I hate to write this. Elect Trump so that he will be responsible when the economy tanks. He is responsible for what is about to happen. I don't want a democrat blamed for the disaster that is about to happen.
Nixon pumped the economy for his reelection in 1972. The economy soon went south. Bush pushed the economy and started two needless wars, off book by the way. It came back with vengeance in 2007-2008, Obama cleaned up the mess.
Perhaps we need someone that cares about all the people all the time?
Or someone that cares about one person all the time?
4
Our discussion of health care for all stays constricted.
Why not mention that the GOP and some Democrats keep saying they fear huge, dangerous amounts of spending that 'we can't afford', if all citizens get the right HC?
They can't say out loud the truth---they want to block any interference in high profits derived from our illnesses and treatment. The great con is this is equated with American Freedom.
How could it be otherwise when big insurance/pharma donors have funded politicians' campaigns? That's defines what's 'centrist', while HC for all is 'radical'.
So the media goes along --it mainly quotes the fear of HC for All threatening our finances, while admitting it also MAY actually offset much personal expense that burdens citizens now. May or may not?
That was the line today on Msnbc by careful W. Post editor Ruth Marcus. Most media and NYT never explain how dozens of capitalist democracies have for decades funded HC for all. If not single pay payer, then with insurance premiums REGULATED by govt for the citizens that elect it. That, in USA is a radical idea.
The govt we elect, in effect regulates its citizens plenty, for the benefit of the corporations that fund our elections. Then we stand in long lines to vote for the choices they give us.
What keeps Krugman from using concrete examples from dozens of other democracies to argue against our big money system of health care? That would look radical, as our politics and donors define the term. We get it.
9
Look at the average age of Republican politicians who have stood by and let the deficit balloon. Sure, political hypocrisy plays a role here, but so does the fact that they simply will not be around to deal with the consequences.
4
Duplicity is modern politics. There is nothing but winning. If you're making @ $200,000 a year, with good perks and great pensions, well, what do you expect?
It's not power that corrupts, it's money. Republicans really love money. Trump and Republicans first move was tax cuts for the wealthy and their corporations. Democrats need to be simple and real: show the graphs of who has benefited from the last four years. Who is richer? Who is struggling? What does this concentration of wealth, income, property look like?
So many jobs created. But, what do most of them give you? The American Dream? No, more like serfdom. Spell that out. Americans need simple. The chants of 'USA, USA' are simple. The chants of 'Lock her up' are simple. Just show them how the wealthy are taking over.
Trump's prayer breakfast speech was unholy. Oh, my god, what a terrible man we have in charge. So not like Jesus. Show it. People do understand how immoral and greedy and lying this guy is. Just use his own words and actions against him.
We should be more focused on his reprehensible environmental polices & align that with what is happening. Antartica has its warmest day ever? People are lazy & bad at citizenship, but they can be taught that climate change is real and coming straight at all of us. Trump just brushes it off; it gets in the way of profits for his old-school, extinction-inducing energy companies. He's a businessman; cut him a break.
America is most certainly at a precipice. Who are you?
4
Pelosi should have shut down the government over a budget with $1 trillion dollar in deficit spending in a growing economy.
She thought she did us as solid by thinking allowing it would prevent a cut in public services to offset the tax breaks for the rich, but instead she handed Trump his re-election with a turbo charged economy.
Republicans keep outsmarting the Democrats.
3
Krugman doesn't seem to be able to keep up with the fast-deteriorating American political system. Hypocrisy is such a minor crime when Trump, his lawyers, and of course the "new GOP" lie with impunity. They claim up is down and black is white while patting each other on the back for successfully creating an alternate reality for the adoring peons following them on Fox News. Mere hypocrisy is so yesterday!
3
Paul,
All of the things you say, as always, ring true. I am always looking for what you might be missing because despite the validity of your consistent presentation of fact and argument, the leadership that has taken control of our country now has successfully hidden these most salient facts and argument, as you point out, over and over from the minds of the electorate. They have done this to a level that makes a difference, enough to ensure that even a stolen election has vaguely credible proofs available.
What I think you are missing is the machine learning/AI influence on stock prices. They have smoothed out the drops and urged the market higher and will continue to do so. Trump's credibility depends on the algorithms supporting stock prices. Those AIs' and their algos don't disappoint. (It's kinda like the paperclips AI production machine eating the universe, because its goal is to make more paperclips, but more sinister).
The AIs and Trump are working together now. The existing algos that support stock prices won't let the market fall when it needs to.
I also think our easy money Fed is hiding inflation from us. Maybe not purposefully, but the measures aren't realistic. Drug prices, Car prices, fees for communications services, etc.; the stuff that makes life work for people, it's much higher and continues to climb quickly.
It's too bad that we don't have Ross Perot's voice to remind us of that mysterious giant sucking sound coming from the US economy.
3
There are times when words fail to accurately describe something, despite multiple synonyms to choose from. For example "hypocrisy" as it applies to the Republican party. The word is so often used - and justifiably so - but given the incredible and sickening level *of* their hypocrisy, now seems obsolete and inadequate. So perhaps it is time to devise an entirely new word that means "a radical, pernicious and self-serving form of hypocrisy, largely espoused by public officials, that denigrates and defiles the public good." Such a word might aptly be called "Repocrisy" - forever named after the party that inspired it.
5
@Mr.Paul Krugman: Ergo,the Triumph of 11/4/2020 for President Donald Trump,will fade for his base and country by 2021.
Leave it to Paul once again to eloquently express his simplistic theme: "Democrats good, Republicans bad". He neglects to mention that it was Democrats who set the stage for the 2008-2009 financial crisis with their "everyone's entitled to own a home" policies which drove the relaxation of mortgage loan qualifications. They pressured Fannie May & Freddie Mac to buy up millions of "loser" mortgages. So tell me again how Democrats are disciplined fiscal conservatives while Republicans are irresponsible spendthrifts. Give me Trump's economy and economic policies over Obama's any day!!
2
That the GOP gives handouts to the wealthy is nothing new - been playing that game since Reagan.
That Democrats build up reserves only to have them raided by the next round of GOP leadership (remember Clinton was the last president to have a balanced budget) is absurd.
I abhor the GOP’s destruction of the future - economically for most Americans, environmentally for nearly all of the biosphere - but they have been consistent in promoting their rapacious agenda.
When will the Democrats wise up and play for keeps like the GOP has??
1
The economy is basically like Trump's businesses in the 1980s. Flying high on borrowed money. The 90s and his bankruptcies and borrowing money (illegally) from daddy will likely come. Either way it doesn't matter. To talk issues when it comes to Trump misses the point. He's a lying, self-serving, small, thoughtless person. I don't care if every policy decision he makes is the right one (they are not). He's not destroying government (well he is) - he's really destroying culture. Those who oppose him should focus on him as a man, not him a policy maker. Dems should nominate the most likable candidate they can find.
1
Reality will eventually rear it's ugly head and Trump Inc will seek blame in the opposition/enemy - whomever that may be at that time. I often wonder how people with zero acumen in economics end up running our economy? Trump obviously cheated his way through Wharton; Mnuchin knows about as much about economics as Jarvanka do.
Greed is their economic policy. Get money, steal money, con money - pay no taxes - that is Trump Inc's economic policy.
2
Why haven't Democrats slammed Trump, every day, about the deficits and loss of manufacturing under his reign? The stock markets are up, but that was not Trump. He inherited a great economy from Obama. Trump inherited everything he has ever gotten. Trump has never made a dime without losing other people's money first and using the tax laws to make money while his investors suffer. Dems need to slam, slam, slam Trump's past, his criminal behavior and his 6 bankruptcies. I never hear about the fact that just before his inauguration, he was forced to pay a $25 Million fine to settle his Trump U scam. Why not???
4
Paul - what took you so long?!? Trump was acquitted one day, and the next he gave an astonishingly optimistic state of the union speech that gut-punched every democrat in the USA. Positive news just seems incomprehensible to democrats! Between Ross Douthat and Paul Krugman - and all the trump Hate on CNN/MSNBC - is it any wonder that democrats are depressed and morose? Cut off the "breaking news" this weekend, turn off your phone, go for a walk outside, think about your blessings.
2
Me thinks the "hypocrisy" swings both ways. Since when does Krugman care about deficits?
2
Is there a candidate that is stating this clearly?
1
These are the real numbers directly from the Treasury:
The national debt increased +37% during Bill Clinton’s 8 years as US president, reaching $5.7 trillion as of 1/20/01. The national debt increased +86% during George W. Bush’s 8 years as US president, reaching $10.6 trillion as of 1/20/09. The national debt increased +88% during Barack Obama’s 8 years as US president, reaching $19.9 trillion as of 1/20/17. The national debt has increased +16% during Donald Trump’s first 3 years in the White House, reaching $23.2 trillion as of 1/20/20.
Source – U.S. Treasury Department
When has either party paid any attention to the deficit with actions, not words. Watch what people do, not what they say. Both parties are equally guilty. Laying this problem at the feet of any individual or prior administration is not only disingenuous but shows ignorance of the facts. Mr Krugman, maybe you should do some research before you write about these types of topics in the future. Otherwise, you sound like the all the other political hacks we hear from all the time with their obvious partisan views.
4
Have fun now and let someone else deal with the mess...DJT.
3
Let me start with trump is a liar, immoral & completely inept.
That being said, isn't the large deficit because of increased spending. It appears tax revenues have increased even with the tax cut. You can only assume that they would have been higher without it.
2
Re: The GOP "are being politically rewarded." Yes, because half the country are idiots and/or selfish. But no one ever blames "the people," only the politicians and media.
Economics aside, just look at the picture headlining the opinion piece. ALL WHITE except for the ONE BLACK guy at the front of the pack. MAKE AMERICA WHITE AGAIN.
So much for the big tent.
How can any person of color be a Republican?
every dem in office now, is scared.....too afraid to play hardball......throw the easy low blows (remind people that certain gop members are ok with rape), hit them with their own words, actions, and votes.
the dems wanna play nice, and by the "rules"....in war there are none, and this issa war.....start acting like it.....
that is unless they are in on the schemes, and if so citizens are indeed doomed.....
When I google what is the usa national debt, it consistently comes up around 23 trillion dollars. That's quite a gap from one trillion. Who do we believe?
@gagal Mr. Krugman was talking about the deficit, which is the amount the government spends in a year that wasn't covered by that year's earnings, requiring borrowing. Every year, the deficit adds to the debt. That's why Mr. Krugman is concerned- the National Debt increased by 4.5% in one year, and that doesn't seem sustainable.
8
@gagal A deficit of $1 Trillion is the annual increase in the total debt ($23 Trillion).
2
@gagal
The trillion dollar deficit is the ANNUAL budget deficit for a single year! That is like overspending your annual income. The 23 trillion is the ACCUMULATED debt incurred over many years. That debt sometimes goes up and sometimes goes down, just like your personal circumstance. Under Trump and the Republicans that debt has EXPLODED, with the annual deficit nearly doubling, with nothing to show for it- no roads or bridges, no improvement in health care, no improvement in the lives of our neediest citizens.
17
Krugman uses Trump’s name 9 times in this column. But just defeating Tsar Trump the Terrible & obedient courtiers won’t defeat American political propaganda against spending in the public interest.
It’s the GOP’s identifying mantra, whoever they nominate. For some time, Democrats have been put on the defensive by a combination of the GOP power in states, the Supreme Court, our legalized mega donor financing of elections and the dominance of FOX state media.
This powerful combination has weakened opposition, which avoids criticism for looking like ‘big govt radical leftists.
So govt spending we need for a 21st C democracy, using adequate, fair taxes, has been unfashionable. We’ve been willing to sacrifice the public good, and convince millions of voters this is excusable as protection against big govt interference in our Freedoms.
It's a triumph of propaganda in a free democracy, which once had a secure, expanding middle and working class. How else could they block health care for all, that every democracy has had for generations?
Our columnists ignore positive examples, just being resolutely anti Trump/GOP. That’s easy. We need much better than that already boring stuff.
Future Trumps lurk in the swamp, ready to surface. He’s not the last one.
2
It will all culminate in an inflationary monetization of debt. It is just another case of history repeating.
2
Democrats and the media must remember that all Trump and the Republicans despise is the truth .
We must stand up for the truth and immediately call them out.
Democrats must respond to very lying news conference with a conference of the truth .
There is not a single Trump policy or piece of legislation that has benefit the middle class / working class.
5
deficits only matter to republicans when democrats are in power. republicans spend and spend and then democrats come into office and cut to clean up the mess the republicans made.
4
It is ironic that Republicans oppose everything that has given Trump a good economy. Trump has savaged the Fed, which has lowered interest rates for its own reasons. Republicans oppose raising the minimum wage, which has helped low-income workers in some states. They also supposedly oppose big spending, but Trump signed big spending bills that gave a Keynesian boost to the economy. And, of course, as Prof. Krugman points out, they oppose deficits, except when the stimulus will help them in the election.
2
Thank you Paul, for bringing up your column from way back in 2009 when Republican's were trying to drastically cut Obama's stimulus package. I've often used those words as a "come back" to people who say you're never right. You were exactly right about the effect on the economy of a too small stimulus package. It would recover, but far slower than it could have.
4
It is a great disappointment to me that the public media doesn't note the overuse of Fiscal policy to pour constant money into the economy when it doesn't need it. The current administration is loading up the American debt when the economy is relatively healthy. In addition, this is causing instability in the economy. The US populace needs to understand this and the media needs to include this in their analyses.
2
It is going to be 'interesting' when the next recession hits - we'll be looking at bank bailouts again but this time negative interest rates from the Fed since they have no place to go to "stimulate" the economy out of recession.
5
@d ascher .......i would bet the next downturn will be right after a dem takes office.......not because of what they do, just big corps, wealthy hoarding the taxpayers monies....
3
The main driver of the recent increase in the federal deficit is the 2017 tax cuts bill and not the spending increases. It's misleading to point out, as Rand Paul did recently, that federal revenues have been rising lately, including those generated by the corporate income tax. That's quite correct but deeply misleading since tax revenues are always rising absent some change in the tax code or a recession. That's simply because the US economy is normally growing; incomes and profits are all normally rising due both to economic growth and to inflation.
The better question to ask is how did the tax cuts affect federal revenues as a percentage of nominal GDP? Using nominal GDP corrects for both economic growth and inflation. Some of the tax cut provisions took effect in Q4 of 2017 so consider that in Q3 of 2017 total federal revenue stood at 18% of nominal GDP. In Q4 of 2017 revenue fell to 17.8% and then to 17.1% in Q1 of 2018 and to 16.9% in Q2 of 2018. The percentage then stabilized through Q2 of 2019 but fell again to 16.8% in Q3 of 2019. So the tax cuts have lost 1.2 percentage points of federal revenuer due to the tax cuts bill. And most of that decline was from lost corporate income tax revenue. In Q3 2017 corporate income tax receipts were 1.35% of GDP then fell to just 0.69% in Q1 2018 and were only 0.60% of GDP in Q3 2019. That's a loss of 0.75 percentage points or about two thirds of the total loss.
3
What costs more money isn't overuse of doctors, it's millions of citizens in this rich nation putting off medical treatment due to costs, then later their conditions worsen and cost more to treat. And may damage their family finances.
And it's the multiplier effect we need our media to discuss. Use concrete past examples from our past.
The multiplier effect resulted from GOP Eisenhower spending big money on the interstate highway system, coast to coast. The new highways led to big increases in new suburbs, shopping centers, businesses, factories, plus home and car buying. And more business profits.
The multiplier effect resulted from govt spending on low or free college tuition in state colleges. U of CA and City College in NY are just 2, This was centrist, not radical as is now painted.
Subsidized college tuition (much lower tuition than now) multiplied the upward mobility and earning power of millions of people, greatly expanding our middle class---an example for the world.
Many grads were 1st in family to get degrees, thus higher paying jobs than parents. They later paid higher taxes that paid back the govt for their tuition and helped fund policies in the public interest.
Without those examples, today's voters are vulnerable to GOP messages on reduced govt, that are against the public interest, and pro the private interest.
Why don't the media and Krugman use these and other examples, which would be hard for the GOP to refute? Quote the grandparents.
6
There is no such thing as macroeconomics, only political economy.
1
Dr. Krugman, you really missed the mark on this. This economy may seem like it's hot, but the internal economy of at least a third of American's lives is worse than it has been since the Great Depression of the 1930's.
Even I know that with only one macroeconomics class in college in the 1980's.
The United States economy is an even bigger fraud than it was under Reagan. And Trump is a bigger fraud than Reagan.
Most Americans are NOT living the standard we did in the 1960's and 70's before all of this began.
7
The postwar era was an historical aberration that will never be repeated. Be thankful it lasted as long as it did. On that same subject, I find it amazing that when liberals long for the 40’s-1980, for its robust middle class, affordable college and high upper tax brackets, they argue that we can again have all those things if only we place the right individuals into elected office. But let a conservative don (pun intended) a MAGA cap or wax nostalgically for that same era, we are told that the values and civility of the era cannot be culled from the male privilege and racism of that time.
2
Over-stimulus will have repercussions. No longer can the U.S. afford a recession, nor a fiscal crisis (which could be triggered by student loan debt default; credit card default; housing downturn; war; virus or other surprising shock). The only response would include more liquidity injection and will lead to inflation and probably stagflation OR cuts to social programs which have been a Republican party goal since FDR. The Republicans have mortgaged our future. Consider that the flow of wealth to the super wealthy will continue under present and future scenarios thereby consolidating the nation's wealth disparity.
2
Very true. If I still lived on a farm (as I did when I was a child) I would say we are "eating our seed corn." Or to bring it up to date we are "living on the credit card." Fun and more fun until daddy takes the T Bird away.
Not a way to run a Nation. Just a way to be "the best ever."
5
Nixon sabotaged Johnson's peace efforts, Reagan sabotaged Carter's efforts to get the hostages back, the Rs have sabotaged voting efforts and election counts, etc. Now the GOP has a third dirty trick, in addition to their international and political sabotage, economic sabotage.
9
Anti govt spending is a symptom of the powerful political movement to weaken the govt we elect to represent We the People, for our interests and well being. It aims to destroy regulations and guardrails that might reduce profits, from which politicians also benefit.
The Citizens United decision aided the dominance of the 1% over our politics, forcing politicians compete for big money favor and make laws accordingly.
It's the 10th Anniversary of the 2010 Supreme Court's lie that previous limits on mega donor money in elections was anti 1st Amendment. If the high court could lie, why shouldn't Trump/GOP/FOX?
Our revered Court used our Constitution against us, muffling the political influence of average citizens. This enabled the 1 % to set norms, to define left/right/center in politics. Thus any policy in the public interest is 'left wing'.
When will the media stop avoiding CU, to trace back cause/effect as they lament our political blockages?
The big story ignored story is that voter majorities see the harm, and favor the reversal of Citizens United as it has worked to disunite America.
What is our news media afraid of? Less profit from campaign ads that swamp voters, paid for by mega donors? Do editors have to tell reporters/columnists not to discuss CU or do they avoid it automatically?
The Court green-lighted exploitation of the many by the few, distorting definitions of Freedom. Enter Trump/fellow swamp creatures to take advantage. We see daily effects.
3
Often I catch myself wishing that the Democrats were as hypocritical, cynical, and cut-throat as the Republicans. Then I realize that if they were, I would not be a Democrat.
277
@Drusilla Hawke
Leave out the hypocritical, and it sounds like what the Dems need today.
16
Yup.
Far from being the "pay as you go" fiscal conservatives their mouthpieces portray them to be, Republicans are the ones who actually go on sprees, giving large tax cuts to those who don't need them who then speculate with those newly untaxed funds--little if any of those funds ever go to infrastructure or something that might improve the commonweal-- and set up bubbles that eventually burst, hopefully when the other party is in power.
And then when the bubbles burst and tax revenues are decreased even further, they cry austerity--a perfect excuse to cut back on social programs that benefit "those people" who, because they aren't rich and therefore not smart or worthy, don't deserve them anyway.
You sort of have to begrudgingly admire the cruel shamelessness of it all.
346
@Glenn Ribotsky They look at the world through the lens of their own bottomless greed. That makes shamelessness easy.
21
@Glenn Ribotsky ….The GOP ignore the public interest with slogans on American Freedom. Proof are their excuses for Trump outrages.
They deliberately under fund what benefits the public interest. They put out propaganda about American Freedom from Big Govt. The effect actually decreases our freedom to live lives of security and well being, with govt aligned with our interests.
Any health care plan progressive democrats may ever get passed will be under funded by the GOP. They'll let states opt out to oppose 'federal govt control'. Too bad for those state's residents.
Then the GOP will point to the 'failure' of govt programs. A clear pattern.
Then Democrats, forced to compete for big money to run for office, after the court's Citizens United decision, don't protested strongly enough to protect the public.
The media try to not look too 'radical', defined by GOP/mega donors. It avoids how Medicare for All is paid for in dozens of capitalist democracies for generations. The Times might actually interview some citizens abroad.
Of course, most media gets big profits from campaign ads swamping voters, paid for by mega donors. Easy to see the cause/effect on our politics and our lives, and how the main media presents issues to voters.
10
@Glenn Ribotsky You are describing the phenomenon called electoral whiplash...the pendulum swings wildly back and forth every 8 years or so, and fiscal policy is one of the things that gets yanked around.
6
I was traveling back & fourth teaching in South Korea (because I couldn't find work as an systems analyst after turning 45 in 2005). I thought, with its reliance on foreign markets and sources of raw materials South Korea's economy would hemorrhage.
It did nothing of the kind.
In response to the 2008 crash South Korea implemented a full throated Keynesian response: roughly deficit spending roughly equal to 25% gnp spread out over 4 years time.
New rail, new high speed rail, airport enhancements, subways, and nearly every other subway station was rebuilt. Innovative marketing responses caused Hyundai & Kia cars to surge in the U.S. market.
Australia & South Korea were the only 1st world countries to eek out positive growth in 2009. By spring 2010 Unemployment was <4%. Because of the Supply side bias in the rest of the world, North America & Europe suffered massive unemployment & struggled to get positive growth made worse by the Euro which strangled the GIPSIs.
In 2010, South Korea with auto export boom & low employment actually suffered from an embarrassment of riches. There's circumstantial evidence that they actually fudged their econ numbers downward in 2010 to avoid drawing angry attention from their supply side trading partners.
In 2009 US GNP was $16 trillion. An equivalent response would have been $4 trillion over 4 years. <$1 trillion just wasn't serious. We got <$900 billion of which 50% was tax cuts. The cash for clunkers may have been what saved the day.
7
Krugman is playing into Republican hands when he attacks the deficit. He makes himself appear as "fiscally responsible", yet the Democrats would indubitably increase the deficit if they are to begin paying the trillions required for slavery restitution to one of their core groups. Taxes for restitution would likely be unpopular with many voters.
The government, contrary to Krugman, has a huge capacity for deficit spending to pay for everything the Democrats promise, as well as for tax cuts.
Won't the federal debt have to be repaid? No. When the time comes, the government may institute a means test, perhaps based on the poverty line, with uber-rich bondholders getting their richly deserved hair cut.
3
@Emily JM Your straw men will blow away Emily. Krugman supports deficit spending for projects that bolster infrastructure and job creation for most Americans. He notes that most of the explosion of the deficit has lined the pockets of those already doing well. Also, almost doubling the deficit in such a short time has moved us closer to pushing it into a danger zone.
13
@Emily JM
So in your scenario the government either rewards the rich with tax cuts or the not-so-rich...but either way it spends the tax money it collects to support only one segment of the population...rather than projects that benefit all taxpayers.
That's the formula for taxpayer revolt and the path to a real blood-letting.
2
My Senator, James Lankford, sends a propaganda piece out every year. Federal Fumbles (Oklahomans love their football) focuses on all the waste in government. Two years ago, the piece included lots of ‘waste’ in the NEH budget, basically fellowships and grants on projects Lankford found frivolous. I have sat on NEH and NSF panels several times, and so I contacted him to tell him that both agencies vet proposals more thoroughly than virtually any other granting institutions. His response? The enormous federal deficit required fiscal restraint. Of course, that didn’t stop him from voting for the 2017 tax cut, and he loves larding the defense appropriation.
The hypocrisy is well established. In the hands of Republicans, fiscal responsibility is merely an excuse to cut programs they don’t like.
8
Prof. K, I think you're dinging Trump's economic policy unfairly. Trump's economic policy is working -exactly- as it is designed to work. Corporations are reaping record profits, and the 1% are doing pretty well, too. Exactly as intended. So Trump has delivered exactly as intended for the people who matter... to Trump. And, for the rest of us, we have a debt-fueled binge of a roaring economy, which will leave someone tomorrow with a huge debt hangover... but it won't matter to Trump, because he's not going to be around. He's already said this is his thinking. I see only one solution here...
Vote Them All Out!
5
Infrastructure? What is that? The poor and middle class are still working at low paying jobs and will continue to do so. They can't afford health care unless their employer provides it, and chances are they don't. What to do? Vote like your life depended on it.
6
@Jordan Davies ......well said
1
To me the issue is always demand vs supply in econ policy bias
1st Civics:
In Anglo-Saxon Common Law countries most issues were settled by the judiciary centuries ago (tho we relitigate them today for political purposes)
That leaves mostly just affecting economics to politics
Econ is dominated by supply & demand
Demand=wages. Increase wages=increase demand=increase GNP
Supply=savings/investment (capital) &/or wage suppression
Govt policy can favor demand or supply (in relation to each other) But there is a limit or saturation point to the efficacy of each - where more of the same policy doesn't get you more growth
Too much demand leads to stagflation (more demand input does not=more output/1970s)
Too much supply leads to low/deflation & investment bubbles (due to low ROI in the aggregate due to lack of demand)
In the case of stagflation: time to switch to supply side (1972-81). In the case of lowflation&bubbles (dot.com bubble 1998-now): time to switch to demand side bias
We r 22 years late in returning to demand bias. In 2016 this showed up when Sanders policies were put thru the standard econ model & growth estimates went off the charts. Investments in infrastructure/higher wages would create booms not seen since 50s&60s
BTW:
Capitalism=making money by investing money. This began w/ pooling $ for trade ships but extended into investing in machines/factories. Our system is not based on capitalism, its based on free contract which allows for capitalism
That's alot
4
There would have not been anything cynical about Obama ramming through your suggestions Mr. Krugman, it's just that he was overly idealistic and in a way, rather weak.
Let's list the failures of a man I nevertheless admired and voted for twice:
1. As you say, the deficit spending in the wake of the crash.
2. Merrick Garland
3. Gun control
4. Containing the Syria crisis
5. Containing Russia
I am amused that you focus on 1. as the domestic consequences of 2. and 3. are just plain sad, and the domestic consequences of 4. correlated to 5. have yet not been fully measured.
Oh yes, I forgot, 4. and 5. were not an issue because we were smartly "pivoting to Asia," while Russia was "boxing over its own weight" and "Syria was just Russia's backyard"...
4
Ironically, Mitch McConnell spends money like a drunken Democrat.
Whether it be Merrick Garland, Trump impeachment, or deficit spending, McConnell is a proponent of scorched earth partisan warfare.
He is the chief cynic among cynics who believe that a show of comity is a show of weakness and to reach accross the dais in a spirit of compromise will lead to exploitation at the first chance.
Hardened individuals like McConnell do not see the political machinations of the state as a civic ritual to be respected. They do not consider that political art in its purest form is a fevered tango among quarrelsome but caring civic partners whose shared love of country punctuated by practical disagreements is a necessary and responsible process of responsible democratic representation.
The benefits of compromise are manifold. As Prof. Krugman points out, Obama wisely did not dismiss it and valued it more than most. Compromise leads to enhanced credibility among partners in any forward-going negotiation. In addition to the direct benefit that to get some you must give some, both you and your partner across the dais will be taken more seriously when compromise is not possible. In other words, you are more likely to earn a pass when the stakes matter most.
It is clear from the events of the past weeks that McConnell does not care about the Constitution nor the rule of law. But maybe he could at least respect his profession a little more and practice politics as a purist should do.
2
Hey Krugman - you predicted that the markets will crash under Trump - when can I expect that to happen? i know the 225k jobs created in January went to all the millionaires and none went to low or middle class workers - I'm just wondering when one of your predictions will occur!
1
Totally agree. It's so evident. I can remember the constant whine from the republicans about being fiscally conservative when Obama was pres. I haven't heard a whisper of being fiscally conservative during Trump's reign.
With the whole republican party being complicit in this deficit charade, how can we ever trust them again. Somehow, the republican party was able to maintain the myth of the deficit problem for years when Obama was president.
Then in lockstep fashion they pivoted their position on the deficit when Trump came to power. I think we are dealing with a whole new animal with the current republicans. Forget about bipartisanship. They want to annihilate the democrats. I think we need a third party.
3
Mr. Krugman, of course, will only point out negatives under Trump and positives under Obama - partisan newspaper reporting. Both administrations are spendthrifts - Obama, with his mediocre stimulus packages and escalation of overseas wars (Afghanistan and Iraq), wasted trillions and doubled out National Debt from $10 trillion to $20 trillion. The National Debt, under Trump is increasing almost as quickly - it is estimated to be approximately $24 trillion at year end. Trump also is expanding military spending, which is a complete waste. I truly hope someday, Mr. Krugman will allow himself to objectively report both sides of the coin - deficit and debt - they go hand in hand.
4
@JMS To claim an equivalence between huge deficits when the country is in freefall, heading for a depression, to those that occur in a time of relative prosperity is ...well... ridiculous.
3
If anyone ever needed proof that Krugman and the Times were totally indifferent to actual policy and instead were naked political partisans, this column cements it.
Consider:
- Krugman cites Obama's $600 billion deficits, but argues that Obama didn't spend enough
- Krugman cites Trump's trillion dollar deficits, and blames them on tax cuts
- the fact is that federal revenue INCREASED since the passage of the tax cut, meaning that the deficit increased because of TOO MUCH SPENDING, which is what Krugman called for when Obama was in office!
So while Krugman guzzles pina coladas on the veranda of his beachfront St. Croix townhome, my three-year-old daughter's (who actually lives in CONUS) share of the national debt has increased to - appropriately - all sixes ($66,666.66 - $22 trillion divided by 330 million population). All because Trump did what PK wanted Obama to do!
So Paul, if you're reading this, please PM me so that you can make things right by transferring funds sufficient to cover my daughter's share of the debt you championed from one of your offshore accounts into her trust account. I can provide the routing and account numbers at your convenience.
3
The bigger question is, how come Republican criticisms are taken so seriously when we know they are unfounded? It seems Democrats are always looking for approval or validation from Republicans, and why would they give that, really? Democrats need to lead without fear.
1
Under Donald J Trump's presidency, America has got the tallest, most majestic trees. Have you seen them? They're called Redwoods and they are amazing!
I give Trump as much credit for our economy as I do those majestic redwoods, in other words, none at all. Thank you Obama, for saving our economy, we are still reaping the benefits.
i know that you are a prestigious economist and i am not. but why did you leave out the fact the job increase in the last 3 years of obama was greater than the job increase in trump's 3 years; one of trump's lies in his supposed state of the union. and don't you think that the stock market would have had a more subtle but continuous increase with clinton for trump's rambling about trade wars and his complete lie that we don't pay for those import tax increase when we actually do. any country that says something that goes against trump is threatened with a trade war. this is not helping the economy as i am sure that you know. but all these little things have to be made clear to voters.
2
Isn't this exactly what Reagan did, or almost? Slash taxes, defund the public sphere, and overspend domestically on the miltary and things we don't need to fatten the corporations, thus radically driving up the deficit? Claim the economy is booming because of the these slashed taxes when it was really Volcker and monetary policy that brutally brought us out of the infaltionary 70s?
