet another pile of Republican debt.
@Mr. Jones. that is absolutely correct, and keynes himself made that clear. that's the precise problem with keynesian economics- the govt, once it spends, cant stop.
We need to listen to the young people who have been elected into Congress. We need to build for the 21st Century. Connect the whole country so that the populations in the rural areas and small towns can develop a way to make a living in the current economy. Just repairing bridges and roads although necessary will not move us forward as a country. I am older and I know I don't understand what is needed to move our country forward but young people who are steeped in the new economy must know. Look at Donald Trump and the Wall. It explains my point.
2
Any program or policy that improves the lot the working class, addresses the nation's infrastructure and global warming is a pipe dream until Democrats own the House, the Senate, and the Presidency.
I'm tired of hearing about the Blue Wave. When 4 incumbent Democratic Senators failed to win reelection the wave stopped short of ousting Mitch McConnell.
1
If there is a deficit issue the first goal of The Democrats should be to roll back the tax cuts to the rich and have tax clawbacks from corporations that got trillions repatriated at lower tax rates then used the money for stock buybacks rather than building new factories and creating new jobs. Clawbacks are possible, Irving Picard proved that was possible for the Madoff Investors, what are the rest of us pawns of the rich, where are our clawbacks?
2
Let's return the top tax rate to 70% and eliminate the cap on payroll taxes. Deficits gone overnight. But, the rich prefer we borrow the money from them, the money they once paid in taxes; and instead, pay them back with interest.
1
Deficits matter if we explain to the people on a pie chart, how much of the federal spending going to interest payments. People understand how much of a drainage interest payments are on family finances. All government does is tax and spend. The difference between Republicans and Democrats is how it is taxed and how it is spent. For example, the affordable care act with pre-existing conditions has wide support. People are willing to pay for it. Politicians should explain to people in town hall meetings, where the taxes are going, because that is all what the government does. The rest belongs to church.
1
@Kodali
One party tells them where the money goes and the other party lies about it. What are they to believe?
Paul is right. The future requires major projects that only the US government can initiate.
Infrastructure is an easy target and one that our country tragically requires. It's big, huge and expensive. It will generate jobs, provide tax revenue, and increase consumer spending. And it has a cause and effect feel that will be immediate.
And with that initiative, going green-energy is the Manhattan project of our time. It will define our children's future.
I would easily trade the 2017 tax cuts for either of the above.
2
Well Paul, I for one clearly remember Republicans screaming deficits, deficits, deficits until they got into power and now it's all about giving more to those who clearly don't need it and really don't know what to do with it all. Unless of course it is a wealth transfer in the form of campaign contributions to the GOP. That everyone doesn't see this boggles my mind.
3
I believe that most Americans are not "financially literate". If they were, the approval rating for the 2017 tax bill would have been much lower.
In my experience, most Americans don't pay much attention to financial readiness until they face a major expense, then it's too late. If they were, 401k balances would be much higher and people wouldn't lean on Social Security and Medicaid (when they run thru their life's savings) so much.
1
@ejr1953
401K balances would be much higher if the Financial Corporations running them weren't ripping us off for over 30% of our earnings.
1
12%? The Speaker was that popular? I try catch Lou Dobbs show, when I can, and I never would've guessed Ryan was in double digits.
While a government is certainly not a household, if we don't expect our households to abide by Paygo, mortgage payments anyone, maybe we should start looking at national finances in the same way.
Government should be looking at and measuring value for money. Build out/renew infrastructure when it's cheap to do so. Invest in and encourage programs that provide outsize value like R&D, healthcare, education, international development. And perhaps most importantly, ensure that entitlement programs are fully costed and funded from tax revenues rather than from borrowing.
The inconvenient truth of national governments is that the vast majority of their spending goes to flow-through programs like Social Security, Medicare and Medicaid. After paying for the military, only about 15% of the federal budget is actually spent on discretionary items.
The budget deficits and the ballooning national debt can safely be ignored while the US dollar is still the world's dominant currency. It can be spent and relied on everywhere because it is considered safe and is the benchmark currency. If it became a secondary currency, with say the yuan in charge, things would change and investors would demand higher interest rates to buy US debt - maybe much higher. This could cripple us economically. Keeping the dollar dominant is ultimately the responsibility of our economy and military in our coming geopolitical showdown with China. Every third-world country we defend, like Afghanistan, is part of this struggle. Liberals who counsel retreat from useless wars, and isolationists like Trump, should contemplate America broken by a non-dominant dollar and unsustainable debt. It may not be moral to be the world's de facto policeman, but it may mean survival.
It’s worth considering that Democrats control half of one third of the government, and that their surge of power, is significant but far from overwhelming. Their input will be necessary to future legislation, but not sufficient. Abandoning their role of treating the hangovers caused by GOP’s “Just do it” approach to government and simply attempting to join the party will not advance the interests of the 90%.
As Dr. Krugman has always said, the time to deal with the next recession is when the economy is humming. Going into the next one with increasing deficits, growing Chinese and Russian influence, negligible interest rates, the Roberts Court, the McConnell Senate, the Trump/Pence White House, and dreams of creating a new social contract doesn’t seem like a winning strategy. Winning the Senate and dealing with a putrid Executive Branch seems like a better course.
The federal debt to GDP ratio, how economists assess the magnitude, is at the highest percentage it has ever been since the end of WWII. Another well worn economic principle is governments spend and stimulate the economy in downturns while rebalancing once the economy returns to health and full employment. This Trump-Ryan administration did exactly the opposite via tax cuts for the wealthy.
The debt and deficit will inevitably become an increasing impairment on the federal budget impacting all programs and therefore a hot topic for the media and voters. Pelosi is right to draw a clear line that the financial irresponsibility led by Trump-Ryan is now at an end and the democrats are the party of fiscal responsibility. To not make that distinction would give Republicans license to blame Democrats for the fiscal mess we’ve inherited much like Republicans blamed Obama for the fiscal mess the Bush administration left us with.
For those concerned that progressive programs won’t get passed, any new spending coming out of the House would be dead on arrival with the Senate and President as increased spending gives them an easy reason to reject it.
@Paul
'... any new spending coming out of the House would be dead on arrival with the Senate and President ... '
I hope you're right.
"Meanwhile, the federal government can borrow money very cheaply"... True, but what about when we can't? It's not like we can just stop borrowing; we have to continually refinance as securities mature. As global interest rates rise it's not just new borrowing that's affected. And God help us if people stop believing that we're the safest game in town. Routinely running trillion-dollar annual deficits with a booming economy and full employment could have that effect. Once confidence erodes, the erosion feeds on itself.
Change the tax cut, increase taxes on the wealthy and don't limit the SALT deductions. Leave the alternative deduct large. That way those who liven in poor and cheaper areas get to claim deductions more like richer more affluent people. Make that a "pay go" trade off. Then take care of infrastructure with another tax increase on people who can afford it. My Public Finance Professor said he thought it might be helpful if people say a grocery list of things their taxes pay for. They would see they couldn't get close to those prices in the private market. Hence, pay go allows you to raise taxes to pay for specific expenditures.
But be aware, Nancy Pelosi is not a big government liberal. People don't understand the SF Bay Area. As a 20 year old we had many fiscally conservative liberal republicans represent us in congress. The are just now fiscally conservative liberal democrats. Only the party affiliation has changed. Most of the school districts there get way more money than the State alotted minimum, due to home values in the multimillions, and very few children. Their streets are all newly paved. Yea homelessness is a problem in SF. but try the smaller cities and towns all around, from Calistoga in Napa to Monterey, and you'll get an idea of the economic fire power here. They are very entrepreneurial, and see economic advantages to government dollars used well.
There is a big difference between spending (money goes out, never to be seen again) and investing (money goes out with a reasonable belief that it return with a benefit). I hoped the Democrats would know the difference.
The Republicans spend like money is going out of style, usually on things with little or no long-term benefits while the Democrats, once back in control, either go extreme austerity to make up the monetary shortfall or have to reduce or curtail their investment plans while they clean up the Republican mess. Rinse. Repeat. This is old.
This is where Krugman wrecks his credibility. He's spent the last year berating the Republicans for their phony concern about the deficit which is now as a consequence of their incompetence approaching a trillion a year when the economy is performing well and it should be coming down. This is an issue and it will only be solved by addressing the tax and spending question. The Democrats need to talk and act responsibly in this area and this little homily from Krugman which (despite the minor and late caveat) is a variant of the deficits don't matter mantra doesn't encourage this approach.
1
"Reality doesn’t seem to matter." And that's the rub! When one believes whatever one believes, based upon...and not on... and generalizable-facts, created-fictions, and fantasied wishes, transmuted into NEEDS-NOW, become "goulashed" reality is virtual. Unconstrained by its very essence of interacting : Uncertainties. Randomness. Unpredictabilities. Lack of total control whatever one's actions and their timeliness. How can "reality matter," and to whom, when unaccountability, by individuals as well as systems, is enabled? Fostered? Protected? Anchored as a norm? A value? When "reality" is mantrafied by many as being little more than a created, voiced, written semantic, its necessary manifestations are little more than being "virtual" memes!
Seems like a simple solution is link pay-go requirements to the state of the economy. Waive requirements when the previous quarter's GDP is negative, enforce them when it is positive.
"Who's afraid of the budget deficit?" Republicans are afraid of the budget deficit, that is when they themselves are not creating it, as they do every time that they hold political power in Washington.
3
Pelosi will hopefully wield the gavel in such a way as to find republicans that share some interest in fiscal responsibility. Not the Freedom from Reality Caucus, but people that want to be responsible about spending, and about any cuts.
Now is the time for those who've been hiding under trump rocks to get back in the sunshine and do some work for the good of the country.
1
Paul,
After reading all these posts from my fellow liberals, I'm limp wristedly fanning my face because I'm light headed with the 'vapors'. Reality check. The Democrats have only one half of one branch of government. The Republicans have all the rest. And, they don't even have the most important half of the legislative branch; the Senate has the confirmation role for the judiciary and cabinet (not that that matters to Trump who merely appoints "temporary" replacements for the people he recklessly fires).
So the Dems can at least block bad bills that come through congress, right. Right, but the Dems could always do that anyway as long as they maintained at least 40 seats in the Senate. So not a whole lot has changed.
Perhaps the biggest change is that the Democrats are guaranteed that, if Sen. McConnell decides to end the filibuster of regular bills, they can still block them if they need to.
1
Only justification for Pelosi et al to support “paygo” is to make it easier to block wall funding. Note that no one is talking about how to pay for it with the deficit already blown by the tax cuts.
1
Care to revise that view on the tax cut and the pro growth Trump agenda Mr. Krugman? Because that’s an awfully strong jobs report that just dropped. How are you gonna spin that one I dare ask? Job growth surging at a blistering pace and yet an uptick in the unemployment level. This says not only are new jobs being created at a super healthy pace when we’re way way overdue for a recession based on historical averages of expansions and the global economy is cooling off, a large number of our fellow citizens who during the Obama administration had their tails between their legs in surrender are awakening to this new land of opportunity and reentering the workforce. I’m sure you’ll treat us to a set of (wonkish) supply and demand curves to explain this all because it couldn’t be that it is the Republicans and not your favored Democrats that have it right this time. Could it?
1
And don't forget that Clinton left us with a big surplus. W promptly pushed a tax cut saying he wanted to return the surplus as it was the citizens' money. And then W started to accumulate a deficit by getting us into 2 wars, with no care about how we will pay for the wars.
3
There are progressives, liberals, Republicans, conservatives, Tea Partiers, Democrats in no particular order that are names of political interests. The Republicans have made political progress on two fronts, first calling themselves the "conservative" party conflating all forms of conservatism as theirs. The Democrats has lost support of many of their clients (the little guy, the workers, the many who get shafted by the "big"). The fact is that we all have some admiration for "conservative" values like honor, service and prudence. Democrats have been labeled "tax and spend" and lost influence among those who are fiscally prudent.
Most of us Dems also believe that the other side of R's influence is needless racism, and culture wars, which we should stand against even when the visceral bias challenges us. That is a hard but necessary discipline.
We need infrastructure, Social Security, medical care for all, but most of us also want to be "Prudent". Without political power in the other branches of government, the question is moot. So let us attract those "little guys", who happen to be fiscally conservative, back to the party so we can have a proper discussion about taxes and social spending, without ceding the discussion to the Republicans who represent the Oligarchs.
1
In memory of Larry Eisenberg:
Our House is now led by Pelosi
There's hope that some reason we will see.
We'll invest and progress
Out of GOP mess
and restore our nation's decency.
7
One of the first orders of business should be sensible tax reform that does not beggar our government, making those who can best afford it pay the most.
8
just as in personal life, debt can be healthy. Long term debt for housing for example. But debt for example to buy a pair of sox that will be worn out before the debt is paid is foolish.
So debt for infrastructure and long lasting needed assets is smart, but funding a useless wall or military items that the military doesn't want or need is foolish. Republicans seem to be willing to fund the useless but not the beneficial seems to be their norm.
3
We could rid ourselves of deficits entirely if we reduced defense spending to levels commensurate (or even 2x) with other large nations.
9
The types of renewed government spending, other than health care, required are those that focus on repair of existing infrastructure and construction of preventive structures to mitigate damage from climate change. To the degree possible these should focus on labor intensive activities. Military spending that is overly High Tech and requiring little manpower must be examined with jaundiced eyes.
2
There has never been a better time to address our crumbling infrastructure. After all, the self-professed "King of Debt" sits in the Oval Office and he "knows how to build stuff better than anyone else." In approving an infrastructure bill, he could actually deliver on his first campaign promise too.
The only barrier of course is if the Republicans in Congress now decide that since the Democrats have some power, debts and deficits matter (after spending two years legislating as if they didn't).
2
I can understand the need for deficit spending as promoted by Mr. Krugman, but I see no downside to raising taxes (including Social Security tax) on the wealthiest. If the tax rate for those making millions was at least 60% we would be in much better shape. If corporations were stripped of their entitlements, we would be better off. The Defense and HUD spending can NOT continue at the same rate. If the Office of Inspector General audit shows an annual TRILLION DOLLARS in unexplained costs, then deduct at least that from the budget... they know where the money is, let them use it.
2
“Almost as if their real goal was shrinking social programs?” That’s EXACTLY the GOP’s real goal is (in tandem with lining the pockets of those with unequalled wealth with additional wealth); pretty much always has been.
But the main reason the public thinks the GOP is the “fiscally responsible” party is because Republicans always TALK about getting the deficit “under control” - never mind what they actually DO - whereas Democrats don’t talk about it near as much.
Now, even if Democrats talk about budget deficits, no one believes them because the Republicans have spent the last 30-40 years demonizing Democrats. That successful demonization is the main reason the GOP still exists.
9
The plutocrats and corporations that finance the GOP have more money than ever. In spite of the November election they will resurrect their political machine in whatever form is required to keep Americans divided enough to keep them in control of the government.
We must ask: What would the highest corporate tax rate and highest individual tax bracket be if the political issues of gun control, abortion and DACA were settled?
A large majority of Americans agree on each of those issues, and yet those issues divide the middle class and dominate the nations politics. Why is that?
The answer becomes obvious when we examine the political activities of giant corporations and the billionaire inheritors of great fortunes who have come to control the government. The money, power and priviledge of a tiny minority can only be maintained by dividing everyone else.
3
Quoth Calvin and Hobbes: "If I'm going to get clobbered, I like to deserve it." Deficit hawkery would be worth it if we ever got any credit for it (well, either that or if it were good policy on its own merits). But since we don't, and it isn't, it's long past time to stop worrying so much. We're going to get smeared as irresponsible tax-and-spenders no matter what we do; let's at least get some good things done with the taxing and spending.
3
"But, you may say, isn’t it politically important for Democrats to present themselves as the party of fiscal responsibility? I’m highly skeptical."
Mr. Krugman applies sound budgetary thinking only when it is convenient to make a point he wants to promote. Deficits do matter. what should occur is the redefinition of some spending as "investments" instead of "expenditures". A good example is education and infrastructure.
You are not going to find too many people who will disagree that spending on education is one of the best investments an individual and country can make. It is necessary for a prosperous future, whether it be an individual or a collection of individuals called a country.
The same holds true for infrastructure. It is a must we have good roads, bridges, airways and waterways. Unfortunately it is also a must to have a strong military.
It is also "fiscally irresponsible" not to maintain the above investments and others not mentioned which should be financed with a more graduated income tax.
it has been clear for over two decades that Republicans (once elected) no longer care about debt and deficit but still falsely claim to be the party of debt and deficit to get elected (as do republican voters). Alas, paygo would work if a two thirds majority were required to approve the suspension of the rule.