2
The deficit has increased every year since George W Bush's presidency. During the Bush Jr. years the deficit doubled, and it doubled again during Obama's presidency, going up by almost 10 trillion dollars. So far Trump has added 4 trillion more dollars to the deficit in 4 years. He's actually somehow managed to slow the rate of increase to the deficit despite tax cuts.
This is because, as shocking as it might be to some people, tax cuts don't actually drive deficit increases. Spending does.
@Joel You're confusing the budget deficit with the national debt. Then you claim that the value of x - y depends only on y.
3
How do you reconcile U3 metric of 3.6 % unemployment with continued subdued real wage growth and inflation and labor participation rate that barely budges? Booming Economy with Investment spending contracting and manufacturing is in recession? All that money going to Wall, St and very little of it going into real economy. Despite this both monetary and Fiscal Stimulus have been very aggressive with both domestic as well as military spending increasing sharply. Excluding the Government Spending component of the GDP we would be in recession.
2
Economics can be complicated and people only want sound bites. The only media that makes any attempt at explaining economics is NPR, but let’s face it, the average person isn’t listening. Everything in this article is correct, but getting the average voter to understand is pretty hopeless. We’ve seen this happen in the past. Clinton had to right the economy, which he did, but then Bush undid most of his good. The Republicans bill themselves as fiscal conservatives, but they are the opposite. They brag about the “economy”, but they mean the stock market. What happens to us when it collapses again, which it surely will? We have a huge deficit and low interest rates. It will take a magician to fix things.
What I would really like to know is what event (or events) will result in a spike in interest rates. Given that several Western European nations have negative interest rates and some of Europe's banana republics have such low rates on their government bonds, I don't see the US interest rates rising anytime soon. So long as interest rates remain low, deficit spending is unlikely to affect the economy (or at lease the public's perception of the economy) much.
I wish Prof. Krugman would write a column about the signs we need to watch out for the case of rising interest rates.
1
It is 300 years since Swift anonymously wrote his Modest Proposal and the one country that most needs Swift's satire the most, you have to explain it is not about eating babies.
Modest Proposal is about the economics that leads to the greatest inequality in the Western "democratic" world.
I understand why Republicans are having such a hard time that they had to abrogate their responsibility to govern to the private sector.
It is too rare that we see the names Piketty , Saez and Zucman in the NYT but their school of economics is the only one that goes to the core of what Carter aptly called the American malaise. Carter took office because of the widening wealth gap that started in 1965. Carter 1976's populist not shackled to Wall street or more appropriately Big Oil.
I don't think 55 years of a widening inequality in wealth, income and fiscal security has taught America anything. Trump happened in the best economy the world has ever known and Brexit happened in an England whose economy was again a leader in creating an England that was again a major player in the global economy.
In a world of too much money chasing to few investments I can't imagine two political parties so bereft of understanding or any understanding that what roils America and England is an absence of meaning.
History may inform us of Trump's deficitpalooza but I am afraid the USA will be only of blessed or cursed memory. How many light years between DC and West Virginia?
2
If I were Bloomberg I would create a special TV network and have it transmitted in most important battleground states so people could switch from FOX propaganda to real data network.
It doesn't have to be big like Bloomberg Network just business experts explaining honestly in simple terms what's really going on...
I assume he has enough capital to create a niche program and present it in a states that matter.
4
The major indices of the Trump Goldilocks economy like the Dow-Jones, GDP and the unemployment rate totally obscure that the beneficiaries are mostly those at the very top income earners. It's time to stop using these skewed aggregate indices and replace them with those that reflect the continued and increasing gap in income inequality. We have two economies--one for the wealthy, and one for everyone else. It's time for The Times to report income growth stratified by income levels to reveal that the "rich are getting richer" while everyone else is falling behind.
5
Dear Professor, you are good at math. Rather than defining our dysfunctional past, what about using math to define our collective present possibilities? What we saw in the Senate was a case where 52 Senators, predominantly from deficit running red states, (requiring Federal money to remain solvent) representing 18% of the US population acquitted their rationalized leader: DJT. Given that 80% of the population only had 47% of the vote, it's quite clear that we are living in an age of Constitutional dysfunction, and minority over representation. This is what enables Republican hypocrisy. What to do? Given that those 26 states (and Vermont) are dependent on money from the majority in the blue states, there must be a way to get their attention. A tax holiday, or an actual Tea Party? Power only works if you control the checkbook, without it, the red state power grab is exposed for the fraud that it is. We need a leader who represent all American, not just 18% of us, but in order to do that, we must show the American people where the power lies, both with the majority, and correspondingly the will of those who pay your bills.
3
This economy works well for the top 50%. We in the bottom 50% could try eating cake if we could afford some, but we have a hard time affording rent, education, healthcare, medicine, and everything else required to live a decent life. You are one of the only economists who seem to see this. Thank you.
1
Would be interesting to see how would/could this picture change if Trump is re-elected, but Democrats take control of the Senate, while retaining the house?
2
I get the sinking feeling that we might just have the functional equivalent of children playing government dress up in place of actual representatives. I try not to let cynicism get the best of me but I need more than solemn marches with impeachment documents and press scrums that no one can make even an attempt at gaining insight from. Is it all really just a show for us rubes?
1
Yes, no surprise, huge tax cuts for the rich created huge budget deficits. But there's more to the story: Republicans and their rich patrons are pivoting to blame the deficits on people who want "free stuff," attacking the social safety net the rest of us depend on.
4
I've known all this all along; not all the details to be sure. But I never could have put it so lucidly, succinctly and eloquently. I'll be sharing this.
2
"The Two Santa Claus Theory is a political theory and strategy published by Wanniski in 1976, which he promoted within the United States Republican Party. The theory states that in democratic elections, if Democrats appeal to voters by proposing programs to help people, then the Republicans cannot gain broader appeal by proposing less spending. The first "Santa Claus" of the theory title refers to the Democrats who promise programs to help the disadvantaged. The "Two Santa Claus Theory" recommends that the Republicans must assume the role of a second Santa Claus by not arguing to cut spending but offering the option of cutting taxes.
According to Wanniski, the theory is simple. In 1976, he wrote that the Two-Santa Claus Theory suggests that "the Republicans should concentrate on tax-rate reduction. As they succeed in expanding incentives to produce, they will move the economy back to full employment and thereby reduce social pressures for public spending. Just as an increase in Government spending inevitably means taxes must be raised, a cut in tax rates—by expanding the private sector—will diminish the relative size of the public sector."Wanniski suggested this position, as Thom Hartmann has clarified, so that the Democrats would "have to be anti-Santas by raising taxes, or anti-Santas by cutting spending. Either one would lose them elections."
Wikipedia
3
I agree with what you say, but I think that the Republicans aren't just cynical; they are better at selling than Democrats. They think like salespeople, crafting their message to their customers, aware of their customers' tastes, prejudices, knowledge, and ignorance. Obama and Bill Clinton were good salespeople. The current Democratic candidates aren't. They may even think that their ineptness at sales is a sign of their moral superiority.
2
When it comes to the economy, I say, "Thank you, Barack Obama!"
He didn't do all he should have done, but he did enough (despite Republican opposition) for us to have an economy at all. The Great Bush Recession could have gotten worse and could have lasted longer. But Obama pulled us out of it. And we have him to thank—no so much Mr. Trump, who will literally do anything to goose up growth for the wealthy, no matter whether the growth is sustainable or what its environmental and social costs are.
6
The reason Trump remains popular with his base is that they have not yet personally felt the disastrous effects of his policies. That's probably why people aren't marching in the streets. As outraged as we are, we personally are not yet feeling the direct effects. But we will. It's just a matter of when. Trump takes credit for Obama's economy, and if a Democrat wins in 2020, s/he will get the blame when Trump's chickens come home to roost and everything falls apart. Except for the facts that children are in cages, the environment is being destroyed, dictators are seizing power, our institutions are being hollowed out, and Dr. Evil holds the nuclear football, I'd rather have Trump, and not a Democrat, holding the bag when this house of cards falls. He and his cronies need to own this, and we must make them.
5
The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money.
“A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years. These nations have progressed through this sequence: From bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage.”
― Alexander Fraser Tytler
2
@Robert Wood
Excellent commentary.
1
All spending starts in the House.
Tell me why Nancy Pelosi allowed Trump to go hog wild on spending.
The reTrumplicans slashed the income to the government.
The result should have been a slash to the spending (military and social programs).
Instead, both were increased, allowing Trump to have his cake and blame the Democrats for the taste.
@Carl Republicans controlled the Senate and the House when 45 went "hog wild on spending"...
If you look at the OP as simply the operating system for the ultra-rich, everything they do makes sense. Of course their paymasters allow them to fill their pockets with some of the loot too. That helps keep them in line.
The G.O.P. from Reagan forward has been try to sell one over-arching principle: each of us should have more money. It has been about greed, but greed "all dressed up" by convincing people of the following: "it's your money"; "you know better than government how to spend your money"; "government is the problem, not the solution"; "it's about taking control and being empowered" (think privatizing Social Security).
But the G.O.P. has used Libertarian nonsense and Tea Party wing nuts to make sure that not everyone gets more money. No, only those "entitled," the already wealthy and fortunate get most of the money; the rest of you just have to get a job or jobs, work harder, so, someday, you too will be just like, for example, the Koch brothers. (Remember the "death tax" nonsense because, someday, you too might be wealthy enough to have to pay federal estate taxes?).
At least the Libertarians are internally consistent, though foolish. They really believe they can reduce government budgets by 2/3's and, somehow, we'll still be the United States, #1 in the world!
But note that the G.O.P., whether in or out of power has never really worked hard to reduce federal spending. They love federal spending (e.g. defense, energy, agricultural subsidies) that puts money in their pockets. Reagan submitted only one "balanced" budget. W. Bush ran up "off-the-books" military and security spending for our endless wars.
1
As always, the Democrats try for "bipartisanship". Will they never learn?
1
The late, great Jack Germond clearly explained this after the introduction of the Republican's contract with America.
"Whenever you see that many politics standing around waving the flag, hold on to your wallet."
Same people, same flag, same greed.
1
I don't disagree with Krugman's analysis, but this is the umpteenth time he's written the same OpEd testifying to the hypocrisy of the Republicans and his own brilliance.
2
The last president to have a budget surplus was Clinton, a Democrat.
What does that tell you about Republicans and hypocrisy?
They really don't care as long as their pockets and their corporate funders are full.
https://politicalticker.blogs.cnn.com/2010/02/03/cnn-fact-check-the-last-president-to-balance-the-budget/
2
It’s not the “economy stupid” it’s the stupid economy.
1
This is Exactly, how the Republic Dies.
Orwellian version of "Bread and Circus"
3
If t rump is re-elected it will largely be the fault of the so called 4th Estate giving up reportage for both-sides-ism access to republicans.
On the front page do we see republicans and t rump being called out for their lies? Rarely.
You guys in the news biz need to remember that in a fascist state you are typically out of work. And in prison.
1
Well, what do I know, you are the Nobel Prize winnewr Econoimist Sir !
What I see is a scary scenario, all the luxuries and over spending of trump we are the ones paying for all that, how does it end ?
Disastrously !
Trump has to be unseated, all depands on the voters particularly the youth, please all register to vote this lying, conniving , self imprtant President trump with limited vocabulary and knowledge. out of the White House.
Hope the Democrats take over the Senate and Congress in 2020
1
Then is it now time for the House to prepare a massive infrastructure bill (before it becomes a Republican "idea")? Do so, present it to the people (voters), be very specific as to how the money will be spent (say, projects in Kentucky, Michigan, Pennsylvania, West Virginia, ...).
Tie this to a very reasonable improvement in the Affordable Care Act (don't call it Obamacare!!), then you will have a new efficient spending plan to be presented to voters. And if it costs a trillion or 2, so be it!!!
Just like Trump to take a ton of free money, aka $400 million inheritance from his daddy, and turn it into nothing but graft and economic losses (his casinos went out of business.) Not sure what's more staggering, people's ability to be mislead and lied to, or the efforts to do the lying and misleading. Don't people remember? Ugh.
The problem is most people are stupid. They don't read the news (the real news), they don't know history. I think it's time for democrats to get serious and start giving the red states precisely what they want: cut all their federal benefits and take a wrecking ball to there economies. Save the blue state money for blue state citizens.
Trump campaign ad: Nobel laureate and Princeton professor Paul Krugman says that the Trump economy is "Indeed, strong." New York Times.
A sad old man .
Wow! I see one black man. The true face of the Republican Party: white for life.
If Trump is reelected he'll blame the deficits on Medicare and Social Security, then try to destroy both.
It will be Nirvana for the GOP, Reagan's dream, and Hell for all others.
1
@David Henry ---Except he'll have a hard time explaining why the only program with dedicated funding (the FICA tax) and is forbidden by law to pay more in benefits than it receives is the cause of trillion dollar deficits. MSM along with voters should call him out on that fact, here's hoping they do.
1
@Bob Rationality, law, or facts have little to do with how our "legislators" vote, or haven't you noticed?
Just another freak show at the National Prayer Breakfast.
The carnival barker at it again among his slavish loyalists obsequiously laughing in unison.
I can't believe that 90 million people want to keep Criminal in a WH...it's a devastating and mortifying thought.
When did this country lost it's soul!
Who is going to stop his endless, deranged incoherent mouth diarrhea, this bottomless, reeking pit from brain sick, demented creature!
Only us the People!!!
Let me suggest long but very informative article from the Atlantic please read and distribute to everyone you know.
https://www.theatlantic.com/magazine/archive/2020/03/the-2020-disinformation-war/605530/
The Billion-Dollar Disinformation Campaign to Reelect the President
How new technologies and techniques pioneered by dictators will shape the 2020 election.
That's what's coming in an avalanche, be prepared to meet it!!!
1
But this is not new. The Republicans have always caused a mess, and when they once again fail miserably to take accountability for their mistakes, the country returns to elect the true adults in the room - the Democrats. Yes, the Dems have their issues but it doesn’t include constantly sucking up to the rich or pandering to people who pretend to be Christian and/or conservatives.
So the GOP is like an entitled homeowner expecting the “help” to keep their house in order.
• We have the Right and the GOP to thank for the malicious sabotage campaign that is being conducted to undermine the good faith and credit of the US Government in order to open the way for reduction or elimination of our “entitlement” programs for Social Security and Medicare.
• We have the Right and the GOP to thank for our utter failure to keep up with our infrastructure needs for the last 50 years.
• We have the Right and the GOP to thank for perpetuating the most costly and ineffective health care system in the world.
• We have the Right and the GOP to thank for the effective elimination of all control over the possession and use of firearms, and its accompanying rise in fatalities over the past 30 or more years.
• We have the Right and the GOP to thank for the decline of public education, ever since equal access has been required by law.
• We have the Right and the GOP to thank for the precipitous fall of worker compensation, and the spectacular concentration of wealth such as had not been seen since the “Gilded Age” at the end of the 19th Century.
If good men and women are unable to expose the utter hypocrisy and malevolent intentions of these agents, hell bent on tearing down our country and its modern democratic institutions, we will also deserve a share of the blame.
@Tom R
Agreed,
I would also say we have the right & the GOP to thank for the emergence of a rogue/cleptocratic/gangster Russia & dystopic Eastern Europe. At the end of WWI, the GOP dominated senate, then Harding/Coolidge admin failed to stay involved in shoring up the international peace system created after the Great War. In addition the lack of loan forgiveness made the entire world economy brittle, which eventually lead to the Great Depression, the rise of Hitler, WWII & the holocaust. After WWII Democrats dominated & provided for NATO & the Marshall Plan, creating history's most golden golden age. The Marshall plan cost about $500 billion in today's money. In 1990 with the fall of the Soviet Union, a new Marshall plan & help from European administrators & Japanese/Korean econ planners would have created a prosperous democratic block across Eurasia. Instead the GOP supply side era had us sending nothing but Chicago School market fundamentalists to Russia pushing that society into 3rd world conditions & paving the way for the rise of Putin, helped along by Bush who saw petroleum in his eyes & in his soul.
The right & GOP also prevented peace in Vietnam in 1968.
On the other hand...
50 year trends cannot be sustained w/out complicity from elites in both parties & the median wage has been flat for 48+ years even while GNP is up 150% (90% going to the <1%)
The oligopoly syndicate is pouring hundreds of millions into stopping Sanders because many Trillion$ r @ stake.
Yes, sadly my complaints about Obama largely stemmed from his constant attempts to "work" with a side that announced from the get go their adamant refusal to engage. For them it's all about power and the country be damned. Any Dem, like Biden, who claims they should be elected because they can work with the other side is a fool who is setting themselves and the country up to be manipulated by these masters of deceit. The only thing that will stop Republicans at this point is a humiliating defeat at the polls. Vote Blue!
Mr. Krugman is certainly correct, but this is not new by any means. When in opposition, Republicans for decades (since the '30's) wore economic straight jackets, preaching balanced budgets and decrying the 'tax and spend' policies of the ruling Democrats. Makes sense, if you stay on course. But no, when the tables are turned, and certainly since Reagan, the Republicans taxed less but turned on the spigots of spending, leading to even higher deficits than the ones they used to complain of. The hypocrisy is damning, but does it really matter? As I recall, Mr. Krugman himself does not see the danger of trillion dollar deficits. I do, but then again, I am not an economist. But when interest rates rise, and they will someday, we will all be economists - because the yearly interest on our debt will equal what our defence budget will be.
Paul, when does a President actually "own" the economy? In other words, when is is fair for us to blame or applaud a President for the current economic environment?
Of course, as usual Dr. Krugman speaks using solid evidence and necessary conclusions. I wish he would speak with David Brooks, who seems to think all of us middle class folk are feeling some kind of economic joy; not worrying how our children or grandchildren will afford college, or whether any pre-existing conditions will prevent affordable care if the courts overturn the ACA. We in the middle class are doing so well, we only need two jobs to make ends meet. And we are just fine with the rich getter richer and richer, while we tread water. Please Dr. Krugman, have a good sit down with your colleague.
3
For republicans, politics is a war in service of their corporate patrons, because it is founded on business practices rather than democratic politics. Democrats have traditionally brought knives to a gun fight. It would be good if everyone played nice, but that is not the reality, and democrats need to wake up.
They do not need to lie, but they do need to play hardball. Attack republicans bluntly for wanting to reduce and/or privatize social security and medicare. Criticize them bluntly for wanting to dismantle medical coverage. Blunt attacks on women's right to control their bodies, and call anti-choice what it is: Attempts to harm women's health. Blunt attack messages are often, almost by definition, exaggerated in some respects. But let republicans try to defend against that rather than then self-censorship. I for one am sick of democrats playing nice.
2
If it wasn't for "big government" spending, we would not have made the scientific and technological advancement that the country and our citizen's have now. Without big government spending we would not have beaten the Russians to the Moon, nor have micro-chips and medical screening technology that all came from the space program.
If it wasn't for big government spending by DARPA, (Defense Advanced Research Project Agency) we wouldn't have the Internet, because it was created by a big government agency. The private sector (corporations) would not have spent the funds needed to create the Internet nor help this country become technically superior to all other countries of the world.
We have advanced because of big government (spending) and because government doesn't need to make a (huge) profit as the private sector must do to survive.
Don't forget, our children and grandchildren will have to pay off the Republican deficit, probably during a democratic administration. The media has to share the some of the blame along with dems trying to be the good guys.
1
We've been in, essentially, a wartime economy with occasional lulls for 70 years or so. You really can't make a profit on F16s and Abrams tanks or mini wars. Some do, but the rest of us definitely don't. To some degree it was thrust upon us, but to another some of us were looking for it. During this time we've neglected the infrastructure - some one wasn't minding the store. We've got a lot of general officers and admirals to show for it - and a patchy grid, failing educational system and a lot of dubious billionaires.
2
Don't forget that the Tax bill that passed was also done through chicanery and advertising that it would bring growth to 4-5%. When Obama was in office, a corporate tax cut was on the table, but it was slightly more modest and also included some tax increases to high earners to offset. It collected dust in the senate. Instead what we got through the GOP is the baby thrown out with the bath water - tax cuts everywhere and all the loopholes that were to be closed got lobbied away. All this gasoline got us about the same GDP growth. Next stop - cut more programs, medicare, social security. And God help us if a recession hits. Thanks a lot.
3
Thank you. As a CPA I have been making this point for years. Remember it will occur sometime down the road where the USA will not be able to borrow any more unless they are willing to further deter our government created incumbrances by paying very high interest rates on the bond sales which support our overspending. Next, at some point the US Government will not have enough to pay this and then the executive in office will have to have the Feds simply inflate the currency in order to make the necessary payments. At that point the poorly educated masses will start to scream but just as I have written many time in articles related to the messes in Venezuela they really should not complain as they are as much a part of the problem today that those in office are. Most taxpayers actually feel that it is alright to steal from their own children.
1
@David Gage
You're analysis is correct. We will go into an inflationary cycle that will, in essence, discount government bonds as the dollar becomes worth less. Unfortunately, the Boomers, many of whom seem to like President Trump, will watch the value of their fixed pensions and annuities lose their buying power as they are eroded by inflation.
If the GOP regains control of Congress and the White House, they may well reduce Social Security cost of living adjustments and Medicare payments, further adding to the woes of retirees. We'll then see if Mr Trump is the "feel good" president for whom they voted.
1
@T Norris Thank you.
1
So should we deficit spend? No? Yes? When? When not? Tell this fiscal dunce.Even if you've said it before.
1
"For whatever reason, Democrats haven’t been willing or able to behave that cynically. Republicans, however, have. And if Trump is re-elected, that asymmetric cynicism will be the main reason."
Here's the thing. Dems don't even need to behave cynically.
They just need to speak up! While Trump distracts with his criminality, McConnell is packing the courts and making his donors richer. Dems had to pursue impeachment, but my view is their rhetoric needs to shift now to all the broken promises: no infrastructure plan, no troop withdrawal, no wall, manufacturing is not rebounding, destruction of protections for preexisting conditions, farmers hurting, GDP not 4% etc. Trump lied (shocking I know) in his SOTU speech about protecting pre-existing conditions against those dastardly Dems and his whole caucus cheered! I have not heard one peep from Dems about this to correct the record. We're too busy arguing about Pelosi ripping up the speech and whether Pelosi really does pray for Trump.
Come on guys.....please get on this.
Driving up the deficit when they're in power is a tactic in Republicans' strategic plan rather than hypocrisy. A gigantic deficit gives them political cover to do away with, or drastically reduce "entitlements". They scream "deficit!" when Democrats have the WH because they know their plans won't go anywhere and it paints their opponents as profligate spenders on good-for-nothings.
1
Amazing, amazing amazing....that our Country is underneath the continued Control of
a classic Sociopathic Personality Disorder, who flagrantly flaunts his active Diagnosis.
Meanwhile, what might be an honest and active Diagnosis of his Crowd of Constituents?
In the Shadow of “President” Trump’s Daily Public Daily manipulation of our Consciousness,
Who might have the Presence to deliver Us from His overwhelming Presence? Where is
the undergirding Wisdom of the True Democratic Society once known and existent?
2
What amazes me is that this could be news to anyone.
It is the GOP's house of cards and a pump for the wealthy. Indeed, the greatest entitlement of all goes to the elite.
Hypocrisy at it's finest!
1
Don't forget as well that during the Obama years the European economy was in the doldrums which dragged on the US economy. Just as Obama's 2nd term ended did Europe see some positive economic numbers. Frustratingly. Trump again like all through his life has managed to claim credit for others success or escape the fallout of his own irresponsibility.
Trump talks like a 6 year old explaining how government works. it is simple, picturesque and so unserious that it soothes, distracts and downplays the serious nature of what the presidency does. When he talks about bad guys, well none of us want bad guys in the country and we let fear override the facts because who wants to be the 1 in a million. when he talks about how great the economy is, well, we all want it to be true because locking our doors won't solve our financial problems. Same for his stupid climate change skepticism, we think, maybe we are overreacting or harbor inaction guilt
We know the facts but Trump creates just enough pinch of insecurity in the thinking public's mind that he takes some of the certainty out of conviction. Lincoln talked about a more perfect union and we liberals take that literally striving for perfection defining that to mean that what we do now is not good enough. We question Is something wrong with Biden because of his son's Ukraine connection. Trump is a master at sowing the seeds of self doubt that weakens us. He is the definition of an evil instrument masterfully wielded by McConnell.
"By the way, whatever happened to the deficit scolds who were so prominent during the Obama years? They’re oddly quiet now."
Can the NY Times send a reporter to stick a microphone in the face of Alan whats-his-name and the rest of those folks? It could be a great study in political trends, or maybe hypocrisy.
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Krugman has gotten to the point that he is so predictable that you don’t even need to read what he says, you know what he is going to say about who wears the white hats and who the black hats. Krugman lost all credibility when he vehemently asserted on the day after Trump’s election that we were going to have a major recession on account of Trump’s election. He is so partisan and uses his economic theories to attack Republicans in virtually every column.
What is wrong with Democrats? They get pure juice like Republican deficit spending and it’s nothing but crickets.
They should be yelling ‘TRILLIAN AND COUNTING’ every single time Trump blathers on about the great economy. Every.Single.Time. They should be screaming about running on debt money, about what is guaranteed to happen when the bubble bursts.
There should be ads everywhere, and every Democratic leader should be warning voters all day and every day.
It’s like the Democrats just don’t know how to attack this cancer of a Presidency. It’s so much easier than they think; attack the deficit with everything they have.
Nada. Crickets. And they lose again.
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I thought Paul loved deficits ... Oh .. I forgot ... that was then
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Democrats are much better at governance while the Republicans are muck better at politics.
Eventually, the pumping air out of the left tires to inflate the right tires of the US Truck is going to cause a crash.
I envision an advertisement in which the cycle of tax cuts & deficits is aligned with the year & name of the President.
To ensure the graphic communicates effectiveness, hire Edward Tufte to represent the data.
How do I contact the DNC?
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Hypocrisy does not exist in the Republican dictionary which is dedicated to the proposition that the end always justifies the means.
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In the mornings, a cup of strong coffee and reading the NYT; especially Dr. Krugman. This last shakes up my head and intelligence to see 20/20 again: paraphrasing Bertrand Russell "Why I am not a Christian"... it is in my case "Why I a not a Republican"...
The Democrats have to become ruthless like the Republicans in order to fight the Trumpian corrupted GOP.
Whatever the US needs I am not sure, but the whole world needs more Trump. A democrat in the White House will likely declare war on Russia.
What you're saying is that people will buy Trump's SOTU speech, lies and all.
it is all so obvious, yet nobody explains it in a simple way:
weak demand --> stimulus needed --> corporate tax cuts --> no increase in demand but windfall corporate profits --> profits used to buy back shares --> stock market strong (at unprecedented irrational valuations) --> still no increase in demand as stock ownership concentrated in top deciles --> economically uneducated people feel economy is strong as stock market is strong --> vote republican --> further deficit spending through tax cuts --> .... --> at some point decreasing marginal benefits in stock market, etc --> deficit concerns get larger with public --> republicans arguing for cost cuts --> social benefits cut --> no effect as demand even lower now --> stimulus through tax cut --> ... sad but true
As with most topics, Trump’s economic blah, blah, blah is meaningless. His limited intellect and attention span only allow him to see, and eat, most of the sausage, without having any understanding or interest in how the sausage was made. A dollar is a dollar, even when it has Chairman Xi’s picture on it. 230,000 new jobs...”hey, that’s a lot, isn’t it”? The economy is thriving on borrowed (seriously) time. “Thriving” means that people can now get two or three minimum wage/no benefit jobs instead of a measly one. Trump’s yuge gamble is he will be re-elected before the next crash occurs. Then when the demolition happens, and it will, he’ll blame Obama, the FED chair, the Gulf Stream, declare America bankrupt, take a tax write off and waddle on his merry way. We will survive another recession. Four more years of this, my liver can’t handle!
It’s funny to see this guy still talking about Paul Ryan while others almost forgot this name.
If you like past history, don’t bring the the person who are enjoying retirement rather than the other one who not only spoke badly about him but also predicted imminent recession convincingly like an all-knowing guru. He is still very active. You know who I am talking about? This miraculous never-dying hero is....., yes it’s YOU!!! Talk about old-yourself before going any further to the future.
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Yeah you were right, you have been all along. But the bottom line is lies and hypocrisy have carried the day. Americans either cannot see through Republican schemes or they don’t care. Either way Trump wins. Do you have a solution?
1
This is a bunch of hogwash from a guy who is perennially pre-occupied with tortuous revisions and explanations of economic history.
1
Centered around? Really, Dr. Krugman! Centered on, please, thank you.
"You can fool some of the people some of the time, but you cannot fool all the people all of the time..."
I knew that was the correct analysis. It's a ginned up economy etc. But why haven't the analysts and Democrats made this argument??? What I frankly see is a society and economy on steroids, manic and pathological. Not the brilliant city on the hill. It is clear on every highway: the people are in a frenzy. You can feel it. Or I guess turn on the TV. We have a real problem. And the President seems to be coming frankly unhinged. Like that disability Amendment unhinged. He is sounding like Nixon was caricatured to sound. Oh for the days of sanity! This is no joke.
One of the most destructive mantras ever coined is: "It's the economy, stupid." Unfortunately, it has also become the single most important way of assessing the success of a president. So it's not surprising that Trump and the Republicans are touting all the economic metrics which make him look successful, while ignoring the things that are destroying the civic and legal fabric of the country. And then there is the unaddressed peril of climate change whose cost is beyond reckoning. If Trump wins this year because of his supposedly strong record on the economy, we will all suffer for stupidly believing that he and the Republicans have managed the country well.
I can swear under the oath and prove that the NYT editorial policy has been to misinform the American public over the last couple of decades.
Now, if the NYT editorial board wants to provide me with the space for my testimonial to prove this case I am willing to do it.
All the NYT should do is to invite me.
The problem is that everybody's more interested in the dirty laundry of the other people while meticiolosly hiding the very own.
The question is why nobody prefers the clean underwear or we we are unwilling to learn and improve.
Why, oh why, didn’t Obama build his council of advisers around Paul Krugman? Obama’ timidity, say pusillanimity, paved the way for Trump and his cadre of hypocritical supporters. The fiscal deficit, why aren’ t republicans howling about it? Workers illusion of economic good times is fueled by easy credits. Fiscal irresponsibility lies behind the claims of boom times. Fake economy and fake prosperity.
"Who cares about the budget?" Trump said during a campaign speech the other day. That sums up the hypocrisy of Republicans and the Tea Party phonies who won't care about the deficit until another Democrat is in the White House.
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As much as Krugman absolutely HATES to admit it, the economy is indeed "running pretty hot these days." Can you say understatement! The left/Dems cannot stand it that things are going oh so very well while Trump's in office, so low and behold, this greatest of economies is actually somehow a "bad" thing because of the deficit. Oh no, can't give Trump any credit for even beyond obvious great things going on in this country--it's actually a mirage, everything is actually/magically "bad" because one of the all time Never-Trumpers says so--hilarious. Why do people read this nonsense?
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Tragically true.
Do the math: the extra 500 Billion deficit could have been put into each person's pocket: With 333 Million population, that's $1515 for each man, woman, and child in the US. Money in everyperson's pocket would have stimulated the economy just as much. Instead, the 1% got most of it. Sham sham sham.
The deficit scolds are cavorting with all the other grifters, scam artists and pickpockets in Trump’s cesspool. Their doctrine is to befoul, despoil and besmirch.
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All true. SO, what's the outtake then? Lower yourself to the Republican level of cynicism, the Democrat Party, or keep losing elections.
"By the way, whatever happened to the deficit scolds who were so prominent during the Obama years? They’re oddly quiet now."
Well, they realize that deficit spending is good for giving the economy at least a temporary boost and they didn't want that happening during a Democratic administration. They might be hypocrites (OK, they *are* hypocrites), but they're not stupid.
How many times are you going to write yet another iteration of this column in which you reassert points you have made repeatedly in the past? If you have nothing new to say perhaps choose another topic or give up your seat at the table.
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The thought of having Trump as president for another term is highly depressing. He will do something dumb and further degrade the country. The man is simply not very bright.
It's classic (R)eagonomics:
1. Steal the taxpayer's credit card,
2. Borrow it to the limit (while exploding the taxpayer's National Debt),
3. Give most of the borrowed $$ to the Pluto-Corporatocracy, 4. Throw enuf' orts to GoodBrain's base of "uneducated people" to make 'em think they're getting rich,
5. Hand the whole stinking mess to the next (D) prez, just before the whole Ponzi scheme implodes,
6. Change their tune to braying endlessly about the horrors of indebtedness and the inefficiencies of the gub'mint,
7. Blame it on the (D)s.
After we get past your obligatory silliness – wage gains have very little to do with governmental mandates and the reason fewer people are insured is because that’s the way the ACA was designed – we see some modicum of truth, which is unusual for you.
First, government borrowing/spending does not produce growth. If it did, the late 1990s would have been catastrophes, as the feds restrained spending to 16% of GDP. BHO’s “stimulus” was nothing of the kind; as was the case with the 1920 recession, the economy fixed itself, because that’s what economies do, absent socialism or other stupid governmental policies.
Leftists, simultaneously, contend that the present economic prosperity belongs to BHO while, as here, lamenting that the GOP “obstructed” everything he wanted to do. Pick one.
In 2013, against the NYT advice, the GOP ended extended jobless benefits. Curiously, that’s the year you cite when things started to improve markedly.
No, it’s not tax cuts which produce deficits; they produce prosperity and higher revenues. Massively increased spending - which just about every Dem MC supported - drives deficits.
Deficits ARE a problem, and DT is wrong to cave into the Dems’ incessant demands for more spending. We will certainly regret that portion of the Trump presidency when he channeled Pelosi.
The solution, of course, is much less domestic spending. Inquiring minds abide your list of proposed spending cuts.
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Actually, us commies just have this lousy habit of noticing reality.
1. If you wanna yell about how government doesn’t improve wages, go yell at Trump. He’s the one bragging about how he’s improved wages.
2. Spending doesn’t improve growth? Oh. That must explain what happened for the twenty years or so after 1941. Doesn’t do much to ‘splain why Trump brags about growth after spending $2 tril on tax cuts and $2 tril on the military, though.
3. What we actually say is that we shoulda spent at least a couple tril on infrastructure when borrowing was almost free, and that Republicans blocked it. Which they did. Still waiting for Trump’s infrastructure, though.
4. Things axly started to improve markedly around 2011.
5. The other blah-blah I’ll skip, but I will note that of course you’re too chicken to say that you want Medicare and Social Security slashed.
It's obviously a 'win at any cost' mentality for the GOP. They've displayed their short-term game plan over and over, and America is still buying it. I think it's a given that Trump is gonna win. The Dems...they got the old codger with the finger and the gay guy?!? What they need is PC Principle! The Trump machine is going to slice up Sanders and Buttigeig like soft butter.
If Donald Trump wins reelection it is because the American voters want to be ruled by the 21st century Butch Cassidy and his Sundance Kid.
Deficits don’t matter, when the GOP does it.
DUH.
As conservative as I tend to be, all appearances are the Republican party of our times borders on the wicked.
Trump is upto his old “pump and dump” trick as far as the economy and stock market goes. It is shameful to have let such a dishonest con-artist, a perverse liar and a cheat, to hijack the WH and pull the wool of the eyes of the gullible masses that continue to follow him over the cliff. Lies, lies and more lies for the next 5 years until it all collapses.
1
Dr. Krugman,
Take a leave of absence from your NYT duties and go campaign with whomever the Democratic candidate is.
This article could have been written the day trump won. It also has already been written 5 times. Why dont people see that this has happened, is happening, and will happen again? Im an idiot and i saw it coming. And it will happen again and ahain. Why do we dems let us get played over and over?!!
Grave sins committed, specifically by the G.O.P., for political expediency, however prejudicial to the country's financial stability. Deeply shameful of course but republicans, and their useful idiot in-chief, could care less what happens in the long term...as long as they can re-assault their miserable seats in government...to sell themselves to their donors and their special interests. Corruptibility free for the asking!
I agree with everything you say--except the last sentence. If Trump is re-elected, the reasons will be the same as last time: cheating, misogyny, racism, backward thinking, hypocrisy, an unfair electoral system--and just plain stupidity. Do you really think that the sort of person who votes for him considers the state of the economy first and foremost? Isn't that giving them far too much credit?
Now its deficits and Deutsche Bank and these are signs that your "movement" is floundering. On day after the democrats Major fail on Impeachment you journalists looked at the older misses to pull out of the sack of lies. Please tell me who in the feckless democrat field is going to run and what are their "IDEAS?" I haven't seen anything but "steal from the rich and give it to life's losers"! Great Plan!
Are you a socialist Paul?
Fascism: Permanent one-party rule in the service of the plutocrats. (cf. "Republican Party"). It's a slow-moving coup.
"reportorial neutrality", Professor surely you jest! That you choose to call out the press over believing deficits were (are) an important problem, yet have sat on your hands and pen and gleefully ignored the biased nature of reporting over the past 20 years on all manner of things of real substance speaks volumes as to the depths to which you have sunk as a shill for the Democratic party. Shame on you.
The Democratic candidates need to fight the propaganda that Trump made the U.S. economy great again. They should show (with simple pictures) the reality of the economy under a Trump vs Obama. Trump’s job story is really just the asymptotic tail of steep declines in unemployment under Obama. How many Trumpistas know the farm bailout necessitated by Trump’s trade war dwarfs the GM bailout and it mostly goes to agribusinesses (some foreign owned) and not to mom and pop farmers. Nice charts here: https://markets.businessinsider.com/news/stocks/9-charts-comparing-trump-economy-to-obama-bush-administrations-2019-9-1028833119#overall-economic-growth-as-measured-by-quarterly-gdp-growth-rates-has-been-steady-1
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@Harvey Absolutely agree. And make the message as simple as possible. He is adding $1T/year to our debt for the same economic growth with a manufacturing recession, flat wages and nothing to address climate, Sounds a lot like how he ran his casinos before they went bust.
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@Pete Make the message simple, and tell a story: Imagine if your neighbor suddenly bought a million dollar mansion and $200,000 car. You might think, wow, he's doing well! But what if you then learned that he borrowed $800,00 to finance his new house and $180,000 to finance his new car. Suddenly, he doesn't look so hot. In fact, you might even think, one slip-up and that house of cards is coming down!
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@Harvey
Harvey, i think you've hit on something really important
with your comments.....I've been thinking for a long while
that it is time for the News media, and particularly the electronic media to 'TEACH'....TV et al (and that includes the print media) should be stepping up to the blackboard to create a classroom...one much needed with all the lies flying about on a day to day basis. Each case must be made and proved ..true or false........We need instruction...in separating truth from lie or mis-statement with
verifiable facts......Each day, on the front page in a box surrounded with black, one lie, dissected replaced with
verifiable facts.....One a Day...shoot down a lie....in any place it might originate with references and indisputable data
There is some serious teaching which needs to be done.....
Every day...one lie, one fact that the American people might not understand......not opinion...but facts that are indisputable no matter the political leaning.
and i would take it one step further....The NYT should be part of a Nationwide effort of newspapers to teach, expose, and explain the untruths rampant in this country and it must be presented in a new way...found in the same place every day on the front page os all major newspapers
It should be the first thing to hit eye or ear of every purchaser of news every day.
Talk to the Nation's best teachers......They do this
day in and day out.
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Serious question. Is there a point where all the new people getting jobs, and presumably paying taxes, will cover the difference from the reduction of taxes taken by the government?
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@Norville T. Johnston ----No, the annual deficit was small when W took office, he proceeded to start two wars along with more tax cuts to drive them back up to $100 billion or more annually.
GOP overspending when in power is meant to create rationale for canceling entitlement programs, moving the country even further fro recovery and effective reform to meet real needs. We're way behind much of the world in establishing universal health programs or even considering Basic Income (see Yang), as tremendous technological and environmental labor disruptions unfold, and the American medical care funding mess continue around us. But we hear very little from most Dems of the devastation we face from GOP financial and anti-constitutional agendas. Their party became a cult of personality from Reagan on, and is pretty much an unprincipled election machine. One Republican, Mitt Romney, is seen as a great hero for respecting the law and performing his duty as an impeachment juror. Most of these people have to go if we're to recover and rejoin and maybe even lead again in a world now facing multiple survival challenges.
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Glad to see this equal opportunity blame but sad not to see the blame on our mighty 2-party-winner-take-all-lesser-of-2-evil system not to mention the Electoral College!
1
I'm actually not so worried about a 'good economy' helping the GOP this election for one simple reason - I don't know anyone that has really benefited from it. Everyone I know is one accident or paycheck or bit of bad luck away from catastrophe. Everyone I know doesn't see a real retirement in their future. Everyone I know is desperately trying to figure out how to protect their kids from crippling college debt. Everyone I know has their fingers crossed that their health holds. The democratic message is actually pretty simple: "Do you feel like this is all so much harder than it should be? You are absolutely right. If it feels like none of this is working that is because it is not."
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"For whatever reason, Democrats haven’t been willing or able to behave that cynically."
Paul, check out the spending positions of the D candidates, from GND to free med care, to cancelling student debt, to free college to free everything... Appears to me they have recovered nicely from that lack of cynicism.
No one really cares Mr. Krugman. I remember commenting, when Trump won, that the Republicans were dancing in the streets so the could spend.....on their donors. Look around. Is anybody really shocked that Trump charges the Secret Service exorbitant prices? The Treasury won’t hand over Trump’s records but quickly hand over Hunter Biden’s information and God knows who else’s. Trump plays golf every single weekend, unless it is an emergency at Walter Reed, to the tune of $127,000,000. Add to that his $3.4 million for his Super Bowl party. No one cares. Trump makes money....for himself and the deficit? Meh.
6
Would it have been cynical of Pelosi to deny Trump $1 trillion in deficit spending in a growing economy? I don't think so.
You just know Republicans would have shut down the government without hesitation, until the Democratic president caved.
Republicans may do whatever it takes to win, but Democrats aren't doing enough.
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Hypocrisy, lies, cynicism are all and have always been manifestations of good 'ol politicking - nothing new. Yes, the media (including FB, twitter, etc) have exacerbated the partisanship and have acquired an outsize role in our politics. That much is NOT hard to understand, even though it is not possible to fix or work around.
However, it should be possible to understand why a) the economy (as reflected by the stock market more than by hard economic growth data) is as hot as it is, and b) unemployment is as low as it is. Why is Dr Krugman unable or unwilling to explain? If you believe that the "prosperity" is due to factors other than what Trump and his team have done these past three years, it should be possible to make that argument directly without pointing to "politicking" as if that was a novel idea!
1
Paul again adopts the view that the GOP has a “plan” and “thinks” about cynical strategy. They do not plan nor think. What they do is what they are told to do by the owners of the GOP brainwashing apparatus that controls the votes of almost half of voters. To gain support of this unparalleled propaganda apparatus, the GOP members of Congress will do anything and say anything requested of them.
The way out of this predicament depends on dismantling the echo chamber that fuels mindless division, alternative facts, and crazy conspiracies. Counterargument and logic and evidence cannot penetrate the deluge of misinformation enshrouding these voters.
3
This "economic recovery" is straight out of the Reagan playbook: he used "defense" spending, tax cuts, deregulation, and environmental destruction (remember James Watt?) to amp up the economy. This is a similar package with a more destructive, less charming, and much dumber guy at the helm.
3
IMHO, the US economy is driven by consumer spending, and that in turn reflects a) availability of retail credit, and b) consumer confidence about the future. The belt tightening that happened post 2008 created space for individuals and families to take on more debt, and that more than anything 45 did improved the availability of retail credit. And, as for consumer confidence, that is high because of the "wealth illusion" created by stock market indices. More than any other President, Trump has used all the levers at his disposal to help financial market traders jack up the indices. I do not have hard data, but the so called scheme of "using tax cut for stock buybacks" had only a limited impact on the prices of stocks that make up the DJIA, S&P and Nasdaq. Because the financial services industry has created such complicated instruments, it is easy for them to fool retail consumers into doing (buying/selling) what the industry wants them to do. A handful of traders on the financial markets are able to create the "wealth illusion", provided there is no oversight by the Feds (CFPB).
As for unemployment, the perception of prosperity helps businesses add jobs, but what we have seen since Trump took office is nothing extraordinary. It is merely a tepid continuation of what was happening during Obama's second term. There is an interesting chart at https://en.wikipedia.org/wiki/Jobs_created_during_U.S._presidential_terms#Job_creation_by_term which helps put things in perspective.
So, what will the Ds do when Trump is in his second term and the big "tax cut" expires for the middle class. Recall that it has a 5-year term while the cuts for corporations and the wealthy were made "permanent."
The Ds will be in a box. The Rs will feast on it.
My favorite hypocrisy is the screaming about the evils of “Socialism”, while purposely crashing the agriculture export market in an ill-considered trade war, and then bailing out large agri-business firms at a cost higher than the auto bailout. Not a single thing Warren proposes is more socialist than that.
3
Trump voters (and some democrats) do not understand billions let alone trillions. Means nothing as a campaign message.
I hate to think this, but it would be best in the long run if the economy tipped into recession soon, and the Republican tax cut strategy gets thoroughly debunked. It would be painful for most people, but it might put to rest once and for all their voodoo economic policies.
No, Trump won't be re-elected because of the good economy. The good economy is just an excuse for closet white nationalists to vote Trump and still look "respectable."
It's essentially Lamar Alexander position: "Trump gave us a strong economy and the alternative to him is economy-wrecking and civilization-ending socialism."
The ugly truth is that a majority of whites in key battleground states believes that Trump is addressing their concerns, smiting uppity liberals and re-establishing old racial and gender hierarchies.
For many of Trump supporters being a white man is the only thing that gives them dignity after Republican policies have devastated their communities and economic lives. And Trump is reaffirming this belief. It's votes for nothing.
3
Trump and the rest of his buddies, are surely fat and happy, since he and his 10% have received 83% of the benefits causing trillion dollar deficits, leaving the rest of us with their leftovers.
While luxuriating, he is going to cut our miniscule Social Security, Social Security Disability, Medicare, Pre-existing health conditions benefits, and annually increasing sky high Drug Prices of at least 5% per year with their and Pharmas greed, while they continue to live higher on the hog!
He golfs one of every three days according to the press, and he has yet to reimburse us taxpayers with the cost of his jaunts, that we have paid for with our taxes.
Now that's Trumpism at its best...the greedy forever taking more from the needy!
2
The Democratic Party better take off the gloves and channel its best inner cynicism before Trump is re-elected and the Republic implodes. One tactic would be to scare the bejesus out of seniors with hyperbolic claims that the GOP will eliminate or privatize or drastically cut social security and Medicare entitlements, leaving them on the street. Another is an aggressive and sustained campaign aimed at women voters zeroing in on Trump’s serial infidelity, misogyny, cruelty - substantiated or unsubstantiated. Time to dive into the weeds and fight fire with fire.
What I haven't seen anyone address is the possibility of runaway inflation. If we're simply printing money to pay the bills, then pretty soon the $100 bill will replace the dollar, and not long after that, we won't bother with coins at all, and every bill will have 3 zeroes.
It can happen here.... and I'm predicting that it will, by the end of Trump's second term.... if foolish irresponsible Americans let him have it.
Paul, I don't know if you actually read these, but as one fan of Asimov's Foundation Trilogy to another, I just want to pass on this thought: If James Madison was Hari Seldon, Donald Trump is the Mule. He couldn't have been predicted and he's completely disrupting the Constitution -- witness the servile behavior of the congressional GOP. I don't know what to do about it, but, like the Mule, if he can't be defeated, at least he must be thwarted.
I recall then-Sen. Lloyd Bentsen in his 1988 Vice-Presidential debate pooh-poohing the economy and saying the deficit made it look better than it was. He said something like, "let me write [x] billion dollars of hot checks, and I'll show you false prosperity."
[sorry, I can't find the exact quote]
It's and uneven playing field due to the essentially different sense of political shame. I have the feeling that while Republicans think they should lead, that power belongs to them by right, Democrats have the lack of confidence of the poor person who has done well. Forever, uncertain, forever prey to doubts and for this reason sensitive to accusations. Republicans are the politically bullies who march into positions of power ready to do whatever they want and dismissing these late-comers with terms like extremists, socialists, unpatriotic. It is Democrats who are forever looking for acceptance by offering compromise, timid in asserting themselves and afraid to break rules or forms. They don't have the thick skins of Republicans that allows them to proclaim time and again, despite their falsity, that all taxes are bad, that prosperity flows from the wealth to the poor, that all governments measures to solve problems are bad. So, they don't feel any shame in their proven hypocrisy. They are convinced that winning justifies their actions. Trump and McConnell become their models. Regard for forms is for others.
tax cuts never pay for themselves. the Rs have been
spouting this flat out zombie lie since Reagan.
It will never end
1
This story has been repeated throughout time. Republicans get a sense of fiscal responsibility when they are out of power and forget it the day they gain power and the ability to deficit spend simply to provide tax cuts. Then reverse themselves to hammer Democrats on profligacy when the Dems regain power. Wast, rinse, repeat. It is tiring. Republicans have no shame.
Well and the part that is the most frustrating is that Trump's pushing the petal to the metal to keep the economy from slipping into recession before the election will work. He will win a second term, then the recession will hit along with deficits soaring even higher. It's the same pattern Trump has taken his entire life. He makes himself richer at the expense of everyone else and then jumps ship back to Florida or his golden tower and watches the dumpster fire burn while he is completely unscathed. And then when the recession does hit, it will be someone else's fault as always. It was Obama! But her emails! The fact that half our country is dumb enough to buy that this man is some sort of economic or business genius makes me feel very depressed about our future.
I like to think that the reason for the asymmetric cynical dealing is that Democrats are more principled than Republicans.
But it does feel like a lot of those movies in the 80s, where the lovable group of weirdos always loses the Big Competition, because no one believes them when they say that the popular and/or rich kids are cheating.
The huge increase in the inequality wealth distribution during this upswing in the economy is stunning and shameless. The fact that business reinvestment has not appeared after all the promises that were made to sell the giant corporate tax cut is notable. When the hammer drops in the next few years and the economy falls into recession the first thing to happen will be the new hires will be the first let go. Having a trillion dollar addition to the debt in one year during a period of economic growth is remarkable. This a time when debt should be paid down out of the economic growth. The cynicism of the GOP is boundless. The GOP is using a Keynesian method for goosing growth. They are riding their shameless hypocrisy for all its worth.
In his "History of the World, Part I", Mel Brooks, playing a stand-up comedian performing for the Roman Emperor, said the Roman Senate was "the best legislature that money can buy". The joke fell flat and the Emperor took drastic action. But really, what's the difference with the US Senate today?.
All the pundits were stating that there would be growth of 4% or higher. Where is that growth? The masses think that because their 401k is doing well now in the present that the future looks great but they don't take into account that today's dollars will not be worth the same in the future. And of course they don't pay attention to the deficit because no one wants to think about who is going to pay for all of it. Yes republicans are hypocrites, cynical and amoral which is why we now live in an autocracy.
Maybe I'm missing something here, but this seems like the budget deficits represent a classic Trumpian/Republican fraud, which goes something like: Borrow money from children/grandchildren/great grandchildren since they don't vote to fund prosperity and perhaps safety (if it's military spending) for people who do vote. Claim either because of stupidity, fantasy or outright dishonesty (not always clear with this group; Trump included) that the tax cuts will pay for themselves with economic growth and when this fails to materialize still claim credit for budget deficit fueled prosperity and pretend the deficits never really mattered.
I am not economist enough to know at what point deficits constitute stealing from your grandchildren -- the ones who will be responsible for paying for them with future taxes or possibly future inflation -- but I suspect the trillion dollar deficits we are seeing now land in that category, and that is why they don't trouble Trump and his enablers among the Republicans.
To sum it up- scratch below the surface of Republicans’ long-term fixation on ideology- their purity tests- and one soon discovers a culture of amorality, greed, and predation.
The preachers of the republican creeds have used them as trojan horses for campaigns of self-gain.
Trump for all his faults didn't put himself in office.
If the American voter wants to pull the lever for shiny objects so be it and RIP.
What a revolting ridiculous situation. We're staring at a national debt at historic highs; having been kited, on the Trump/Republican watch, to outwards of the orbit of Pluto and moving even further afield. All of which average America will be held accountable to pay some day.
I'll acknowledge that there are times a nation should engage in deficit-styled spending. Anything that secures the future of the citizenry isn't necessarily a bad thing. But have you seen anything, ANYTHING, of value produced for all that debt? Truly? Anything at all?
See any national infrastructural repair programs in place, for instance? All I've been seeing is an orgy of corporate share buy-backs, a massive inflation of the stock market and the like, nothing more substantive that this..
What I see is endless central bank QE sluicing free money, like a drug into the arm of an addict, thru the veins of the economy. It's producing a euphoria and concomitant high, but that's all it's doing.
We're squandering all that money for the momentary release, the buzz of the hit. And like all addictions this one is not going to end well. The aftereffects will be with us for years to come and guess what? Like I said it's average America who will be left holding the bag, and its you, me, who will be asked (told, really) to pay for all the largess.
But hey...why worry? In the end we're all dead. Let the band play on.
John~
American Net'Zen
The only way not to pass on the huge debt to your children is not to have them and then, maybe....
Here’s the best way to fight the deficit hypocrisy - stop promoting the fiction that deficits are bad. For generations we have been warned that a national debt crises is right around the corner. Any day now this irresponsible out of control debt will result in soaring interest rates and worthless money. Just look at Zimbabwe! And our children will be be stuck with the bill! And China will take over!
Paul’s just mad that Republicans are so good at using this nonsense to get their way. The best way to solve that problem is to start telling the truth about deficits. And, sorry, “just you wait!” is not an answer.
It's simple. It's class warfare, which the Republicans decry but can't look in the mirror and see of themselves. Another hypocrisy. Look at the cultic sycophancy in the White House pity party yesterday - how much were regular folks represented? (And why would they want to be there if they have any self-respect?)
Another hypocrisy regards treason. Republicans will rant about patriotism regarding flag displays and flag respect (which Trump so religiously observes during the Star-Spangled Banner), but turn their heads away from the treason of withholding military aid to an ally fighting off invasion by a US enemy, purely for personal gratification. (At least Russia is ostensibly a US enemy; I'm not sure it's a GOP and Trump enemy - seems to be a lot of common affiliation along oligarchical, dirty money, carbon resources and religious orthodoxy lines).
If you think THAT cynicism is bad, you should read the comments to this column!
Krugman’s critics like to point out that in despair he predicted decline after Trump was elected.
They fail to acknowledge Krugman retracted that prediction just days later, saying his pessimism was wrong. Krugman has not hidden from his mistake.
Now for the cynicism part. His very same detractors ignore both the spectacular 40 year failure of tax cuts to pay for themselves, AND the refusal of economic austerity charlatans to acknowledge their economic malpractice and overwhelming record of demonstrable failure.
Which is of course the point of today’s column: the economic con men learn as much from their mistakes as Senate Republicans will learn from letting Trump off of impeachment without so much as a scratch-neither they nor Trump can tolerate being accountable for their failures.
I’ll take the guy who made a mistake and admitted it, over people with 40 years of failure that are too small to admit it.
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Yes, and if a Democrat is elected suddenly they will screaming about the deficit and resisting all social spending claiming that that is in fact what drove up the deficit. We know that they are hypocrites, but what do we do about it.
"For whatever reason, Democrats haven’t been willing or able to behave that cynically."
Because Democrats, despite all their flaws and a few bad actors (Bob Menendez comes to mind), still believe in government, the Constitution, compromise, morality, honesty. The GOP believes in two things: delivering wealth to their oligarch backers and maintaining an iron grip on power at all costs. Does the GOP even have a platform anymore? What's their healthcare plan? Their plan to address income inequality? Predatory lending? Skyrocketing cost of education? They don't even bother to pretend to have policy anymore. And they pay no political price -- it's truly astonishing.
The only real question is whether enough voters are cynical (or stupid) enough to continue voting for this madness.
The best thing I've seen in forever is Nancy's ripping up of Trump's speech. Ditto for GOP policy on anything. More ripping up of anything The GOP puts forward!
Mr. Krugman,
Please read Harari's book "21 Lessons for the 21st Century".
Progressive politicians are hamstrung in this contest for one very simple reason. Republican politicians can lie, cheat, steal, cover it all up, and then lie about the cover up and as long as they maintain a position that conforms to the primary planks of conservative thought (low taxes, more guns, no abortion, wrap yourself in the flag whilst holding a bible but don't lift a finger to help the poor) then their voters are willing to forgive practically anything.
However, democrats are expected to, at the very least, appear to have a moral compass that points true north. Democrats expect that when one of our politicians sexually assaults or harasses somebody, or lies through their teeth to voters that there will be some level of punishment.
It's like we are playing the worlds most important game of pick-up basketball where the rules are "call your own fouls". We call fouls on ourselves, but when they cheat or bully their way to the basket our cries of 'FOUL' go totally unheard. And as we all know. We have to call foul on conservatives, because lord knows they won't do it for themselves.
It is the faux sincerity with lots of faux patriotism by McConnell and the rest of them that really sells the cynicism.
You have a hard job Paul, wading through all of this minutiae of budgets and economic boondoggles by the hooligan in the White House. I am thankful for your efforts in this, and your voice of reason and caution in the midst of this exploding rush to happiness now for those who have jimmied the levers in their favor, and the seeming ruination that must come from the “spend now, pay never” approach of these thieves running the show.
"U.S. labor market remained strong, adding 225,000 jobs in January"
WP 2/8/2020
What can we learn ? It works
No president is dumb enough to cut spending and balance the budget. That would offend many existing beneficiaries including social benefit recipients, government subsidies, over paid contractors, ballooning bureaucracy, and wasted military spending.
As long as not on my watch that national debt imploded, sitting president will not care. He or she will make sure that their supporters will get the benefits regardless of budget deficit. As long as the president Trump doesn't have to pay out of his pockets, he will spend. It is just a number, and business as usual. And Mr. Trump is an experienced player in bankruptcy court.
There is no law to balance the budget. Automatic budget cut across the board when budget is short was the best approach to handle budget deficit. Unfortunately, the majority of house and senate just doesn't care. If the government is a business, then the owner should fire all these irresponsible people who run the business in red.
Sooner or later we will face the reality. It may not be you and me at this time, but the future generation will bear the burden to pay it back.
It is, sadly, quite simple.
They are venal, mendacious and corrupt. All pretense to having any principles beyond these is just for show.
This is why we must defeat them on November 3, 2020. We will have to work hard for it, but we will do it, if we do everything we can to get folks to register to vote and turnout for the election.
Why don't the Dems and more in the media talk about this? isn't an informed and educated citizenry critical to America and true democracy? The lies, hypocrisy that the Repubs and trump are able to get away with is astounding. This and so many other GOP / trump lies and activities are extremely destructive of our well being, yet where are the Dems, media and other important voices? Who will tell the people?
The further and the faster you kick a can down the road, the bigger and the badder it gets.
Asymmetric cynicism, going to have to remember that one. I went to one of those confabs Pete Peterson rolled out back in 11 or 12. It was very dry and not very convincing. Of course we can't forget the Reinhart-Rogoff sell out with the bad data that a grad student ferreted out. They claimed, without substantiation, the level of debt that would crush a country. Smoke and mirrors, fraud and now asymmetric cynicism. Sick people, sick country, is there a bottom?
When the public finally wakes up to the sham economics voodoo of Republican Trump-ism it will be way to late to fix it. Trump Republicans are going to use the coming economic disaster to reduce social security, medicare, medicaid and every other socialism policy they can find. Just like the food stamp program cuts going on now. And yet 13 billion is going to farmers because of Trump's failed tariffs and the top 1% has been enriched even more. Our bankruptcy President is bankrupting America through his Republican enablers and his own stupidity except the lining of his pockets and those of his family. How as president do you going to a prayer breakfast and malign those in attendance. We should ALL prayer for him!
My Congressman, Scott Tipton, had a debt counter on his website when Obama was in office. It disappeared when Trump was elected. He refuses to tell me why. Hypocrite.
Too few people in this country are critical thinkers. They do not gather diverse information, or only get information from a biased source. They are unable to make logical decisions.
"hot" US economy?
Krugman is just as uninformed as Trump.
K really needs to talk to someone not in his upper middle class world.
Is he unaware of why GM workers struck?
@analanta If they have done magic, they've done it by (speaking slowly) doing things they didn't allow Obama to do. OK?
With respect, no one cares. I know a number of very committed progressives and Democrats, and we are all in dismay at the stunning incompetence of the Democratic Party. The Party that stupidly did not campaign in the upper Midwest in 2016, now gives us Iowa, escalating infighting among an ever changing cast of candidates, a Democratic National Committee in disarray, and a four month impeachment effort that saw Trump’s approval rating go from 39% to 49% since October. With this level of incompetence in his enemies, Trump needs only to get out of the way and let Democrats do a fine job of destroying themselves. And any hope of honest government. You cannot believe how dismayed people are in our corner of upstate New York.
Paul I am a frustrated as you are that so many people keep supporting these crooks. I have come to conclusion that americans are so uneducated and religiously besotted that thay can no longer tell truth from fiction. For them, of they believe something it must be real.
I wonder how much of this fiscal hypocrisy has to do with fiscal ignorance and indifference. Most Americans, including our politicians, seem to live paycheck to paycheck. Your understanding of economics is beyond the stratosphere for most it is nonexistent.
Another incisive analysis of how the deformities of RPB policy gives rise to bizarre & tortured public discourse
That said, the problem is both broader and deeper than "hypocrisies"
As the Trump experience has made clear, much of the time RPBs are simply selling out and out LIES
The best example was the corrupt & fraudulent invasion of Iraq,
undertaken ONLY to provide a "rationale" for massive no-bid government contracts to Halliburton, KBR and Blackwater,
all companies with direct, crony connections to Cheney / Rove / & the rest of the W regime
But the blatant reversal of criteria in RPB rhetoric about deficits and government spending is more subtle, if no less dangerous
Here we have literally decades of RPB "DOUBLE BINDS":
the simultaneous & consistent transmission of two or more emotionally powerful, yet deeply contradictory, messages
Successful response to one results in a failed response to the other, & vice versa,
so recipients are automatically "wrong" whatever their response
Thus, RPB deficits = no problem -- Dem deficits = alarm-blaring crisis threatening the Republic
As you note, after 40 years, the objects of these contradictory messages -- the Democrats -- STILL haven't figured out "responses" that overcome this intense RPB manipulation
But time is just about up for Dems
They MUST stop being AFRAID to call out the LIES / HYPOCRISIES / DOUBLE BINDS
If not, they will be forever cleaning up messes RPBs have CONSCIOUSLY created for them TO clean up
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And most of the Democratic pundits want to put a moderate in the White House that will "work across the aisle". It is absurd to think that you can work with people that are this duplicitous.
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Every single one of those people in the photo lines up behind the 1%er's, not Mr. & Ms. US Citizen. Please remember that at the voting booth.
Were gas prices manipulated too? $4 a gallon during the Obama years and now much lower. Why?
There has been lots of talk recently about how there are Republicans who are afraid to cross Trump so they all fall into line but really they are just as upset by how things are going . TOTAL BALONEY ! Trump has done EVERYTHING the Republican party has wanted and if you continue to support the Republican party you are supporting a racist, misogynistic, homophobic party that has no interest in democracy but only power. It is not new . It was so with Nixon, with Reagan, and the Bushes. They dressed it up in compassion or morality but it is white supremacy and the consolidation of power . The next step is if it looks like the Republicans might lose will the strategy of Germany in 1933 be used : turn the power completely over to he executive branch and give up on democracy . After the impeachment fiasco they certainly seem uninterested in the constitution.