1
The federal government prints the money and we need it to pay for the real deficits -- free education, a modern transmission grid that will carry low-cost clean energy all over the country, universal health care, more health care and early childhood education providers. We've had decades of neglect and need to get back on an even keel with a Green New Deal.
As a lifelong Democrat I have always thought that a balanced budget was a low priority item----ranked well below the common good.
I learned in a college finance course to look skeptically at investing in a corporation that has no debt. No debt suggests the corporation might have nothing going on in terms of innovation, future new products or growth. It is common to hear owners of small businesses say "if I ran my business with debt levels like the US has I would be out of business." This reasoning may well be why their businesses are small and frequently of short duration.
I know the US government is not a business or a corporation. But I and many others of US believe that eliminating poverty and improving medical care are worth borrowing for. We believe US is worth investing a little more in to increase its debt to pay for its survival, growth and existence, and our wellbeing.
2
While paygo is a crude tool, you still need some type of budget constraints. What’s great about budgets is that they force you to prioritize. And if all the priorities are tied for first? We’ll you may need to look for additional revenue.
As far is infrastructure, a helpful way to pay for it is to see how much extra activity it creates. That’s then your paygo.
1
Tell it, Brother Krugman. And you always do - clearly, concisely, putting often complex issues always in easy to understand terms. A national treasure you are.
5
The main message here for me is that Democrats need to stop worrying so much. They need to just do it. Unfortunately, given the current balance of power, we probably will just have political gridlock for the next two years.
The most hopeful aspect of this column is that we are once again discussing issues that will truly help people in the country and that actually have hope of being implemented, albeit somewhere over the horizon. But at least the horizon is visible again.
Democrats need to always remember this golden political rule: you can't implement your policies if you don't get elected. Every one of them should be taking time to read Paul Krugman today.
141
@Blue Moon
That's right, Democrats DO need to stop worrying so much and stop being afraid of what Republicans say in response to them.
Take a long look at Alexandra Ocasio. In response to typical Republican boorishness when she was booed at voting for Pelosi she said, in essense, SHOVE IT. Albeit more politely by she made her point by replying " you aint me:.
She's young and fearless. She's going to be criticized like crazy because of that. Even by her own party like the old sea ummm, dog McCaskell.
Well, Alexandra YOU GO GIRL!!!
An old Chinese proverb says it all: The dogs bark but the caravan moves on.
To all Democrats: Let the negative Republicans bark and growl - just keep moving on. The louder they bark and growl only means that you ARE going in the right direction.
CHEERS!
14
@Blue Moon
We live in a strange time when the standard for Democrats is that they must always act like adults while the standard for Republicans is "anything goes."
We've also witnessed the fact that Republicans know how to win elections, but don't know how to govern. With Democrats, it's the reverse.
Let's hope the Democrats understand that a message that they understand the economic anxiety of the middle class and have viable programs and ideas to help is what is needed to win back the White House and Senate.
9
@Quinn
EXACTLY!
There are NEW Democrats now and I feel pretty confident that they aren't rthe OLD Democrats who were fearful of the false narrative that Republicans wrote for them.
4
Although admirable in intent, Democrats always make the mistake of assuming that the American public is thoughtful and logical about budget issues. Really, they just want things but don't want to pay more taxes, especially for things that they think will go to someone else. Finding the right balance, and convincing voters that they are paying for something worthwhile, is what the politics demands.
207
@Larry Figdill
One thing I'm pretty sure the American public will support is raising taxes on the 1% (or even the 5%). In California a voter initiative to increase taxes on the wealthy passed with large margins twice - once as a temporary measure and then to make it permanent. Paygo would not be my choice here, but there is more than one way, as they say, to skin a Republican. Touch Social Security or Medicare and there will be an uprising.
10
@Larry Figdill
Remember: You can please all of the people some of the time and some of the people all of the time but you can't please all of the people all of the time.
Do the right think and it'll all work out in the end.
Don't get bogged down in trivialities and pay absolutely NO attention to Trump and his inane tweeting.
That way lies madness.
7
@Larry Figdill
I think you are quite wrong. When issues are properly and simply presented and it is clear that the money will not be siphoned off to excess profits for contractor donors or other forms of corruption, the American people have usually demonstrated a willingness to raise taxes to conduct necessary and useful government business.
5
I see what you're saying about a mechanical mechanism being pretty useless. But let's face it: the US debt is totally out of control, largely because of GOP irresponsibility and inability to govern for the good of America.
Progressives like myself want to see programs enacted which will do tremendous good for America: Medicare for all, free tuition at public universities, good and affordable child care, implementing an economy based on sustainable, global-warming-fighting energy. To do this, this country needs massive changes in the tax code and new sources of revenue. It is best to have these fiscal changes in place before or at the same time that the hugely expensive programs are put into place.
And when Democrats put these changes to the tax code in place, they need to remind everybody about how fiscally irresponsible and hypocritical the GOP has been and how much these changes will help the average American.
118
@Tom Krebsbach
And unfortunately, they need to remind everybody AGAIN AND AGAIN.
9
@Tom Krebsbach
The GOP has been successful at convincing the middle class that taxes are theft of their hard-earned income and that government is completely inept and wasteful. What we now see is the long-term effect of this: infrastructure worthy of a third-world nation, declining educational performance, declining life expectancy, and healthcare statistics on par with developing nations.
What the middle class has not yet awoken to is that the GOP's tax cutting has simply shifted the burden of costs directly onto the backs of the middle class. It's why the middle class feels it can't get ahead.
A massive revision to the tax code is needed. All income should be treated equally - there is no economic justification for preferential rates on "carried interest", dividends and capital gains. The argument that the top 1% are job creators, so should have beneficial tax treatment is complete fiction.
With the 2017 tax bill, the GOP has forfeited any claim to being fiscally responsible.
14
@Tom Krebsbach
Republicans want everyone to have access to quality education, healthcare, childcare, a clean environment. We believe, also, in a concept called subsidiarity, that says services, and needs are best provided at the lowest level of government or community. If the widow next door has trouble keeping her lawn mowed, you do it for her or get the neighborhood teens to do it. If she needs a ride to the grocery store, you ask her when you are making a trip.
The federal government takes care of things only it can do, like providing for the national defense, maintain a federal judiciary, and adjudicating interstate disputes like preventing NYC from dumping one million gallons of raw sewage into the waters of America.
The red leaning state of Tennessee has established free tuition for all high school graduates for two years of community college. It also conducted a five year study of pre-school and determined that it did not have positive results. It turns out that three and four year olds who attended full day pre-school had poorer outcomes than children who did not. Exactly the same results demonstrated from the Obama administration evaluation of 40 years of Head Start.
Federal and international "guidance" on global warming has made things worse. Substituting corn ethanol for gas did not reduce CO2, raised costs and resulted in water pollution leading to algae blooms in freshwater sources. Encouraging the substitution of biofuels released greenhouse gases.
K writes, "All, the sums will be so large that asking how they’ll be paid for will be crucial."
This is the wrong way to think about how the gov operates. K seems to believe gov spending is limited by taxes and borrowing. If you ask yourself the question "Where does money come from in the first place?", you will see this wrong.
The federal gov can create as much money as it needs out of thin air. It then spends this money on gov operations, e.g. the military, roads & bridges, research, education, etc. In this way money gets to you so you can buy & sell stuff.
Now while there is no theoretical limit on the creation of money, there is a practical one. If too much money is sent to the private sector, there will be excessive inflation. Taxes & borrowing take some of this money back. Thus the purpose of taxes & borrowing is to adjust the amount of money in the economy.
So the right question to ask is whether the amount of money in the private sector will cause excessive inflation. Prices are proportional to the amount of money in the economy, but INVERSELY proportional to the dollar value of the stuff we can produce. So if the result of gov spending is to facilitate production, prices will not rise too much. Spending on infrastructure, for example, will do this. Tax cuts for the Rich, not so much.
"So much of our economic issues could be solved if people understood that the US cannot run out of money, & how hard it is to cause hyper-inflation from gov spending alone." - max
2
@Len Charlap Havng read both of your comments, I would like to offer this thought. Pay-As-You-Go is a political policy statement with economic implications. It is not an economic policy statement with political implications. Republicans get the difference between political policy and economic policy instinctively. Democrats, not so much.
Pay-As-You-Go serves as a flexible basis for rejecting Republican sponsored bills and justifying Democratic sponsored bills. Like Paul Ryan's magic asterisks and GOP supply side analysis, it provides justification, however flimsy, for the "affordability" of programs that will make lives better for all Americans. It may just be a fig leaf, but a fig leaf strategically placed is significant and comforting.
Didn't CBO recently come out and say that interest on the debt alone is likely to more than triple to close to a trillion dollars a year in less than 10 years.
It seems we should all be frightened of budget deficits.
2
We don't have to "increase" taxes, just undo the Republicans pointless political fraud/stunt of the 2017 "Tax Cit"; It was not a tax cut, but a transfer of wealth from the struggling American Middle class to the Already Have WAY to Much and Already too big Corporations, and their owners.
That is not a Tax Increase,
It's a Revenue Restoration bill.
356
@Karl
And undo the Bush II tax cut and the Reagan tax cut, and then you will be talking about real money.
31
@Karl Because of the limitation of the SALT deducation in the "tax cut", reversing the 2018 tax "cuts" would actually cut taxes for millions of us in blue states.
16
@Karl
YES!
Also corporations like Google, who, I just read HID $23 BILLION in Bermuda to avoid paying USA taxes.
Think of all the money scammed by just Google. Now multiply that by dozens of other corporations doing the same thing. At that rate, IF they actually were made to PAY those taxes, there would be no debt or deficit at all.
OVERTURN Citizens Unites and that obscene 1% ers tax cut.
31
If your roof is leaking, do you spend the money to replace the roof or do wait for it cave in and ruin your house? The way politicians operate, they wait for the thing to cave in.
In Kansas City, we knew decades ago that the sewer system had to be rebuilt but we waited to last minute and now the public is faced with huge water bills that would have been much lower if the work was started many years ago.
Our nation is falling apart. We haven't adequately funded Medicare and Social Security. I specifically remember watching financial shows in the early 90's and economists predicted that the budget would blow up around 2010 because of the aging population. It did.
We don't have a spending problem, we have a revenue problem. There are enormous amounts of money being made that goes untaxed. Guess who benefits from that? Not the coal miners.
Republicans are afraid we will end up like Europe where people are happy and have healthcare, childcare, and retirements. But if you add in the cost of healthcare and senior care to our taxes, we end up spending as much as they do except they get something of value for their money.
The bottom half makes too little to pay much in taxes and the top 10% makes so much that is untaxed. This is exactly the world the Republicans want.
So don't let our roofs cave in. Fix what needs to be fixed and even out the tax code so it gets paid for. Start with raising the corporate tax back up to at least 25%. I'll go for that paygo.
771
@Bruce Rozenblit, Our legislators do not let the roof cave in. They take out a home equity loan, adding to their already too large debt.
13
@Bruce Rozenblit, the article is not wrong but it is not right either. Americans DO CARE.
But what they care about is what the country is going into debt for. Going into debt to pay for endless wars is not it.
Spending money on things that improves its future - infrastructure, education, R&D, healthcare - that Americans are willing to do.
However, the sky is not the limit. These things have to be paid for unlike what the Republicans do: drive up the debt and leave the country with nothing to show for it.
72
@Bruce Rozenblit-Let's not only raise the corporate tax rate but close the loopholes. Few U.S. corporations pay even a 25% tax. Many pay less than 10% and some pay a negative tax, actually receiving more money from the federal gov't than they pay in. With the IRS's enforcement enfeebled do to funding shortfalls, as much as 20 percent of tax revenues goes uncollected.
A Gutted I.R.S. Makes the Rich Richer
https://www.nytimes.com/2018/12/25/opinion/editorials/irs-audits-rich.html
101
They shouldn't put themselves in a straitjacket but we shouldn't be building huge deficits when we're at full employment either.
The Republicans used paygo when they were in the minority to stifle spending when we had high unemployment and a depressed private sector to stifle the recover under President Obama.
Now we are in a period where the private sector is doing well. We should be increasing taxes and lowering the budget deficit.
Obviously the President's effort to wreck the world economy is going to have an impact on the US economy so that may change things very quickly.
Fiscal responsibility matters, so does policy. There has to be balance and the state of the general economy matters.
1
Krugman is right about PayGo, but I assume Pelosi didn't want to give the Republicans an easy way to label the Democrats as fiscally irresponsible. And she knows that in reality PayGo would still be law and therefore operative, though it would also remain toothless and therefore not really very significant.
I'm mostly impressed at how the progressives in the Democratic party spoke up against PayGo, but then compromised and went along with their speaker. I think this bodes well for the Democratic future. The can accommodate different viewpoints without tearing themselves apart.
2
@617to416
A healthier accommodation would have seen the establishment compromise with the progressives.
While I fully agree, I also respect the Pelosi is a very strategic figure and may know exactly why, in the chess game of politics, this is the right move.
3
Nicely done. They call that the sandwich method.
Appreciate the honesty and consistency. K is such a liberal, I expected a flip or dissembling. He gave it straight and clean.
Well done. Bravo. And thank you.
In another comment I showed that deficits have always been necessary to avoid horrible economic condition, Let’s look at a period that deficits were not sufficient. After the Clinton surpluses, we had deficits from 2001 to 2008 which was followed by a severe recession. What went wrong?
The first thing to realize is that the federal deficit measures the net flow of money FROM the federal government TO the private sector.
The first chart at https://www.slideshare.net/MitchGreen/mmt-basics-you-cannot-consider-the-deficit-in-isolation
shows what happened.
In the 1990's the deficit was reduced. The flow of money out of the federal sector was reduced.
Simultaneously the flow of money into the private sector was reduced. Then in about 1996 money began to flow out of the private sector, out of the country in fact. In about 1998, money also started flowing into the federal sector.
In 2001, we had deficits again, but our trade deficit was really large. Except for a brief period in 2003, the Bush deficits were not large enough to compensate for the money going out of the country. Money still flowed out of the private sector.
In addition, the Bush deficits sent the money mostly to the Rich who spend a lower percentage and use the rest for speculation. This money was not very useful for commerce and the risk thus created was bad.
People then turned to banks to get money. Private debt exploded. But the banks could create only so much money.
Finally in 2008, the economy crashes.
2
From your comments, Len, and other reading, at some point it will be interesting to see if Krugman and other progressive mainstream economists grapple with MMT. You do a good job explaining it.
1
A note unrelated to your column. I was elated that Pelosi was leader of the House or Representatives again. I came to appreciate and deeply admire a true leader. She is a mixture of the Lincoln ideals and the effectiveness of Johnson. I think she would have been a magnificent president (and she can still be). But not sure if it is needed - she is exactly what is needed at the House.
And one of the best things that I have done in my life is start reading your columns. Thanks for all you have done. Your clarity of mind is no news, but your defense of Pelosi against the tidal and glib narrative was pure bravery.
3
Here's the problem. Democrats want to be in the position of convincing people to support tax increases on the wealthy. For if the economy is , as many suggest, headed into a decline, why is it doing so so quickly if the tax cut was supposed to grow the economy? And the Republicans want the middle class to believe their plan is going to help them so they can cut social programs. Problem is only half the Republican plan has come to fruition. They simply can't get over the hump of making the middle class wealthy enough to make them come around to the cuts. In other words... the tax cuts made wealthy people wealthier. The middle class sits with the engine idling waiting for the tank to be filled by a better grade of gas. And we are about to head back to where we were before the tax cuts after two years. So, what was the point of the tax cuts? Paul Ryan essentially spilled a lot of milk in aisle. He runs out the door while the loud speaker bellows "Clean Up In Aisle Six". No longer his problem. The minimum wage guy is stuck holding the mop and pushing the pail. Once again. Does it ever get old? Not to Republicans it doesn't. And Democrats have to try and come up with a counter plan that looks different from the one used in the past. But is really the same. Not too hard to figure out, really.
11
Mr. Krugman, respectfully, you are wrong about the origin of the Tea Party. It has nothing to do with race. The tea party started at the end of the Bush era in reaction to the massive federal bailout of the irresponsible banks. The people, the taxpayers, felt they were getting a raw deal bailing out billionaire bankers, and they were upset they had no say in the matter. It was W, and Hank Paulson calling the shots. Obama only continued the policy. Calling team party members racist is just wrong and frankly appalling. You don't need to disparage a huge swath of good people as racist to make your point. Thank you.