KEY to economic sanity: Work on the SENATE - get rid of McConnell. Put Dems in those seats!
As one of my republican neighbors said "We get all of this stuff and nobody pays for it until after we're dead". This is GREAT!
Economics has been described as the “dismal science”. As currently practiced, economic analysis seems to focus on the ‘immediate’ like employment, debt, etc. Understanding the consequences of these measures are beyond our economic models. This echoes my experiences in engineering education. (For a long time we continued to teach design with the vacuum tube while the transistor had made significant inroads into technology.) I heard today that the US is so far behind China in 5G technologies that we are exploring ways to ‘acquire’ this important infrastructural capability. We are planning to ‘buy’ this technology by acquiring companies in Sweden and Finland. (This is ‘good’ (capitalist) strategy to buy what you do not have.) The discussion focuses on either acquisition by our gov or a combination of public and private ‘investment’. In short, we did not have the ‘foresight’ to improve our communication facilities during the developmental phase of 5G. This will not create jobs in the US. As Professor Krugman notes, the tax cuts did not significantly increase capital investment in our economy. Yes, some ventures may fail but others may indeed succeed on a grand scale to the benefit of all our citizens.
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Professor Krugman fails to mention Obama's repeated calls for an infrastructure bank to spur the economy as the stimulus began to fade. Had the Republicans put the interests of the country over those of their party, we could have boosted spending on something that would leave the country enriched with a safer, cleaner power grid, an improved transportation system, safer bridges and dams, and modern water treatment systems. Such undertakings would produce countless good jobs resulting in a multiplier impact on the economy. Instead, Trump and the Republicans reward big corporations who pocketed the tax breaks with stock buybacks.
The Trump economy is a house of cards ready to collapse, resting on government, consumer and corporate borrowing, all at record levels. Just as "trickle-down supply-side economics rationalized the scams of the Reagan era, "modern monetary theory" now provides pseudo scientific justification for driving the economy with deficits, borrowing, and printing more money.
Though it appears unlikely that Democrats will win the White House in the coming election, it may be a prize to be avoided. Like Obama, the new President may be greeted with the next global economic collapse. Be careful what you wish for.
The most depressing thing about the Republicans' obstruction of President Obama's agenda is the fact that he, Obama, is widely blamed for the failures of his last six years (seven, really, after Scott Brown was sworn in, giving McConnell the 41st vote he needed to block anything and everything).
I really thought that the Republicans would be blamed for their obstruction. They weren't. Even some Democrats and many progressives insisted that Obama should have done more. How? Harry Reid was blamed for eliminating the filibuster of judicial nominees. He had no choice; McConnell was blocking even the most non-partisan nominees. And McConnell showed that he would have done the same when he ended the filibuster for Supreme Court nominees in 2017.
What happens if trump gets four more years, and the stock market bubble bursts after the election? In 2009 only three Republican senators voted to rescue the economy (Collins, Snow and Spector). Thirty-eight Republican senators voted to send the country, and the world into Great Depression II. Incredible!
One thing I would like to see covered is the level of personal debt. How does personal debt in 2020 compare to that of 2008? The stock market is partying like it is 2007, or 1929.
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@Andy Beckenbach See my comment above, Andy. Government, corporate and consumer debt are at record levels. Defaults on auto payments are increasing, even with low interest rates. The economy is growing slowly, floating on a sea of consumer credit and government deficits. Only fools believe this can continue.
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I like Paul Krugman, he tells it like it is, but really this is very one-sided.
Society doesn't benefit from tax cuts? The middle and upper middle classes: $24,000 standard deductions under the new tax law, child credits, EITCs. Of course the benefits (rate cuts) are heavily weighted to rich folks, but most of us are benefitting. I realize that if you were deducting state tax and local property taxes on your $500K to 1.5mill houses in the northeast and left coasts, trump's limit was a deliberate stick in the eye, but you can't talk about journalistic impartiality without at least allowing for the possibility that we are all getting on this bandwagon.
We will all need to pay the piper, both for taxes and for a green future. Everyone will pay, everyone will benefit. Let's not kid ourselves.
Joe Bob was the person the Republicans had in mind when they passed the tax act. So many of us act in the same way. If I get an extra nickel - even if it’s temporary - and I have zero information as to scope of the billions in benefits accruing to corporations, then I’m good, right? Please show Joe Bob where the tax cuts have gone. He has no idea. Do you?
First off, the individual standard deduction isn’t $24K.
Second off, are you seriously arguing that Trump’s moving towards a “green future?”
What do you expect from a Party that has been syphoning money off the taxpayer throughout their entire existence? Tax cuts, tax avoidance schemes, favorable bankruptcies rules, LLC’s to protect assets, investments shelters, foundations, religious deductions and outright subsidies are the rule. It is only inevitable that they will spend to appease the Mar-a-Lago crowd and National Security machine. The only amazing thing is inflation has been limited to a stock market that defies fundamentals and a real estate market that favors investors and the high-end wage earners. Someday the bubble will pop… and then we’ll need another Roosevelt to take on the rich and powerful.
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come now. It has always been a Republican policy to run up the deficits when they are in power by cutting taxes for their donors and then use the deficit as a leverage to cut social spending when the pendulum swings. It worked. Bill Clinton balanced the budget by cutting social spending and deregulating finance enough to spark the stock market bubble.
There is nothing new here from a policy standpoint. What is new is that the rot in the US economy has gotten to the breaking point. The real reason for the "booming" economy, at least in part, is tha the Fed reversed quantitative tightening, reversed interest rates increases, and is now directly intervening, on a large scale, in repo markets.
All of this is the result of the economy being filled with debt to the breaking point, when an attempt to normalize interest rates fails at 2.5% and needs to be reversed on an emergency basis. The next step is permanent 0% or negative interest rates.
This should properly terrify everyone. US is still "ok" for two reasons: it is falling down from great heights ,so it is taking some time. It still has the reserve currency of the world. The latter advantage will go away simply because the US weaponized this advantage instead of quietly enjoying it. Dethroning the dollar has become the matter of national security for the remaining 95% of the planet, so it will be dethroned sooner than it needed to be.
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The debate will become much saner when Centrist Democrats like Biden, Buttiegieg and Klobuchar stop fighting reasonable programs like Medicare for All and College for All with charges that these are fiscally irresponsible. We can afford to have nice things.
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Remind me again...why was it that we’re spozed to pay for college for the children of billionaires, and just precisely what was the plan for a) getting this Big Medicare Whooha through Congress, and b) getting around 180 million working Americans to cheer for giving up their $14 grand a year employer subsidies, accept some vague government plan, and have their taxes raised some unspecified amount?
It is obvious that Trump doesn’t realize, that after he is no longer President,
either by not getting reelected or terming out,
the people he is excoriating will still be in power.
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The real problem is that most of the press - i.e. seems like everyone except Paul Krugman - gives Trump a pass on this conduct - i.e. putting the U.S. economy on a "sugar" high - caused by a one trillion dollar budget deficit. Trump could care less about deficits. For him, he probably figures we could just print more money to get out of the mess he is creating. His mode of operation is to bankrupt companies due to mismanagement and then run the other way when things dont look good - leaving everyone else holding the bag. He will do the same to the good old U.S.A. if he can get away with it. He could care less. As long as his hair looks good. But again - the problem is the press - that does not hold Trump accountable for the 1 trillion dollar budget deficit which is giving our economy an artificial "sugar high" boost.
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Why Republican corporate tax cuts don’t work and government spending does:
When a corporation gets what the last tax cut gave them, a lot of it buys back stock. It expands the economy slightly. But the result of that exchange is not the economy moving forward as a whole. It drives up the stock market, which might make you and me a bit more money, but it has nowhere near the economic effect of putting that same money distributed in the pockets of the bottom 75% of the country. We usually don’t invest that money (outside of things like home remodeling).
When the money is spent by the federal government doing things like infrastructure, the money circulates, and each move through that circulation, it increases economic activity. The workers building that road, get paid. They then, more often than not, spend that money on goods and services, which provides money for those other workers who get a slice of that money, to spend it. They, in turn, continue the circulation.
Every one of those getting the money and spending it, don’t spend all of it. Some winds up in increased taxes paid, at each transaction. Therefore, some of the money winds up going back to the government. When it is given out to the wealthy, it mostly goes into savings (stocks are, in part, a risky form of saving), and only gets taxed when the investments are cashed in after growing. And then only if the stock doesn’t increase in value, there is no tax benefit.
Simple Economics 101...
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One thing for sure Krugman your prediction, the economy would be in the tank because of Trump at the helm was as wrong as it could be, the prediction was not thought out or really had ANY merit, it was just the bitter disappointment of Clinton lose and Trump's triumphant historic victory.
@Jimd You people are the worst. You know full well Krugman retracted that 3 days later, explaining and apologizing. Quit telling only half the story!
There is an obvious comparison between Tramp's economy and that of a typical consumer family. The family was offered a nice new credit card. They accepted it and now they are on their way to max it out. The family never had it so good, there are new shiny things for everybody, but mainly for daddy. They pooh-pooh anybody who suggests that one day, maybe soon, the card will reach its limit, and repayments will come crushing in.
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trump's claim that he's done so much for the economy appears to be correct until you examine what's under the surface. Like most businesses he's associated with, he's going to bankrupt the country at which point a democrat will have to clean up the mess.
The sad part is unless the democrats get their acts together and finds a palatable candidate, which appears doubtful, trump will be reelected. The amount of damage he will do to this country will be ten times what he did in his first term.
Expect a dictatorship where the rich get richer (only if they kiss his feet) and the poor are walking the streets begging for scraps.
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Don't lay all the deficit hystery and resulting slow recovery at the feet of Republicans. President Obama eagerly embraced austerity as well. Who could forget his "we've got to tighten our belts" line in the 2010 SOTU and his vain search for a "Grand Bargain with John Boehner. I won't.
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@Dynamic Bill : Responding to economic extortion and sabotage attempts by the GOP shouldn't be seen as agreeing with austerity. Also Obama was desperately (and I say a bit timidly, but that's another story) trying to bring Republicans into the process. But Mitch was willing to destroy the country in order to "save" it.....for himself.
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@Dynamic Bill
Yes, it's easy to look back ten years, use one out of context line (if it's accurate) to cast a whole situation a particular way, and construct a false equivalency (a recently popular media route to supposed neutrality in judging politicians are aren't doing equivalent things at all).
Yes, it's easy to reduce everything to such a line and then blame that line as representing something so significant that it renders meaningless anything else that happened. Because why not? Memories are short and the larger picture is easy to cast as irrelevant.
In the meantime, ignore the cynical, destructive "lines" of the current president because he hasn't said anything questionable at all.
It's so easy.
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@Dynamic Bill
With all respect, that's false.
Yes, Dems support cutting and eliminating deficits. And yes, contrary to Republicans, they actually keep those promises, once they are given control over DC.
But that's not the only different between the GOP and Dems.
In other words, it's not just that Republicans are hypocrites and Dems not, as Krugman shows here.
On top of that, Democrats ONLY support cutting deficits when the economy is doing well (as measured in low unemployment rate and about +2% annual GDP).
When there's a great recession, they support "deficit spending". That's why Obama signed a $878 billion Stimulus into law, in 2009. And only AFTER the economy recovered did he want to start bringing down the $1.4 trillion deficit inherited from G.W. Bush.
Republicans, on the contrary, oppose "deficit spending" and propose "austerity" instead. "Austerity" means cutting deficits instead of increasing deficit spending DURING an economic crisis, and in order to speed up its recovery.
The GOP imposed this on Obama since 2011. Result? As Krugman remembers here, a recovery that was MUCH slower and MUCH more painful for Main Street than what would have been the case if Obama would have been able to pass the second part of his Stimulus (= another $800 billion in deficit spending) by the end of 2010, as planned.
No single line in a SOTU can ever refute those facts.
And his Grand Bargain was a compromise, allowing for at least SOME additional deficit spending ...
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"...For whatever reason, Democrats haven’t been willing or able to behave that cynically. Republicans, however, have. And if Trump is re-elected, that asymmetric cynicism will be the main reason."
Asymmetry is a good word and should be used more often to describe what is going on in the economy and this country generally. Asymmetry in that corporations have more influence in the writing of tax laws than citizens do. Asymmetry in that corporations pay much less taxes in proportion to their wealth than average American. Asymmetry in spending on military vs. anti-poverty programs. Asymmetry in funding political campaigns and campaign spending on elections in that one politician can spend billions on advertising and another is not allowed on TV because they have not raised enough money. Asymmetry in the coverage of politics by the media in deciding that one politician's or party's lies have the same value as another politician's or party's facts. The list goes on and on. Asymmetry needs to be a talking point for Democrats. It is more descriptive of what is wrong in this country than "economic inequality".
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Hypocrisy, lies, cynicism are all and have always been manifestations of good 'ol politicking - nothing new. Yes, the media (including FB, twitter, etc) have exacerbated the partisanship and have acquired an outsize role in our politics. That much is NOT hard to understand, even though it is not possible to fix or work around.
However, it should be possible to understand why a) the economy (as reflected by the stock market more than by hard economic growth data) is as hot as it is, and b) unemployment is as low as it is. Why is Dr Krugman unable or unwilling to explain? If you believe that the "prosperity" is due to factors other than what Trump and his team have done these past three years, it should be possible to make that argument directly without pointing to "politicking" as if that was a novel idea!
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@anatlanta You "forgot" that Obama saved the US from a 1929-style depression. The result was a recovery, under Obama, that continues to today. This is NOT Trump's doing. Also, the jig-economy guarantees that lots of people work for small salaries, so help the overall economy. In short, Trump and the GOP claim to be the cause of what Obama and the Dems have accomplished.
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@anatlanta
I hope it does not finish with another Great Depression, which really seems to be the only logical outcome.
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@anatlanta Let me explain. The stock market is at record highs because the tax cuts caused corporations to bid up the prices as they conduct stock buy-backs. More money searching for returns on investment from the same number of companies raise the price of these stocks even though the number of widgets produced (productivity) is the same.
If the tax cut money had been used instead for infrastructure improvement we would have had a broader stimulus effect on the economy and we would have improved infrastructure. The stock market a lousy measure of the economy, it is a measure of how much you have to pay for the same claim on the profit (return on investment).
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The unfortunate fact is that, even though they both increase the deficit, it's politically easier to pass tax cuts that disproportionately benefit corporations and the wealthy than it is to enable government spending for public goods like infrastructure. This reflects the fact that people and entities with money, information and networks simply have much more access influence when it comes to shaping politics and policy than the less informed and less engaged (and, yes, less educated) public at large. And it's not just the fault of Republicans or a pandering news media; Obama, too, publicly stated that he was constrained by concerns about the deficit.
Isn't this how things have gone historically? Republicans run up the bills with tax cuts and wars and Democrats have to come in and clean up their mess. Then when Democrats try to spend money on projects they think are important Republicans start screaming fiscal responsibility. Of course, it is hypocrisy. What isn't hypocritical about republicans? Thanks for pointing it out. This needs to be pointed out more often.
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@Jennifer
"Can't Republicans see that it is good government that protects us from the tyranny of those who are out only for themselves?"
They do and that's why they hate it. Democratic (with a small 'd') government. What they want is corporate government (how Mussolini defined his creation).
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@Jennifer Republicans are now spewing untruths on a daily basis.
According to the Daily Kos, wages are barely keeping up with inflation. "Although wages have been increasing, when inflation is factored in, they haven’t increased much. In 2019, real (inflation-adjusted) wages rose 2.9%, but their buying power was reduced by 2.1% inflation."
14
@Jennifer
It needs to be pointed out on the front page, not just back here.
13
Thank you for the thoughtful column. There is one minor viewpoint worth considering. There is a clear strategy of the republicans. Demand fiscal responsibility on spending when democrats are in control of the budget (which undercuts support of the democratic agenda) and spend wildly without restrictions when republicans are in control of the budget (which supports the republican agenda). It is a hypocritical yet highly effective approach. Note that the democrats do not follow such a strategy.
3
So, if the Republicans are hypocritical and don't believe in the things they say they do, what do they actually want? Is it simply power? To what end? To destroy the regulations and guardrails that allow society to function?
It seems as if they are out to prove Reagan right -- that government is the problem. I've noticed that Trump has taken to calling public schools government schools, probably because even he realizes that it is too big a step to demean the public, so for right now should limit himself to demeaning government.
Can't Republicans see that it is good government that protects us from the tyranny of those who are out only for themselves? Can they not see that their efforts to suppress the vote, to hold up bills in the Senate, to refuse to fill judicial vacancies, and to build up a man who admires dictators are the realization of Lincoln's fears that government of the people, by the people, and for the people will perish from this earth?
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@Elizabeth Fuller
Of course they can see it. They don't care. They have the power, and will use it to benefit only those they consider worthy of governmental largess, the rich and the large corporations.
50
@Elizabeth Fuller The republicans just demonstrated themselves as co-conspirators in the cover up of Trumps High Crimes and Misdemeanors. This is nothing less than the triumph of their political will against overwhelming evidence that Trump abused the power of his office not only to hold hostage an ally, the Ukraine, for his own political gain and to prevent any evidence or witnesses to be presented to congress as is required by the Constitution. They crave only power for the sake of power and care not about the oath they took or about the People they supposedly represent.
29
@Elizabeth Fuller
What do republicans in power and with money want? This is the absolutely correct question to ask (what motivates them in other words) and once you understand this, the world will make sense from their POV.
So I will answer it, it is about the economic and power gap psychology, it isn't how much money and power they have, it is how much they have relative to everyone else. When you get this you will understand why they support everything they do.
30
Genuine question -- has the deficit ever been a real political or economic problem in the US in the last 50-60 years? What would need to happen to the deficit to become a political or economic problem? The deficit can be a consequence of excessive tax break for the rich(est) or it can be a consequence of overspending on, say, healthcare. Why is former never and the latter always is a problem in the US? Is this a cultural/ideological thing? The rich deserve tax breaks for their "job creation" whereas one has to be able to afford a decent healthcare?
44
@jjb In answer to your question, no the deficit and debt have not been a real economic problem in the past 60 years. But if you look over the long term, 200 years, debt as percent of GDP has always been reduced during periods of economic prosperity. This is the first time that the debt is increasing, and by a lot, during good economic times. Thus we face for the first time the prospect of going into the next economic downturn with record levels of debt.
26
@jjb What would be needed? The world convening and removing the dollar's status as the global reserve currency. If we suddenly have to pay our debts by earning and using foreign exchange, instead of by printing money and inflating our way out of debt, we would feel the real effects of the Republicans' con game.
The next Bretton Woods conference will not be a happy day for the United States.
12
@dj sims Not even close to correct. Debt increased in all but one year of Obama's term, and I read here that was a prosperous time, which T has inherited.
1
In addition to pointing out that a overheated stock market and low unemployment % does not translate to prosperity for most of the population, the Dems need to point out the hypocrisy of the GOP by using an example that folks can appreciate. How would average, hard working Americans react if presented with a hypothetical family who have maxed out their credit cards and home equity, then live a lavish life style telling everyone how successful they are and how great the economy is for everyone? I think this is a powerful way to express what Trump and the GOP are doing.
131
@HCM You're operating under the impression that anyone in the GOP cares enough to listen to what you're saying.
The GOP is the party of disinformation and hate. The problem is, both of those things are easy to push upon the uneducated masses who also harbor those feelings secretly, even if they don't want to admit it.
4
I live in Greece. The unfunded debt of the US federal government of 2020 remind me of the uncontrolled debt of Greece in the lead-up to the crash in 2008. A basic problem was and is tax collection. The Greek government was notoriously poor at collecting taxes (they're a lot better twelve years later); the US government under the Republicans do not want to collect any taxes.
3
@Bruce
Unfortunately, that's not true.
The GOP doesn't want to collect taxes FROM THE WEALTHIEST.
Their tax cut bill increases taxes for many ordinary citizens, and for those who got a (very small, compared to what the wealthiest got) tax cut, the bill includes a passage that makes those expire after a couple of years, contrary to the massive tax cuts for the wealthiest (= people like Trump and his buddies).
Also, when the tax cuts for small businesses and families with children in college that were included in the 2009 Stimulus bill (which consisted for 50% of well-designed subsidies, and for 50% of well-designed tax cuts for the middle class and small businesses (= the biggest job creators)), expired, under Obama, it's the GOP, not Democrats, who refused to extend them for another period ...
Conclusion: NEVER forget that the GOP is the party of fake news - as this op-ed so eloquently illustrates too.
5
Big difference expanding the federal deficit either by a tax cut or government spending. The former increases the private sector share of the economy while the latter increases the government's share. Let's examine how socialism has done in the past not only in overall economic pie but also totalitarianism versus democracy and income inequality so we can learn from history. Soviet Union, Red China, Eastern European bloc particularly apples to apples East Germany versus West (capitalist countries never had to build a wall to keep their people in), similarly North Korea versus South, Greece, Cuba, Bolivia and Venezuela with many countries in Europe attempting to move away from their socialist failings including France, Sweden and England. And I know what your rebuttal is going to be: Wait for it, wait for it ---- the tiny tourist destination of Denmark.
2
@Blair
Funny how failing France has a life expectancy ~3.5 years greater than the US. A life year is typically valued at 250-500K, so effectively they are getting an extra million in value per person. Would you pay an extra 10% in taxes for an additional 3 years of life? There's no right or wrong answer to that question though I'm pretty confident that the vast majority of folks 40+ would say yes. I certainly would. You can look all across Europe and Asia and life expectancy is typically 5-10 years greater. Time is $, my friend, and a good, long life really is priceless.
2
@Blair There are ways for the government to put money ("government spending") into the hands of private citizens that will actually spend it, which will fuel the private sector economy. Tax cuts to people with lots of money already on hand isn't it. And this latest version of tax cuts to businesses shows that in our current corporate environment tax cuts fail to incentivize businesses to invest in ways that promote spending and economic activity, rather they give bonuses to millionaires and buy back their stock to play games with its valuation.
@HR Millionaires don't sit on their money. They invest in productive assets. Which do you think is a more efficient allocation of resources: that or central planning?
Mr. Krugman should really give up on attempting to "talk away" one of the best economies, as well as stock performances in our history during the profoundly economically successful Trump administration--this is simply a fact. Following Trump's election Mr. Krugman could not have been more wrong with his anti-Trump rhetoric, so now he's went from being blatantly/embarrassingly wrong to back-handed criticisms, such as the nonsense in this article. Here is the beyond wrong nonsensical prediction from "Dr Krugman" following Trumps election, astonishingly wrong! "So we are very probably looking at a global recession, with no end in sight. I suppose we could get lucky somehow. But on economics, as on everything else, a terrible thing has just happened." Simply WOW.
3
@Chris Wite
The thing is, the real results of economic policy are not usually evident immediately. Giant tax cuts for the wealthy may bring about a temporary boom, but the effect of having no money to spend on infrastructure and the health, education, and welfare of citizens can be catastrophic in the long run. We need to take a longer view if we are to survive.
4
@Chris Wite
Chris, one of the other things Dr. Krugman says (not in this op-ed) is that if you found someone who did not know there was an election in 2016 and showed them the progress of the economy, whether it is stock market, unemployment, wage growth, job growth, that they could not find any meaningful difference pre-2017 or post 2017.
Where they would find a difference is in the deficit, which has increased severely under Trump/Republican control. As it did under Reagan/Bush and Bush 2.
I too can provide the **illusion** of prosperity if I max out my credit cards and HELOC without plans to pay them back. Like we saw in 2007.
1
@Chris Wite
Ask yourself if infrastructure has benefitted from this great economy Trump says he single handedly delivered and Mister "I have not passed a significant bill in 3 years " McConnell.
You have no answer Mr. Wite. None at all. Because it does not exist. What say you? Who is benefitting who?
How do you break this cycle of hypocrisy?
First, Americans need to recognize that the Republican leadership and its Evangelical following has declared war on America's Secular values.
Each individual Democratic tax payer could - just as a hypothesis - radically reduce spending. For example, deferring any larger purchases and refusing to partake in an economy of inequality over and above necessities would be very painful but could break the cycle.
It worked at least once: Christianity did it to Rome.
By now, Democrats (and some Republicans) should be aware that to save America, 'war'-like responses and strategies are necessary.
Vote with your money! Pay back your debts!
On the other hand, give it another 3 months, and the house of cards could implode on its own. All it takes is a catalyst (2019-nCoV, perhaps?).
A.J. Deus
Social Economics of Poverty and Religious Terrorism
2
I am a big Krugman fan and totally agree with this analysis, except it’s conclusion, which is to take refuge in name calling: the Republicans are “cynical”, i.e. bad. Sounds like a whining younger sibling: Tommy hit me. An equally valid description is that the Democrats have been playing checkers while the Republicans have been playing chess, or perhaps cricket vs. rugby. The Republicans will do whatever it takes to win power and deliver the spoils to their enablers. You can call that cynicism, hardball, determination, politics, strategery or any other name you want, but I know what the opposite of that is, and I am pretty tired of it: it’s called losing.
@Stan Letovsky
Cultivating cynicism means cultivating the idea that all human beings, especially your opponents, are bad people, so you better give up any hope of truly moral behavior because it simply doesn't exist.
That is EXACTLY what Fox News and the GOP have been doing for two decades now.
The opposite of cynicism is moral integrity.
In a democracy, the ONLY way to have a government for the people, is to have a government by the people. That requires ordinary citizens to engage. And they will only engage out of moral integrity, not out of cynicism - unless they are already so cynical that they gave up believing in the government altogether, because THEN they will engage again, but now to vote for cynical politicians, whose rhetoric constantly cultivates the idea that indeed, the government cannot possibly be a force for the good or have any moral integrity.
So yes, for the GOP cynicism is a strategy. But that doesn't miraculously turn into non-cynicism ...
The economy will soon take a hit when the coronavirus becomes a pandemic. The tourism business will see serious declines followed by trade problems with China.
Americans' fears of this illness could destroy consumer confidence while citizens hunker down.
This incompetent administration needs to get busy dealing with this possibility. Many of Trump's supporters can be at risk for a variety of reasons but may never leave his side at their peril.
Mr Krugman highlights perhaps the most important issue facing the democratic party.
How to communicate persuasively to the middle class Americans who vote. Right now the party is incapable of doing so.
So long as the democratic positions on expanding social welfare programs, creating a wealth tax, supporting reparations, ignoring the reality of illegal immigration and the like remain their mainstream message to the electorate, we fail. Those messages do not resonate with the white working and middle class who do vote.
Yes, the GOP politicians are hypocritical in their approach to fiscal discipline and just about anything to do with Donald Trump. They are spineless and morally repugnant.
But, the majority of the electorate that votes reliably does not resonate with the increasingly socialist postures taken by the democratic politicians. It's useful to note that President Obama cautioned the party not to push the socialist agenda of some of the freshman class and several of the candidates.
President Obama kept this country from going into another Great Depression. His popularity and his wisdom in domestic affairs saved the day for us all. His counsel should matter.
Unless the democratic party is able to reconnect with middle class and working class white voters, we will have republicans in charge.
1
It is pretty much GOP politics as usual. It is willing to sabotage America to gets its way and then blame the Dems. Then, the American media and the electorate buy the GOP's narrative. We just saw the same lies with the removal trial in the Senate. Pure insanity. How can anyone trust the GOP?
2
Can somebody school me on what helicopter money policy is? I am told that is what Trump and company's monetary policy goal is to keep this Potemkin village humming. Will there ever be another recession?
Steve Rattner did an excellent take down of the 'great economy' myth the media perpetuates on Joe Scarborough's Morning Joe show yesterday. I wish the press would study the data and report on it.
Same as it always has been, with a brief respite during FDRs presidency. One new aircraft carrier, the Ford, is costing the taxpayers $13 billion, that on top of another $5 billion that has gone into R&D. That'd buy a lot of health care for the uncovered, especially in a sane delivery system. That is, if the uncovered weren't people who don't matter to the GOP. Those people need to vote, as if their lives depend on it. Because they do. Oh, and if you appreciate your Medicare, and your Social Security, you need to vote too. Because both are in the GOP crosshairs. Wake up America.
1
A CNN poll this week showed roughly 70 percent of Americans say their economic situation has improved in the past year.
Roughly that number credit President Trump's policies, and give him high marks for handling the economy.
When those numbers reach 99.9 percent, the hold-outs will be Paul Krugman and his befuddled acolytes, who keep praying for like those pilgrims waiting for comet Hale-Bopp for the economy to crash, with the attendant misery for millions, so their hero will be proven right.
How is that election night 2016 prediction of a cratered stock market and a recession that "NEVER" ends working out for you, Mr. Krugman?
I'm sure you were smart enough to cynically ride Trump's economy to an increase of your own personal wealth.
You should let us know if you ever cash out of the market. Then we can take your dire forecasts seriously. They still might not be right, but they'd be less hypocritical.
2
My liberal friends who are economists and finance people have told me for years that government deficits are different from personal debt and that it’s just not a bad thing. And so have Democrat apologists. But let a Republican increase deficits with the spectacular results we are seeing (3.5% unemployment, 3.5% mortgage rates; $2 gas, low natural gas prices, growing 401Ks) in our economy, and now the deficits are terrible. Sounds like sour grapes hypocrisy.
2
Republican deficit hypocrisy also puts in to stark relief the insanity of the Tea Party outrage against a Democratic president attempting to stave off a second Great Depression. These same people don't even register any concern about the recent $1 trillion deficit to be rolled into the national debt. I think that capacity for cognitive dissonance may be integral to their continued support for president trump. Indeed, it may be essential.
1
The tax cut has mostly gone into chasing assets.
This is just one more instance of political dysfunction in which it is plain for all to see that THE PEOPLE ARE THE PROBLEM, not the politicians. The politicians (of a certain political persuasion, of course) are happy to exploit voters' ignorance and inability to correctly ascertain cause and effect, but there would be nothing to exploit if the average person was well informed and accustomed to seeing through acts of political manipulation.
That public gullibility is at the root of the depressingly successful political ploy outlined in this column ought to be as obvious as the color of the sky, yet even the most brutally honest writer at The New York Times will not glance for even a second at that unpleasant but vital truth.
My neighbor just bought a new fancy car, went to a luxury vacation and living like no tomorrow. I later found out, he lives in all borrowed money.
Everyone knows massive new spending stimulates job growth. No surprise there. But borrowing must be repaid.
But there’s more hanky-pinky going on than the $1.8 billion tax windfall to corporations and the wealthy. Pay close attention to the Federal Reserve.
It has injected $400 billion (yes,*billion*) into the economy since September 2019–in just 4 months.
The current “strength” of the US economy is, arguably, entirely artificial and unsustainable.
We are living large by driving up our national "VISA card" balances to the tune of trillions of $$.
1
@J Schlosser Agreed, it is called buying votes....
Paul,
1) We don't know the long term effect of massive deficits yet because long term has not yet arrived.
2) We do know that Obama ramped up deficit spending from $200 Billion in 2007 to $1.3 Trillion in 2009, while simultaneously purchasing worthless mortgage "assets" onto the Fed's "books", which, is also deficit spending (printing money to buy worthless assets). Those "assets" eventually totaled $5 Trillion dollars Paul.
3) We also know that all that deficit spending did have a positive impact on the stock market, and, eventually, the economy.
What we do not, yet, know is what the long term impact of all the foolish, massive deficit spending will have on the United States because, Paul, nobody knows what that will be.
However, if HISTORY is any guide, the outcome will be a collapsed currency and widespread poverty with large inflation. This is not my imagination, this is documented history AND it is what is still taught in Economics classes all over the USA. My daughter just took an exam with these questions, with answers that were marked correct.
So, yes, you have been a rabid dog supporter of huge deficits for some time.
But, you, and I, still don't know how all that crazy spending will turn out in the long term.
In the short term, because we are still the world's reserve currency, we can be a successful Zimbabwe.
But, once we are not the world's reserve currency, I think we will just be Zimbabwe.
2
Other than PK, news coverage of economic and fiscal policy by the mainstream media is pathetic. Reporters who specialized in markets, the Fed and such arcane matters as stimulus policies have largely disappeared from respected newspapers. TV reporters in the field get, at most, 30 seconds to explain seriously complex but vital economic subjects. Social media from the right, meanwhile, has weaponized economic numbers to fit an extremist agenda that whatever Trump does is brilliant, while Democrats ought to be in jail.
Only two (and very inadequate) economic indicators are regularly reported: stock market swings and monthly unemployment numbers.
No wonder Republicans get away with painting themselves as fiscally responsible. They are exactly the opposite, but you'd never know it from media coverage.
1
The only governing principle the GOP has is to retain power. Everything else is subordinate to that prime directive. Viewed through that lens, everything they do starts to make more sense. Any hint of fiscal sobriety died when Ike left the Whitehouse, except when Democrats are in power. Morality and character are essential, unless they're inconvenient. "Truth" and "facts" are a waste of energy when you can simply repeat a lie often enough that it becomes the narrative. Hard to pin down these shape shifters.
1
Recently Fox News had a piece praising low tax Florida and deriding high tax California. Wikipedia says that GDP person in California is $59,000 while Florida’s is $38,000. What has Fox News learned from Kansas’ failed experiment and hasn’t learned from the available GDP stats? Fox News is part of the Repub scam.
1
Thank Obama and the Fed for giving Trump an easy path to brag about. When does the economy start reducing our debt since Trump tells us what a great job he did to save all mankind? You pay down debt in strong economies, Trump. More lies.
And besides Mr. Krugman, where are all the deficit scolds in the press now? Oh, I know: making us fret about how Bernie Sanders, but particularly Elizabeth Warren will pay for there "socialist" programs.
If we cater to fascism, we will all be in obedience or silenced someday. We have to fight the hypocrisy and cynicism and outright lies that lead to it - but is it too late?
The democrats need to wake up to the fact that we are in a fight for the survival of our democracy and should stop bringing a knife to the republican's gun fight.
1
Yup, we’ve seen the movie before. More than once.
Anybody who pays attention to politics knows that if Republicans lose in the upcoming election they will become deficit hawks. In fact, they will be apoplectic about deficits and the debt.
And, there will be many Very Serious People, who are mute now, who will warn us that ruin is just around the corner unless taxes are cut and the social safety net is slashed.
To call this farce fiscal hypocrisy is an understatement.
1
A Cynicism Gap!
The Republicans have been working on their cynicism since the 1980s. The Democrats, as a party, aren't cynical because they always think, incorrectly, that this time the fix is in.
The economy is just about average. The working class is working two minimum wage jobs and the middle class is losing it's health insurance. Having two minimum wage jobs and no health insurance is not going to make anyone wealthy. Growing by 2% or less, the economy is not "hot" for the poor and the wealthy are not bringing back their money to the United States. The economic disparity between the wealthy and everyone else through Trumpy's ludicrous ignorance and the Congressional Republicans' willful greed has contributed to a deconstruction of governance, the kingly executive and the abrogation of congressional powers. Let's not deceive ourselves, the continuing Separation of Children from their parents, the Withholding of Insurance benefits from citizens who have paid for coverage, the superstitious belief in Conspiracy Theories and the promulgation of Lies are all EVIL. Trumpy has ravaged the lives of the working and middle classes and the plan is to continue to rub them into the ground.
1
Never forget republicans believe in socialism for the rich and capitalism for everyone else. Keep this in mind and their actions are very predictable.
IMHO, the US economy is driven by consumer spending, and that in turn reflects a) availability of retail credit, and b) consumer confidence about the future. The belt tightening that happened post 2008 created space for individuals and families to take on more debt, and that more than anything 45 did improved the availability of retail credit. And, as for consumer confidence, that is high because of the "wealth illusion" created by stock market indices. More than any other President, Trump has used all the levers at his disposal to help financial market traders jack up the indices. I do not have hard data, but the so called scheme of "using tax cut for stock buybacks" had only a limited impact on the prices of stocks that make up the DJIA, S&P and Nasdaq. Because the financial services industry has created such complicated instruments, it is easy for them to fool retail consumers into doing (buying/selling) what the industry wants them to do. A handful of traders on the financial markets are able to create the "wealth illusion", provided there is no oversight by the Feds (CFPB).
As for unemployment, the perception of prosperity helps businesses add jobs, but what we have seen since Trump took office is nothing extraordinary. It is merely a tepid continuation of what was happening during Obama's second term. There is an interesting chart at https://en.wikipedia.org/wiki/Jobs_created_during_U.S._presidential_terms#Job_creation_by_term which helps put things in perspective.
Do the math. Since Reagan's tax cuts the federal government has accumulated $22 trillion of debt (foregone tax revenues). Republicans borrow; Democrats scrimp. Over that time period the top one percent have increased their net worth by about $22 trillion. Hmmm. In short American taxpayers have been conned into borrowing money in order to enrich the tip top of the economic curve. All that debt is taxes the wealthy didn't pay. Did it help the economy? Sure, a bit. It definitely helped the stock market as the rich needed to put that money somewhere after they bought their yachts and summer homes. Fortunately our economy is so huge (and interest rates near zero) that the carrying costs of $22 trillion haven't crippled us. Unfortunately, nearly everyone has been left out. Inflation adjusted real wages have barely budged since the seventies. Net worth of ordinary people is pathetic. At some point average Americans will awaken from their dream state and exact just vengeance--or not. We may be trapped in a Steve Martin skit.
1
Another fantastic jobs report today. Unemployment remains at historic lows and the number of jobs created busted all expectations. Wages -- for everyone -- went up much more than inflation, the report says. CNN and Gallup polls show record confidence in the economy and stock markets -- fueling retirement accounts of millions of Americans -- are at record highs.
What is that tinny, cranky little voice I hear? Sounds like an echo off that election night prediction of total worldwide economic ruin, and an economy that would "never" recover.
1
@Philboyd
That's really not the point. Do you remember that after Superstorm Sandy, there were several US Senators who didn't want to provide Federal aid unless there were budget offsets to compensate for it? Now, all of a sudden, boom, deficits don't matter, here's another $1T tax cut, folks, enjoy!
One of the many things I don't understand about economics is inflation. We now have full employment (less than 5% unemployment) which is putting upward pressure on wages. Because of the various trade wars and tariffs, the costs of materials is rising as well. So, with more expensive labor and materials, why is there not greater, or any, inflation?
@brooklyn
Paul explained it. Inflation, outside of inflation causes by price shocks or devaluation of a currency, is caused usually by rising wages chasing too few goods (demand outstripping supply). The reason we don't see inflation is simple, and that is wages are not under pressure even with low unemployment, it is something that Trump nation cannot see. Trumps tax cut, in traditional economic theory, should have generated inflation, 'priming the pump' in good times generally causes inflation with too much money chasing too many goods. The problem is the Trump tax cut stimulated basically only one thing, the stock market. Wage growth generally follows GDP growth, and that has been modest (it is still 2%), but the problem is Trump's tax cuts went to corporations and the well off, and that money was used to buy back stock and increase dividends, and that kind of stimulous affects only a small group of people. More importantly, those same corporations getting such a huge break are giving small raises, in large part because Wall Street hates seeing wage increases, so by giving small raises, the stock price soars. Not to mention that thanks to outsourcing jobs to third world country and the abuse of H1B and other visas, companies have suppressed wages even in well paying industries.
As a result, most workers aren't seeing the extra dollars that drive inflation, and the well off who do don't consume much.
"For whatever reason, Democrats haven’t been willing or able to behave that cynically."
In "Rules for Radicals", Saul Alinsky already explained that reason: the goal of the left is to increase material and non-material wealth for ALL citizens.
In a democracy, that can only happen when all citizens engage - inform themselves about who does what in DC, organize, and vote.
The only way for citizens to do so, is to cultivate a deep belief in their own power to change things for the better.
As soon as they start imagining that no matter what they do, the government will always be corrupt and work for the wealthiest only, they disengage - de facto leaving it up to a corrupt minority to take over the government.
That's why Trump's attack on Biden has been so effective: he didn't have to prove anything about Biden (he didn't even ask president Zelinsky to do so), all that he needed was launching rumors, knowing that IF people see that his son was on the board of a corrupt foreign company, he'll have achieved his goal: destroying their hope that Biden can be "trusted" as someone who wants to work "for the people" instead of for himself.
The right never has this kind of problem, quite on the contrary: the more they cultivate cynicism, the more their base will be fired up to vote, because those citizens already gave up the idea that the government can be a force for the good decades ago, and will tend to vote for those who "have the guts to say it like it is" ... .
3
Part 2
And there's another way in which cynicism is the Achilles heel of the left: the only way to achieve real, radical, lasting, non-violent democratic legislative change, is to do so step by step, election after election, compromise after compromise.
Cynicism claims, however, that - as Saul Alinsky so eloquently remembered - "compromise" is a dirty word ... .
That's why David Brooks was right to see at least ONE similarity between Trump and Bernie Sanders: Bernie's main message is that you CAN achieve radical change overnight, all that is needed is for a president to really want it.
By constantly hammering down this message, he's certainly firing up about one third of the left, because it's always nice to remember what the finish line actually looks like.
It's also what paralyzed the Obama administration already two years after he became president though, as people did NOT see radical change overnight, only compromising with Congress, and concluded, as the Huffington Post already wrote less than 300 days after he entered the WH, that Obama "isn't that much into you".
By personalizing legislative progress made compromise after compromise, and suggesting that doing so indicates a "lack of character" and even worse, being "corrupted by power", this kind of message systematically cultivates the "political illiteracy" (again Alinsky .. ) of the left, and de facto makes it impotent to achieve ANY kind of change, as once again, people stay home instead of engaging ...
Dead on,
Our economy is on a sugar high, with low interest rates, and a lopsided tax give away to the wealthy. Keep in mind banks loan and give the best rates to those who don't need it, (ability to pay back).
This is Trickle Down at its finest, were the 2% gorge themselves on the horns of plenty and the rest of use think we are doing good because we can chew on scraps.
These policies are meant to get King Rump past 2020, then his policies will almost exclusively be designed to ensure he and his family can keep and ingratiate themselves at our expense.
In the meantime our education, infrastructure, environmental and health care, policies languish because of a lack of leadership.
One part of me hopes Rump wins so the economy implodes on his watch, the more rational side wants an adult in the room when that happens. But it will happen.
Please Vote to end the madness at 1600 PA Ave.
1
I am very tired of people saying the US economy is strong. As nearly as I can tell, it may be strong for the top 1-10%, but leaves 90% of the people either at the same level of income or worse off. The unemployment statistics, for example, count work one day a week as a job. The gig economy provides work with some income but no benefits. Wages have only increased modestly, spread unevenly throughout jobs, and increases in wages are largely nullified by increases in prices driven by tariffs and inflation. Jobs counted may be inflated by temporary work and part time work in low paid jobs. The economy is not "strong" for most working people. As much as the 10% are doing fairly well, it seems likely the economy is poised for a fall. I hope it comes soon so we can vote Republicans out of office.
16
@Eero
Agree totally, and the Times and other business writers are guilty as hell. When you watch CNBC, for example, they crow about "200,000 new jobs created" or "The unemployment rate is 3.x%", but no one is looking at the quality of the jobs or pay. For the stock market focused places like CNBC, when they talk about pay increases they make it sound like a 2% raise is a big deal (you can bet stock analysts hear 2% and say "what, so much? Should be zero")
A real booming economy is one where everyone shares, and it hasn't happened, despite what the MAGA idiots think. The problem is this boom has been focused pretty much in one sector, stock prices, and that helps primarily the top .5%. Companies in the last year actually slashed investment in so called capital formation, all the while using the tax cut to buy back stock and increase dividends. Yes, people with 401ks did well, but the problem with that is it doesn't help the current economy (and those 401ks can disappear like vapor, to those chortling, under Bush II the Dow, now at almost 30k, hit 6500).
126
@music observer Actually someone is looking at the quality of jobs: https://www.jobqualityindex.com/
@music observer "When you watch CNBC, for example, they crow about "200,000 new jobs created" or "The unemployment rate is 3.x%", but no one is looking at the quality of the jobs or pay." ... except when it was Obama in office... this alll you heard during the 2016 campaign from Republicans. CNBC, Faux News and the like regarding the 'bad economy'... but today, it's not an issues... Hypocrisy....
What should give everybody pause is why are interest rates so low if the economy is so great?
Now Republicans are quietly pushing cuts to Social Security, Medicare and Medicaid hoping to wait til after the election to push for it. But they tout cuts in FS pretending to care about deficits.
To Republicans it is not about deficits only gutting the safety net but about socking it to those they consider undeserving or without political power, but even they acknowledge that cutting some benefits will hurt them politically. Cutting taxes, swelling the deficit is however perfectly OK when it gives a needed sugar high and bolstes executive profits at the same time giving the underclass a false sense of security
3
The U.S.'s debt to GDP ratio is a little more than have Japan's. Japan survives with very modern infrastructure. We are far from catastrophe if Japan is a good example. Nobody yet has explained why not.
1
@Michael Cohen
Japan first of all has been in a near recession or recession mode for a long time, when was the last time you heard "Japan is going to take over the world economy?". Secondly, unlike our government, the Japanese government has always invested in infrastructure, for example, unlike the US, Japan saw having affordable broadband access as important to all its citizens, in Japan most home and apartments have access to very high speed broadband at a modest price, in the US the same service is expensive.
The real answer is look at what that debt is financing. In Japan they used the money to modernize infrastructure, in the US the debt was caused by slashing taxes on the well off and corporations, while spending almost 800 billion a year on defense. The US, despite Trumps claims of getting others to pay for their defense, spends more than the rest of the world combined, including China and Russia, on defense, and defense spending does not make the economy boom.
The only reason the debt hasn't hurt us, with high interest rates, is that people are willing to buy our debt, especially Saudi Arabia and China, who hold trillions of our debt. The US is still seen as a safe harbor (would you buy Chinese bonds? I wouldn't), so we don't have to raise interest rates on our debt to compete.
The most important enemy of the people, in a democracy, is cynicism.
A democracy only works when all citizens engage. Cynicism makes them give up on the very idea that the government CAN be a tremendous force for the good, putting the country first.
That means that all that it takes for a small minority of corrupt, wealthy citizens, to control the government and use it for their own enrichment alone, is for them to be able massively cultivate cynicism.
Doing so has always been the first objective of Fox News. Over the last 2 decades, Republicans gradually took over more and more fake news in their own rhetoric, until they noticed that that might no longer be enough, and hired a reality tv actor who adores watching tv and tweeting, instead of still having the guts to lie so blatantly in front of tv cameras 24/7 themselves.
Obviously, with a tweeter-in-chief, the president doesn't have the time anymore to engage in real debates and negotiations with Congress, so once he gave himself and his buddies a massive and unpaid for tax cut, he didn't pass any major piece of legislation (= 3 out of the 4 years of his first term).
No wall, no repeal and replace Obamacare - even though Trump didn't need a single non-Republican vote to get this done.
No bipartisan comprehensive immigration reform - even though Obama already got such a bill through the Senate in 2013 (tripling the number of BP agents at the southern border) and Dems in 2017 accepted to add FULL funding of the wall.
3
@Ana Luisa I'm not sure that a Fox network in Canada would be able to renew their broadcasting licence.
Anyway you have my sincere sympathy with regard to Trump and his pathetic band of little men. Unfortunately I don't think the truth will dawn on the cult until it is too late for them. As for the rest make sure in November that it is not too late.
Begining with Reagan every Republican administration has increased deficits to boost the economy and reward the wealthy. Reagan's deficits, to be sure, were somewhat more modest. They are not about to let the Democrats pursue a similar policy.
1
Is anyone else concerned that Trump views the US economy the same way he ran Trump Inc ? Borrow all you can to pay for the glitz (or lock in the favor of corporations and the top earners ) and worry about repayment (if you can)) later. Remember that during the 2016 campaign the “king” of debt mused that America might not have to repay it’s debt at full value. I have a concern about deficits but am not a hawk. Just thinking about the infrastructure funding Trump’s $ 400B / year deficit hole could have provided.
9
The Congressional Budget Office projects trillion-dollar budget deficits for the foreseeable future: https://www.cbo.gov/publication/56073
These deficits are unprecedented and unsustainable.
During periods of full employment, the government should be running surpluses, not record high deficits.
The solution involves major tax increases on the wealthy and corporations, such as those that Bloomberg is proposing to reverse the Trump Tax Cuts.
https://www.nytimes.com/2020/02/06/opinion/mike-bloomberg-tax-2020.html
Otherwise, the entire economic system will collapse, maybe not this year, but soon.
9
The mistake many people make is to think that the stock market is a true indicator of the country's economic health. It isn't.
The market has risen recently because it has been propped up by companies buying their own stock back with the windfall they got from Trump's corporate tax cuts instead of investing that money back into their companies. And the hedge funds have been covering their short trading to avoid large losses. The net is that the recent prosperity in the market is an artificial bubble, and according to traditional market dynamics, is due to implode before much longer. But it's certain that Trump and Mnuchin will do whatever they can to keep the run going through the election. After that, watch out.
The truth is that Trump has reshaped our economy to drive inequality even higher. It is designed to help the wealthy get wealthier, and to suppress the "takers" (i.e., the middle and lower classes) as much as possible. We are in the midst of the most massive transfer of wealth to the upper class in history. We cannot long survive as a viable country like that.
The next President (who must not be Trump) needs to repeal Trump's tax cuts and institute rational economic politics if we are to survive. Otherwise, we will just end up further entrenched in Trump's pockets, and those of his crony capitalist brethren.
13
Dr. Krugman: The Republicans get in office, cut taxes, stimulate the economy, win re-election, and then people overextend, financiers do the same, and we have a meltdown. Then, the public has had enough, and the Democrats get in.
Obama arrived with two wars and an economy in shambles. He didn't fix it in 100 days or even a thousand. Lost Congress, and only the fact that the ACA and the weakened stimulus got through and kept things going.
But in Trump/Pence land, this wasn't fast enough. We are Americans, after all, and we have to have everything NOW. So, the Republicans once again took over, deficits are suddenly OK (Cheney said that, too), the economy is humming along, Trump will be re-elected, then climate change or new virus, or Iran or NK will cause a meltdown (I don't know what Wall Street is doing now that is going to worsen our lives, but I'm sure there is something.)
Then on a cold day in January 2025, a Democrat (and it won't be Bernie, Joe, or several others I can think of) is inaugurated with the economy in shambles, the world in an uproar (unless the coronavirus type scenario occurs, in which case the world will be rather quiet), has to try to fix a mess that needs 10 years to fix, but will only have a few months, before she is blamed for the whole thing.
I could be wrong, but this seems like a broken record (sorry for the Biden analogy.)
11
To be clear, the Republicans have been the deficit run-up party over the post WWII period since Ike. Moreover, they've specialized in recessions, having presided over 89% of the 111 months our economy struggled in recession spanning this same time-frame. A downturn is coming .. they've always delivered. It remains to be seen whether the resulting pocketbook issues overcome fealty to Trumpism.
4
Yes, many people become wrapped up with how well the economy and stock market is doing. I could look great too if I had added a trillion plus dollars in tax cuts to the deficit in claiming my genius was responsible. Personally, I am enjoying the increases in my portfolio but I do realize there will be a day of reckoning regarding this "sugar" economic high as we service an increasing deficit. Between the cost of the Iraq/Afghanistan wars (Bush) and then... basically printing money to finance & avert a 2008 depression (Obama), we as a nation have not experienced any "serious" economic austerity. Those two events add 20 plus trillion deficit dollars to the budget right there. It is assured once the Republicans are out of power, they will be the first to point out the budget deficit that they have mostly created and certainly added to with tax cuts, as Democrats hopefully attempt to clean this hamstring mess up. We will see!
4
It’s good to see this finally laid out in detail. Krugman’s writing is always wonderfully clear. My only quibble is that because of the emphasis on the present and the future, the enormity of what the Republicans did (and the continuing press complicity) is still understated.
The Republican Party knowingly did everything possible to prevent recovery from the worst economic collapse since the depression. In fact, going back to the beginning, if it had been up to them, Bush’s bank bailout would have failed, and we would have had a full-scale depression. As it was they did their best to prevent recovery, causing real hardship to many millions of people over many years. Except for very few articles such as this one, that crime remains unacknowledged in the press.
On a similar subject, we hear everyday about all the job losses in manufacturing perpetrated by the evil Chinese, because Clinton let them into the WTO. 100% of those job losses occurred under Bush, when currency manipulation was perfectly addressable within WTO rules. We were just too busy with the war.
Overall it is fair to say that the Republican Party was responsible for more joblessness and real pain to the American population than anything those evil Chinese even dreamed of doing.
11
And let us not forget deregulation. Is selling out the environment a factor in the so-called good economy? Trump certainly claims that it is.
I don't think we can repeat often enough -- if the Republican plan for the economy is succeeding, it is because they are willfully ignoring dire warnings from the scientific community. Even Saint Mitt seems to be on board -- while Trump reveals plans to industrialize national monument land in Utah, Romney says he is behind the Republican handling of the economy.
4
Are we now at the point where the GOP fears that a Democratic administration would, rather than restock the treasury as in the past, it would stall their effort to create an autocracy?
The economy is strong, except in the Rust Belt manufacturing sector, which again lost jobs (12.000) in the last month. Like the last election, this one will turn on white Rust Belt workers. Michael Moore was dead right in predicting that Trump would win those workers in 2016, once Goldman Hillary was nominated and all the ones who had supported Sanders switched to Trump as the closest to Sanders of the two nominees (a con job the workers bought out of desperation). And Michael Moore is dead right again this year that Sanders is the only one who can win the Rust Belt back. There's no mystery to why Sanders crushed Trump in the Rust Belt exit polls in 2016, and would have crushed him in th election as a result of sweeping the Rust Belt. Sanders is the one truly on the workers' side, and they know it. Anyone who thinks Bloomberg or Pete can win those workers back from Trump is simply nuts. "Moderate" neoliberals want to emphasize the suburban vote, and claim that that vote will go for Trump if Sanders is the nominee. (Will suburban women really vote for The Handmaid's Tale in Trump's post-RBG court system? Really? Then they and their daughters will deserve what they get.) Like Moore, I think the real hinge off the election is in the Rust Belt instead. As our Dear Leader is found of saying, "We'll just have to see."
1
Economists are surprised that there is not more inflation with the $1 trillion deficit and low unemployment.
In fact there is significant inflation in the assets that rich people buy like stocks and real estate. Poor and middle class folks don't have much more disposable income as they still are nowhere near being able to afford their health care co-pays and deductibles, school loans and credit card fees, things the rich don't need to worry about.
8
@Martin Exactly, it's why no one can afford a house in any vaguely desirable area...
Why is business investment down? This may be a partial explanation. Trump cut the business tax rate from 35% to 21%. So now, if businesses invest in equipment, they only get a tax write-off of 21% for those purchases, instead of a 35% write-off under the old tax rate. This is a disincentive to invest. Why not keep that money, or buyback shares instead, if the tax benefit of investment is significantly reduced?
Few understand these subtleties of our unfair tax code. Middle class Americans writing off mortgage interest save only 10% or 12% of that interest on their tax bill, while the wealthy save 30% to 37% of their mortgage interest in their taxes. The more you make, the better the tax breaks! This is what happens when money runs the country.
2
Paul, I am a fan but have a question about this column. If anyone reading this has the answer, I would appreciate it. It’s sincere. You spend many columns talking about how tax cuts don’t result in economic growth, but in this column you say they did. Which is it?
@E Skubish: “Economic Product” is measured solely by exchange of money. There is no adjustment for the actual utility of the cause of money exchange.
There is a disconnect between spending and revenue, and it was done on purpose.
The GOP final objective is to present Congress and the American people with a dilemma, cut SS or cut Medicare. Other options like cutting military expenses or increasing taxes reasonably to the top 10 % not on the agenda.
But Trump and the GOP have found a way to increase taxes for the Middle Class, and is tariffs. A 30 % tariff or import tax on the 2.6 trillion of imports would generate 780 billions of tax revenue without touching the very rich. For the rest of us, the debt. Once it reaches 30 trillion, which is coming soon every family of five in America, those making less than 50,000 a year will have a debt in excess of 400 thousand.
6
The formula for political success is clear and we can blame it on the voters.Cut taxes and increase spending without regard for the future.We,the voters, are only concerned with now and will blame whomever has to fix it in the future for the pain that fix will exact from us.
3
I wonder how great the economy would be without all of Trump's trade wars and tariffs? The only time that a republican is fiscally responsible is when there is a democrat in the White House.
18
The Russo-publicans quite apparently have not been acting in the national interest for some time now. They made citizens suffer during the Great Recession so they could deny any political benefits to the Democrats and then, once they are in power, they pass tax cuts that benefit their wealthy donors. The Russo-publican Propaganda Machine has become so powerful that we now have two different and separate narrative streams in our national political discourse and Dr. Krugman's points will never make it into one of those, except perhaps to be ridiculed. Maybe Bloomberg can buy enough air time to pierce that bubble for some people, or at least motivate enough non-engaged citizens to get out and vote.
Our nation is in a state of great peril.
16
This column and the one that David Brooks wrote pretty much sums it up. Republicans adopted democratic Keynesian economics and stole the show. Game, set, match. Democrats should congratulate them, take back the issue and promise to share the wealth better. Be optimistic, let Trumps weird personality do the rest. They need a shot of a Hubert Humphrey Happy Warrior candidate. A great smile and lots of love and optimism goes a long way. Who wants doom and gloom all the time?
3
@Kenneth Hubert Humphrey LOST bigly.
@Kenneth
They didn’t steal Keynesian economics. Keynes would never advocate for a tax cut when the GOP passed one.
If Trump is re-elected, tighten your safety harness. The next recession will be a whopper, and with the choices Trump made to lubricate the economy and facilitate a second term, we have few options for combatting it’s effects. With the bozo in the WH and his clown posse of “economists,” this country will be run into the ground. China and Russia can’t wait.
@Kenneth There's nothing Keynesian about Trump's trickle-down Reagaonomics-on-steroids.
It is said that beauty is in the eye of the beholder and apparently also for deficits. It is also true that beliefs color the beholder's eyes and so it should come as no surprise that republicans, having been taught that taxes are bad, look the other way when tax receipts fall and deficits balloon...after all its for a good cause. Republicans also believe that the demise of Obama care would be beautiful, but they also look away from the dangers of being uninsured or under insured. They see beauty in climate denial...obviously they think burning California to be a pretty sight.
Republicans sold as beautiful austerity,when stimulus would have been better and in an expansion tax cuts to those who see them as beautiful, mainly the rich and corporations ready and willing to buy back their shares for the benefit of the...rich. The same rich that look away from homelessness, salary stagnation and health care for all. These same rich, as deficits climb will see beauty in laying off teachers, firemen, police, cuts in medicare and medicaid and social security.
Democrat's sense of beauty involves a strong reaction to climate change, alternative fuels, health care, education that does not bankrupt, social security and deficits to provide for stimulus. Clearly as long as republicans hold washington this concept of beauty will not be getting a fair hearing...but in the coming elections it is clear that the future will be dominated by whose concept of beauty dominates our politics !
4
Deficits went up under Reagan. It’s the reason they put the debt clock in Manhattan. We got 16 Million jobs.
Deficits went down under Clinton. In fact Clinton balanced the budget.
And we got 23 Million jobs, almost 50% more jobs than under Reagan.
W Bush took the balanced budget from Clinton, zero deficit, and gave Obama a whopping $1.4 Trillion deficit. Also the worst recession since the Great Depression.
And with two "tax cuts for the jobs creators" we got 3 Million jobs.
Obama got us through the Great Recession, cut the deficit by almost 2/3 to $550 Billion.
And we got 11.5 Million jobs, almost 400% more than W Bush.
And that was with the “jobs killing” Obama-care.
And 20 Million people got healthcare.
Now after 8 years of Republicans relentlessly railing against the debt, the Ryan / McConnell / Trump tax bill will increase the deficit from $600 Billion to $1 Trillion.
The projected ten-year increase in the debt is $12 Trillion which is $80,000 per taxpayer.
To be paid for by our children and grandchildren.
Every Republican senator voted for it. Not one Democratic senator voted for it.
JOBS:
2011 - 2.09 Million
2012 - 2.14 Million
2013 - 2.30 Million
2014 - 3.00 Million
2015 - 2.71 Million
2016 - 2.24 Million
2017 - 2.06 Million
2018 - 2.40 Million
I wouldn't mind if Trump voters got fleeced but the rest of the country is getting fleeced, too.
34
My question is: Who overseas how much and to what Trump spends OUR money? If no one, I fear he will bankrupt our nation.
4
If you graph employment since 2009 it looks pretty much like a straight line. What is not a straight line is the explosion of deficits under Trump. I don't think he mentioned that in the State of the Union Address. A period of economic prosperity is supposed to be the time to remove national debt, not add to it.
22
What really needs to happen is for the Democrats to hire PR people who know how to send out this message far and wide in language and graphics the average American will understand--over and over and over.
That they don't is what makes me want to tear my hair out.
44
@Jan
Well said.
Republicans are much better at PR.
It helps that they are shameless.
3
For this very reason, prominent progressives embrace Modern Monetary Theory (MMT) more as political strategy than economic theory.
Over recent decades, Republicans have successfully prevented an expansion of US government spending to fund European levels of social benefits by cutting taxes and raising deficits when in power, and then demanding austerity to remedy the accumulating debt when Democrats are in power.
Having learned from this gambit, prominent members of the progressive wing of the Democratic party are now turning the tables. MMT allows them to promote a massive expansion in government spending without admitting that a corresponding tax increase (likely a European-style VAT) will become necessary to fund that spending.
1
@Chris Brightman And why not redirect 100s of billions from the bloated military budget & add a wealth tax?
Companies often ask me if I want a job when I plan something to be done by them. There apparently is a talent shortage out here.
Correct me if I'm wrong but Trump -- enjoying the tailwind of the Obama recovery but of course claiming all the credit for himself -- at various times promised anything from 3% to 6% GDP growth. It now stands at 2% for 2019 and continues to shrink because of Trump's trade wars, which have reduced both our imports and exports. Instead of bringing back U.S. manufacturing jobs, American companies have switched Chinese supply chains, made more costly by Trump's tariffs, to other countries like Vietnam and Mexico. Meanwhile, Europe has become the biggest buyer of Chinese goods and China and Russia are now allies in a push to "de-dollarize" the global economy. Not satisfied with bankrupting a casino, Trump now seems to be trying to do the same to our country.
21
With the death of Dr. Li Wenliang, the world is reminded of China's oppression to individual liberty and free speech. However, in my view, worse than that is our, the American speech irrelevance, or speech impotence. At least the Chinese know they do not have a voice.
As we have just witnessed the impeachment "side show" put on by the Republican Party, even the speech of the members of Congress, on the Democratic side, is irrelevant and impotent, in changing the minds of their own esteemed colleagues.
I am saying this here because... how long and how often has Dr. Krugman said what he said in this writing? Did it make any difference?
For speech to be truly free, it's speech that needs to be meaningfully and honestly listened to. Otherwise, it is just an illusion that we have a voice.
Our previous 19th century fight was for freedom of speech. But in the 21st century, it is a fight for truths, facts, the value of truths and facts, and not selfish self interests. The previous fight was with dictatorial governments. This new fight is with ourselves, our own minds. How are we going to do it?
5
@Doodle
Being able to synthesize Dr. Krugman's analyses also requires a brain capable of doing so. That is in short supply among today's electorate.