10
@Chris
"The tea party started at the end of the Bush era in reaction to the massive federal bailout of irresponsible banks."
The problem with your theory is that they voted for Trump who immediately installed Steve Mnuchin and Wilbur Ross, two of the biggest financial predators around. AND THEY STILL SUPPORT HIM!
I'm not saying the Tea Partiers are racist but there must be another, deeper, reason for their actions.
It was also about opposing Obamacare. Remember keep your government hands off my Medicare and death panels. Also, there certainly was a racist element; remember "hafrican american".
Why try to be financially responsible when your "partner" just spends it all on junk as soon add they get the chance? You might as well spend it all on the things you really need when you have the chance, especially when no one really cares.
1
“It’s almost as if their real goal was shrinking social programs, not limiting national debt.”
Almost? Ya think?
19
The US Government should not be run like a third rate donut shop on the corner, where the owner (in this case the self-perceived 'owner' Trump) can just withhold payment of salaries on a whim and employees are suffering.
The sick dog must leave the White House or we all get rabies.
5
"it was basically about race — about the government spending money to help Those People." Actually, its about the wealthy using race, abortion, religion, guns as manipulative dog whistles to control and get their way to pick the pockets of the taxpayer class - regardless of race and regardless of party. Does anyone really think the Kochs, Adelsons, trumps, and the rest of THEM care what race or partisans they get to exploit to fund their tax break giveaways?
Its not the wealthy who will ever help pay off the national debt that enriched them so - it is the taxpayer class that is burdened by deficits they'll have to pay. Indeed, the wealthiest get wealthier by increasing the debt of the rest of us! Their goal is to get us into a permanent state of debt so that they will have full control over all of us - debt slaves have no rights, especially now that the Consumer Financial Protection Bureau has been destroyed and the IRS has been de-fanged from investigating the non-tax-payer class.
Yes Lindsey, the wall is a metaphor. Indeed, the wall paid for by Mexico scam is a metaphor of Republican kleptocratic strategy of fooling their gullible base that only little people pay for walls. They were conned into believing that Mexicans were the little people when the reality turned out to be American taxpayers are the little people. Anyone think trump will pay his fare share of his wall? Or any of the $2 trillion in increased debt so far (in a booming economy, no less)? Will the Mercers?
6
It really looks like Democrats have for a long time been saving money in the national piggy bank, only for their mean big Republican brother smashing it with a hammer and blowing it on coke for himself and his friends. Leaving Democrats look bad every time they return to power because then they are the niggardly party unwilling to spend money on nice gifts for voters.
3
We can get most of our money from cutting military spending and our false "border security" but most of all we have to have a real national health care program. Is there any country left that doesn't cover it's people? And this entire game of whack a mole with the poor's benefits. It's so far beyond stupid to tax the poor a $100 for every $100 they earn so the rich can keep buying houses and avoiding taxes. In fact I invite the Times to do an in depth study of just how unfair our laws are for land owners who rent their properties. And how they are the largest contributors financially to terrorists within our own country but our so called law enforcement won't go after them. Why?
3
12%?
Seems high.
Imagine a speaker who has historically very strong speaker competencies as opposed to Craven Stumbling Coward Ryan.
Krugman is just possibly right in this piece: It would be helpful if he could answer just a couple of questions of the many who would receive if he would invite them.
I am a great Krugman admirer but I wonder why he didn’t say that the tea party was an artificial concoction started and financed by the Koch brothers syndicate?
Yes, it was about race—principally against a black president—but artificially engineered by the Koch brothers’ syndicate just as candidate Trump elicited racism in his campaign and continues too do so with his wall.
6
I think the intent of enacting Paygo is (a) countering a myth and (b) proactively contrasting priorities with the last GOP-led Congress. The myth to be put down, of course is that Democrats are irresponsible budgeters. The need to contrast priorities is a consequence of the GOP's 2018 tax legislation. Bringing in Paygo rules highlights just how wrong the myth is and just how irresponsible the last GOP Congress was with it's ill-conceived, poorly targeted tax cut. Since Democrats don't have sufficient control to dictate the agenda in this Congress, spelling out just how irresponsible the GOP has been is great messaging.
I understand the point re flexibility for the coming recession. Unfortunately, addressing the existential danger presented by the increasingly amoral GOP is now more important.
So, Paygo is just the start. Dare the GOP to use the Senate and/or veto to block responsible legislation on voting rights, guns, health care, social security, etc. and let the voters see just where GOP interests lie (hint: it's not with the general public).
1
Medicare for All would most certainly require a detailed discussion of how to pay for it. Making so large a change would be the fiscal equivalent of a gustatory decision to eat all the food you would consume in a month in only one day.
It would be much easier to "digest" such a change by making it incremental, opening up eligibility to join the Medicare pool in annual groups of 5 years of age. So, the first year eligibility would be open to those over 60 to join Medicare. Next year the eligibility would fall to 55 and up. And so forth...
The change could be further buffered by adding a declining deductible, initially say at 20% which drops 4% a year to be removed after an individual's period of enrollment extends 5 years.
People need to understand insurance as just a way to pay for something on time. I have been driving for about 50 years and I have averaged car insurance payments of about $500 annually over that time, totaling some $25,000 in aggregate which, if invested (as insurance companies do), would grow conservatively to about $100,000. That sum would allow me to have totaled my car once in that interval and left a considerable sum in the insurance company's coffers.
All insurance works much the same way, including health insurance. The answer to the Medicare for All problem is the same as the answer to this question: How do you eat an elephant? One bite at a time.
3
"Reality doesn’t seem to matter."
At some point it has to play a role. We can't go on borrowing a trillion dollars a year. Interest in the debt is currently $400,000,000,000 a year, and will double in ten years. It's sure as heck going to matter then.
You can argue about the solutions all you want; you cannot argue that this isn't a problem.
5
The issue here really is about messaging and branding and the GOP is way better at it than the Dems.
The GOP's goal is to create enough red ink to be able to insist to voters that the US Household needs to cut up its credit cards and tighten its belt - a scenario many American households can relate to -nevermind that a country's economy doesn't work like a household's. And since no one particularly loves paying taxes, its easy to simultaneously talk about how Washington bureaucrats waste tax payers money and should not get any more "of your hard earned cash!".
Lo and behold this means cutting social programmes in the end: a one two punch and William F Buckley's "starve the beast" scores!
What is the equivalent Democratic branding/messaging playbook?
"We want to spend to help people but we will do it responsibly by raising money or spending less on something . We aren't wasting your money, please trust us."
It just doesn't have the same venom, bite and purpose does it? No wonder the Democrats are usually swimming against the tide of public opinion.
2
tea party was against Bush and bailouts. the free market system is the most efficient system delivering maximum goods at minimal cost. a small government is not racist. the government takeover of healthcare is a misnomer but health care costs are eating the budget along with entitlements. Low taxes is good for jobs and companies and they include racial minorities. when capitalism lifts millions out of poverty it doesn't discriminate on skin color.
2
Some fiscal responsibility would be nice.
China won’t keep lending us money if we don’t pay them back. As of October 2018 the US national debt was 21.8 trillion dollars.
1
It's too late, Pelosi sealed the Pay/Go deal, thereby sabotaging any chance at major funding of much needed climate, infrastructure, and social program spending.
Just as in the Obama years, the Dems cherish austerity.
1
Why are Pelosi and Schumer their party's leaders? Is it because they are supreme political geniuses who can divine every current in the political maelstrom, as the media would have us believe, or because they are the greatest recipients of corporate dollars on their respective coasts? It doesn't take a genius to slow-walk progress, just a stooge. If it ever become the norm in Washington that politicians who take PAC money are not welcome, these two marionettes will be out on their assets.
1
Republicans have managed to brand the Democrats as the “tax and spend” party. Whether you agree or not, it seems the only thing more reckless from a responsible fiscal management perspective would be a party which insists on slashing government revenues while increasing spending. The record clearly shows the Republicans are the party of “no tax, just spend baby, spend.”
But wait, wouldn't Keynes advocate slowing down the firehose of public spending when times are good? Does Keynesian economics only work one way--i.e. unleash spending when times are bad, and unleash the spending when times are good? Is this how you taught economics?
Cut military spending in half.
Then the U.S. will only be spending as much as China and Russia combined.
Gives a tidy $300 billion to spend on others stuff.
2
That assumes you believe defense spending data from China & Russia. For them, people are expendable, weapons are not.
With all due respect to Mr. Krugman, this piece is nonsensical and disingenuous. He asserts that when Democrats are in power, 'big efforts' are made to balance the budget. Utter nonsense.
The federal budget in the late 1990's achieved balance after Gingrich and the House Republicans forced the matter and after Bill Clinton cut capital gains tax rates which unleashed a gusher of capital gains revenues from the dot.com bubble. That was a bipartisan effort.
In 2007, the federal budget deficit was $161 billion, the last budget in Bush's tenure that was GOP-controlled - it had also declined the previous two years. When Democrats handled appropriations in late 2007, they ushered in a $459 billion deficit in 2008 after Pelosi promised an end to deficit spending. In 2009-2010, they gave us $1 trillion dollar deficits that have now become the norm.
BOTH parties have clear histories of being woefully reckless with debt & deficits. The Obama Administration doubled the national debt in just eight years - Obama never objected to prolific deficit spending. It is irresponsible to suggest now that deficits are of secondary importance which is the underlying message of this column.
5
What is actually irresponsible is to ignore the fact that President Obama pulled the country out of the worst financial crisis in decades, and possibly saved the world from a global depression. There was no alternative to deficit spending to undo the damage done by 8 years of George W.
Republicans claim they're going to spend money repairing our abysmal infrastructure, but they never do. They only want to cut taxes for the most wealthy, and privatized every public asset in sight. Well, I'm not going to settle for corporations owning all of our bridges and roads and charging me for the privilege of using them. No more profits for corporate welfare queens!
2
"Reality doesn’t seem to matter."
That really says it all. The majority of Republicans that still believe Obama was not really a US citizen, that Trump is bringing back factories, that most of the gov't spending goes to minorities and illegal immigrants (who voted by the millions for Clinton, thanks to the Democrats open borders) -- they are just so far removed and so immune to facts that it is probably hopeless.
1
This is a political column rather than a fiscal policy one, but then again all budgets are political. Long term deficits left unaddressed create an existential threat to our overall prosperity and security. Krugman knows that but also is correct that Democrats have through their political incompetence lost the argument with voters as to whether deficits caused by ridiculous Republican tax cuts for the rich matter, so we may as well spend some of this”free” money available in this low interest climate on other goodies. Krugman should go back to educating us with the economic truth that if we fixed our fiscal house and were able to spend our taxes on infrastructure instead of debt servicing we could indeed be “great again”. Instead Krugman is saying “why should the Republicans be the only pigs who can feed at the trough?” Condescending, not informing.
4
I remember negative interest and right now I believe negative interest was what Canada, Europe and the Western democracies need.
I watched the Democrats takeover of the House and realized that for Canada the Democrats are easily more of a danger than the Republicans.
We have an economy that supports Canadian ethics and values and last year our stock market was positive for the year. It is quite apparent that our values are not American values and Herr Trump is a menace, he shows our reducing our dependence on the American economy is a necessity. The Democrats are just as much a party of America first and as great a threat and our nation one tenth your size cannot prosper relying on the good will of our Southern neighbour.
I suspect I will spend many days worrying who is worse for Canada and the world Republicans or Democrats. Our future lies with the Baltic States Scandinavia and Europe.
Our economy is based on our ethics and values and has nothing to gain tied to an economy based on American values as expressed in your economy.
We are a middle-class society which is inclusive and seeks diversity which believes in providing 21st century equality of opportunity. We are globalists who believe neo-liberalism threatens our sanity and our planet. We believe the best wall America can build is the one where Guatemala, Honduras and El Salvador are safe, well governed, and provide opportunity so they like Mexico are better places to live than the USA. Nobody wants to be a refugee.
Most people’s understanding of the deficit is from Republican messaging, that’s the only craft they do well. Unfortunately all they use is lies well crafted lies. I am hopeful that the new young blood in the Democratic Party can work together with the House leaders and finally stop the circular firing squad. Paul has it right, don’t use a paygo policy as it is the first dumb idea in the circle.
Krugman thinks it is bad for the economy if the stock market goes up because foreigners own 33%. I have never seen a main stream economist support this.
3
Professor Krugman doesn't mind if the stock market goes up, despite the fact that a third of it is owned by foreigners. What he does consistently say is that a ruinous tax cut for the wealthiest and for corporations will send one third of our money to foreigners they take the profits from an artificially inflated stock market, and the most vulnerable in our country face the prospect of gutted Medicare and Social Security along with Medicaid to pay back the corporate raid on our treasury. Ironically, Trump can't even deliver that to his corporate masters. He is steadily eroding all of the stock market gains with his trade wars and utter ignorance of how government or finance work.
1
Pelosi put pay go in place to stop progressives from getting any form of Medicare for all in place. The Corporate Democrats donors made them promise to keep their tax cuts in place instead.
1
I could have written this article. I expected more background, explanation and analysis from an economist.
1
Oh please. The only time in recent history we had a budget surplus (Clinton) Republicans were in charge of the House.
2
If Democrats are going to be blamed for excessive spending anyway, they shouldn't be afraid to spend to improve social justice and equality.
Krugman says-- "if and when they’re ready to move on things like some form of Medicare for All, the sums will be so large that asking how they’ll be paid for will be crucial."
"If? Some form of"? What's the Democratic party for?
Well, PK are you ready to move on to "things like" Medicare for All? Or is that too left wing progressive for the Conscience of a Liberal to even discuss, much less advocate? The GOP is regulating the limits of policy, obviously.
Now can you answer how dozens of other capitalist democracies have long been paying for it, as accepted policy, supported by citizens? If not single payer, using insurance mandates--- but with the crucial govt regulations of premium costs.
Big govt? Of course, for all citizens, not elites. I'm waiting for Krugman to deal with this sometime---should be right up the alley of an international economist.
From “True Cost Blog---List of Countries with Universal Healthcare” with start dates and type---a partial list:
UK 1948 Single Payer
Switzerland 1994 Insurance Mandate
Japan 1938 Single Payer
Sweden 1955 Single Payer
Netherlands 1966 Two-Tier
Australia 1975 Two Tier
Netherlands 1966 Two-Tier
Germany 1941 Insurance Mandate
France 1974 Two-Tier
Norway 1912 Single Payer
Sweden 1955 Single Payer
Austria 1967 Insurance Mandate
Italy 1978 Single Payer
Our big money politics make US media and most politicians afraid to grapple with these contrasts to the USA, and their implications.
What do you say, PK?
First thing first, end the government shutdown and then cancel the tax cuts of 2017.
The perpetual line of thinking from Mr. Krugman that budget deficits don't matter at all in this country - I have read it so many times in his columns that I wonder why he even expresses this point of view any longer. Our current national debt and annual budget deficits prevent every American citizen from potentially enjoying benefits which most of the rest of the free world enjoys, first among those being universal health coverage. Any kind of progressive agenda is made virtually impossible due to our national debt. In this regard, Ms. Pelosi and the Congressional Democrats understand something that Mr. Krugman obviously does not.
3
While both are fair causes, Dr. Krugman mocks national debt alarmism but sounds the bell on global warming alarmism. They share similarities: it's going to be bad, we need to take steps now, but the experts have no idea when the impact will arrive.
While I'm a fan of liberal causes, I wish Dr. Krugman would use his Nobel Prize in economics beyond the scope of day-to-day politics to explore how do we face both legitimate challenges. Even if the national debt doesn't arouse your political passions, we need to recognize that the interest on debt ALREADY IS a straitjacket on liberal interests.
Look what happened in France with the yellow vests protesting modest gas tax increases. How can we address both challenges here? That's where we need Dr. Krugman's big brain.
Less echo chamber and more serious journalism.
1
Well, actually, since the budget deficits OMG scam the GOP pulled off during the Obama Era proved to be one of the phoniest, cruelest propaganda campaigns in history, let's look at this picture a little differently:
The lauded "low unemployment number," as a recent ProPublica article on rampant age discrimination in the workplace makes clear, is also a farce.
The banks got bailed out of Great Depression II, when the millions who lost their homes, retirement savings, college savings, careers should have been bailed out instead.
Now, most of those people are contributing to "low unemployment" by being "retired," not permanently out of work due to age discrimination.
So: let's fix this.