Quick question: has spending increased dramatically under Trump and is that driving the deficit or is the deficit rising because of tax cuts? And does that matter? It seems to met perception drives the economy and companies/people at the top of the income ladder are happier when Republicans are in charge so they don’t complain as much about the economy and that has an overall positive effect on perception and spending habits of consumers.
3
The short of it that piling money onto the mega rich slows money velocity so much that printing the money doesn’t drive inflation.
3
If he's re-elected the deficit will be the reason for reducing Medicaid and Social Security benefits.
30
@George Bukesky ----Then he should have to justify it with facts and figures, SS is prohibited from paying out more than the FICA tax generates so he needs to explain how the only federal program with targeted funding is the reason for trillion dollar deficits. Neither he nor anyone else do it with a straight face.
3
@George Bukesky
There are a lot of places to save money. We don’t need public education, or the FDA. We could sell the public parks to Disney, and the libraries to Barnes & Noble. We don’t need FEMA - a Democratic money-wasting by-product of the climate change hoax. Let the Puerto Rican’s buy their own paper towels! And there is no need to raise taxes, we can just increase the cost of luxury items, like food and clean water. If worse comes to worse, we can have Mexico pay the whole thing off.
@George Bukesky And, the only reason he wants to get re-elected is so he can stay out of jail!
For years I thought that Dr Krugman had argued that the effect of the Trump tax cuts would be a short term increase in the growth rate of the GNP followed by a return to about the 2% growth rate seen in the later years of the Obama administration.
Therefore I find it odd that in this article he claims "But if we ask what lies behind that strength, the main answer is an explosion in the federal budget deficit, which exceeded $1 trillion last year."
@Scott
All of those results were correct. Is it your criticism that he neglected to say that the deficit would rise as a result of the cuts?
2
Suspect there are two parts within the GOP. Those who are the President's supporters and will follow him to the end, and those who know what he is doing is wrong, but are too cowardly to say so. I would like to think the latter are in the majority, but given what has just happened, given recent events, maybe not.
There will be a price to pay for the President's misdeeds in the economy. The President neither understands nor cares, as the second term is all to him, and if that means burying the United States in debt and trashing the world trading system, then so be it.
In the meantime the non-tribalists, or better, liberals, need to use the time to get a clear analysis of how the West has got into this mess, to understand the root causes of how the tribalists (let's not dignify them as "nationalists" or "populists") have been allowed to claw, snake, and trick their way into power, and find out how to stop them.
It's a sad fact that politics beats economics every time, and that politics and politicians are too dangerous not to be treated with the utmost seriousness and care.
12
Paul,
Did it distress you as much as me that all the discussion on the news after the SOTU was about snubs and paper tearing and not about the substance of the speech. There were some pretty outrageous factual errors.
For example, he said that he was going to protect pre-existing conditions insurance. Just the opposite is true. How can the news media let that go? (To be fair, a number of them, including the NYT, did point it out, but it got drowned out by the middle school behavior.)
40
@Thucydides I didn't watch the whole speech, but what jumped out on me was his dissing of the public school system.
2
The key phrase in your article is "abandon all hope for the future." I think it would be more accurate to say ignore the future entirely. Trump's personal and political actions evidence a complete lack of concern, or even consideration, of the future. He lives for today, perhaps for the moment. Unlike virtually every other President, he has zero regard for his legacy. I am certain he never even thinks about how history will describe his presidency. He is allowing the planet to burn. Why would he care about the economic impact of his fiscal policies?
20
Dr, Krugman is illuminating as always. I particularly like the usage of "asymmetric cynicism" - ain't that the truth!
6
Agreed that it's difficult to get out attention via headlines so that we take a minute or two out of our day to read the text of a story. If the text that follows fails to keep our attention by offering detailed, logical, explanations and analyses absent some juicy suggestions, we may decide that we are too busy to get to the last line.
Mr. Krugman is trying to tell us that wool is being pulled over our eyes. How to make it clear that we are likely undermining our children and their children's futures is the challenge. We're preoccupied with today. We leave tomorrow to others.
9
I completely agree with this analysis. However, anyone that pays attention will note that Mr. Krugman's stance on deficits (good or bad) seems to depend on who is in the White House. Personally, I despise deficits (Democrat or Republican) and think they are no better than a pyramid scheme. Why can't we live within our means?
1
@Dave Krugman's stance on deficits depends on whether or not the economy is in recession, not which party is in the Whitehouse. And whether deficits are good or bad depends on how they are used. The federal budget is not like your household budget. That said, most people borrow money to buy their homes; they don't pay cash.
9
@Dave No it depends on the economy. When the economy is weak, in recent times when Republicans are in office, the economy should run a deficit and when it is strong there should be a balance.
7
@Johnson02118
Apples and oranges. I paid off my mortgage, not you. My grandchildren aren't going to be paying off just my government "benefits", but everyone's.
Common sense of money 101 is that all debts are to be paid or bad things will eventually happen. We are $22 trillion in debt as a country. I don't know how long or how far we can get away with borrowing more and more money but eventually our economy will come tumbling down. The dollar will crumble and then the stock market will collapse because both the dollar and stock market's value are both based on confidence and nothing else since Nixon took the dollar off the gold standard. I'm just waiting.
6
I believe a country can have large deficits if those deficits are aimed at improving the economic capacity of your economy. If you are spending all your financial resources on consumption that uses existing physical resources and you leave nothing to put towards improving your future prospects then over time you will have less productive capacity and a lower standard of living.
I can't see the point in cutting spending on R & D, education and sunrise industries while you give that money to super wealthy investors to spend on inflating the cost of land and housing.
Do you exhaust the rich fertile soils of the old South with endless cotton crops and no fertiliser or do you use your Yankee Ingenuity to build ships, engines, manufactures and create mega wealth.
It seems to me that America is going back to the old lazy aristocratic Southern Planter way of doing things. Eventually the Southern system broke the South which couldn't compete with the industrial might of the North.
Eventually, spending money on luxuries instead of necessities and concentrating wealth in fewer and fewer hands will break a system.
16
@David Thank you for providing the answer as to when deficit spending is a good thing and when it is not; as you say in your first sentence, are you
"improving the economic capacity of your economy"? To use Trump's tax cuts as an example, the rationale given was that these cuts would increase investment, but nowhere have I read of any requirement that the money saved by these cuts actually be used for investment. Government subsidies should be used as an incentive for behavior that supports economic growth, not the mere accumulation of profit for its own sake.
Correct me if I'm wrong, Paul, but I recall that the Trump tax cut was aptly titled the "The wealthy donor relief fund" by some economic commentators, or something to that effect.
3
@Steve
What point are you making? The use of political rhetoric, the misuse of words is the oldest political game in history.
For an economist like Krugman, solutions to economic situations are fairly easy. Government spending during bad economic times will give a badly needed stimulation, but will lead to deficits and debts. As the economy recovers and grows, deficit spending can be cut back and the debts pared down. That's how it works in economics models, but not in political science realities. Government spending can and will stimulate the economy, but then we shortchange the process by giving Republicans control of Congress and the WH. Their inevitable tax cuts always double down on the deficits. It's going to catch up with us and it ain't going to be pretty.
6
The simple fact is that if people are hurting and are in debt they will vote for change in November. Propaganda, false claims, promises, and fear tactics may sway some people to maintain the status quo, however, the deeper the hurt the more difficult it is to hide the truth.
November is 9 months away, and voting is the once in four years opportunity to affect change for a better future four years. Your loved ones will bear the consequence of your vote for four years, so you'd better cast away your partisan emotions, think rationally, and vote smartly.
4
@Sam
True Sam, thank you. Unfortunately unless you live in Ohio, Pennsylvania, Michigan or Wisconsin your vote means nothing.
1
@Johnny Yes Johnny, you raise a valid point!
Paul Krugman has it right; but forgot 2 aspects of the rise of Republican Populism. Although greater deficits over 10 years ago may have brought the economy back faster, the uneven distrubution of the bail outs 0ver 10 years ago caused the rise of the 99% percent on the left and the Tea party on the right. The banks and wall street were bailed out and are ritcher than ever, main street lost their homes and are renters now. Relative to the financial class, the majority of Americans are poorer than ever. Populism rises on the left and right beause of that simple fact.
Printing American money works great, just like rising oil prices work great for some dictators. However; oil and paper money are commoditys. Once their value falls the great economy is over.
5
Someone please share a rational thesis for why "The U.S. economy is running pretty hot these days."
It can't be attributed to the corporate tax cuts from 2 years ago. That was a one time event (and the on-going effects were modelled in by analysts on Wall Street pretty quickly). Global trade is shaky. China, Brazil, India, Germany, UK not doing great. So, what is it? Are US companies saving that much due to lowered regulations?
2
@AP917 Cheap money and greed.
This is the same way Trump runs his businesses. Loading them up with debt, skimming off the assets and leaving the husk to the creditors. We have fattened up the financial industry with borrowed money. There is no value behind most of those soaring stocks. When it goes south the financial engineers will have cashed out and the 99% will be wondering where the 401K savings they spent years accumulating went.
50
The last fiscally responsibly GOP President was George H.W. Bush. Republicans saw what happened to his reelection bid when he tried to reasonably balance the budget and they have chosen a different, cynical path ever since.
Eventually, we will be broke- or at least cash strapped as we are forced to pay down debt- and our posterity will wonder why we did this to them.
13
We live in strange times. Boomers are retiring at unprecedented rates. Early in retirement their increase in leisure spending may help sectors of the economy. But soon their medical bills will pile up and be a drag. The Republican Party is grabbing the cash now, and they will all flee when the bills come due.
22
@EW I look around at the retired boomers filling up restaurants, casinos and cruises and buying vacation homes . Our economy is based on retired boomers feeling financially secure. Unfortunately, based on what I've seen happen to people firsthand, the chance of being hit with crushing medical bills has increased greatly. Consumer confidence may only be an illusion.
8
I’m sure a major argument Trump and Republicans will make against the eventual Democratic nominee will be we can’t afford the programs they will propose and ignore the programs republicans installed that have doubled the deficit. Democrats need to cut this off at the pass now and start play commercials reminding Americans of all the promises they made about their tax cut benefits to the average Americans. I could see a endless loop of Sarah Sanders tell us all we would get a 4,000 dollar raise. Then a man in the street asking people hey did your employer give you the Trump promised $4,000 raise. Democrats need to get out of their ivory towers and into the streets!
33
Cynicism isn't the proper word. Cons lie. If their lips are moving lies are emanating. Tax cuts do not lead to growth. Deregulation reduces workers' share of wages and protections but does not lead to growth.
If you look at production and nonsupervisory workers they are making exactly the same hourly wage now that they made in 1973 (BLS $23.24 in 2019 dollars) in real wages (inflation-adjusted).
We have legally created an economy where 90% of the cash generated by corporations is returned in stock buybacks and dividends. That drives the stock market but it does not drive organic growth that benefits labor.
In an economy driven by 70% consumer spending, this is not the way to generate lasting fairness and growth. We need to reregulate the use of cash by corporations and bend the curve to favor organic growth vs the financialization of our economy.
34
@Donald Pack One final point. What I'm suggesting is simply a return to the full-blown capitalism of the '70s. Our problem is not capitalism vs socialism. Our problem is the gaming of the economy by the few to harm the many.
Here is an example to make my point. The EPIPEN was developed by taxpayers to provide a device to inject troops on the battlefield with a nerve agent in case of bio war. The product then became released to the company for public use. That was in the middle '70s. Forth-five years later it's still under patent through a process called evergreening. The company sues anyone that attempts to develop an alternative. So $1 of Epinephrine costs ~$300.
This is rent-seeking where someone gets paid unfairly for a profit not earned fairly. This is all over our economy. It's not illegal but it is wrong. Worse still it explains all but 14% of the profits generated by companies and idividuals over the last couple of decades. The average person may not know the details but they know unfairness and they feel it in their lives.
That is the reason for Trump and Bernie.
1
>>the [Obama] administration wanted to win bipartisan support and wasn’t willing to use reconciliation to bypass the filibuster<<
Mr. Obama’s main concern was How He Would Look in History. There is no cynicism in him. He is a moral paragon who’s uplifting oratory has virtue dripping from every syllable. But he is not a leader and as President, he was a failure who’s only legacy is the disaster of Donald Trump.
8
With all due respect, I don’t think this is fair. He showed, by example, what it meant to do your best for the majority of the population, without name calling or tantrums. He did this even while facing enormous opposition from Republicans and accusations of non citizenship based on racism. And he succeeded in getting universal health care, a goal that had eluded other Presidents for decades, then lifting the economy out of a deep recession. It is certainly possible to disagree with how he did things, but I don’t think it’s possible to agree with a politician in all things. He made tough calls, and we can all second guess, but that’s the nature of that job. If it’s not being done by a second rate reality show host, of course.
He was the definition of a leader. I miss having a sober and mature grown up in that office terribly.
33
@kbaa nice conservative talking points without a shred of substance. Sure, lot's of people didn't like Obama, but blaming him for Trump. WOW, that's truly low.
@kbaa -----What is your definition of a "leader"....is it a self proclaimed billionaire that spewed a bunch of bogus claims about an irrelevant birth certificate. A suit was filed during the 2016 campaign to disqualify Ted Cruz from running for the White House because he was born in Canada. His mother was an American citizen, it was thrown out right after the ink dried.
You and your kin could help if you ceased calling it a 'strong economy' before qualifying. 2.2%- 2.5% growth is not strong growth.
15
The US economy is in terrible shape. You have a gigantic budget deficit. For a country not involved in a major war or facing some economic or financial calamity it is huge. Despite this enormous outpouring of money into the economy your growth rate of barly 2% is pitiful and a sure sign of gross economic mismanagment.
That growth rate is nowhere near enough to prevent the government debt to increase fast. The US government is not using this borrowing binge for investment.
To finance all this the government has to borrow billions and billions of dollars abroad.
Borrowing huge sums of money abroad to pay for domestic consumtion with the result that the governmnet debt is increasing fast cannot be called anything but a disastrous policy.
There is no such thing as a free lunch. Those lenders will eventually have to be paid back somehow.
If I were a democratic politician seeking to be elected I would ask the voters who they think will have to pay back these foreign loans. Will it be the sons and daughters of those very wealthy who benefited most from the Trump tax Cuts or will it be the sons and daughters of regular working people? Obviously Trump and the republicans have the latter Group in mind.
74
@Torkel Blom another aspect of the "real" economy in the US is how deep in debt most Americans find themselves. It's a very well-known fact that a huge percentage of Americans could not come up with a modest sum of money if they encounter an emergency. Student debt is huge. Credit card debt is huge. Americans are taking out long-term loans when they purchase automobiles. And, despite what many might believe, food, housing expenses are higher than average. And let's not forget "the big one," health care costs. The stock market is not the economy that people actually live in, a place where there are bills to pay.
22
@mrfreeze6 "And, despite what many might believe, food, housing expenses are higher than average". Huh?!
@Mikhail23, yes, I currently live in Europe and comparable rents and mortgages are, simply put, higher in the States. In central Michigan I was paying 3 times the rent I'm paying in a comparable town. Food is cheaper here. Transportation costs are lower (it's called public transportation). Health care costs are far, far lower than in the States.
4
Voters have become like Wall Street, interested only in the short term, and unable or unwilling to think strategically or invest for the long term. So if this month, or this quarter, looks pretty good, hey, the economy is good! They can't see, or simply ignore, the long term deleterious effects of some of Trump's economic policies--the spiraling deficits, the continuing unfair distribution of wealth, his attempts to cut retirement and medical benefits, the weakening of financial institution regulation and consumer protection.
His supporters say they like having a "businessman" in the White House, and Trump truly has brought Wall Street thinking to the presidency: Seeking short term benefits (for his own political gain) at the expense of long-term strategic planning. Much like with his attitudes about climate and the environment, future generations will pay for his lack of long term vision.
48
Dragging their feet on stimulus created many perverse incentives such as greater reliance on SS, SNAP, etc. The workforce participation rate has hardly budged and personal debt is climbing, not just student debt. Rather than business stepping up to invest in ways to limit climate change it has continued in the age-old practice of nest-feathering. Short term tactics might have enabled our species to become the apex predator but they don’t bode well for its future. We might not even make it to the median as far as length of time to extinction is concerned.
8
I suppose, though, that you’d be willing to step up and tell everyone what to do.
The real question is how can we be getting away with $trillion deficits?
The answer is because the world fiscal structure is set up in a way that the strongest currency becomes the base for other currencies and the dollar is and has been the strongest since the end of WWII.
What has sustained that strength is the formerly Republican view that, during stable periods, budgets should be balanced with big deficits reserved for when you need them like wars and recessions not normal financing of the economy.
Autocrats regularly turn to deficit spending to retain power thereby mortgaging the country’s future for current gain.
Now that the Republicans have formalized their bestowing of Autocratic status to Trump with their acquittal of him for abuse of power Trump is free to continue using the economy to fund Trump Enterprises where the US is the cash cow subsidiary used to fund it.
America, in its wisdom, has given a scam artist autocratic powers that the Democrats are doing their best to continue for another term, assuming that term limits aren’t extended.
16
I think there’s a simple way of looking at Trump’s tax “reform”, that most people could understand, and that brings home what is the actual result of the corporate tax cuts.
The US is borrowing money to fund stock buybacks. Just think about that.
30
@Newguy
Terrifying.
Paul, you know that unsustainable deficits will lead to what Republicans always wanted, a steep reduction in government entitlements. Trump will promise to not touch Medicare or Social Security in a major speech like the SOTU, but in an interview say “ yes, we will probably be looking at entitlements”. Between the annual deficits, the increasing national debt, and the interest payments owed, we are in deep trouble. Ross Perot was rightfully critical of the five trillion national debt in 1992, I am sorry that he went silent before he died with a national debt at 23 trillion.
13
And let's not forget that the GOP is still holding its most cynical economic card of all, just waiting to be played should they win again in November. Having exploded the deficit with tax cuts that benefit the wealthiest, they will now cite the deficit to justify a truly Dickensian crusade to dismantle what's left of the social safety net. All in the name of fiscal probity, of course. We're already seeing it happen with SNAP and Medicaid in red states, with Medicare and Social Security sure to follow.
85
@Charles Nordlander
he is also talking about giving more tax cuts. and dems own the house right now. budget talks are supposed to start next wk.
8
“...and there has been a sharp increase in the number of Americans delaying medical treatment because of costs.”
And let’s be specific here- this isn’t just elective surgery we’re talking about, it’s people unable to fill prescriptions because of the cost or taking less than the prescribed amount, it’s people praying that serious medical symptoms will just go away because they can’t afford a trip to the doctor for themselves or their children, it’s people with rotting teeth, untreated glaucoma and who are foregoing routine screening for any number of serious illnesses.
Any economy/society that allows growing numbers of its citizens to suffer in this way is not “strong” by any definition.
54
A good column on the economy would explain why, if it's booming, so many Millenials, seniors, and people whose blue-collar jobs went away feel broke.
11
Yes, the economy is good, but:
- The gains in the Trump era have been astonishingly inequitable.
- The tax cut giving a temporary jolt to the economy was capricious in the extreme, and its benefits were designed to overlook states such as New York, California, and Massachusetts.
- Trump is burning the furniture to heat the house.
44
All of the money goes into wealthy people’s savings accounts.
You want stimulus and wage growth it has to be focused on the working class receiving the wealth in some form. Everyday non-speculative people who receive benefits will spend it or solidify their position paying off debt like student loans or buying a house to live in.
This would strengthen the economy as people would be less likely to default when things get difficult. It can go the other way also though if the money is somehow funneled into the hands of people who are slightly to wealthy and will dump money into Ponzi scheme speculation.
5
As the sage Warren Buffet noted, the US economy can easily run a 2.5% deficit given real GDP growth of about the same.
But if a deficit is a future claim on taxes, it should be directed to investments that will grow the economy.
Deficits are far larger than growth under Trump, and they are meant to deplete resources for Social Security and Medicare obligations already made by the United States Government to every person paying payroll taxes.
Corporate tax cuts did not increase investment, but reduced investment. This is sensible. If consumers are not seeing increasing discretionary income, they will not increase aggregate demand, so corporations have no reason to invest.
Trump bankrupted 6 companies - more than any person in modern history. He is now doing the same on a larger scale - with record trade deficits. record fiscal deficits, and negative real interest rates.
Stock market cash flow multiples are stretched beyond reasonable growth expectations, and the ability to offset a downturn using Keynesian tools are weak.
Deficits used as constructive investments in the present or future can always be justified.
But half of Americans have no retirement savings. Trump's corporate giveaway is stealing the thin financial security available to present and future seniors.
39
Professor Krugman; You need to explain your points on
Public TV so that the average citizen of the USA can understand your points;....a PBS Classroom is the answer to convincing
those who need to know ; why the US economy is
thriving ….in the short term; and then why the US economy
will not thrive in the long term.
As Willard Strunk might say: Keep it Simple ; and then
by doing so ; Say what you mean; and Mean what you say.
Rather like a syllogistic argument
We need a lot of argument in the days ahead so that our
economy will be managed for the long term
9
@Carol B. Russell
if public tv wont get cut. trump has tried to do that for three yrs. that means PBS, nature, BBC world news etc.
@Carol B. Russell. Great idea except the people who need to understand are not watching PBS. They watch inane nonsense like the Apprentice and then believe the host is actually a savvy businessman.
"Economic gains have been lopsided, with a large increase in corporate profits that mainly reflects giant tax breaks, while workers haven’t seen comparable gains (and gains for lower-wage workers have been driven in part by minimum-wage increases in blue states). The huge gains in health insurance coverage under President Barack Obama have stalled or gone into reverse, and there has been a sharp increase in the number of Americans who report delaying medical treatment because of costs.
Still, it is indeed a strong economy...."
In what world does this equal a "strong economy?" Everyone I know is struggling and suffering.
11
Economists (real as opposed to Republican) usually predict more of what is. Here it's that huge deficits don't matter. so give a scenario where the amount of the deficit, or cumulative big deficits, do matter. By itself, interest rates the fed pays rising, would have a huge impact. A big recession (like we're seeing in China now or for whatever reason) with this would also be something bad, that would feed on itself. These are hypotheticals, but endless huge deficits for short term benefits, would seem to have some dire consequences at some point--banana republic like.
Economic Neanderthals, climate change Neanderthals, planet habitat extinction Neanderthals--we seem to be hit now by all of these at once.
5
The Tea Party was more focused on the President’s race than on the deficit which was only an excuse to try to sabotage the recovery.
9
@lester ostroy
That is exactly what it was. Pure partisan hatred politics that republicans constantly perform even before Trump arrived.
I think that the U.S. economy is simply too large and too complex for most people to understand.
It’s kind of like a giant warehouse that’s being plundered by its own inhabitants. People understand what they find in their own aisle, and they understand that the aisles are connected and that certain things are typically found together. They even know that there are loading docks somewhere, and that people exist outside the warehouse. But they don’t understand how the lights stay on, or why the wind sometimes blows coldly through cracks in the wall that don’t get repaired.
They also don’t understand that the warehouse was designed and built by human beings with manners and purposes very different from their own.
9
The Republicans have been playing this game for decades now, and they've gotten very good at it. One only wonders what it says about the American voting public that, so many decades in, they still seem to have not caught on to the grift.
65
It's right to blame the GOP for their shamelessness, depravity, and cynicism when it comes to their fiscal hypocrisy. But it's not their fault that it.... seems to work. If the voting public were better equipped (or just more willing) to look past the mere talking points – GOP propaganda – and engage in some critical thinking, examining the historical context, these ploys wouldn't be effective.
Ultimately, we the people are responsible for whom we elect. And yes, I'm well aware of the decades-long campaign by the GOP and conservative media machine to repress, misinform, gerrymander, and disenfranchise their way to ill-gotten political gains.
But apart from all that, we still have a voter apathy problem in this country. Until that is solved, we'll continue to see flagrant GOP hypocrisy on parade, because its effectiveness has been proven time and again among (mostly Republican) voters over the past 40+ years.
23
@Cat
well, consider that Michigan just kicked off over 100,000 voters since they missed one election where they didn't vote.
I noticed you missed that in the gerrymandering section with voter expulsion off the voter roles. some states even if the person has missed one election. also, Georgia has been trying the last six months to kick off almost 300,000 people.
and if you are working two jobs many states have gotten rid of early voting. many people who are working two jobs is to make ends meet. many teachers work two jobs. one to pay bills, the other to buy school supplies since they get no budget.
4
@Cat
What do you expect when this very newspaper treats every utterance by a Republican as decided fact.
Republicans can say the moon is made out of green cheese and this newspaper will report it as: "William Barr says the moon is made out of green cheese. Partisan democrats disagree." And then the reporter would follow up on all the reasons that Barr offers for knowing the moon is made of green cheese and explain that it was the upright and honest William Barr who said it was. With the disclaimer that partisan Democrats with a partisan agenda disagree.
You are right. The Republicans cynically use the budget and tax cuts to create enormous deficits when in power and to stimulate the economy in the short run and then obstruct the Democrats and their fiscally stimulating government spending programs with their hypocritical mantra of fiscal austerity and budget cuts to middle class programs when out of power. This is not the way to responsibly run the economy. No wonder there is record social and income inequality, which reflects in part the inevitable consequences of the Republican’s cynical fiscal gaming of the economy. For they use that game to transfer wealth through tax cuts and financial deregulation from the poor and middle class to the wealthy and their corporate elites. It is amazing how they can get away with this. But they are cynical in using the right wing media and distracting voters with their social agenda against abortion, minorities, immigration, gun control, and liberals. They also now use voter suppression, gerrymandering, and disinformation to ensure their political success.
23
@IN
Unrestrained capitalism destroys liberty and justice for all. It is as dangerous as tyranny but far more insidious. I don’t understand the wealthy of this country that have all material needs met yet act in this manner. At such a point there is no valid reason to act in such an amoral way that harms the community and mankind. What do they get out of this?
How are wealthy capitalist any better than aristocracy at this point? And with the massive regulatory capture and crony capitalism this will undermine healthy ethical businesses as they are targeted by corrupt ones abusing government through their lobbyist buddies in positions of power.
We have a serious corruption problem. This ends badly for capitalists as well. These people will eventually be so entrenched there is no chance for competition.
9
Hogwash. The market will always create a solution. The government only creates winners and losers. It produces nothing.
I wish the Democrats would run animated ads showing the GOP transfer of wealth from the working and middle classes to the multimillionaires.
It seems the Democrats have only themselves to blame for Trump’s success, after Trump got his tax cuts through, he asked for an increase in military spending and the Dems would only go along if Trump agreed to much more domestic spending. And Trump like most Dems and unlike some Reps never said he cared a whit about the deficit. And Krugman only seems to be concerned about the deficit when it benefits a Republican. Maybe Krugman and his fellow economists should propose to decrease a nation’s GFP by the amount of deficit spending. Deficit spending is sort of like cheating. Any nitwit can do it and it doesn’t really indicate how well an economy is doing whereas a surplus indicates that the economy is paying for some spending that occurred in the past and therefore is doing better than current spending indicates.
6
@Robert Richards high deficit spending should be reserved to stimulate a depressed economy. When unemployment is low, the budget should be closer to balance or better yet balanced. The current deficits will have to come down sharply when inflation and rising interest rates raise their ugly heads.
This column is a timely dose of reality but the dosage will need to be increased to drive a stake in the heart of the zombie collection that was cheered at both the SOTU and the acquittal celebration at the White House.
It was a grand celebration of the zombie ideas that are now claimed by the ideology of Trumpism that have replaced reality.
There was no hint at both Republican rallies of the grand challenges confronting the U.S. and the World. Remembering how easy it was after the 2010 election for the deficit scolds to take control of the narrative, the memory convinced me that the public and the very serious people can be easily persuaded to agree with a well financed narrative and make recognition of the real challenges like global warming, and the major factors contributing to our quality of life almost invisible.
It concerns me that the merchants of doubt coupled with the false narrative created by the celebrated economic achievements of the G.O.P.'s and their denial of global warming will cause the U.S. to fail to see the economic potential in creating energy solutions for shifting the global economy away from fossil fuels.
Clearly, global market competitive technologies must be developed and deployed at scale to create very cheap electricity.
This is not politically easy and will require a high level of international cooperation and investment, rivaling what we and the international community invest in defense and diplomacy. We can start by voting blue.
13
Would it be to much to ask of the American taxpayer that they
consider their annual tithing to their government a business investment. As such, they rightly should demand a return on
their investment. Presently, the rationale for the revolutionary war has returned. "No taxation without representation," is true of our politicians. What should be true of our policy is the corollary, "No taxation without those taxes being spent for the benefit of the taxpayer."
6
@Jaden Cy
Agree and note that this is precisely the MO
of the Scandinavian countries--higher taxes, but transparent uncorrupted benefits returned to the taxpayers whose tax returns are publicly available
to all!
5
@SJM
Which is what we need here. The populace is screaming for it but the media Is unwilling, unable or incapable of articulating this model to the American people. There is always an excuse instead of a will to make it happen. The excuse is normally from people like the banker of JP Morgan that derided socialism but had no problem taking massive handouts during our last economic disaster they created.
Funny how socialism is bad for Americans but good for the extremely rich. This must end. Our nation will it survive much longer of the wealthy continue to abuse the populace and attempt autocracy to entrench themselves.
2
We pay about $500 billion in interest on the debt each year. And those who hold the bonds are wealthy. For every dollar we pay toward Medicaid, we pay a dollar in interest to the wealthy. I’m guessing that Mr. Krugman’s portfolio includes hundreds of thousands in bonds. And the higher the debt the higher his interest. No wonder he favors deficit spending
@michjas Ummm...he was talking about the fact that deficit spending has skyrocketed under Trump, and not for the sake of rebuilding infrastructure or investing in the future. Trump REALLY loves deficit spending.
20
@michjas - Tax cuts push up the deficit just as much as spending and the 2017 tax cuts were horribly designed to mostly help the rich and big corporations. All of us will pay for those tax cuts(deficits) with higher interest rates for decades and when the next recession comes we won't have the room to pull the economy out of the ditch.
14
@saltlakeq You did read the article, i assume, including where he championed deficit spending to stimulate the economy (and fill his pockets).
1
When I asked my sister in South Carolina why she had voted for Trump (I had warned her), one of her vague reasons was that the national debt was too high. I guess she had heard the "tax and spend Democrats" phrase too often. I know she's not so enthusiastic about him now, but Democrats and we liberal Independents have to get out the word: four more years of Trump would almost certainly mean higher debt, as well as heavy cuts in Social Security, the disappearance of Medicare and Medicaid, right-wing Supreme Court justices who can curb women's rights and other freedoms we take for granted, further reversals of environmental and scientific progress, more mistreatment and abuse of refugees and their children, more air and water pollution...the list of horrible possibilities goes on and on. But concentrate on the money: threats to Social Security and Medicare could be enough for 90% of the voting population.
28
@Carol Robinson oh she'll vote for him again, as the evil democrats is all she hears about of fox propaganda channel.
The good economy Trump inherited from Obama is being sustained largely by consumer spending in Blue states and government spending in Red states. Manufacturing, business investment, agriculture, and even coal mining are down. The economy is OK despite Trumps terrible policies. That should be the message in the general election.
9
What is Krugman talking about? The "deficit exploded?" The truth is the deficit hasn't increased nearly enough to meet our infrastructure and Green New Deal needs. The truth is that the Trump deficits haven't increased inflation--that's good. The bad news is that they've taken up "inflation space"--the wiggle room the government has to create budget deficits without triggering a general rise in prices--that could have been used for purposes other than giving multi-millionaires a gift.
The government needs to spend at least $5 trillion on infrastructure repairs and another $5 trillion on Green New Deal programs over the next 10 years. Our economy can absorb this spending without spurring inflation if we put every able-bodied person to work for the common good.