Social Security needs radical change. Its budget needs to be doubled, and the retirement age needs to be reduced to 50, the point where corporations start intimidating workers into permanent unemployment. Benefits need to be doubled, at least, in payout, to make up for this shortfall, and the massive inflation in living costs that have occurred since Reagan.
Where does this money come from? Simple. The Pentagon. We don't need a military 7x larger than all the rest of the world's militaries combined; it's utterly insane.
We do need a safety net for the destructively unemployed 50+ workers, who if added in would make that pretty "unemployment rate" figure a far different story.
If Democrats can't start pleading for this, they are worth nothing.
2
@Steven
Thank you for your lucid comment, Steven. Yes, we could afford to strengthen Social Security!
For nearly 20 years, the Democratic Party has consistently failed to communicate effectively with American voters.
Either it had no voice when one was needed, or it mumbled-stumbled whenever it found its tongue. Either they get some real muscle in their messages, or they continue to bang opponents on the head with cotton candy.
1
It sounds like the Old Keynesian is awakening from his post-Trump austerity nap. When it looked like his Gal Hill was going to sidle into the Oval Office, PK was all for deficit spending - don't pull a European Union said he, keep the green backs flowing....Then, voila. The clock struck midnight, the Left apoplexed, and our Nobelist threw Mr. Keynes under the national debt. Gotta tighten those purse strings, said Paul. Gotta show some fiscal restraint. Can't be spending money we don't got...So, it seems that long nightmare of a night is releasing its hold on Mr. Krugman. With the Democrats able to [attempt to] throw some money around, those deficits don't look so bad after all. What's a few more Tri$$ions added to the debt if it buys some lofty Democratic goals like Medicare-for-All? Paul might even embrace Bernie's fiscal policies now that Her Greatness has the gavel again. Shoot, a flip-flop of that scale would right in keeping with the neo-Keynesian Krugman.
It is a matter of public perception that the Democrats are fiscally immoderate spendthrifts and the Republicans are prudent and fiscally responsible. This despite an almost daily barrage of evidence to the contrary. The perception is rooted in a mix of racism, lazy thinking, mythology and what is oxymoronically referred to as received knowledge. This massive cognitive dissonance has ever reigned and has proven impenetrable to assaults of reason, factual data and history. Rational argument has absolutely nothing to do with it.
Considering our obscene national debt, when do deficits matter?
Keynes was right; he has always been right
Supply side is bunk. For Rs. deficits only matter
when there is a a Dem in the White House
as Bill Clinton famously said, the enemy is math
To the contrary, one of the most powerful and lasting parts of the ACA was including capital income in the Medicare tax, greatly strengthening the program. Or, Clinton raised taxes on the rich, lowered the structural deficit, and jump started growth in the 90s. Is this a political argument or an economic one? Agreed that paygo is foolish but what's the economic theory of running a huge deficit in a tight economy? The Dems will have to face the expiration of the very few tax benefits that went to the middle class, and should be talking about taking back some of the massive tax breaks given to the wealthy to pay for healthcare, reinstating SALT, and doing for social security what they did for Medicare by including capital income, not just wages.
1
Deficit hypocrisy is a Republican art form and public opinion regarding their fiscal stewardship is, shall we say, unsupported by the evidence.
1. Bill Clinton (D-Arkansas) had surpluses from fiscal years 1998-2001 (the last fiscal years he budgeted), the only surpluses since 1969. No less a conservative luminary than Alan Greenspan became worried we might pay off the national debt. Bush made sure that wouldn't happen, with tax cuts of about 1.5% GDP. For scale, the budget deficit historically is 3% GDP. He turned a big surplus forecast from CBO into big deficits, when the Clinton Boom turned into the Bush Bust.
2. Republicans lie that tax cuts pay for themselves. CBO reported that revenue was $270 billion less in 2018 than they forecast when Trump was inaugurated, due to the cuts. Deficit totals forecast for the 2018-2027 period are up 45%.
If we want to fix the deficit, we can eliminate the $300 billion/year in tax breaks ("tax expenditures") that the top 1% get, including treating capital gains and dividends as ordinary income for them. Going back to Bill Clinton rates for the top 1% is another $100 billion. Removing the cap on the payroll tax, which would increase taxes on the top 6% of workers (and only their income over $128,700) would bring in another $200 billion.
There, deficit problem solved, without raising taxes on the bottom 94% of workers. We'd probably stop reeling from one asset bubble to another and would grow the economy a bit faster over time.
Paul Krugman makes many excellent points, but one truth sticks with me. This is that the political arguments about deficits on the part of Republicans were a mask for racism. This rings completely true. Once in power the GOP deficit arguments were abandoned, and the racism and xenophobia were exposed for the , raw prejudicial attitudes they are. We have a long way to develop as a nation.
2
Pelosi is smart. She does not strike me as someone who would capriciously cede power by enacting any rule, including PAYGO. I suspect she has a reason for Paygo that will benefit her power and the Dems.
Arithmetic: One should go into debt on appreciating assets when the assets are appreciating at a higher rate than the cost of the debt, provided one can sustain the necessary cash flow. It is smart to pay 1% interest to repair or replace a roof, a bridge or any required infrastructure when the cost of the replacement will increase more than 1%/year if the repair is delayed. Cheaper to do it now.
It is stupid to give a tax break and increase the deficit when the economy is near full employment, has an abundance of capital and the demographics suggest less workers will be available in the future to pay down the debt.
PK is right on target. Ideas like "pay go" represent outmoded, almost knee-jerk politics, especially when there are so many needs to be addressed.
Besides, the Republican bandits don't have a leg to stand on concerning deficits, They were the ones who blew up the deficit, and all the Dems need to do is keep reminding everyone who bears responsibility for the disgraceful tax "reform" plan that benefits the wealthy over virtually everyone else.
Also, besides, investment in infrastructure, health care, and environmental safeguards are widely popular with voters, not political stunts created by the maestro of mis-direction.
Dr Krugman, you know better than anyone that now is not the time to run deficits. It is not crazy for Democrats to also be good Keynsians. And nothing they pass in the House will become law anyway. They should stake out positions that middle class Americans will support, including PayGo. Cut the defense budget, stop hemorrhaging money on overseas wars (where Trump actually makes sense, god help us), and reverse the corporate tax cut you have so eloquently excoriated. None of it will get past the Senate. But the goal has to be to win in 2020.
1
I am for Paygo. It's only -- and completely -- political. Democrats have to make sure they aren't attacked as deficit busters, regardless of whether it is fair. Dr. Krugman's argument is that it isn't fair -- sorry, but that ain't the optics of the politics.
The bigger issue, now that Trump is 60% discredited and soon will be 80% discredited, is discrediting the traitorous Republican Party.
Wow Paul, most voters are too stupid to understand the deficit, so why bother? I furthermore don’t think that short term economic growth justifies burdening future generations with our free ride. Soon 10% of our tax dollars will go to servicing the debt. Imagine what that money could go for without debt payments, infrastructure and education? The answer of course is to reverse tax cuts funded by pushing their cost onto future generations via deficit spending. Do the right thing, not the easy thing.
1
Absolutely, Prof. Krugman. The Democratic party has proven over and over that it (we) are the party of fiscal responsibility. The Republican party very loudly proclaims themselves to be that same thing, only when Democrats are in power, though. And a lot of the public still is brainwashed into believing them. So it's not going to hurt the Democratic congress to use a little common sense about the matter, rather than imposing strict limits on itself, which will do more harm than good.
Deficits only matter when Democrats are in charge, as indicated by the budget wars of the past decade:
Clinton balances the budget for fiscal years 1998-2001 and starts paying down debt held by the public...Conservative Alan Greenspan publicly worries we'll pay off the national debt.
Bush cuts taxes, turning the surpluses he inherited from Clinton into big deficits, a $5.5 trillion swing for the worse... Republicans think its fine.
Obama runs $800 billion stimulus total over four years when faced with collapsing economy he inherited from Bush... spawns the Tea Party and scorched earth resistance from Republicans.
Obama extends 80% of the dollar value of the Bush tax cuts by letting them expire for the top 1-2% only, after extending them 100% from 2010-2013...Republicans complain about tax hikes and partisanship.
Obama raises taxes on the top 1% via ACA, which scores repeatedly as a deficit reducer, covering 20 million people using a conservative model of the 1990's...Republicans claim socialism and vow to repeal ACA.
Republicans complain about $10 trillion in debt additions under Obama, despite only about $2 trillion of that due to Obama's policies...
...then Trump adds $4.3 trillion stimulus via tax cuts mainly for the rich, increasing the forecast debt additions 45% over 10 years and...crickets from the Tea Party and Republicans.
Democrats doing the right thing, Republicans blowing up the deficit. People have to get informed for our country to function.
Dr. Krugman expects way too much from Nancy Pelosi way too soon. This scenario reminds me of the Hunger Games where there were two presidents--President Snow and President Coin. Is that what we have now--President Trump and President Pelosi?? Dr. Krugman forgets that the Republicans still control the Senate and there's a Republican President in the Oval Office.
Nancy Pelosi had better get her House of Representatives in order first. Younger Democratic members of Congress have already started zinging those four letter expletives around so frequently that Richard Nixon would blush from shame. So far the next generation of Democratic lawmakers isn't very promising.
Republicans still control the Senate, so Republicans will keep Democrats in a "fiscal straightjacket" so why not embrace it?
Even Trump has ranted about how we're being played as suckers by the drug companies, can't Democrats challenge Republicans to squeeze some money from drug companies? (and insurance companies, Wall Street, energy companies, internet providers, etc)
It's so sad that with interest rates near zero for almost 10 years, there were no projects to improve our infrastructure. The Repubs were elected to head the House and Senate in the last eight of those years blocked everything to make sure Obama was a one term President. Trump promised infrastructure programs but only if large corporations could walk off with public infrastructure assets. Now we'll see if the Dems can frighten the Repub Senate and Trump into actually doing something. As Trump himself said, our infrastructure is an embarrassment. Can you imagine an airport like Reagan or La Guardia in some backwater country? They probably wouldn't have them.
Mr Krugman, you were right to criticize the Republicans when they followed their boy-wonder Speaker, Paul Ryan, down the bottomless hole of blowing up the deficit.
To now say that the Democrats shouldn't be fiscally responsible is hypocrisy - and you're better than that.
1
I no longer take Paul Krugman seriously or literally when it comes to all things economic. His advice is too partisan. Whataboutism is a disease that Serious People need to extricate from their lexicon. Yes, since WWII the economy has done better under Democratic vs. Republican Presidents and there is no need to rock the boat now. Paygo is for Serious People; the GOP never has been serious about fiscal responsibility, based on their actions vs. their words. Prof. Krugman needs to stop with the cynicism, whataboutism & fiscal irresponsibility and get with the deficit hawks before it is too late.
3
I agree 100 Percent. The next Battle : Medicare For ALL. Trumps huge Tax Cuts for the Rich and/or Corporations would have went a long way towards funding that goal. Enough. I’m 60, and as long ago as Junior High School, I’ve been a Democrat. Why ??? I root for the underdog. I cheer for the little girl, or guy. I’m certainly not “ religious “, but I believe in the Golden Rule. It’s time to care for the sick, their Families without throwing them into bankruptcy. And people actually dying because they have NO insurance, and wait too long to seek ANY treatment ? That is truly Third World “ living “ and shameful. Any person seeking my full support for 2020 : I’m throwing down the Gauntlet. Enough of Republican lite and corporate sponsorship. We need an FDR or LBJ for THIS Century. Step UP.
1
I generally agree with the leftoid comments here, but the notion of cutting deficits by enacting anything like Sanders’ MFA with all the trimmings is demented. Not to mention that asking half of America to give up their employer bennies is a great way to get creamed in 2020.
(No, you can’t just let everybody healthy and working keep their same plans and just sign up the sickest and oldest demographic. See also the individual mandate.)
I also just take paygo as necessary politics.
Democrats must drop paygo. Using the rigid rule does nothing but hurt working and middle class Americans. As stated here, even after Democrats reduce deficits and Republicans come in and promptly blow the money on tax cuts for the wealthy and explode the debt, Republican voters (and plenty of Independents too) still insist against all reason that the G.O.P. is better at dealing with deficits.
Trump voters who "claim to care about the deficit" as well as "fiscal conservatism" really only care about race. The Times article written on January 2nd, "A Trump County Confronts the Administration Amid a Rash of Child Cancers," demolishes all arguments to the contrary. The article dealt with Johnson County, Indiana, which voted overwhelming for Trump, and in which children are dying in droves because the ground is filled with industrial carcinogens, specifically TCE. President Obama moved to ban TCE and similar chemicals, while accelerating cleanup of hundreds of contaminated sites like Johnson County. However Trump indefinitely postponed those bans and prevented the cleanups.
Despite this, people whose children are dying in Johnson County said they'd still vote for Trump. It means they fear and hate people who are different than them more than they fear for and love their own children. You can't even attempt to reason with such people, and so Democrats need to do what is right for Americans, even for those who are willing to sacrifice their own children on the altar of their hate.
1
Krugman, you are just plain wrong to act like deficits are a minor annoyance. The GOP/Trump tax law will produce a vastly expanded deficit, which will give justification to reactionary conservatives to gut social security and health care, some of their stated objectives. And the laws of economics are such that you cannot live on credit beyond your ability to pay, UNLESS you debase your currency. There is no escape from this economic fact, and you would have a lot more respect if you would stop your own little brand of falsehood on this matter.
2
@Paul
Well, Paul, once you get huge wealth disparities (like now), it's mostly the rich who suffer when you debase the currency. People who don't have much money, and don't own much, don't lose much by debasement. And what poorer Americans earn tends to be bare subsistence. No matter how many debased dollars you have to pay them to do it, you can't cut the poor below subsistence or they will cut your throat.
This isn't a problem Krugman has to solve. It's a problem the rich have to solve. Of course, they won't even notice they have this problem, until they are in fear of their lives—or at least in fear of their fortunes. Threatening debasement might turn out to be a good political tactic. Too bad Democrats like Pelosi don't get that.
Mr. Krugman is wright. For too long, the Democrats have been trying to appear fiscally conservative but socially liberal. It has cost them their once-upon-a-time labor base. It made the ACA more expensive than it should have been for the lower and middle classes to keep the top 0.1% happy. For too long, the Democrats have allowed the Republicans to use the budget as a straight jacket on them, but as a full cookie jar whenever the Republicans happen to be in power. They are tight to try and rid themselves of "Paygo".
It’s our experience in Canada that when the budget problems mount it’s not the Conservative party that has the wherewithal to make the necessary decisions. Ultimately the deficit problems in the USA will be resolved by the Dems.
Grover Norquist is alive and well in Republican minds. His goal of “reducing government to the size of something that can be drowned in a bathtub” is still in play. They want to privatize as many government functions as possible, eliminate employee costs and generate profit.
2
At the end of the Vietnam War in 1975 no one could predict how high rates would be just four years later. Well with the budget deficit heading to 30 trillion in five to seven years coupled with huge number of US population hedging over 65, interest rates will soar in five to seven years. The only way out is to inflate . Look for interest rates to rise significantly in the next five to seven years as doubt rises significantly with respect to the dollars value. If the ten year which is st 2.5 goes to 5% NYC real estate will lose about 20% of its value. If it goes to 7% , look for a 40% decline. If you are retiring do not overpay for an expensive condo in the top cities for rates are going significantly higher in five to seven years due to budget deficit. Of course if you are a multi millionaire and can afford a 3 million dollar condo there is nothing to worry about. It is all relative.
1
Trump's wall will NOT help the American people. The wall will only keep the American people IN the United States when the value of the U.S. dollar comes down. It's a matter of supply and demand, and entirely FORESEEABLE based on the laws of economics. An overvalued U.S. dollar has cost our country 80,000 factories since 2000. Because the dollar's value is artificially high, because it is tied to the price of oil. By moving our economic base overseas, our leaders are rapidly creating the infrastructure of Africa -- i.e. a land without factories and lots of guns. The Mexican people are going to be very grateful that the wall we be in place, because it will protect them from the economic problems north of the border.
1
I think Paul mischaracterizes Republicans objectives. They wish to reduce Government involvement in the economy by cutting spending and lowering taxes and are happy to to the latter alone expecting it will somehow force the former.
Of course The good Professor is right that that objective prevents them for making wise investments such as infrastructure spending or universal healthcare and Pre-k all of which, and more, would produce excellent ROI’s and are essential to us maintaining our national strength.
1
@Mark Marks
The way Preferred by Repubs for Spending Cuts is to Privatize half the Government Functions ... and privatizing them at prices the upper-middle class and rich can easily afford for even bigger profits on Wall Street.
It is imperative that the budget remains flexible in order to deal effectively with economic, domestic, and foreign affairs crises. It is also always a good investment to invest in modernizing infrastructure and improving health care, education,and social security. So I agree Paygo is not a good idea politically because it limits important options.
That said the budget should always be fiscally responsible but not rigidly so.
"In fact, even the deficit scolds who played such a big role in Beltway discourse during the Obama years seem oddly selective in their concerns about red ink. After all those proclamations that fiscal doom was coming any day now unless we cut spending on Social Security and Medicare, it’s remarkable how muted their response has been to a huge, budget-busting tax cut. It’s almost as if their real goal was shrinking social programs, not limiting national debt."
It's not "almost as if"; it is.
4
Until Citizens United is reversed and there are serious campaign finance reforms made and K Street lobbyists money is banned our plutocracy will continue to work for the 1%. It's just that simple.
2
Pay as you go -- now "paygo" -- is a political statement with economic implications. It is not an economic statement. Ms. Pelosi has invoked paygo to fire a shot across the Republicans' bow and I think its a good tactic. It will force Republicans to make choices now and in the future.
If they want $5billion for a wall now, Ms. Pelosi can insist that that Republicans devise a way to pay for the wall now. That will require Republican to choose between building a wall raising taxes. It may end the shutdown sooner.
In the long run, it gives a Democratic Speaker the magic asterisk that Paul Ryan and the Republicans have monopolized for the past twenty years.
3
I am surprised (maybe I am not) that as an economist Dr. Krugman, you lay out a column that does not go to the heart of the matter.
The budget is a matter of priorities and how as an economy and a society, it shall be better suited for the betterment of all, and not just all of one kind.
1. Taxes - They need to be raised to prior 2016 levels, and more on those people and businesses that are not paying their fair share. Inversion must be abolished.
2. Defense - needs to be reduced drastically, and all illegal wars stopped with troops brought home. This is where the budget is hemorrhaging taxpayer money.
3. Single Payer - this is where the domestic budget is hemorrhaging money, and where costs are exploding exponentially faster than inflation.
4. Social Security - raise the FICA cap and enhance benefits
5. Government - there needs to be a line by line assessment of all services and the waste thereof . It needs to be more efficient and for those that need it, and not wasteful.
The money is there, but it is not being properly allocated.
5
@FunkyIrishman
All good points worth discussion... sadly, the fox is guarding the chicken coop and until that is changed all bets are off! Yeah, they will throw us a bone every now and then but real change can not happen until the fox is removed. BTW... Trump is a symptom of a much larger problem.
1
@Chris
Indeed. Electoral reform is required, but it won't be even debated (let alone implemented) until massive, massive true Progressive majorities are elected for there to be a chance. (chicken and egg thing)
Before all that, we must get involved in primaries to just get the candidates, but even there the system is rigged in the Democratic party.
Makes one want to stay home ...oh wait !
1
@FunkyIrishman
Agreed... "Staying Home" is not an option! The 2018 election was just a beginning.
It’s just a matter of time when the national debt catches up to us. In the not too distant future the interest we have to pay on the debt will crowd out domestic spending. A devalued dollar and hyper inflation are inevitable.
2
Another good column. But try to think outside the box. For example: How about a wealth tax? Exempt the first 10 million, then tax the wealth at 1%. This will make up for the "Trump Tax Cut" and will help to reduce the deficit. Prof Krugman should discuss the pros and cons of this.
1
I am pleased to read so many comments from readers who really get it. This is not about Paygo. In and of itself it is sound fiscal policy. Law can change it. Instead, as many have suggested it is about clawing back more tax revenue. Republicans have been drowning the American citizen in the bath tub, just as Norquist promised years ago. The rich and corporations have looted the Treasury. Read my lips: "Higher taxes on the rich."
5
I don’t think this is that. Paygo is a brilliant strategy for raising taxes generally, on the rich, the people and corporations that got so much from the cut. Paygo keeps the taxing conversation in the public eye in concrete terms that benefit peopl and esp. democrats. The GOP tax discussion is abstract and generalized such that it reliably scares people and frightened people make bad decisions that often go against their self interest. So let the conversation begin. Do you want better roads or do you want to know that the rich are getting richer?
3
I’d like to see Democrat’s take a serious look at ending the cap on social security and Medicare taxes. I’m pretty sure the vast majority of Americans don’t even realise there is one as they have never received a pay check that does not include those taxes.
18
@Chris
Good thinking, and in the same vein, include those whose "earnings" come from investments and capital gains in the Social Security System. That would make it fully funded for many years to come.
" But, you may say, isn’t it politically important for Democrats to present themselves as the party of fiscal responsibility? "
This suggests that the party of fiscal responsibility can't make intelligent decisions about deficit spending. Since Reagan, Democrats have demonstrably been the party of fiscal responsibility - they at least plan for how to manage the budget, rather than attempting to sink the ship permanently.
4
This really is a tough subject, one that cannot be nor should be sandwiched into an op ed of about what, a 1000 words. I continue to stand by basic Keynesian philosophy, borrow and spend at the bottom, contract at the top. But are we at a top? External data (if one can believe it) says yes. But internal data like the low borrowing rate despite a low unemployment rate say no or maybe. Repealing some of the worst of the Tax Scam package the Rupukes passed in 17 might help. But borrowing our way out where we are now, I just don't know. Whatever we do, don't cut social spending to "balance" or try to balance the budget.
12
Democrats need to better communicate their successes in managing the economy and the deficit. Trump is always harping on how well he has managed the economy, while making a mess with deficits, trade wars, attacks on industry leaders, etc. Obama should have spent a lot more time hyping his achievements in avoiding a depression, saving the auto, banking, and mortgage industries, providing affordable health care. It seems like the Democrats are too embarassed to promote their success.
13
@felixmk Good points, and what has been driving me crazy for 40 years. With the republican track record and platform, they should be easy to beat, yet the Democratic Party can't seem to find a PR team with any talent. Frank Luntz can make republican policy (selfishness, greed, polluting, estate taxes, take your pick) sound like the smartest and most patriotic thing ever. Where's our people who can make success sound successful? It's why Jon Stewart, Stephen Colbert et al are so successful. Why is the DNC so inept at this most basic function of and reason for their existence?
Or voters are too lazy to pay attention.
1
There are some really big investments that need to be made, and soon, if we are to protect our nation's energy and communications infrastructures, not to mention saving the planet from global warming. Each of these is on the order of $1 trillion. So, if we attempt to do things right, we're looking at some budget busting expenditures no matter what else happens.
We did it previously with the New Deal, WWII, our highway system and, to a lessor extent, with the crisis of 2008. We can do it again. But it's going to require an end to the shenanigans in our tax system and on the part of some corporations as well as serious international cooperation, none of which the Trump administration seem to care a whit about.
And therein lies the Democratic platform. And since we can't expect Trump to do anything about it, it's an election issue for 2020 that can't be beaten if the Democrats would put some honesty and creativity into their platform. These two ingredients have been missing from both parties platforms for decades and are primarily responsible for the backlash that brought us Trump in the first place.
Put some boldness and creativity in your platform Democrats. You'll be surprised by the reaction of the populace if you do it right.
5
The Republican Congress' fiscal recklessness in terms of the deficit is an opportunity area for democrats - they can demonstrate to middle class suburban voters that they understand the need for fiscal discipline. Sadly, no matter the "par-as-you-go" claim, I think they will follow Paul's instinct to spend and borrow more and more money, making the GOP budgets look almost austere in comparison.
1
What Democrats should be talking about is the imminent surprise that about 90% of Americans will discover when tax time is due.
They will discover that to pay for the tax cut benefiting the top incomes our con artist president did it again just like he did for so many Trump University students.
Because the disastrous tax cut for the wealthy is bound to hurt many Trump voters, one would think that at least a few will be getting tired of being conned.
14
@JT FLORIDA
Yes--the cap on SALT deductions, the elimination of exemptions, and the problems mid 2018 with figuring out proper withholding means that come April a lot of people who normally get refunds will owe, and there will be a lot of grumbling.
And, since many people use refunds for big purchases, that not happening will not help the consumer spending figures, and might even be a recessionary trigger . . .
1
There a lot of spin in the Times today claiming that the recent falls in the stock market are because of the trade war with China. This is Wall Street propaganda. The economy is slowing because the Fed has raised interest rates too far. What the New York media outlets are not going to tell their readers is that it is the Wall Street banks that have been leaning on the Fed for higher interest rates.
@Schrodinger If interest rates were too high, people would avoid borrowing. This has not happened, companies have more debt than ever, and personal borrowing via credit cards and mortgages is still historically high.
6
I’d ask for proof, but I guess it’s true, what they say you did to that poor cat.
@Robert ...Schrodinger's cat tunneled through the wall of the box and is now raiding the garbage can.
@felixmk....a slowdown in borrowing is all it takes to send the economy into recession
The middle class deserves to get cheated if it cannot even realize what Campaign Finance is and how it favors the special interest rich. The middle class does not even notice that Europe and Canada have a much more fair model for elections. The middle class deserves to get what they voted for, which is a tax cut for the rich and more money to defense contractors and big oil and chemical companies. Hope the voters learn to follow the money.
5
There are two things you need to know to understand this issue.
1. The US Federal govt cannot run out of US dollars. All US dollars are created ex nihilo through the banking system by the Federal Govt. You may not like this. But that doesn't matter.
2. A fed govt deficit is a non-govt (that's you and me) surplus, and vice versa.
Think of the US economy as a bathtub and dollars as the water in the tub. You want to keep the water at the same level.
Now if the drain is open and water is running out (as is the case when running a trade deficit) then you want to pour more money/water in to keep the water at the same level. (This is would create a federal govt deficit, which is not a problem bc the fed gov can never run out of dollars).
If we ever ran a trade surplus, this would be as if water were coming up from the drain. Then we would want to take water out from the top by raising taxes and/or cutting spending, creating a govt surplus.
(Greece gave up its ability to create money when it went on the Euro. That's why it ran into trouble. The US can have any amount of debt and deficit, and still "borrow" at near zero interest rates because markets know it can never run out of dollars.
The fed gov does not "borrow" in any normal sense. It issues debt to drain the reserve increase caused by its spending, in order to maintain an interest rate. If the fed gov ever stopped doing this the interest rate would just go to zero and stay there.)
1
Your analysis is correct insofar as it describes debt held by US nationals, but neglects the fact that a lot of debt is held by foreigners, which does nothing for our economy.
I know that I generally avoid reading or listening to lengthy, tortured parables that include such bellicosities as, “You may not like this, but...,” is what I know.
If both parties become as irresponsible with deficit spending as the Republicans currently are then in the long run the US government will get itself into a great deal of trouble. The result will be a loss of sovereignty as the US becomes subject to the whims of its creditors, especially the Chinese.
Krugman knows very well what can happen to governments that go wild with deficit spending. Krugman also knows that there is no case for massive deficit spending when the economy is as strong as it is now. Krugman is forgetting his economics here in order to please his Washington friends.
2
@Schrodinger The Chinese certainly hold a lot of our debt, but they are in over their heads. It's in their best interest to see that our economy does well, and the currency maintains it's value, or their investment will lose a large percentage of its value. They can use it as leverage, but only to a point. We need each other, and they, at least, know this.
1
Both sides are to blame for this uncontrollable deficit and the biggest threat to our way of life. Its bad enough a lot of pension funds are running huge deficits but the US Gov with 22 trillion, Social security and Medicare at 65 trillion, and unfunded liabilities in the stratosphere. Its time for real cuts in spending across the board. Its not fair the next generation had to suffer for this greedy generations uncontrollable habits. This is also another reason for term limits to bring in fresh ideas and energies to real issues and problems. America must move now on this issue or face something similar to the Roman collapse.
@Jeff
No, what's necessary is to raise taxes in a progressive manner on both corporations and individuals (back to Eisenhower 91% marginal rates, and lest you cry tears for the billionaires being taxed at that marginal rate, realize that even with those marginal rates, the wealthiest were only facing a total 46% tax rate) get rid of carried interest, close the loopholes offered to the wealthiest, fund IRS properly so it can go after the tax scofflaws like Trump's family ($1 sent to the IRS comes back with multi dollar tax collection), get rid of the insane Fed Flood insurance program for properties over a certain value and for any property that has already collected once, so we don't keep funding the same mistakes over and over and over again, require proper pension funding and stop allowing hedge funds to buy corporations, load them up with debt to give the hedge funds a huge payback and then force them into bankruptcy because they can not pay back the loans, at which time they renege on their pension obligations, start making corporations and other polluters to pay the full cost of the clean up of their spewings.
There is plenty that can be done and hasn't been.
49
@Jeff No, it's really just one side. Going back as far as Reagan the Republican party has been irresponsible with deficit spending. America has had to elect Democrats to clean up the fiscal mess the Republicans left behind.
18
@Schrodinger - our fiscal problems got baked in long before Reagan. More like in the 60's. And guess by who?
Just repeal the bloated, greedy Republican tax giveaway as a first step. All it accomplished was stock buybacks that inflated stock prices so the executive suite could cash out.
33
Some people think the Democrats should attempt to be the party of reason and controlled spending. This is an obvious mistake. Krugman fully explains it: The Republicans own the name of fiscal responsibility and nothing the Democrats do to try to appear more responsible will change that until the GOP self-destructs -- if that ever happens. That is why Pelosi supporting Paygo is self-defeating. It only constrains Democrats, who don't need constraint and don't benefit from the appearance of it because hardly anyone who cares notices. And it reinforces the Republican propaganda that we mustn't spend "beyond our means". Pelosi is smart and tough, but this step is just creating a pitfall for her own party.
10
For Canadians today represents a political, economic and social crisis. For me with many American friends and family listening to the speeches was depressing even agonizing. After two years of Trump and Canada's realization we needed new friends was a good thing.
The feeling I have is that the Democrats will be worse for Canada than Trump. Our ethics and values are Canadian and too many feel that Canada shares the values of the Democratic Party. We do not. We belong with Scandinavia and the Baltic States.
We are globalists. We are a conservative middle class society. We believe in fair trade and proper oversight.
We are not neoliberals and believe the strong should not be able to dominate the weak.
Nafta benefits Canada and Mexico.Maybe Canada and Mexico benefit more but the USA also benefits economically, we think this is a good thing for everybody.
I see nothing in the Democratic platform that might make seeking new partners no longer a consideration. We share only one border and for Canadians the freedom to go back and forth for jobs and education would be a very good thing but that will never be on the table. We believe in two different worlds and the USA and Canada are incompatible. The Democrats frighten me because they are a whole lot saner but just as unCanadian and just as dangerous.
3
For Canadians today represents a political, economic and social crisis. For me with so many American friends and family listening to the speeches was depressing even agonizing. After two years of Trump and Canada's realization we needed new friends was a good thing.
The feeling I have is that the Democrats will be worse for Canada than Trump. Our ethics and values are Canadian and too many feel that Canada shares the values of the Democratic Party. We do not. We belong with Scandinavia and the Baltics.
We are globalists. We are a conservative middle class society. We believe in fair trade and proper oversight.
We are not neoliberals and believe the strong should not be able to dominate the weak.
Nafta benefits Canada and Mexico.Maybe Canada and Mexico benefit more but the USA also benefits economically, we think this is a good thing for everybody.
I see nothing in the Democratic platform that might make seeking new partners no longer a consideration. We share only one border and for Canadians the freedom to go back and forth for jobs and education would be a very good thing but that will never be on the table. We believe in two different worlds and the USA and Canada are incompatible. The Democrats frighten me because they are a whole lot nicer but just as unCanadian and just as dangerous.
One of the things I allus liked about Canadians is that until now, I never heard one deliver themselves of a silliness such as, “un-Canadian.” They were always pretty good on noticing who’d been shrieking at Canada lately, too.
@Robert
Excuse me for thinking out loud. We are a trading nation and this is serious.
I suspect the demands of the Democrats are just as onerous as the demands of herr trump. We are listening.
Japan and a cooperative Central Bank has 21st Century infrastructure and 2.5X the US debt to GDP ratio. Because of a cooperative Central Bank who buys almost the total Japanese debt, at interest rates much lower than the public is willing to accept, the Japanese Government pays almost no money on its borrowing. Only the Japanese Central Bank will buy Japanese Government issued bonds.They have been doing this for many years. If necessary we could do this to. Japan pays a rate of interest it desires. Private borrowing is pegged not to the Federal Bonds there. We could do the same. If the U.S. chooses it doesn't have to be encumbered by significant interest charges. I don't see what precludes us doing the same thing bring the U.S. internally up to a firsth world country like Norway.