The crazy thing about this is that supposedly "responsible" experts think we actually have a choice. We don't.
6
@WDG Agree with you. The really worrying debt is household debt. Governments can easily spend on socially and green projects with long lasting returns. Taxes are a means to stop the rich betting on assets and, as Paul says, they're NOT investing. They only come in if government spending is crazily inflationary on useless and hateful stuff - another nuclear bomb anyone?
There are a few Democrat candidates for the White House who know this, do not pander to Wall Street, and basically want an FDR New Deal with a large Green element. And strength to Trade Unions.
1
@Hector
you are right on that. supposedly businesses are spending money and factories are coming back . where? where are all of big pharmas coming back to the u.s. oh wait they aren't.
You think that with Trump Prez we’re going to start spending $10 tril on infrastructure needed by ordinary Americans?
Oh, my goodness.
The Democratic candidates for President, VP and Congress will need to educate voters about Republicans' fiscal flimflammery. Hopefully, it isn't asking too much to expect most voters to get it!
5
A simple way to communicate one Republican “accomplishment” that most Americans would understand:
Calculate how much most individual taxpayer taxes would have been reduced, if the tax revenue losses due to the recent massive tax breaks were instead given to middle-class Americans. This amount is what Republicans decided to give to Corporations and mostly rich folks, instead of to folks who would have spent it (and really stimulated the economy).
@Mike. Just what we need—economics lessons from Bernie.
"In the fourth quarter of 2019, the U.S. debt-to-GDP ratio was 107%."
As we all know many of the jobs created are deficient in salary and benefits.
What is our real inflation rate? Let's count food and other missing data. Let's not use the magic of hedonics!
The market is zooming because folks who want to invest in safe fixed income products are forced into stocks.
The effects of bailing out Wall Street vary by region and the age of their populations.
Many New Yorkers have become exceedingly wealthy, while folks in the middle of the country have been hurt!
Trump is taking credit for an economy, for which he really had no positive impact. If there is a crash will he take credit for that, too? Of course not.
9
Deficits do not matter as long as the economy grows faster than the interest rate on the deficit. That is what one expects if the deficit is used for productive ends, like more infrastructure, more research, more education and improving the health of the work force. For Republicans, productive ends are to give more money to those who need it least and pretend that it all will eventually trickles down to the rest of us. More luxurious yachts, more McMansions, more servants hired, that is all good for the economy. The rich get to enjoy the good life and the servants get employment. A perfect Republican society.
19
If the largest group of voters including from the working and middle classes, regardless of political affiliation, are able to see what Paul is saying and make the GOP a permanent minority party in both houses, we can possibly see real growth for them. Wages will rise, deficits will be cut, SS and Medicare will be safe. No, I am dreaming...
6
@Gary Valan -- That is only if the Democratic Party would do anything for them.
Half the Democrats want very much to help.
The other half pretend a concern but don't actually want anything other than the status quo ante Trump.
This is the Progressive/right wing & hawk Democrats split.
No, that largest group of working and middle class will get nothing, nothing at all, from making the GOP a minority party, if that means empowering the right wing Democrats to do the same economics and wars.
4
@Mark Thomason
This is exactly why of all the Democratic hopefuls, the one I least want to prevail is Joe Biden. A successful bid by Bernie Sanders would most empower those who “want to help” and could force the Democratic reactionaries to toe the line behind his progressive agenda just as all those Republicans who once opposed him have fallen in behind Trump. But will the DNC let the Blue Wave gather the strength it needs to cleanse our crooked rigged system? If Iowa is any indication, I fear not.
I trust that Elizabeth Warren wants to help too. I’m less confident about Pete B. But he does say a lot of things I can agree with on major issues.
And if Michael Bloomberg succeeds in grabbing the mic, will he follow through on his stated agenda of taking on inequality? His op-ed yesterday focused on that, but we need to advance on so many fronts beside...climate change mitigation and healthcare foremost.
1
I think the stage is now set for the next downturn, which will be agravavated by the low interest rate environment combined with the deficits resulting from the tax cuts. We may be traveling towards the "big one" this time, and I hope it happens under Trump's watch, even if it means re-electing him.
14
Mr. Krugman gives Democrats a pass on their hypocrisy. In the last 50 years, the federal minimum wage has effectively declined. And there have been many years when Democrats had their way. But Democrats aren’t committed to increasing the minimum wage. Increases benefit the working class, who vote Republican. So forget them.
3
@micjas in Phoenix
What you are writing is not correct. Please review the historical record.
Congress and the white house have been In the hands of the Republicans for more years than not for the last 30 years. Since the Gingrich “Revolution” when Republicans took over much of the House and Senate in the 1990s while Clinton was in the WH going forward the Republicans have ruled either both the WH, Congress or just the Senate, except for first 4 under a Obama. GOP has balked at raising the “National” minimum wage more often than not.
The current minimum wage of a whopping $7.25 an hour was set in 2009 after Obama took the WH and the Dems Congress. The new one was set last year under a compromise with Republicans in House but hasn’t passed.
In 2013, Obama tried to raise minimum wage to $9.00. But Sen. Marco Rubio, R-Fla., said: “I want to see people making a lot more than $9 an hour. … The question is, is a minimum wage the best way to do it? And history has said the answer is absolutely not. In fact, the impact of minimum wage usually is that businesses hire less people.” That’s always the Republicans excuse.
The fact is, since the Fair Labor Standards Act established the original federal minimum wage in 1938, research on minimum wage legislation is not only voluminous, it is contradictory to what Ryan, Rubio and others in the GOP choose to believe — that raising the minimum wage reduces employment.
I live in NY State. The Dems raised minimum wage to $15.
4
Amazed that you can make these statements. In what parallel universe are you living where the GOP has done a single thing for wage earners and the minimum wage? They have fought against increases for decades
@michjas Let's see if you can read: try this passage, "...while workers haven’t seen comparable gains (and gains for lower-wage workers have been driven in part by minimum-wage increases in blue states)." Were the words short enough? Like "blue"?
US is taking in more money than ever before even with reduced tax rates.
It’s all about the spending.
Would PK recommend spending reductions to close the deficits?
1
@Arch Stanton
There haven't been any significant increases in SS, Medicare, the "entitlements", no work on infrastructure, etc.. Congress hasn't appropriated money for the beautiful wall.
So if what you say is true about the government receiving all this increased tax revenue, why did the deficit just increase by a cool $trillion?
23
@Arch Stanton
No, money was spent when it was given to the rich. ...and PK would say "Time" to take it back, now, and then some!
...and, we little people, who have cds have been financing the Feds mismanagement of the economy for decades.
Or, should I say that the Feds mismanagement of the economy has stolen billions from us "little and quiet" people to transfer to the oligarchs.
Time to reverse that trend and to repay us for government designed theft.
9
@Jim Hugenschmidt
Military spending on contractors and non-compete corporations where many dems and republicans sit as board members though unqualified.
Paul, its been doom and gloom since the Republicans have held much of congress and all the more so since Trump took office. I find you convincing and keep waiting for the shoe to drop... and waiting for the shoe to drop...
I am no economist. But I do know something about forecasting. It wouldn't hurt if you could tell us how bad (or good) something is going to be and about when that something is likely to happen. Otherwise this is mostly just smoke. Not nearly as dense as that on the other side, but smoke none the less.
6
@David Greenspan
The question is this. How much of that GDP is in the hands of those who want this system. As soon as a democrat takes office, especially one they hate, they will fire people and punish the working class.
They have so much money in the bank they can keep full employment until they desire to drop the economy.
On the larger scale it is tied to the fed. Trump might be ignorant but he knew if the fed raised rates he would be hurt. They instead lowered it to my surprise.
The prime rate is like a stop and go light for the extremely wealthy. As soon as it goes up you can guarantee it’s their excuse to pull back and economically assassinate labor. Not because they really have to do so but because it protects their power.
We badly need a strategy to defeat Trump. David Brooks has tried. It would be nice if this is done here.
A good column here about deficits would explain how Japan does well with 2.5 times the U.S. government debt to GDP and current large government debt. Japan unlike the U.S. has modern infrastructure. Can we do it? All the U.S. talk about deficits sounds like ignorance to me. Its about time we obtain some knowledge about government deficits. American public opinion is woefully lacking at Professor Krugman could explain how countries can live with large government debt.
3
@Michael Cohen "We badly need a strategy to defeat Trump. "
Why?
To do better for most Americans, then yes, we badly need that.
To do more of the same that the "centrist" right wing hawks did for so long to get us here? No. We don't need that.
We actually need to defeat those Democrats, just to have someone worth electing. Certainly, it will never be Republicans, so we have got to force the Democrats to offer it.
2
@Michael Cohen
The strategy is to Get Out the Vote.
But will it be an honest election? I have doubts about results in Ohio for the last twenty years.
There are literally oceans of Dark Money trying to cement the rule by the 1%/.01% into place,
Until we bury the current Republican-Reptilian party in a crossroads with a stake through it's heart, all the members of the Democratic Coalition are welcome.
AFTER we have thoroughly discredit the "neo-con" consensus (and it is a con, with a conman in chief) and their zombie ideologies about fiscal policy and climate change, we can have the faction fight in the Democratic party.
2
Apply the 'Is America Better Today Than 2016?' test.
Unemployment is down, but jobs are often lower-paying and without benefits and often less than 30 hours a week. Are roads better? Are bridges finally fixed? Do we have modern railroads? Is healthcare cheaper? Are public schools fixed? Are we funding science more? Is the internet secure and safe for kids and adults? Have we won the war on crime and drugs and the opioid Rx crisis? Is the Middle Class doing better? Is Any politician even mentioning the Working Class? Have college costs come down, and is the loan forgiveness program working as intended? Have we brought all the troops home? Are our borders secure, our food safe, and the CDC ready for any new disease? Are we still the Beacon of Democracy?
If the answer to all these is yes, then Trump has done his job. If not, perhaps the political climate will change, too.
91
@SpeakinForMyself
Great questions we should all demand be addressed. The problem I see is that many politicians, on both sides or the isle, are spending more time listening to special interest lobbying groups that fund their reelection campaigns. The concept of "The Common Good" seems to be not so common anymore.
5
@SpeakinForMyself , I'd point out that it's not just a matter of people actually being better off, but also whether people feel psychologically validated by Trump's use of identity politics and denigration of racial minorities, immigrants, foreign countries, culturally liberal elites on the coasts, etc.
2
Come on Paul, you know that the federal deficit will never be controlled, under any administration. We'll continue to use deficit spending to stimulate the economy and if we really need more money, we own the printing presses, right?
3
@Kurt Pickard Venezuela has good printing presses and even with all their oil inflation is through the roof. So, yes we can print money but eventually you have to pay the piper.
7
The reason Obama didn't push for and push through, with reconciliation, an adequate stimulus is that Obama, Biden and the Democratic establishment had (and have) drunk the neoliberal cool-aid. They are not believers in what government can do but worship the market. There's no fight there because they lack conviction. Which makes it all the more sad that Krugman goes after Sanders with a rhetorical club every chance he gets. Bernie understands that we need real change, not Republicrat posturing. And blaming the mythical Bernie voter who will to support a Clinton or Biden is like blaming the customer for not making a product they like. We need real change. Whoever is going to win is someone who gets that.
10
Yep, this is why I blame Bernie&the Berniacs, all right.
@snowjs That's what people thought in 2016, and the Batsignal went out and we got the Joker.
Even if tax cuts increase revenues, it's a waste of time if government spends more than it takes in, regardless of which party is in power. Paul is always for both higher taxes and higher spending.
1
Umm ... what happened to "The Tea Party"? And where is Paul Ryan? (Did he die?)
I seem to recall coast-to-coast sabre-rattling on that organization's part / Ryan's watch, not too many years ago, concerning (with some small measure of validity) a potential national budget-busting apocalypse.
Where did everybody go?
(Apocalypse now, I guess -- )
8
Ah yes! The GOP favors "less government" while the Dems are "tax & spend" fiends...
Reality is the opposite. The GOP loves to "tax & spend" but they like to splurge on military hardware: progressives prefer to invest in our society, education, infrastructure and other "soft" sectors of our economy.
Does our military budget really need to be 10 times the amount of the 7 next largest nations' budgets combined? Really?
52
@Bob : "The GOP loves to "tax & spend" but they like to splurge on military hardware: progressives prefer to invest in our society, education, infrastructure and other "soft" sectors of our economy."
Substitute the word "spend" for the word "invest" - at east it's more honest. Besides, the federal government was never designed to "invest in our society", whatever that means.
1
@Bob. And actually, a lot of the defense spending is pure waste. A lot of it goes to things that work badly or not at all, with multiyear follow-up spending to fix things that should have been done right the first time. Add to that the costs of a lot of top-heavy bureaucracies for the management of the inefficient programs. And, so as not to end on a misleading note: a lot of defense spending is perfectly necessary, but too much of it is waste, to an extent that hurts other sectors of our society and economy.
10
Infrastructure is an investment in our society. So is decent education. When you talk about “investment” in our military it makes me cringe. While the endless war making is providing some measure of employment to people who might not otherwise have it, it is propping up corrupt politicians with weapons makers in their states, and the products of these manufacturers will either be destroyed, or rust, in the years to come, while infrastructure can provide jobs today, more efficient transit for years to come, and provide a better quality of life - more healthcare, clean water, better waste handling, higher fuel economy. Why we are not demanding this from ALL parties is beyond me. Somehow the rest of the OECD has been making progress on these
10
I was saying I haven’t heard that word in a long time. For sixty years they cry Deficits out of power, in power they spend everything the Democrats manage to save and more.
9
A strong economy. What does that mean?
This is not a strong economy compared to the post WWII, GI Bill-accelerated own-a-house-with-one-wage-earner-providing-for-a-family-of-four economy.
No.
Republicans and other "market globalists" say that was an unsustainable fluke.
Finland, Sweden, Norway, Denmark, Switzerland, Germany and others prove that it is not.
Do we want serfs?
Or do we want an inclusive economy?
43
Krugman's lost any authority on economics that he once had. When Democrats spend money we don't have, he says not to worry, because interest rates are low. But now he's putting the full blame for today's enormous deficits on Republicans, even though Democrats have been passing Trump's budgets with very little if any protest. The blame for our fiscal nightmare is just as much the Democrats' fault as it is Trump's.
1
@Charlie Reidy
Budgets that are mostly mandatory commitments are one thing. Massive budget busting tax breaks to the wealthy that don't need it is something else. You also conveniently left off the differences in spending that would be the focus of each party: Republicans are out to starve the beast and Democrats are trying to help people. Notice how Trump's infrastructure plan has never happened--it's hard for the GOP to be cruel when actually doing the right thing, so they don't bother doing it.
16
@josh: "Budgets that are mostly mandatory commitments are one thing. Massive budget busting tax breaks to the wealthy that don't need it is something else."
The "mandatory commitments" you speak of are Social Security and Medicare, two entitlement programs that account for over a trillion dollars annually.
1
I have never met anyone over 65, liberal or conservative, who is in favor of changes to Medicare or SS unless it’s to increase benefits.
4
To the extent GOP policy influencers/makers are intentionally sabotaging the economy during democratic administrations and then running it hot for votes during GOP rule, then their unAmerican values are undermining our posterity’s well being and forfeiting fundamental values of our democratic-constitutional-republic.
Their success is of great concern.
14
yes, what you say about the cynicism is true and a lot of the responsibility falls on Obama in my book since he never tried to "sell" his plans to the American people and that should be a top presidential responsibility since he run for his ideas.
Being a centrist, like Obama, is a big mistake of the democratic party, and hope that the many lessons will finally be learnt.
That is a reason why the next president should be on the left.
5
There's a word for politicians who starve the return to full employment with austerity and sequestration when they are not in power and then goose the economy with higher deficits to inflate a stock bubble when they are.
And it's not patriot.
36
Government spending in excess of revenues is financed largely by government borrowing from the same folks who get most of a tax cut - corporations, banks and the very wealthy. So instead of paying taxes to the government, the wealthy just swap some of their cash for claims against the government, at interest. Cash flows balance out, it's the government's budget and balance sheet that suffer. The government not only gives the wealthy tax cuts, it pays them interest for not having paid taxes, too.
12
I would give up on expecting the Republicans to pay a price for their bad behavior. In 2008, Republicans did everything they could to turn the financial crisis into a full-fledged worldwide depression; but the Democrats came to the rescue and supported the bailouts. Republicans then tried to blame the government for the crisis and did their best to slow down the recovery, as you state.
But the business community still supports Republicans. I'm not sure what can be done about this. I'd like to see Democrats put more of a priority on economic growth. But there always seem to be a million other priorities.
10
I wish Krugman would explain how the deficit expansion has stimulate the economy so much, especially since he says the tax cuts have not increased corporate investment. Is it share holders spending all those dividends?
3
@Paul W. Case Sr. The government is injecting $4 billion in borrowed dollars into the economy every day. It doesn't take a doctorate in economics to see where that ends.
14
Corporations used about $850 billion of the Trump Tax Cut to buy back stock. Trump said they’d invest in manufacturing and R&D in America. Very little of that took place. The buy backs increased stock $prices and that increased the $compensation of CEOs and VPs at the biggest companies. At the same time, those same companies experienced a lower Federal tax rate. Bottom Line - the $deficit grows and income inequality gets worse.
14
Thanks for this article: I was commenting with friends about the complete absence of budget deficit questions to Trump or on Fox or even by the mainstream media in the news or at the debates. The worst thing is that the minute a democrat is elected, the fiscal hawks will be back arguing for spending cuts and blaming the democrats for exploding the deficit. The republicans are betraying this country, literally destroying its social fabric. But in the opinion pages all the words are against "angry" Bernie Sanders' socialist agenda and how unelectable and bad he will be for the USA.
When a party abandons political discourse in favor of radicalism, anger is the right response. And all people of goodwill should react in outrage and shock. Bernie is not a radical, when compared to Trump and the republican behavior over the past 20 years and counting.
17
Times like these often requires one to look at the possibility of some organized Civil Dis-obedience campaigns. Such as, th refusal to pay taxes "owed" to th government come April; or, servicemen called back to duty instead questioning what type of mission he, or she, is being called on to perform and whether there'll be a decent job to come home to IF they return?
Desperate times calls for desperate measures. A very large majority of Americans know the desperation they live with day after day after day... It's high time those in fiscal control of everything here feel th desperation themselves.
6
My pet cat could be running 'the best economy ever' with multi-trillion-dollar deficits and a loose-money policy from the Federal Reserve. It is interesting that the GOP played down Obama's economic chops by saying in a deep recession that there should be tight fiscal and monetary policy and claiming that the only reason for Obama's strong economy was easy money. Right now, a decade into the economic expansion, the Fed should be raising rates fairly rapidly, which will also have the benefit of putting them in the position to cut rates when the next recession inevitably strikes. And Congress should be raising taxes and cutting spending to allow room for fiscal loosening when recession and high unemployment cyclically return.
15
Thank you Paul. The $1,000,000,000 deficits will never be paid off as they are added onto the existing $20,000,000,000 national debt and as interest rates inevitably rise, each incremental trillion dollars added to the debt will require anywhere from 20 to 50 billion a year in additional interest payments. FOREVER. It is conceivable that within a decade or so the INTEREST payments on the national debt will become a larger part of the federal budget than our military expenditures aka the defense budget.
Think about that for a minute.
Finally these interest payments go, in general, into the pockets of the rich----and then into the Cayman Islands.
8
How much is the "Defense Budget"? Does anyone know on what it is spent (hint: no)? Is it apparent, now that an American Armed Forces base has been attacked with impunity in Iraq, attacked by missiles for which not even an attempt was made to shoot them down or interfere with them in any way, is it apparent that the Defense Budget exists to enrich contractors and let the Americans on the front lines be disabled and killed, to privatize gains and socialize losses (where socialize, if it is extended to include the rest of humanity outside our borders is pretty intense socialization)?
So it is not simply a matter of the Right, when it is in power, directly enriching itself by cutting taxes on a tiny plutocracy, it is an entrenched system to mulct the poor and line the coffers of the rich. Oh, and did I include minority rule enshrined in the Constitution?
How can an honest American tolerate this? Well, I suppose in the first place s/he must know about it, and that has been taken care of by the Right as well. But for those who do know, what should be done? What can be done?
5
Talk about mortgaging the future! This is what the GOP has been doing for decades. No matter how often people are told that cutting taxes does not improve the economy they don't get it. Tax cuts are easy. It's harder to spend wisely and to resist pressure from the donor class whether they are rich corporations or rich individuals. The top 1% own too much at this point. And they have far more of a say than they ought to have when it comes to regulations, laws, etc.
Trump is not the cause of all of this. It goes back a long way. Tax cuts are not good governing. Balancing the budget by cutting social programs, entitlement programs that we pay into, cutting safety regulations, and depriving agencies of money that they need to work hurts everyone.
Do we want to be at the forefront of new technology to clean up the planet? Do we want to have a decent country and planet to live on? You wouldn't think so after listening to Trump's "speech" to the nation. The days of carefree use of polluting fossil fuels, fertilizers, herbicides, insecticides, etc., need to end. We need some visionaries, not reactionaries like Trump and the GOP. We need to spend money on planet friendly technology. And we need to reverse decades of human neglect in America. Trump and the GOP will not do any of that no matter what they say.
2/6/2020 9:24pm first submit
13
@hen3ry
This is fleecing present and future generations every which way they can, Through promises of riches in the afterlife, riches in the present if you work hard enough pedaling a rigged bike, and plain old lying and convincing people that up is down.
It’s robbery.
1
The math is simple. Corporate taxes have been slashed. Executive pay has skyrocketed. The national debt - owned by everyone - is being used to finance stock buybacks - make billionaires into multi billionaires, millionaires into billionaires and the rest end up with a lower standard of living financed by debt.
27
I often disagree with Dr K's politics and his frequent avoidance of game theory in policy analysis, but he is of course 1000% correct here.
Since federal politicians might otherwise just bribe their way to re-election and spew waste fraud and abuse in the process, some form of balanced budget law is in order. So is a ban on presidents running for re-election.
Exceptions for war, unusual levels of natural disaster and recession are reasonable, but the main reason for a balanced budget rule is political, not economic. In fact, it would be worth some of our GDP growth to make our politics less dysfunctional.
Maybe an amendment banning both federal deficits and presidential reelections is something both parties could agree on.
5
Republican Game Plan: Cut taxes. Cut social safety nets, including Social Security and Medicare, to reduce deficit. Pack Supreme Court with conservatives, who will in turn unwind “precedents” regarding abortion, affirmative action and civil rights. Take over the House and repeal EPA, Voting Rights Act and Civil Rights Act. Repeal First and Twenty Second Amendments.
Any questions?
17
If you are investing in the stock market directly or indirectly through your tax-sheltered savings, “all boats are rising.” However, if you are “employed” in a job with low wages and no health care benefits, you are hurting. Unfortunately, many of those employed and hurting will not vote and thus hand Trump another four years.
5
I have done pretty well. I am not an American but own shares in the world's biggest economy. I get the benefits of rising US share prices and suffer none of the downsides. And that deficit is something I never have to pay back.
Funny how America First works out,isn't it?
14
Steven Mnuchin tried to move the goalposts today by conceding that GDP growth this hear may be less than he projected. He blamed Boeing's 737 MAX fiasco, and insisted that the tax cuts "will pay for themselves" even though they obviously will not. It's the usual Trump/Republican playbook: tell lies about what you do and blame bad results on somebody else.
46
This is partly on the American people and partly on mainstream economists who can't send a clear message about the problem--or is there one?--with high budget deficits. But let's face it: most Americans are so easily fooled that we have an utter fraud as president who will probably be reelected.
14
I wish Dr. Krugman would explain to the American people why, in the midst of a stock market that seems to set records every day, the Federal Reserve is doing $60 Billion per month of Quantitative Easing? Is the Fed working for Trump’s re-election?
90
@Daniel Lake
Well, what do you think? Isn't it rather obvious?
Everything is being done to satisfy the monarch in the White House.
2
It is hard to understand how the clearly understandable facts stated here, are not blatantly obvious to every reporter, including those who work for Fox News.
Of course, they are never going to report this. And if they did, Fox viewers would be willfully blind to any possible evidence.
But, the rest of our population who have not undergone a voluntary lobotomy, and are therefore not so willingly blind, need to have these facts pointed out to them - again, and again, and again, and again - until it sinks in.
Republicans sabotage this country, hurting everyone, including their own voters, when a Democrat is in power. Just so they can regain power. It is despicable behavior.
43
@MJC SB
Fox News is not even news, it is an abject joke. There is maybe one person left in Fox News that resembles a news person, and that is Chris Wallace. All the other decent news people working at Fox News have left.
Said the man who has demonized budget austerity for the last 20 years! Mr. Krugman, we have google, we have All your failed predictions!
@Pjlit I have been reading him since 2005, and he has been remarkably accurate. Also, you may not have read what he was saying. He was against austerity when it damaged the economy or held it back. Not when it gave the store to the top 1%.
20
@Pjlit Dr. Krugman has not demonized budget austerity for the past 20 years. There is some nuance here having to do with timing. When the economy is stagnant, you stimulate the economy with deficit spending. When it recovers you raise taxes to pay for the earlier stimulus and reload the government coffers for the next economic downturn. Instead Trump has used deficit spending at a time when the economy does not need it, and this will deplete the coffers for whenever the next economic downturn will occur. And politics being what it is, whoever happens to occupy the White House at that time will be blamed.
6
Republicans are forced to behave cynically by Trump. They are afraid of him with the exception of Mitt Romney, who demonstrated exceptional courage to go against Trump and his party. The rest of the party put self interest over national interest and made our country leadership worse than banana republic leaderships. The world may forgive us that Trump is an anomaly in US leadership.
2
@Kodali
Nah, they have been highly cynical in this area long before Trump. There may be a few of them who really care about deficits who've been cowed by Trump, but the party's general game of making a lot of noise about deficits but then blowing them up whenever they are in power goes all the way back to Reagan.
8
@Kodali "exceptional courage" for a politician. But what a low bar!
Democrats could start bewailing the deficits and agonizing about how our children will never be able to pay of the debt. Lots of GOPers could be quoted on their previous remarks. That would be some cynicism payback.
5
Your Piketty link didn't work for me so I can't check that. I'd add that 1973 is an odd end date to age of prosperity.. Not a good year for the economy. Height of Vietnam spending. Maybe if you chose 1946-1965 you'd get a very different story with regards to the defict.
Also, the great recession brought on by Bush came after exploding deficits, not reduction.
You really need to check your facts.
I guess Democrats need to play the same game, especially when it comes to farm subsidies and hurricane relief, which primarily benefit the red states. .
1
The economy is “hot”? In fact it’s overheated, not with inflation, but with global warming. How is the fact that industry and transportation throw their waste into the air not part of the economy? If people just kept adding their human waste to a pile the basement wouldn’t that be a factor in the quality of life? We now have less than 10 years before we must MUST cut back greenhouse gas emissions by 50% or go over a tipping point. Instead of looking at GDP look at the PPM, parts per million of carbon dioxide in the air. Safe is 350, but currently it’s very close to 414 and it's rising. Do we really think a few “Green” measures we take care of things? Some sound the alarm and cry “emergency”, but few realize what must be done. We at Promoting Enduring Peace call for worker and community takeover of the fossil fuel industries, rationing of fossil fuel use, degrowth, rewilding and other emergency measures.
8
I have been telling people that the national debt isn't really debt, but an auxiliary money supply. Because the government borrows in the same currency that it issues, bankruptcy is impossible; the only hazard from excessive deficits is inflation. Since the financial system needs T-bills to function, we actually *must* run deficits to keep our economy healthy. The national debt clock is completely silly; might as well display each "family share" of the currency in circulation. Thanks for helping me to understand all this.
Professor Krugman, help this simple mind understand. Total federal tax revenues actually increased a smidgeon in 2018 over 2017 (around $3.33 trillion). And they evidently will be even a bit higher for 2019 once the number is finalized. If total tax revenues went up (not down), how does the tax cut contribute to the federal deficit? Is it because tax revenues would have been higher without the tax cut and the economy would still have grown at the same pace?
@Jim Yes. Spending goes up every year (because of inflation, even when it's low and because of the expansion of the population, which is still expanding). As I understand it, per capita tax revenues fell, while per capita spending went up.
2
I never thought I would say this, but if the economy does begin to implode, how will we know? Seeing Trump and his band of hucksters announce a pending recession would in my mind be, oh nevermind, that would never happen.
3
Most Americans don't realize that debt, per se, is not a bad thing. Debt shifts future spending into the present: a good tool to have during a recovery.
Massive deficit spending, especially in a good economy, is reckless. Any kind of economic shock (i.e. Coronavirus) requiring a fiscal response could prove lethal.
As my parents told me: Borrow if you must, pay it back when you can -- there will be more rainy days than you can possibly imagine.
5
Mr. Krugman has a convenient but faulty memory. Obama and the Democrats promised that the $1.4 trillion deficit in 2009 would prevent unemployment from increasing to 8%, not to slow it down from 9%. In fact, the unemployment rate increased over the next two years to 10%. Granted, spending half a billion on Solyndra only made it possible for those Democrat donors to recover their investments and didn't work toward reducing unemployment.
But Democrats had 100% control when they passed the stimulus, including a supermajority in the Senate for the second half of the year. [After the comedian was able to fabricate enough ballots to beat the Republican.]
2
@ebmem
Oh, dear. Where does one begin?
Trump's golf outings and his family vacations and business trips (including ones of which he's not a part )will cost the taxpayer more than Solyndra.
Meanwhile, how many tens of billions a year do we waste on weapons which don't work, from politically connected defense contractors? And just think of the trillions in unfunded liabilities, to do more of it in the future....
66
Pretty sure no stimlus would have been necessary if Bush and Cheney’s policies hadn’t BROKEN THE WORLD in 2007.
37
Hmmmm, and this is relevant how? It looks like you missed the whole point of the article, perhaps you should reread it.
10
". In January 2009 I was practically tearing my hair out over the inadequacy of the stimulus, "
This is wildly misleading on the role of Mr Krugman
When President Obama was about to take office, he assembled a team of distinguished economist, to recommend the size of the stimulus
Here are the numbers, from the Memo send to Obama in December 2018
"The memo also includes a comprehensive round-up of the counsel offered by outside economists on the side of the stimulus. It notes that Paul Krugman was calling for $600 billion in the first year, Robert Reich wanted $1.2 trillion over two years, Jamie Galbraith wanted $900 billion in the first year, Ken Rogoff wanted $1 trillion over two years, Mark Zandi wanted $600 billion, Lawrence Lindsay wanted at least $800 billion, and Greg Mankiw — who is now a top Romney adviser — was “the only economist who we consulted with who refused to name a number and was generally skeptical about stimulus.”
Washington Post January 23, 2012
Kindly, note that when Mr. Krugman had is say to the incoming administration , his recommendation was in the lower half of the expert panel. Indeed, Mr. Rogoff, an economist with whom he frequently quarrels. recommendation was twice as large as Mr. Krugman's
After President Obama acted, on the input of his distinguished advisory panel, Mr. Krugman changed his opinon and began to attack the President.
@Woof
Come on. $600,000,000 over one year, if repeated, is not less than $1,200,000,000 over two years.
6
@Woof
Here in Canada we are tied into America's economy. If America gets the flu we get pneumonia.Somehow the experts in our deep state looked at the data and we escaped much of the damage of 2008.
Economics is not the dark science in fact it isn't a science at all it is more a religion than a science.
Economics has architects and engineers and delivers what we want it to deliver.
3
@Woof Woof -- you're back with your Bourbonesque memory? Did you click on the link? He complained on January 6, 2009 that Obama's stimulus was way too small. $775 billion over two years, which, let me think, is a whole lot less per year than the $600 billion Krugman wanted the first year, which is, let me think, exactly in line with Reich and, if you read the article grammatically, more than Zandi and Rogoff wanted. Yes, Galbraith wanted even more, rightly, but Krugman comes in tied for second highest amount.