2
Very good article!
Gone are the days when there were people who remembered that it was deficit spending that halted the great depression. Very few survivors are left as it has been 88 years and anyone old enough at the time is long gone.
In the 1930s you could hardly find a farmer that was a Republican. then there was the dust bowl with more farmers losing their farms and the same situation, and those migrants from Oklahoma and Arkansas saw Republicans who tried to stop them at the California border, today their descendants call themselves Republicans.
As for deficits WWII was financed by the largest debt ever, and income taxes were 90% on the wealthy, somehow they survived that, today they rail at a measly 38%, while vacationing on their yachts on the Mediterranean, or their villas in Burgundy.
True deficits have to be paid, and they are if they are put to good use, like sewer systems, public transit, clean air and water. It is hard to calculate the economic gain made by lowering the rate of asthma in children, but we know it is far more costly to clean up our waters than keeping them clean in the first place. The same for keeping everyone healthy, we spend more on medical care than preventing illnesses. A little bit of deficit spending on the ACA will save more than any deficit money spent. The GOP so called anti deficit is an appeal to emotions, not to reason, although it is cloaked as such, it is just an appeal to parsimony.
44
I think it is a given that Republicans raised the deficit to not only stop existing social programs but also to prevent new social programs or expanding existing programs.
35
As suggested in the article, Paygo is just another rule for Republicans to ignore when they're in control, and to hold back any and all spending on programs that serve the common good. They've been setting records in deficit spending since Reagan, including in good times when stimulus is least needed, such as now.
Conservatives in Europe also impose foolishly rigid spending limits on member states, requiring that they limit spending to 3% of GDP. The largest, most powerful countries, mainly France and Germany, routinely exceed the 3% limits when it's convenient and in their own interests, but unlike America's phony conservatives, Europe's largest members limit generally abide by the rules when times are good. History proves one thing about fiscal rules and Republicans, and that is that those rules never apply to them, but they always apply to their political opponents.
Children would usually catch on fast if someone was rigging a game on them that way, but as adults, few seem aware of just how crooked Republicans are in stacking the deck in their own favor. A nephew of mine was playing a card game, and when he could see he never had a chance against an older brother who was always just a split second faster at grabbing the card, he threw a fit and messed up all the cards. Seriously, that small boy is far savvier than Republicans' voting base.
11
@Gary Henscheid
You misstated the Eurozone rule. The rule is that deficits do not exceed 3% GDP. Spending is much higher.
On the other hand, every word you wrote about Republicans is a historical fact.
5
@Thomas Zaslavsky - yes, I did misstate the rule indeed. Thanks for the correction !!
4
until now I can't understand why the tax cut is mentioned as a major accomplishment for this president. In January 2017 the economy was already doing fine and there was absolute no need to boost anything with trillions of debt. And to fill 2 vacant supreme court seats is not really a big achievement, eithere. The destruction of all sorts of regulations might be a success short term but will be the biggest loss of this president when some of these deregulations lead to desasters. Be sure that people will mention Trump when looking for flooded Miami in 2097 or when they count the costs of all the pollution and destruction caused by a derailed climate.
8
@Stefan
2037, not 2097.
5
@Stefan
I'm a pessimist these days on the damage Climate Change and Deregulation will do to our coastal infrastructure. And the continuing Reptilian Bail outs of irresponsible wealthy developers.
I suspect Miami will become uninhabitable within my lifetime. One decent size hurricane combined with storm surge will do it. I am now 64, and had a Heart Attack and Bypass Surgery (Hooray for the ACA!) last summer. So maybe fifteen years?
@Stefan - in America getting a SC nominee past the dems is actually quite an accomplishment.
did you catch any of the Kavanaugh hearings? The slime and mud were being slung big time.
Pelosi must have thought carefully about the political implications of insisting on "paygo" because progressive House Democrats were opposed. By including it she communicates to less liberal Democrats, to Independents and to Republicans that Democrats are not going to go on a reckless spending spree and are not going to run up federal debt as has the Trumpian Party. She apparently believes that will attract more voters in 2020. Betting against her political judgement is probably a losing proposition.
12
According to the 12/12/17 NYT article "Sri Lanka, Struggling With Debt, Hands a Major Port to China”, the country owed so much money to Chinese firms that it was forced to sign a lease with China allowing it to take over a strategically-located port for 99 years. "Critics said the lease could set a precedent for Sri Lanka and other countries that owe money to China to accept deals that involve the signing over of territory.”
We already owe money to China. Should we borrow more?
5
Comparing the economies of USA and Sri Lanka is irrelevant for so many reasons, as if you wanted to compare your family budget to Washington’s State (and not only because if the size). Beside that, borrowing now may not be a bad idea depending to what the money will be spent for. If it is to give another tax cut, it would be stupid. Using it to fix the infrastructure could be useful if done properly (incompetent people can always botch the best idea).
Since after Reagan, Democrats taking control have a clear record on one thing: they stabilize the ballooning deficit after a few years, start reversing its trend, hand control to the Republicans, watch them exploding the deficit once more, then have to put the country in order once again. It would be nice to see what the Democrats could do with their majority if they didn’t have to spend most of their time fixing the mess inherited from Republicans first.
The first priority for Democrats as the opposition is opposition -- strident, forceful and persistent. After opposition is damage control.
Democrats don't have the Senate or the White House. They won't have votes to enact an agenda until they sweep Republicans aside next year.
In the meantime Trump and his minions have taken a wrecking ball to everything that benefits ordinary Americans -- health reform, rationale tax policy, education, environmental and consumer protection, energy, infrastructure and a level political playing ground.
Why raise unrealistic expectations? Damage control means no wall, strict oversight of government agencies, rigorous accountability, and censure. When Mueller issues his report, the Democratic house will need to take the lead and act on the Special Prosecutor's findings.
Unless I missed something, the house is still on fire and the twitter twit arsonist still at large.
Taking the spotlight off Trump as well as giving him a target to shoot at is a strategic error and plays right into his small hands.
Democrats need to build a beautiful wall -- maybe every country in the world will help pay for it -- that blocks Trump from doing any more than he has already.
54
The way forward for Medicare for all is to win back control of the government. The Senate and the White House, in addition to the House. When that is accomplished, you reverse the Trump tax cuts and start to eliminate the deficit. The 1% must be required to pay their fair share of the tax burden. To me, that is the way forward.
14
@Michael
Plus a clawback for all the goodies they heaped up under Reagan, Bush II and Trump.
According to Dick Cheney
"Ronald Reagan proved deficits do not matter"
Better stated.
Deficits that arise from cutting taxes for the rich do not matter.
5
So the Trump Republicans have given the United States a huge debt increase during the first two years of the Trump Republican Congress (both houses), McConnell Supreme Court (thanks to Republican intransient determination to have a non-bipartisan government--the Republican way or no way) and Republican President (who is a proven master of bankrupting the companies that he directs, which to some people apparently clearly qualified him to be POTUS). It fits in perfectly with standard Republican business practice such as that practiced by Bain Capital, which is simply a redo of the Republican financial model for running state and/or federal governments. Buy a company (or the government), put yourself on the board (or in the Senate/House of Representatives),vote to max out the company or government’s credit line (borrow as much as you can against the company assets or in the case of the government start a couple of unfunded wars) and award yourself the cash (e.g., short term stock options--when you fire people the stock price goes up; or, if you’re running the government pass some Trump tax cuts). Then when the company or government is all out of money, declare bankruptcy & fire everyone so that the workers have no income, health care, homes, or jobs) and shut the doors (i.e. a government shut down). For good measure your introduce tariffs so that nobody buys our agricultural products or computers and you can clean out the farmers and manufacturers at the same time.
20
@Bill
One of the best summations of the parallels between vulture capitalism and vulture governing I have ever read.
Thank you!
3
“From the beginning, it was basically about race — about the government spending money to help Those People.” Disturbingly, race has been used often by the GOP to attract white voters who believe their hard-earned money is going to “those people” who are undeserving takers. Encouraging race intolerance hampers the voter growth of the GOP as it should. Indeed, it is wonderful to see increasing diversity in the Democratic Party. We are a diverse nation and need to rejoice and celebrate that we can work together and limit our tribal tendencies.
“It’s almost as if their real goal was shrinking social programs, not limiting national debt.” It is an indictment of the well-to-do that sharing their wealth to enhance /support all members is not viewed as essential for a healthy community.
Racism and greed are destructive to our nation. The better angels of many in our nation are attempting to renew our unity. Yes, let balancing the budget not keep us from expanding our generosity for one another and our desires to improve health care, environment, infrastructure, ….
15
This would make sense if the Democrats controlled the Senate, held the presidency, or both. For now they're the party that controls appropriations but can't pass legislation and adopting paygo is a great way to blunt the inevitable attacks.
2
For decades we have been decrying the lack of bipartisanship in Washington. But that necessitates ignoring one of the great and largely unacknowledged areas of cooperation. Since 2001, successive presidential administrations and congresses of both parties have been working to bankrupt the United States. We aren't there yet. But we are well on the way.
Mr. Krugman is right when he excoriates the GOP for their bold faced hypocrisy. And as a former Republican (I left the party when Trump got the nomination in 2016) it shames me to no end. But we are where we are and it is not a good place. The unhappy fact is that we do not have a fiscally sane political party in this country anymore, and that should terrify us.
The idea that deficits don't matter and that one can just keep running up the tab on the national credit card is dangerous. At some point our creditors are going to start asking unpleasant question... like how are we going to pay back all of the money we owe them even as we are asking to borrow more? The math is not likely to encourage their confidence.
For now I am shunning bonds as I see them as high risk and low return investments. My portfolio is mostly index funds of dividend paying stocks with significant exposure to non-US $ denominated securities. And in place of cash I am buying gold and silver.
As a student of history I have seen this movie before and I know how it ends. Yes, you can kick the debt can down the road... but only until you run out of road.
10
@John C.
Another San Joaquin Valley boy (Bakersfield) who as a conservative likewise abstained and dumped the GOP and Trump in the last election says to John C. - "Bravo and well said." Esp. loved the last line about running out of road.
Dear God, thank you for your voice of reason and common sense Mr. Krugman and putting it in terms I can understand! And we are NOW ready for Medicare for all which will save the people over 3 trillion dollars over ten years as even the study by the gulp, Koch brothers says. But, but the fly in the ointment is the insurance companies and Big Pharma who pay some of the democrats to vote against Medicare for all. So how do we get around these corporations lobbying only for their own money making interests? And as you know it is legal to bribe politicians now. If only we could get money out of politics, if only! I so agree with you about investing in the infrastructure and education and oh glorious green energy which will pay such great dividends in creating new jobs and clean air and water and help stop climate change. We owe it to future generations to invest in the best. If the GOP can throw more and more money at the ultra wealthy and corporations getting nothing but personal bribes for the politicians back, then why can't the Democrats, wisely as you have suggested, invest in we the people and this country. You know it will stimulate the economy as the giant tax cuts never will. Thank you, thankyou for you advice!
7
A very simple, but effective model for debt are the, Does! John and Jane to be exact. They used a mortgage to buy their home and purchased inexpensive cars with auto loans to get, to and from their jobs. They have "gainful employment".
They can maintain this lifestyle as long as they don't buy the latest fashion trends with every seasonal change, and they drink most of their coffee and eat almost all their meals at home.
They allow themselves some free spirit, but just a little on the weekends. They make sure their work efforts are excellent, and continue their education in the hope that they may earn more in the future.
Our lawmakers need to think like average folk.
7
Budget deficits do matter. And those deficits pose a real threat to "Medicare for all." Driving a stake through the heart of Big Pharma might be the solution. (Though it would have been better to have done that when the economy was strong.)
5
@caveman007
Big Pharma is the world's most profitable and also most deadly scam - their drugs kill about 100,000 people every year, and that's a conservative estimate from AMA statistics of drugs correctly prescribed by MDs in a hospital setting. More likely the number is 10 times that.
But they're an octopus with tentacles into the medical schools, the researchers, the journals, the media, the hospitals, the medical equipment makers, the insurance companies, the MDs, and the government.
There can be no money left over for anything good until this parasitic industry built on managing (not curing) disease is shut down.
Both parties are solidly in Big Pharma's pocket.
1
I like the one percent SocSec fee for all regardless of earnings. The current crop of multi-mill and billionaires woukdn't like it, but we lower and middling middle class don't like what we are facing these days.
The one percent for a combo social security fee covering Medicare for all would be wonderful. Now all I have to do is sell it to the other 299,999,999 people in the country.
12
No one saw this coming, right?
Fresh off bashing Republicans for abandoning their role as the party of fiscal responsibility, Paul Krugman is urging the Democrats not to assume that role. After all, as he says, hardly any voters really care about budget deficits.
In short, Krugman's criticism of the GOP had nothing to do with good public policy. It was all about denying Republicans the electoral advantage that comes from bribing voters with their own money.
7
You misrepresent Krugman’s argument. He’s not saying that debt and deficits don’t matter. He’s saying that Republicans are obvious hypocrites on the issue. Democrats shouldn’t constrain themselves on spending in order to appear fiscally responsible since the public believes, despite all evidence to the contrary, that Republicans are more responsible. Why not vote to spend on what’s important, like infrastructure? It’s better than another tax cut for millionaires.
You really did not read his article very closely, did you? He is suggesting that there may be times when a little flexibility for specific types of investments is more important than a rigid orthodoxy.
@Ian Maitland Several hoops were jumped through and many points missed. But resentment and inability to admit guilt ended up winning the day.
As an economist, you should consider why interest rates are so low, and whether that situation is likely to continue. If the US suddenly had to pay 5% or 6% or 7% to borrow, the interest on the deficit would jump from 6% of the budget to 15%. Since we are already spending 73% on Social Security, Medicare, and Medicaid, this wouldn't leave much room to cut anything.
If we want to have a social-welfare state, then we have to have a social-welfare level of taxation, where everyone, not just the rich, pay 50%. But if the Democrats put it that way, I suspect they will win few votes - that's why they want to gloss over the issue. But reality says you can't consume more actual goods and services than you produce in the long run, regardless of how the financial system papers it over.
4
@Jonathan....everyone does not have to pay 50%. Taxes must be progressive, obviously.
Cutting taxes for the rich transfers the cost of public services to the middle class.
The super rich during GOP Eisenhower’s presidency paid a marginal tax rate of 91 percent on their highest income.
The GOP govt found ways to finance the biggest infrastructure project in US history--- the building of our national highway system---a huge economic stimulus, creating jobs, new suburbs, home and car buying, new schools and growth of towns.
In countries with well financed, tax supported health care for all, their citizens support it, and their parties don't run against it.
2
@Meredith - Yes, in the 50s, the government did not pay for hardly any health care at all, and SS was less than 5% of the budget. Now they spend $2 trillion on these programs.
Although the highest tax bracket was 91%, IRS records show that the average wealthy taxpayer paid about a third of their income in tax. That's because of all the loopholes they had. Today, the average household in the top 1% pays 33% in tax, which is pretty much the same as in the 50s. There are fewer deductions, FICA is much higher. and the AMT gets a lot of affluent taxpayers.
I believe you just made up a 50% tax rate.
http://www.nomoretax.eu/living/relocation-to-switzerland/
"But another recession will come, sooner or later — probably sooner rather than later — and a rigid budget rule will not be helpful when it does."
I suspect the recession is already here and we just don't recognize it yet.
33
The Professor has good advice: the Democrats need to shoot the works.
But instead of the typical Republican raid on the Treasury and our future that goes to the rich, the military, and the corporations - it should all go directly to the People, with tax cuts, free education, a $20 minimum wage, and into social security and medicare.
Then do what the Republicans do - add insult to injury. Push through laws that tax the rich and their corporations (corporations pay only 9% of total taxes), end tax subsidies, and cut the military waaay back.
The message is that these actions (designed to weaken the Republicans just as they want to weaken the Peoples' safety net) are necessary to pay for the new spending on the People while managing the debt. So you don't just say that the debt doesn't matter (which may be true), but use the fear of increased debt to tax the rich and their corporations.
When the Republicans squeal, simply ask, "Whose money is it anyway?" The objective is to claw-back their theft of the People's money.
27
@Fourteen: "...it should all go directly to the People, with tax cuts, free education, a $20 minimum wage, and into social security and medicare."
Do you run a business where all starting employees earn $20 an hour? As for a "free education", it's not really free, is it? It may be free to you, but someone else is paying for your "free" anything through their time, services, taxes, or some combination thereof.
"Given this reality, why not put some of those excess savings to work in high-return public investments?"
Because the current federal deficit is nearly $1 trillion/ yr.... way too high when times are good (although there needs to be flexibility for recessions)
15
Playing politics with the debt is a bad idea whether practiced by Republicans or Democrats. We have a law that compels Congress to figure out how to pay for things they pass. The Democrats are right to restore the House's rules to comply. And living in this time of burgeoning budget deficits caused by the 2017 tax cut, it makes fiscal sense to not grow that deficit to pass priorities. It actually makes sense to undo part of the tax cut. Not that it will happen with Republicans partially in charge. But the House can move forward on things Americans want, and challenge the Senate and president to get off the dime. Not much real change may happen until 2020, but the setup will be fascinating.
8
As Dr. Krugman certainly knows: We are able to sustain a chonic budget deficit, primarily because other nations in this world ( through their central banks) collect US treasury notes and bonds to be used in trade with each other, in a growing global economy. They do not just collect them in anticipation of buying imports from the US -- which would be the most desirable state of affairs.
The US dollar remains, temporarily, the international medium of exchange in that expanding global economy. That reliance on and demand for US dollars will come to a halt one day, as it has for all previous national currencies in that position. Then the dollar will crash vs. other currencies and imports will soar in price. The day will come when we no longer can export our dollar-denominated debt in return for useable goods. That is what we are doing now! It is a dead end street! This is basic. It is not a Republican vs. Democrat duel.
25
I was wondering when & if someone would bring up the Reserve Currency status of the USD. And how it could throw a wrench into our happy MMT. Some day, eventually, when the Petrodollar has been replaced, the IMF or its BRICS equivalent will come knocking with a bail out offer we can't refuse. And the real fun starts. Whooocodanode?!
Paul, I'm happy to see that you have returned to your deficits don't matter stance that you had all through the Obama years. You abandoned that stance when the Republicans controlled the House, Senate, and Presidency. You were very concerned that Trump's tax cuts would increase the deficit and were therefore "bad policy". Evidently you think that government can better spend my money than I can. You are wrong on that assumption!
10
@lgh. Funny, the columns I've read didn't say any of those things. Maybe we just pulled up the paper on different days. I guess that can happen. The Krugman columns I read ridiculed the Republicans for their transparent hypocrisy about deficits and criticized the Republicans' preference to incur deficits by concentrating more money in fewer hands instead of spending to get money into more hands so as to increase the velocity of funds, a well-known necessary condition for economic growth.
1
I believe he is more bemused by the blatant hypocrisy espoused by Republicans who did exactly what you claim HE is stating: where is their concern for deficit spending when they are in power?
1
@lgh
Igh, if you had 10 million bucks, and a great job, would you borrow, say, $2 million that you absolutely didn't need for anything, with the understanding that not you, but the poor in your community would end up having to repay? That's what Krugman is complaining about. Borrowing $1.5 trillion to enrich millionaires during good times -- which is what the Republicans did with the tax overhaul -- is irresponsible and immoral. Mr. Krugman asked for a stimulus package during Obama's first year because the stimulus would restart an economy in absolute free fall. Please confirm that you can see the difference in the two scenarios.
1
I believe the real reason Pelosi wants the Paygo is to put the kibosh on the new more radical Democrats and their more socialist ideas. Contrary to what the Republicans say Pelosi is no radical but very much the moderate and cautions establishment Democrat. It's to bad really since I think only a radical economic change will save the Republic. If the Democrats eventually take back the Senate and the White House a lot of people will be very surprised and disappointed how cautions they really are and how little will actually change. And then?
7
@joe Yeah sadly you are right, We do need progressives at the helm. And that was my feeling about the real use of Paygo, to stop us from getting green energy or Medicare for all. No real changes in store if the establishment Democrats get the power they want. Only progressives who do not take dark money can save us. And the working class once again will be ignore except during elections. If only the working class begins to vote for progressives, oh wait a great number did. There is hope!
Must be nice to believe that only you hold The Truth. Myself, I keep noticing how few progressives these days have ever shovelled cow manure, can define single-payer, or name three major provisions of the PPACA.
How many decades now have the uberwealthy reaped the benefits of our tax structure. Now that Republicans have instituted their new tax structure that makes income disparity even worse while leaving the cupboard bare. Democrats now have to either live with or clean up the mess. Democrats can only fix the mess when they have control over House, Senate and Presidency.
7
This is great time to reinstall paygo retroactive to the business tax cut. In fact, let's discuss how we repair the tax cut by eliminating loopholes and raising rates, invest in infrastructure by resetting the gas tax grow with inflation, improve Medicare/Medicaid by focusing spend on quality outcomes and end-of-life care, reform Social Security to put it on solid footing and get America out of excess defense spending on Afghanistan and Iraq.
When the economy is growing, the government should be building its budget reserve, not deficit spending like a drunken sailor. This is not about PR, Democrats should stand for responsible government.
18
I'm far more concerned with how the Democrats plan to get things done. Trump's promised infrastructure spending has not materialized. The roads are being driven on daily and are falling apart. We have bridges that need to be repaired or replaced. Funny how Trump's version of making America great again doesn't include spending money on things that can make America a better place to live or do to business.
I think that the Democrats need to call the Gawdawful Obnoxious Patriarchs out each time they lie to the public about deficit spending, the ACA, corporate welfare, and the alleged dangers of protecting the environment. I think that they should try very hard to pass a law circumventing the Citizens United decision. As citizens we have a right to know where our elected officials campaign donations are coming from.
If they can't tweak the ACA I think they ought to start working on replacing it with something better. We deserve a decent health care system. We deserve a functioning government that works for us rather than the Koch Brothers, the Adelsons and the rest of the 1% who don't need handouts from the federal government. The country did quite well when tax rates were higher on the richest.
As for the deficit hawks, where were they when the "tax overhaul" was being passed and signed?
139
@hen3ry
Trump wants the private sector to rebuild the roads and bridges and charge us all huge tolls, while the rich whose workers used free roads for the last 50 years to generate money for the boss, do not have to pay taxes to repair what they wore out. The middle class should realize that Trump is hurting their future, and tolls roads and bridges everywhere is one way this will happen.
8
@hen3ry
The Democrats really should do everything you suggest, but they don't even call the Republicans out - on anything. That's cold hard evidence of the Democrat Establishment's collusion with the Republican Establishment. They're on the same corporate payroll and have much the same goals.
The difference between the parties is that the Republicans leave nothing on the table, whereas the Democrats occasionally throw out a bone. The Democrats give cover to the Republicans.
These two Parties are absolutely not "opposition parties." That's just how the People have been programmed to think by the media.
3
@hen3ry And instead you're hoping to get all this good stuff from Dems ? LOL
Yes, the Democrats should ignore any scolding about deficits. If the Republican "conservatives" squawk, let them be reminded of their profligacy in running up an historic debt simply to make their wealthy donors even wealthier, while setting the stage to gut programs that help most average Americans.
Invest in programs that will enrich most Americans, which will have the result of increasing taxable incomes and therefore tax revenues, thus actually reducing the deficit.
As the old CAPITALIST saying goes: "You need to spend money to make money".
12
Who’s Afraid of the Budget Deficits ?
Governor Brown, D, CA
From Today's NT Times
He (Mr. Brown) is using his remaining days to offer warnings about the future of California and the planet and lessons learned from a half-century in public life, and to talk about a legacy of fiscal restraint — he arrived eight years ago to a $26 billion deficit, and is leaving a $14 billion surplus"
"Mr. Brown suggested that Mr. Newsom (his successor) and lawmakers should be cautious about spending, noting a history of governors opening up the state checkbook in what had appeared to be flush times, but in fact were the early days of an economic downturn.
“Because the more money you have, the better you feel,” Mr. Brown said. “The better you feel the more you spend. But at that very moment, you should have stopped.”
https://www.nytimes.com/2019/01/03/us/california-governor-jerry-brown-farewell-tour.html
His advice on budget deficits to Democrats is the opposite of Mr. Krugman, but after having been in public office for half a century he might have learned a few realities that a Nobel Memorial prize wining specialist in geographic economics (not fiscal policy) has yet to grasp
7
The relevant question is not whether or not to increase the deficit, but rather what will be the cost if we do not soon make significant investments in infrastructure and education.
If there can be a political combination put together that is strong enough to make a viable commitment to such an investment, (if there is a politician with the ability to form such a combination, it is Nancy Pelosi,) the question of financing will be an easy lift.
8
@Ralph Averill
Republican deficits are all non-productive. Increasing the military is non-productive, it just depreciates. Tax cuts to the rich have no ROI. Corporate subsidies get funneled off-shore and into stock buy-backs (which are financially equivalent to increased dividends) and do not trickle down to the workers.
Democrat deficits could go to social security and medicare and benefit those who paid the taxes. Or to free education which has a very high ROI for the country, or to needed infrastructure, also a good payback. Middle class tax relief would be recycled back into local economies and boost growth.
So, as you say, the relevant question is if more deficit spending should be for the positive and practical investments that benefit the People whose money it really is, or if it should be for non-productive hand-outs to those who least need it but are politically connected.
4
All patriotic Americans should be afraid of the budget deficit and the national debt. America can no longer afford generosity for another decade until the national debt is shrunk to 10 trillion by across the board spending cuts. I t was okay to increase the defense budget to modernize the defense force and to increase salaries of the defense personnel but that has to taper off. All spending has to be reevaluated to determine whether it is effective and serves the purpose. If not time to slash waste and programs that are no longer worth continuous funding.
4
@Girish Kotwal. Funny how deficit scolds always forget the other obvious solution to solving deficits: raising taxes on rich people back up to historic levels. That also would do it
And yes, cutting spending on the bloated pentagon would be the place to start.
It's all about starving the beast. Unfortunately, Grover Norquist and friends have yet to realize the beast is sitting at an all you can eat buffet.
11
@Kim
Starving the beast is not a bad idea.
We need to starve the military budget Beast and the beastly largess to the rich and their corporations. But the Republicans want to starve the People to feed all their favorite beasts, and themselves.
Other than some riders added to budget bills and possibly infrastructure, new Democratic legislation is not really much more than symbolic, since the GOP controls both Senate and White House for the next two years.
Better to focus on branding the GOP as the Party of wealthy donors, through investigations into policies enacted in the last two years that were proposed and even drafted by those donors and that contradicted agency mandates established by legislation like Clean Air and Clean Water Acts. And then there is everything criminally Trump to expose to the public in hearings, especially all of the follow up from the Mueller Report.
This can be particularly effective in setting the tone as the 2020 campaign season gets underway. Many in the GOP have been complicit in covering up misdeeds in the Trump campaign, transition and Administration. This could be what finally causes enough key Senators to defect from Trump and creates real jeopardy for him.
After all, one thing the GOP has demonstrated is that it is better to talk about legislative goals, like "repeal and replace", then to actually act on them.
10
Paygo or no go, the deficit is now on an unsustainable path as a result of the Republicans' "Tax Cuts and Jobs Act" passed last year. Now the economy is now softening and forward-looking indicators look bad. When the economy slows later this year, government spending will increase because automatic stabilizers will kick in, and government revenues will decline at the same time. The already-too-big deficit will explode.
Paygo would prevent legislators from additional deficit spending, their most effective weapon, to slow the decline. We got a taste of Republican austerity in the face of a slowing economy during the Great Recession, when Republicans prevented stimulus programs during during the Obama years. They slowed the recovery for several years.
But legislators can ignore paygo whenever they want, apparently, so paygo is more of a cudgel with which to beat one's opponents than an unstoppable doomsday machine. That amounts to good news.
2
Agreed. No one will appreciate this effort. It simply constrains the Dems options to appease who? The GOP? Who do they think is going to impressed by their fiscal restraint?
3
That prescription was exactly what Obama attempted to do with his first budget, but House Republicans set an artificial Trillion dollar cap that they simply wouldn't cross, despite that a trillion wasn't enough to get the economy fully on the road to recovery. Republicans love spending very much, in spite of their fiscal conservative hypocrisy. But they only want to spend when it's they who are writing the checks.
5
someone, at some time, has to pay off those deficits. They should not be allowed to expand without bound.
5
@turbot
yeah, but right now interest rates are low and we citizens nee roads, schools (safe schools), bridges, student loan debt relief, and so much more!
We can tax the rich to get out of debt and rebuild the US.
3
Beyond my prior claim that the Paygo Rule would inhibit future Republicans raids on the Government treasury through big tax cuts, I thought, what if that inevitable recession comes along in the next two years and we need stimulus spending such as Obama's after 2008? Perhaps Democrats could legislate a limit on tax cuts in the future dependent on the existence of surpluses and reduce the rigidity of the Paygo rule to allow for extraordinary circumstances such as 2008. There should be a limit to the extent of deficit spending to minimize the idea of straddling the nation with more debt than is tolerable, much like a Credit Card debt limit. After all, if we initiate too much deficit spending raising inflation, we might lose a competitive ability in the world economy.
1
“The economics of crude, mechanical rules about budget deficits are clear: They’re a really bad idea,” says Mr. Krugman.
Possibly, but having no effective rules around deficits and the economics of borrowing money US taxpayers can’t pay back are worse ideas!
We must find a way to hold self-interested and self-enriching Elected Politicians, government officials, their staffers and operatives from both parties personally and financially liable, responsible and accountable for the lies they have told US, their gross mismanagement of our county, our $21.9 T and growing national debt (106% of GDP), and our $80 T in future, unfunded liabilities they forced on US jeopardizing our economic and national security, while benefiting themselves, their staffers, their party and special interest donors.
4
Take this with a grain of salt : Mr Krugman is the US economist most influenced by whose Party controls the White House
From
Econ Journal Watch, A Journal of the American Institute for
Economic Research .
Volume 7(2) Pages 119-156
Published May 2010 (27 pages)
"When the White House Changes Party, Do Economists Change Their Tune on Budget Deficits?" by Brett Barkley
Abstract:
Quote
"This paper investigates selected economists, to see whether their tune changes when the party holding the White House changes. Six economists are found to change their tune—Paul Krugman in a significant way, Alan Blinder in a moderate way, and Martin Feldstein, Murray Weidenbaum, Paul Samuelson, and Robert Solow in a minor way—while eleven are found to be fairly consistent."
End of Quote
https://econjwatch.org/File+download/430/BarkleyMay2010.pdf?mimetype=pdf
5
I have followed closely Professor Krugman since 2002, and I have always found him very consistent.
37
@Woof And why should we believe economists about anything? Their so called science is pure voodoo, smoke and mirrors and has never satisfactorily explained social and political interactions.
1
@Woof What is the impact factor of this journal?
1
Krugman is beating up a straw man while as always favoring the insiders he favors over anyone who does not bow down to his in crowd.
No need. Demonizing bf “progressives” like a republican. Same methods.
Will hurt the democrats. Will hurt America. Will give aide and comfort to Trump and republican fascists.
Krugman.
2
We just learned that China landed a mobile lunar device on what's known as "the dark side of the moon." China is supposed to be one of our two mortal enemies--Russia being the other--yet the Chinese, for all their autocratic leanings--are willing to invest in education and research and development and science and medicine and space exploration. I have long wondered how a "backward" Communist country is willing to spend money to improve the lives of both their plutocrats and their rank-and-file...and we are not.
Republicans have used the budget and its attendant deficit as a mega-race card. Dr. Krugman is right in that the G.O.P. has baited the rank-and-file here with "your tax money is going to porterhouse steaks" (Ronald Reagan) and "big strapping bucks" (Reagan again). It's a winning formula for sneaking around the bald fact that "welfare" for Those Others is a front-and-center culture item while "welfare" for the rich doesn't get talked about at all.
This country's infrastructure pothole will take untold billions to repair, but imagine the workforce necessary--brainpower and manual labor--that would galvanize a stagnant wage-disparity economy. Republicans have always held up social programs as un-American but have hidden behind their own theft of the Treasury in the service of their donors.
I hope Nancy Pelosi brings her gavel down hard for spending. Let Donald Trump limp into 2020 with that albatross on his back.
People need to work and they need to get paid. Bigly .
267
@Red Sox, '04, '07, '13, ‘18,Well put. The Republicans have consistently used wild war spending/massive tax cuts for the wealthy while in power to drive up the deficit to defeat the Democrats earlier ability to spend large sums on actually helping the nation and all its people. They based it on 2 lies; trickle down and Laffer curve claims (laugher) that reduced taxes would increase revenue). Both false but both very effective
29
you speak of welfare and education spending. the money NASA uses could help support families and early childhood education. china is not a democracy so they don't really have fair elections. they are backward because while they were an early civilization they refuse modern medicine and are very religious with Jewish Christians and Muslims. the party taxes poor farmers to pay for a standing army yet they have no adversary save India who competes for jobs like Vietnam. they have low environmental standards because profits outweigh public health
2
@Jensen If that's true why are Trump and the Republicans trying to compete with them and surpass them election wise and environmentally?
2
Let's be honest.
No matter which party has been in power over the past 50 years ...Government spending has continued to increase.
We have a huge Federal budget deficit, State fiscal outlook is bleak due to unfunded public pensions & health care.
A regular hard working taxpayers pays well over 50% of their wages to taxes!
Federal taxes, Medicare, Social Security, State taxes, local taxes, property taxes and then when you actually buy something ...they collect there 6-8% sales tax !!
The US is following the path that Greece, Argentina & Puerto Rico took.
Great !
I for one don't trust a politician to every help !
6
CNN said 90% debt to GDP ratio by 2028. the answer was Obama's and Congress gang of eight and sequestration. entitlement reform is unpopular and people like risk more than sure defeat in reelections
“Meanwhile, the federal government can borrow money very cheaply…”
This has been the “party line” for the last 10 years. The problem is the federal government (i.e. US taxpayers) don’t have the money to pay it back. We can’t even pay back 1% of our debt without dire consequences. Theories like this article support only make it worse. Krugman should know this. Apparently, no one gets a Noble Prize for common sense in economics.
Foreigners and insurance companies have not increased their aggregate lending to US. The social security trust fund is in net outflows and Fed holdings are on the decline. The only increasing source for buying US debt are mutual funds, banks, brokerage firms, corporations and the wealthy. Sources predominately funded by the wealthy.
We must find a way to hold self-interested and self-enriching Elected Politicians, government officials, their staffers and operatives from both parties personally and financially liable, responsible and accountable for the lies they have told US, their gross mismanagement of our county, our $21.9 T and growing national debt (106% of GDP), and our $80 T in future, unfunded liabilities they forced on US jeopardizing our economic and national security, while benefiting themselves, their staffers, their party and special interest donors.
8
@US Debt Forum
What you call "common sense" is received wisdom derived not from the actual study of the economies of sovereign nations, but based in 3. a.m. worries about paying the bills. Or, as fodder in the hands of dishonest political actors, who desire nothing so much as to reduce taxes and cut social services.
If the deficit hysteria crowd is so very prescient, why have so many prophecies of doom -- we've been told for 80+ years that government spending and "entitlements" were going to bankrupt us any day now -- succeeded only in creating a rotting infrastructure, an under-funded school system and a lack of basic research on which to build future prosperity?
And why do these same hysterics miss the *actual* financial crises? Or the $3 trillion wars?
1
Strange that Paul Krugman can call a woman "the best House speaker of modern times" at the same time she's so ignorant of basic economics -- and so oblivious to political reality and likely consequences to progressivism -- that she's promoting austerity at the behest of the Pete Peterson crowd and the country's billionaires, in terror that inflation might reduce the value of their holdings by a decimal point or two.
What strange disassociation is here? Or is it simple partisanship?
2
She is nevertheless and without doubt infinitively more qualified in her role that (your?) president Trump will ever be in his.
1
I am surprised Paul doesn’t mention a well-known macroeconomic effect: “The Balanced Budget Multiplier.”
Basically …
• If spending and taxes both increase by an equal amount, the economy and employment grow.
• If spending and taxes both decrease by an equal amount, the economy and employment shrink.
Google it if you want more information.
2
We need to rethink how the government creates and spends money. The government does not tax to spend the revenue--the government can create fiat money "out of thin air" as a sovereign right, so it doesn't need your taxes to fund the budget. Why does this fiat money have value? Because the feds will put you in jail if you don't pay your taxes, and the only form of payment the IRS will accept is the US dollar.
The IRS collects taxes to "drive the currency"--that is, make it worth something--and to remove excess currency reserves to control inflationary pressures. This will come as a surprise to most Americans. The government doesn't need your taxes to spend money.
Once this point is conceded, it becomes obvious that the Treasury doesn't have to borrow money in order to spend it, either. The Fed sells bonds to remove excess currency from the economy--again, to control interest rates.
The government can "afford" to buy whatever it wants--this is the wonderful fact that derives from being able to issue your own currency (state and municipal governments do not have the legal authority to do this). The pertinent question is: "What will this spending do to inflation?"
When our economy reaches true full employment--the current measure of 3.7% unemployment is utter nonsense--then spending must be reigned in to make sure the additional currency injected into the economy isn't simply chasing the same number of goods and services. Until then, let's put our people to work.
7
Given that folks will accuse the Democrats of exploding the deficit no matter what they do, they may as well propose big infrastructure projects without tax increases. After all, they can say that big infrastructure projects, like taxes, always pay for themselves...
314
@John M
We fantasize about living in a perfect world where we elect politicians who would accept a reasonable salary, who would have the same health care as the rest of us, who would do the best job they can to promote the general welfare, and who would keep the budget balanced and would work to reduce the national debt. But ... we do not live in that world.
Here in the U.S., we have two viable political parties. Those in the GOP explode the deficit and the national debt, and keep the windfall for themselves. Democrats could do the same, but at least they try to help people. I would take Democrats, every time. (Though hopefully they pay heed to deficits.) This isn't rocket science. One way to say it is that in the land of the blind, the one-eyed is king. But Vince Lombardi has a better analogy: "Perfection is not attainable, but if we chase perfection we can catch excellence."
Democrats: You do not have to help people *and* always balance the budget. Doing so is an unattainable goal. *Many factors* come into play that allow Republicans to regain power, and when they do they just take money from the healthy Democratic economy back for themselves, wrecking the economy again in the process.
So Democrats: Work your messaging. Get elected. Then do the best you can, because it will *always be better* than the only other choice we have.
What is so hard to understand?
17
@John M … How about proposing big infrastructure projects WITH tax increases on those who should be paying more in taxes but haven't for years. And fully fund the IRS for Pete's sake.
12
How can climate change and military modernization not top the list of "things worth borrowing for"? Waiting until the piggy bank is full to invest what is necessary in these areas coul have enormous costs. Nothing wrong with anything else on the list, but these two areas have clear tipping points that are likely coming in the not-too-distant future.
3
Mr..Krugman, just a couple of days ago you very effectively described why Trump's Donor Class Maintenance and GOP Fundraiser Act (officially called the 2017 Tax Cuts and Job Act) was "Even Worse Than You’ve Heard".
You're final point in that analysis:
"since the tax cut isn’t paying for itself, it will eventually have to be paid for some other way – either by raising other taxes, or by cutting spending on programs people value. "
Isn't true then that eventually everything has to be paid for? Even good ideas?
Is a largely symbolic statement by the Democrats that they are not as irresponsible the GOP that much of a straitjacket?
Very little will be passed before 2020 anyway. Giving some thought about how we are going to pay for (or responsibly borrow for) good ideas, once we have a government that believes in good ideas again, does not seem to be that much of a problem.
Especially since the appropriate answer will likely include a repeal of the worst parts of the GOP's tax cut gift to their donors.
10
I wonder if Paul Ryan voted for a trillion dollar deficit to give his friends a huge tax cut. No doubt. But I believe that programs such as Medicare for all would save billions in health insurance premiums and will add funds to individuals and businesses as a result. Those funds will show up in tax returns and money to fund the government. Now those billions are added to the cost of health care but they do nothing to improve patient access or outcomes. Higher wages paid to workers will reduce the costs of so called entitlements. Everyone is, in fact, entitled to a decent way of life. I probably won't see that in my lifetime but I sincerely hope that a better life for all becomes a reality.
58
My take on the "Paygo Rule" is that the Democratic leadership has recognized the decades long Republican practice of raiding the Government coffers to give tax cuts whenever they are in power, thus driving up the deficit and debt. But I think the Democrats might want to sacrifice some deficit spending to put a stop to Republicans tax cuts in the future. It may be worth the sacrifice. But can the rule stand if Republicans regain power? If so, make it permanent.
1
Republicans still control the Senate and are devoted to the idea of no net raising of taxes. Since the Republicans have no interest in paying for what they want, what makes our new Speaker think that she'll get them to raise taxes for what the Democrats want? Being a rational human being, of course, she doesn't. But she also must know that Republicans will suddenly become deficit hawks if she proposes any new spending without balancing spending cuts. (The exception being that perhaps she should allow the wasteful $5 billion for a useless wall if say Republicans agree to immigration reform or some other useful policy.)
But since there will be no net new revenue, it is a great political ploy to lay down the marker that you're being financially responsible and will pay for what you want by reducing excess spending, which America still has tons of in spending on the military, insurance companies, drug companies, homeland security, etc
5
As Martin Gilens and Benjamin Page established in their studies of affluence and influence, wealthy donors get what they want from their politicians: a big return on their investment.
And what they don't want is Medicare For All, free public college, expanded Social Security, living wage legislation, a Green New Deal, or just about anything that improves the lives of ordinary people.
The Democratic leadership can't come right out and admit this, so they set up their convoluted PayGo gimmick while glibly assuring their members and constituents that they can waive their silly old rule any time they feel like it.
Maybe they'll feel like it in another several decades, by which time tens of thousands of the uninsured and underinsured will be conveniently dead, or the ignored climate catastrophe does us in whether we have platinum plans or not.
Right now, they just don't have time to feel like it. If returning and new members accepted money from the DCCC, they'll be forced to spend half of each working day raising more money for the party coffers. (Since the DCC never funded Alexandria Ocasio-Cortez's run for office, she has the rare luxury of serving her constituents rather than the party.)
When the Democrats took back the House in November, most people assumed Nancy Pelosi misspoke when she crowed "Let's hear it more for pre-existing conditions!"
Not likely. She will indeed go down in history as one of the most effective Speakers our Banana Republic has ever had.
59
@Karen Garcia
La Pelosi is already locking horns with Ocasio-Cortez and the other progressive freshmen. Politico had this to say about the first two battles:
"Pelosi 2, Ocasio-Cortez 0
On Day One, the new speaker has already shown progressives who’s in charge of the new House.
Nancy Pelosi “cannot be seen by her party as being weak on negotiating with Donald Trump,” says President Donald Trump’s acting chief of staff Mick Mulvaney. And “Nancy Pelosi is only looking to protect her speakership … and that’s why she’s unwilling to negotiate with us,” according to White House press secretary Sarah Huckabee Sanders. These were excuses by the Trump administration to shift blame for the government shutdown. But they also were intended to suggest that Pelosi’s hold on the speaker’s gavel is tenuous, buffeted by a left-wing insurgency led by ambitious, impatient newcomers like Alexandria Ocasio-Cortez." https://wp.me/p2KJ3H-3h2
You're right, Karen. These incoming freshmen are unencumbered by debts to oligarchic patrons. They're also young, energetic, smart, and obstinate. I have faith in them and in the veteran progressives to keep the centrists on their toes and continue to make electoral gains in 2020 and beyond.
Trump and his GOP may well be the worst disaster this nation has suffered in modern times. We have a new generation that is paying attention to history in order not to repeat it.
70
@Karen Garcia.... yes, Princeton professors Gilens and Page researched congressional records and found that- “only the desires of the richest citizens end up being reflected in governmental actions......The preferences of the average American appear to have a minuscule impact.”
(And see their interview on the Daily Show with Jon Stewart)
Big money finance poisons our politics but our columnists ignore it, getting acclimated to the poisoned political air. Our politics and media operate within the limits the mega donors set. That's why we're the only modern nation that still lacks health care for all in the 21st C.
The GOP is tightly aligned with elite donors, and force Dems to compete for money to run.
But some new candidates have rejected this and used small donations from average voters. That sounds like it may be democracy in action.
See article PBS Newshour-- The rise of the anti-PAC Democrat. Would any Times columnist see this as significant to write about?
One example --- the chief Bush ethics lawyer Richard Painter switched parties in outrage at the corruption of Trump and the GOP excuse makers. Painter ran for senate as a Democrat, rejecting PAC money.
Our media columnists might start to use these candidates as positive role models toward political health.
Majorities of voters and many politicians want to reverse Citizens United and its legalization of big money domination of our politics. This gets no publicity on our media.
9
@Rima Regas
I have faith in the so called progressives like the Green Party and the Bernie bots to set us back yet again and insure another victory for the Republicans.
I am SO glad Nancy has the gravel again.
Ocasio-Cortez and any other newcomer deserves a chance and I will reserve my judgement until I see what she and her Bernie-endorsed co-hort accomplish. If they are able to get the equivalent of the ACA passed, I will reconsider my opinion of them. But I expect sound policy backed with a way to pay for that policy, not pie in the sky rantings. Ocasio-Cortez is new and totally inexperienced in governance, and I hope she is open to learning from those more experienced.
The so called progressives talk a mean game but deliver nothing but regressive policy and a reactionary Supreme Court.
3
Well done. Reverse (and more) the tax cuts for the wealthy, and drastically increase the estate tax. Eliminate the cap on social security taxes. Institute a carbon tax, rebated to lower-income workers.
Then let 'er rip. Education, health care and infrastructure. To start. California for the country.
281
@Rich888
You'd win 2020 with that platform. "Take Back Our Country!"
6
@Rich888. And add to that PAYGo for DOD
4
@Rich888 - Tax Passive Income at Earned Income rates.
4
Democrats want to shake the Tax and SPEND Liberal label while the TaxCut and Spend GOP blows up the deficit and debt. We need fiscal responsibility and maybe it's time to rollback the tax cuts for the wealthy.
14
While the economics of Dr. Krugman's argument may be correct, I'm not sure the politics is. The Republicans have used the deficit and pay-go as a means to obstruct the Democrats agenda while simultaneously building their false reputation as the party of fiscal responsibility. For my part, I would like to see the Democrats force the Republicans to own pay-go now.
8
Pay-Go is a bad idea in general. In this case, it is a very bad idea. Why? Because inflexible self-imposed rules are dumb. They never take context into account and, as Dr. Krugman writes, place us in straightjackets.
The damage inflicted by these last two years of GOP heist has already been done. That damage is on top of what was already leftover from the Great Recession. What was desperately needed in 2010 is still desperately needed. What the GOP has left this incoming Democratic House isn't much. What will Pelosi offset from? Food Stamps? Medicare? Education? There is nothing to offset. But needs still must be met.
Whatever Democrats can negotiate that alleviates the most pressing needs will help while we wait for 2020. Only then, if Democrats win all three branches of government, will fiscal prudence matter. At that point, taxes will have to be raised significantly, undoing Trump, Bush and then some. The Fed needs time to raise interest rates to get away from the zero lower bound. That may not happen soon enough. The expectation in many sectors is that we will have a recession this year.
Democrats need to learn their lesson from 2010 and 2013. You cannot let down the middle and working classes again. Not when most who suffered greatly from the Great Recession have yet to recover. We have a new economy to prepare for. We must veer hard left. We've strayed way too far to the right.
---
Things Trump Did While You Weren’t Looking [2019]
https://wp.me/p2KJ3H-3h2
161
On this victorious day, I greatly miss Larry Eisenberg and feel much sorrow that he didn't get to witness the first step on our way back.
RIP, Larry!
104
We spend 1-2% of GDP too much on the military, 1% of GDP too much on homeland security, 3% of GDP too much on health care at the federal level, so of course there are plenty of areas where we can cut wasteful spending and replace it with productive spending.
10
@Rima Regas: The real lesson that needs to be learned by Democrats is that they must be united in 2020. It appears from the 2018 elections that the lessons of voting in midterms has been learned to some extent. What we don't need is another round of Bernie Sanders dividing the Democratic Party, of which he has never been a part. Liberals have had to play defense for two years with not much to play with. Progressive causes have been set back for a very long time and Trump may have 2 more years to do further damage. Hopefully, the new Democratic House majority will slow the damage down, but don't expect miracles with Trump and McConnell in charge. The right-wing, activist Supreme Court and a whole lot of lower court extremists are installed for at least a generation, and we can expect that they will follow the party line when it comes to progressive legislation. Yes, the country has "swayed too far to the right" because progressive Democrats bought the idea that there was no difference between Trump and Clinton, just like they did with Bush Gore. Republicans (and Russians} are experts in dividing Democrats. Let's hope it doesn't happen again. Sitting out the election or voting for a Jill Stein can't be an option in 2020 for all progressives and moderates in the Democratic Party.
18