1
I guess a deficit is a deficit.
I'm not sure though that a spend deficit is the same as a tax deficit taking into account the overall economic impact.
That is to the extent the tax cuts drive growth, despite a lag, it must also raise tax revenue.
If unemployment is falling and wages are rising that both saves spending and increases the tax take.
Notwithstanding, these days not many countries seem all that worried by debt & deficits.
Economists have a concept called the velocity of money. It is the frequency, how often, that money changes hands in domestic commerce.
Here's an example. Suppose the gov gives Scrooge McDuck a Billion for advice on the comic book market, If Scrooge puts the bucks in his basement, & forgets about it, that doesn't help the economy at all. That Billion has a velocity of 0. Also, if Scrooge loses a financial bet to Daddy Warbucks, & the Billion moves from Scrooge's basement to Daddy's, that is a change, but the velocity does not change because it is not a useful change. It doesn't help commerce, but it also does not affect prices.
The gov gets money to us to use to buy & sell stuff by spending it or by cutting taxes (tax expenditures). If that money has low velocity like the Trump tax cuts, that doesn't raise prices, but it also doesn't help the economy very much. If it sends high velocity money to us, that would cause inflation except that, if the money is spent so that it increases production, that tends to lower prices & prevent too much inflation.
The genius of capitalism is that more high velocity money increases demand & more demand increases production automatically.
Hooray!!
Speculation is bad
for the economy. That money has a very low velocity. AND it increases risk which we have seen in 2008 ain't a good thing.
Since 2007, the velocity of money has plunged. https://fredblog.stlouisfed.org/2016/04/a-plodding-dollar-the-recent-decrease-in-the-velocity-of-money/
20
@Len Charlap very astute. Back in the 80s all my business friends were talking about their cash flow rather than their assets. Cash flow is the best measure of how well a business is doing. If it's strong the business can survive almost anything.
5
@Len Charlap
Spot on!
Exceptionally well written and one of the best explanations of economic activity that I have read.
2
No one listens to you, sir, even though you are a real expert at economics. The corruption is so big, so bold and so entrenched that nothing seems strong enough to crack it. What just happened with Trump truly boggles the mind, but here we are. It is highly likely that we will see four more years of Trump, and what's worse, the rest of them as well. Dracula McConnell and his minions.
We are supposed to "keep an open mind" and not denigrate the "other side" but if this was 1860 and I was arguing with slave owners who strongly believed that slavery was not only necessary but good, I wouldn't be thinking about hurting their feelings in arguing how wrong they were. I wouldn't care if I offended their sensibilities. Ditto the GOP.
FDR welcomed the opposition to his policies. He knew he would be vilified by many, but he didn't care, just like Romney. Sometimes people do actually have integrity.
So much of what's going on now, not just here but all over the world, is awful. The militant Hindu's in India are praising Gandhi's murderer as a saint. Erdogan, Xi, Kim, Putin, and all the rest of the thugs, are a sign of dictatorships rising and Johnson and some of the others are dancing the happy dance at their own conceits.
Your economic advice has always been wise. I don't think the GOP cares at all about what you advise, sadly. Keep writing anyway.
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Good talking points for the presidential candidates!
4
There is a legitimate question if Paul Krugman still understands fiscal policy
On August 15th, he wrote in the NY Times
"The Federal Reserve basically controls short-term rates, but not long-term rates"
Paul Krugman, NYT Aug 15th, 2019
That statement was correct till 2008. But in 2008, the Federal Reserve invented QE precisely to suppress long term interest rates. By the Federal Reserves own fiscal experts it depressed long term interest rates by 1.5%
That is, his statement was erroneous
It is quite evident to economist that Mr. Krugman no longer read academic papers on fiscal theory.
I am looking forward to his response to above comment
2
@Woof Wait, so the Fed is still doing quantitive easing and depressing long term rates? Who knew?
@Woof Fed creates money out of thin air; in principle, they can control the price of anything! It just depends on what they buy.
You know Paul, as long as liberal (neoliberal?) economists let Obama get away with saying things like "...the government will have to tighten its belt..." to fight the recession the public never had a chance to understand the economics they needed to understand. Paul Ryan got away with his magic asterisks because you guys let everyone believe that money somehow originated in the private sector and the government spent money that it stole from the business. If you could just have provided the people with the simple fact that money comes from government spending and public sector deficits are private sector savings. Just a simple public understandng of sectoral balances could have short circuited all of Ryan's deficit hawkery flim flam.
6
From my vantage as a disabled vet and senior, I can only surmise that Mister Trump is claiming he alone is responsible for the economic highs. And this from a man who still has not shared his tax returns with the American public.
7
Party ahead of country.
That's a mantra that works magic for Republicans:
in terms of political victories, starting wars using lies, gerrymandering, environmental devastation, accelerating global warming, rewarding corporate tycoons and the investors enriching themselves off them, etc.
for the country? the only part of the preceding that applies is "devastation."
16
It is really getting hard to know what K thinks about the debt and the deficit. He talks about an exploding deficit as if the deficit were a bad thing. Let's assume he really is a Keynesian who believes as Keynes famously said:
“The boom, not the slump, is the right time for austerity at the Treasury.”
This is usually taken to mean that we should run federal deficits & thus increase the debt when times are bad, but when times are good we should run federal surpluses & pay the debt down.
I was surprised to learn in a speech by Hillary Clinton, that during the Great Prosperity of 1946 to 1973, not only did we not pay down the debt, but we increased it 75%. I thought this has something to do with the effects of the war in Europe. I was surprised to learn that these effects have been greatly exaggerated. (Recently in Piletty's book, I found a chart that showed clearly shows this. http://piketty.pse.ens.fr/files/capital21c/en/pdf/F1.1.pdf ).
I had never really thought about economics, but I thought I just didn't understand what was going on. I continued to believe Krugman's word was gospel.
Then I saw a comment to an article made by someone called Stephanie Kelton who pointed out the history I since posted many times. Everytime we followed Keynes' & Krugman's advice & paid down the debt significantly, we fell into a depression. This happened 6 times & has accounted for all of our depressions. Now I no longer believe in everything Krugman writes.
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@Len Charlap I am convinced that economics is a profession that only makes sense in the context of a big government; it is about how much to tax the people, how much and where the government spending should take place, and about relentlessly growing role of the government in a nation's economy. This is what economists constantly think about: centralized control. Investors, businesses, families, people of all walks of life perceive and react to market conditions quite differently, rapidly and spontaneously, based on their own specific conditions, which no economist ever thinks about. I like Adam Smith's vision of the economy much better than Keynes' version.
@TO :"I am convinced that economics is a profession"
Economics is also a pseudo-science.
You don't understand. Krugman's advice is to spend when the economy needs the stimulus, and to spend well, on infrastructure, education, and research. It is also to tax progressively. It is not to simplistically "pay down the debt". And no, following that advice has not driven us into recessions.
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The only thing that will defeat Trump is a recession. Under this circumstance, the only candidate who will deliver a massively blue Senate and House is Sanders. Go Bernie, go!
5
Trump told his guests at a donor dinner “I don’t give a —— about deficits. “. He’s fully aware of what he’s doing. He’s selling the suckers another shoddy condo, another worthless degree from Trump University. Trump has always used the presidency as a way to line his own pockets, just like every other venture in his life.
If he’s re-elected, he will take aim at Social Security and Medicare. He told a journalist at Davos that the American people have done so well under his watch that they can afford cuts to Social Security. He also said that he was now “deeply concerned about the deficit” so had to look for ways to economize.
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Is there any honest Republican politician left?
I was brought-up believing that forthrightness and honesty were cardinal qualities of a human being. I feel very sad observing that these qualities are disappearing, especially amongst Trump-era GOP politicians. This does not bode well for America.
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I realize this is probably unhealthy thinking, but having watched the political pendulum for the better part of 5 decades, half my mind actually wants Trump to have a second term, so when the crash comes they can't turn around and try to blame Democrats again.
9
@Mford
" half my mind actually wants Trump to have a second term, so when the crash comes they can't turn around and try to blame Democrats again."
That's what the German left was arguing in the 1930s. What they got was the Third Reich.
2
@calhouri
Perhaps, but that's why I reserve the other half of my brain for avoiding apathy.
Professor, you might add that President Trump's bullying of the Fed has depressed interest rates beyond what we should see with our robust economy. The Fed traditionally raises rates to curb inflation but with the unnaturally low rates we see today, we have further goosed the economy while, at the same time, given up the government's most effective tool to stimulate the economy when the inevitable recession arrives.
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@HowieBsd :Have you read any of Krugman's commentary about interest rates over the last 3 years?
Take a look at:
https://www.nytimes.com/2019/06/20/opinion/federal-reserve-trump.html
There are some Olympian level verbal gymnastics there.
Trump doesn't do any real work. He goes to campaign rallies and plays golf. The State of the Union was just another one of his rallies. But Trump loves to take credit for the work done by others. Like the minimum-wage increases enacted by Democrats. Or the "reworking" of NAFTA, even though the heavy lifting was done during the Clinton administration. What is Trump's major legislative accomplishment over his first 1000 days (and beyond)? A huge tax cut for himself and his wealthy cronies, people who already have more money than they know what to do with.
I don't know all the reasons why Nancy Pelosi ripped up Trump's speech, but I suspect his outright lie about protecting pre-existing conditions had a lot to do with it. Pelosi worked tirelessly to push the ACA through Congress, and all Trump and his GOP enablers have done is try to completely destroy it and replace it with absolutely nothing.
Cynicism? How about the deluge of overt lies Trump has told the American people throughout his presidency? Democrats cannot let him continue to get away with it! These lies must be kept in the news *every single day.*
As Lincoln said to McClellan: "You must fight!" If that message becomes lost in the day-to-day Trump noise, then we must accept that we, too, will be lost.
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@Blue Moon i think trump will protect pre-existing conditions. he wants to rip up what we currently have -- and has not announced a replacement. but, he will protect pre-existing. Why? What politician would expect success with the public for doing away with that vital element in healthcare? It's silly to say he doesn't want to protect pre-existing. It's just political.
Kansas Redux: or, Deja Vu, all over again.
Why??? Because they CAN.
13
I say Warren is by far the smartest and has the best economic chops to take on our dimwitted pres. In any case, we must keep broadcasting the truth, again and again, and hope it makes the difference in Nov. If we resort to Trump and the Republican's tactics, we've lost our soul.
17
The fiscal hypocrisy is astonishing. Where are the tea partiers now? Crickets ...
We are living way beyond our budget, and handing the bill to our kids and grandkids. When interest rates go up we’ll be on our knees.
25
How do most people gauge the economy? They look at the stock market. When Trump slashed corporate taxes to an absurdly low level, big companies used that cash to boost their bottom lines and bought back stock. This reduces the number of shares in circulation and increases the profit per share. Result? A big boost is share prices. Trump bought those high prices with an exploding deficit.
But unemployment is so low. As shown by Rattner, average employment gains for the first three years of Trump are about 10% lower than the last three years of Obama. Unemployment is low because we are having a very long steady expansion. With low birthrates, rapidly retiring boomers, reduced immigration, there are fewer people available to take the new, mostly low wage, service sector jobs.
Manufacturing is in decline. The trade war has reduced both imports and exports. Input costs are much higher making US goods less competitive around the word. Healthcare is sucking up everyones money. That's where the growth is.
Low skilled and unskilled factory jobs are not and will never come back. That's some serious hypocrisy on the part of Trump.
So basically, the deficitpalooza was an intentional bribe to get the super rich and big corporations to turn a blind eye to Trump and support him no matter what. That seems to be working quite well.
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@Bruce Rozenblit Very well said!
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@Bruce Rozenblit "Low skilled and unskilled factory jobs " are not necessarily extinct. You may not see them as useful as, say, plumbers but there's still may things that require seemingly simple skills. The robots aren't here yet. What has happened is that other skills have become more needed in the economy. But not everyone can acquire them. What to do?
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@Bruce Rozenblit :"Low skilled and unskilled factory jobs are not and will never come back. "
Some folks saw that coming in the early 1980s (actually the writing was on the wall in October, 1973). At that time they were accused of being heartless Republicans.
Now that rhetoric has become the way forward for progressive thinkers.
At one time those pesky UAW union members had bumper stickers that said: "Out of a job yet? Keep buying foreign." Or "Buy American!". Now it's regressive thought.
What a world, what a world.
3
Paul, I have a question. It seems to me that with the Dow being over 29,000 it could be an ominous sign. It seems that when the stock market is booming as it is now, it possibly can be a forewarning that our over-all economy may be at risk. What say you, in a few short paragraphs?
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@Kathy Lollock
It is the funds that are driving the market prices. Return on investment is <2.8% and their investors are getting worried. Pension funds are not getting enough ROI and state pensions have to be made up by the taxpayers, instead of investments. Savings are even lower <1% which is below the rate of inflation, so savers are actually losing money as their savings will be worth less than they were when invested.
This is a first phase in deflation, if not reversed results in owing more than your equity. We have many historical examples to go by in this case, it is not theoretical, is is factual. Those profiting from the market are those with large holdings in those businesses that have a positive cash flow because of the GOP tax scam. A great many of them are on the boards of directors vote themselves cash bonuses and more stock. Buying back the stock raises its value.
8
Krugman mentions the Obama administration's deficit spending for worthwhile national needs such as infrastructure or healthcare. Agreed that the current deficit is caused by tax cuts for the wealthy, but what actually spending is this administration doing that buoys the economy?
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@Alan J. Shaw according to Keynesian economic thought, government spending itself while running up a deficit stimulates the economy by a multplier effect. Whether the government cuts taxes, buys guns, or buys butter, there's more money out there to stimulate private sector spending. This deficit spending is a valuable tool to confront recessions and depressions. It is a terrible idea when the economy is on sure footing.
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@HowieBsd
Thank you. I agree with you and Keynes.
Let us not forget that the high employment figures also reflect the two and sometimes three jobs that the folks at the bottom of the pay scale hold down.
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@Joan In California And don't forget about the professionals (especially in the medical field) who want full time jobs but must make do with fewer hours which makes them ineligible for benefits. The full employment economy is another trump illusion. The majority of Americans walk a financial razor's edge.
2
While we're at it, can we try to bury two more zombies:
1) that "fiscal responsibility" necessarily entails cutting spending, and that persons who advocate same are by definition "responsible"; and
2) that political reporters know anything about the economy ("neutrality" is an empty notion, in that dismal shade. Take a survey of Times reporters who just "kow" that "entitlements" must be cut, and you'll see what I mean.
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@jrd It's always interesting how they talk about cutting spending when they want to impose some "fiscal responsibility". Nobody ever says that it is "fiscally responsible" to cut income but you can't cut spending without cutting income. Everybody's income comes from someone else's spending and that spending can't exist if the government doesn't spend - and create the money - in the first place. All income in the private sector begins as spending in the public sector. Heck, you can't even pay your taxes till the government spends the money into existence!
8
His base does not read or educate themselves on anything but sound bytes.
Dems campaigning have to show in real terms what a huge deficit does -to those who are independent or need another reason besides health care.
Racking up one’s own credit card and declaring I’m rich should be enough of analogy for people to get it.
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@Liberal Hack
Keynesian voodoo is basically racking up the nation’s credit card. “In the long run we are all dead.” Do you think Bernie voters care about deficits? They want to add $100 trillion to the national debt for Medicare for All alone.
@Registered Repub Actually nothing of the sort is what they are proposing. It's more like shifting spending on insurance that is going through private hands before it gets spent on healthcare goes more directly to paying for healthcare. Studies have shown that between our existing taxes for Medicare, VA and Medicaid and our payments in premiums to private insurers we have enough money in the system to easily afford an MCA system. Take out the almost 30% that goes to operating expenses, advertising and profit to the private health insurance market and the overall cost is less. People are then freer to live and work in more creative ways and the country as a whole is healthier. You, as a Republican, are constantly exposed to the "it will ruin us" rhetoric of those who are the leeches in this system and in a way they are right. They might have to actually do something that benefits the country to make a living. No one should end up bankrupt because of a medical emergency but it happens all the time the way things are now.
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@Hugh Robertson When Democrats prove they can handle the complexities of vote counting in Iowa, I’ll start to take their proposal to take over 1/6 of the US economy seriously.
Absolutely.
1
On the glorious night that Trump was elected, the good professor predicted a stock market crash from which we would never recover. The statement was classic Krugman, always wrong, never in doubt. Despite Krugman’s dire predictions, the market has added trillions of dollars in wealth and created many 401k and IRA millionaires.
Now, the same people that blamed Bush for Obama’s weak economy want to give Obama credit for Trump’s unleashing of American innovation. In reality, Obama did virtually nothing on the economic front after 2010. The Republican House prevented him from implementing his disastrous socialist agenda.
I agree that Trump and the Republicans are awful when it comes to reigning in the deficit, but we don’t need lectures on fiscal responsibilities from Keynesian witch doctors.
2
Do you realize that the ‘incredible’ Trump economic boom lags the jobs growth and stock market gains of both Bill Clinton and Obama? The economy has slowed down since Obama left office and Trump took over. Except, the $deficit has grown ‘huge’ and the very rich has gotten even richer from the Trump tax cuts. That’s who likes the Trump economic ‘plan’. The mega wealthy.
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@Registered Repub I remember him saying something to that effect. I also remember him correcting his comments a few hours later. I felt the same way as the professor and still do. When this economy crashes not sure there will be many options. So dear RR, may you experience the worst of what your party is doing to our country.
5
@Registered Repub What school of economics is Trump pushing. By exploding the deficit for some short term gain Trump sounds like the worst type of Keynsian.
5
Trump knows that his best chance of winning is to keep the economy strong. If he's reelected, he can drop the artificial props and declare a national emergency due unsustainable national debt, and announce draconian changes in economic policy that will go easy on the top earners and much harder on all others. Like everything else in his bag of tricks, he is manipulating the economy to protect his own political survival.
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@William
I don't think he and his cronies have quite that much clout yet, but they are certainly, and very effectively working for it!!!
3
Your last paragraph says it all. Democrats are playing by rules that the Republicans abandoned long ago. They aren't even playing the same game. The Democrats intellectually mired in a past that no longer exists, wistfully thinking that if they defeat Trump that things will return to normal. There is no Republican party. It is now the party of Trump and even when he's gone they will remain his party, playing a viciously different game with only one goal - to seize power at all costs.
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@Barry Henson
Sorry, but THAT is the Republican party. Make no mistake about it.
2
There is are a whole world of economies out there. Global debt is running at something like $250 trillion right now. That's like 3 times global GDP. Trump would have us believe that everything is coming up roses and will only continue. If I remember correctly similar sentiments were to be heard in 1999 and 2007. I fall into the cautious category. Stock valuations are at the high end compared to valuations through time. That's more room to fall. The tax cuts didn't provide much of a punch to capital investments. The 4% growth in GDP that was bandied about by some never appeared. We did get a bunch of acquisitions, plenty of dividends and buybacks. Personally, I would have liked to seen the money that went into the tax cuts put into infrastructure. At least we would have something for our trillion dollar debt.
8
@richard wiesner
How is it you believe that our present government cares about anyone but the monied class?!
1
This article summarizes a rather astute analysis of changes in the Nation's economy. There is one topic related to this that is not often discussed. It is the relative inability of American voters to apply mathematical reasoning to economic conditions. Voters retreat to explaining conditions by using platitudes. I personally blame this on the emphasis in the nation's schools and colleges. Math, science, economics, and accounting are challenging. Students are allowed to shirk away from learning how to integrate mathematical reasoning into their thoughts about our economy. The challenge for economic policy makers is two fold: solving economic problems with sound heuristics and then coming up with a short and catchy phrase that can be picked up by voters to rationalize the approach to managing the economy. (I don't mean to sound cynical.)
6
I agree. Applying sound math to economics is important in education. As a decades-long educator at the university level in chemistry, I have seen a lack of student confidence in math (and other systematic structures) to be a block. Give them opprtunities to express themselves, and they may get over this. It is a challenge, but very well worth the effort.
Are you, perhaps, related to the late Frank Zeidler?
2
Michael - Arithmetic and Economics:
1. We need money to conduct commerce.
2, As the economy grows we need more money.
3. Money can come to the private sector from 2 places--the federal gov or from a favorable trade balance.
4. Net federal spending is measured by the federal deficit, i.e. the deficit measures the net flow of money FROM the federal gov TO people, businesses and state & local govs.
5. But we need spending that will help the economy. The money should go to the people who need it & will spend it, not to the people who do not need it & will speculate with it.
6. Thus in order to get the new money the private sector needs, the federal deficit must be larger than the trade deficit. We have a large trade deficit. We need a large deficit.
7. If the above is correct, periods of negative deficits, surpluses, which pay down the federal debt should lead to a bad economy. They have. There have been 6 such periods in which we paid the debt down 10% or more in US history, They have ALL ended in a real gut wrenching depression. In fact this accounts for all of our depressions.
8. On the other hand, in 1946 we had the largest debt ratio in our history. The public debt ratio was 40% larger than today. We had deficits for 21 of the next 27 years. We increased the debt 75%. And we had Great Prosperity.
While deficits are NECESSARY to avoid economic disaster, they may not be sufficient. They must be large enough & and the new money must be useful in domestic commerce.
@Mark Hermanson Thank you for your remarks. The answer to your question is yes, Frank Zeidler is my father. For other readers, Frank Zeidler was Mayor of Milwaukee from 1948 -1960. His brother Carl Zeidler was Mayor from 1940-1942 when he resign as mayor to serve his country in the U. S. Navy. On November 7, 1942 the ship on which he served sunk after being hit by a torpedo in waters 400 miles from Cape Town, South Africa. Frank Zeidler was a lifelong Social Democrat and twice was the Presidential candidate of the Social Democratic Party. The vestiges of his political life are still alive.
1
It’s all academic, Paul.
Trump’s just been riding the tailwinds of an extremely weak recovery for all except the stock market, which is the place where the inflation is showing up. And the super-rich, of course, who have just used the past twelve years to consolidate their ownership of all the wealth in the country that much more tightly.
The giddy employment numbers everyone, including you, love to tout, leaves out little things like the trillion dollars of student debt; the continuing collapse of the labor participation rate; and the extent of the “employed” who are working multiple, precarious gig jobs, to rent houses they used to be able to own.
We continue to live in an excessively financialized economy, where speculation replaces capital formation and accumulation as the jello foundation of our current, supposed GDP wealth.
Even if Bernie and the Progressive wing of the Democratic Party manage to drive all the zombies, young and old, out of government, they will most likely have the responsibility to manage the deep Crash the Republicans will have left behind them, yet again.
And that will be at a moment where the resources and time left by decades of depraved economic activity worldwide will be insufficient to cope with the impending climate crisis.
All the hope and finger pointing held out in the face of that fact should be seen for what it is: obfuscation, and abject failure.
You are part of the problem.
2
@Steven You make no sense. Did you even read his column?
I appreciate Dr. Krugman's take and I agree. I am just getting too weary to care anymore.
2
The Republican Party leaders have been using a deplorable strategy going back to Reagan and his Tax cuts. After Reagan, came H. Bush who begrudgingly raised taxes after saying he wouldn't. The Republican scam began. Then Clinton became President and had to start new taxes to repair the Reagan damage. There were all the complaints from Republicans that then won them the White House when Bush jr. became President, and cut taxes. Then Obama became President and had to bail out the finance industry and raise taxes to repair the damage of tax cuts and wars. Then we have the Trump Wall st administration that passed Tax cuts and ballooned the deficit. Do you see the cycle Republicans have done? They are robbing the nation every time they win power, then criticizing the Democrats for raising taxes. They are robbing us and lying about it in a decades long strategy I observed. It's a reputation thing. The Republicans have been criticizing Democrats for repairing the economic damage done by their long term strategy of robbing the nation, and after they have the Trillions, they are exporting the wealth to other nations setting up their futures elsewhere. And I believe they are using the Stock markets to launder the money. I wrote about this yesterday morning and appealed for an investigation and then AG Barr directed federal investigators to seek approval of political investigations. To me that confirmed the program of robbing the nation decades in the making. Republicans are robbing us.
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Thank you for the phrase "asymmetric cynicism". I've been a voter since 1978 and this has been a Republican trait as long as I can remember. Especially when the GOP represents its positions as being based on traditional moral values, respect for the Constitution and common sense economics.
51
Seems like the 3rd time through a cycle:
Reagan- cut taxes, increase spending, boom for a while, crash second term.
Bush W- cit taxes, increase spending, boom for a while, crash second term
Trump- cut taxes, increase spending, boom for a while!
Then call in the Democrats to clean up.
621
@George
Right. Final step; run against the Democrats whose programs clean up the mess but cause short term pain. Then repeat.
22
@George Gore Vidal was right...this truly is the United States of Amnesia.
12
@George
Concur.
The US has been heading for the ditch since the first week of January 2018 when the "upward wealth redistribution" (aka tax cut) bill went into effect.
Following the money, brief encapsulation:
The US govt dramatically increases borrowing to offset the loss of tax revenues, money that is then injected into the economy by govt spending.
Corporations used the 'savings' for stock buybacks, not business investment or wages.
This explains the bubbles in both the economy and stock markets. These will trigger the next crash.
7
This argument is one reason I prefer Warren as the Democratic nominee. She is the one candidate who seems to have a grasp on economic issues and more importantly how to seal with them.
As an aside, I would like to see, rather than a tax on wealth or high incomes, a small percentage levy on financial market transactions. It could be a few tenths of a percent, would be as easy to collect as a sales tax, and as a side benefit would introduce a bit of friction into our runaway financial markets.
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@jon_norstog
Not transactions; rather tax bids and offers as a proportion of the potential value of the trade. Let accepting bids or offers cost nothing. Withdrawn bids and offers would be taxed that way, whereas they would not be if only actual transactions were taxed. The tax would be on anticipations instead of realizations, and it would curb some of the schemes used in high speed trading.
4
@Steve S Yeah, that is part of the intent. Reducing trade velocity would make the US stock markets even more attractive to investors; certainly and with all their faults, American financial markets are the best places in the world to park your money.
8
@jon_norstog ... Be careful about taxing things that are hard to track and easy to disguise.
(a) Tax wealth? Are you really going to assess and tax a $40 million art collection each year? Holders of such wealth have many tricks for obscuring the value and also for just hiding the wealth out of view.
(b) Tax bids and offers on stock trades? Within a week we'd have financial software that disguises the bid/offer game until the actual trades are agreed on.
We already have working systems for taxing income, fuel purchases, and many other things. We can tinker with these to raise money.
But I very much would welcome a transaction tax on stock purchases. We used to do that; search for "stock transfer stamps."
7
If Trump wins I have very little doubt that the deficit will be used to start the beginning of the end of Social Security, Medicare, etc.--a la Paul Ryan.
679
@Jackie v. , and that is exactly the message Democrats need to run on: The Republican caused deficit will be used to curtail and privatize Medicare and SS.
62
Precisely, it’s not that they don’t care, allowing the deficit to balloon creates a fiscal crisis that can only be remedied by cutting “entitlements”. I favor the bank robbery maxim of going where the money is: military spending.
34
@Ray Zielinski
Actually the money in huge corporations like
Amazon that pay no taxes and the ultra wealthy and their offshore non tax paying accounts and other tax loopholes and the carried interest duplicity and the carbon based energy and nuclear energy sector subsidies, and the subsidies to big agriculture and shall I go on?
29
It may not be the best source, but Wikipedia tells us that the 2009 Obama stimulus package of loans, tax cuts, and infrastructure amounted to a little over $80 billion per year for 10 years. As one TV economist recently pointed out, the Trump tax cuts amount to an $800 billion stimulus package each year for 3 years, with no infrastructure spending at all. Imagine if even half of the Trump bonanza for the investor class had gone into infrastructure projects. Add in the multiplier effect, and the Trump package could have resulted in a growth of GNP somewhere near the Obama years, instead of the puny growth statistics we see today. https://en.wikipedia.org/wiki/American_Recovery_and_Reinvestment_Act_of_2009
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@jhand At large scale, many categories of spending suffer from diminishing returns. Things get more expensive because production capacity is limited and has to be tooled up. For example, you can do a bunch of infrastructure spending, but beyond a certain point the companies that do that kind of work are all booked and charging more. If it's more local level, people from out of state will come in to fill the gap. On the national level there's not an infinite sink.
Interesting. Thanks for the post AND the link!
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@jhand He's trying to build a wall isn't he? Ohhhh, wait, that isn't exactly infrastructure...
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Most Democrats are proposing significant increases in federal spending along with new taxes on the wealthy to "pay for" them. Many of the spending ideas are excellent. Many of the tax proposals are excellent. However, these don't need to balance perfectly. If they propose less than another $2 Trillion increase in the deficit (over 10 years), they will be more fiscally conservative than the GOP.
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The one thing we can be sure of is that as soon as Democrats are in power again, there will be a fierce call from Republicans to halt all spending because of their sudden focus on the "deficit crisis". They will use that to attack any Democratic initiative. I wouldn't be surprised if they tried to draw in the younger voters against the boomers who they will blame for the deficit.
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@paul Don't give them ideas!
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@paul
Along with voting in the most progressive democratic president, voters need to vote for the most progressive candidates down ballot, including replacing retiring republicans with Democrats.
We can do this. Alabama elected a Democrat to the Senate. Mississippi can elect Mike Espy, and down the line.
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@paul And the mainstream media will agree. In the nineties the media was in a panic about the national debt. There was constant reporting on the debt clock. By the end of the Clinton administration we not only had a balanced budget, we had a significant surplus that was rapidly paying down the national debt.
Gore ran on continuing that policy so that there would be no problem meeting future needs. Bush ran on the idiotic idea that the surplus showed our taxes were too high and we needed a tax cut. No one in the media ever bothered to point out that the national debt was ours and that they thought it should be reduced. By why should they? After all Bush was their preferred candidate because he would be more fun to have a beer with.
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More people need to read this. I agree with Mr. Krugman, the ploy was obvious, he was right, and the national media totally flopped. Now would be a good time to get it right.
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@Leah Flanagan The media's corporate owners love paying less in taxes, too. There was no flop involved, it was all by design.
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Unfortunately, deficit spending is stimulus whether it's proper, long term basic stimulus, or maniacal deficit busting, hypocritical, money to the rich stimulus.
The American people need to learn that even the best systems only work if the people pulling the levers are basically honest. I expect that, after I die if I make it to the promised land, that there will be parts of Heaven which are slums due to managers/politicians who are gaming the system.
Our President is basically dishonest. No matter how much someone perceives that Rumpole is on their side, his innate dishonesty will bring them to ruin.....ie, healthcare in Kentucky & West Virginia.
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The latest economic meme is Heterodox Economics. It says because the economy needs cash to grow, you can just print as much as needed to pay the bills. Just sell more treasury securities, treat the debt as an asset and print money against it. It does not explain what happens when buyers of that debt stop buying.
The U.S. government's public debt is now more than $22 trillion — the highest it has ever been. The Treasury Department data comes as tax revenue has fallen and federal spending continues to rise. The new debt level reflects a rise of more than $2 trillion from the day President Trump took office in 2017, and the Republicans keep trying to tell us how bad Mr. Obama was, and how he increased the debt.
No one in this administration so far has explained how the infrastructure, the roads and bridges, the air and water are going to be brought up to some standard. They simply mouth platitudes telling us how great the economy is. They cite the stock market, which is high due to buybacks because of the tax cuts. Oh and those corporate soy bean farmers that got government aid, but that is not socialistic. Remember in an uncertain market, cash is king, so hang on to it.
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@David Underwood Exactly. And land is king too. Which is why people are scrambling to move their investments into property.
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@David Underwood yessir! A house built on a weak foundation surely cannot stand a stiff wind or an earthquake. One is coming for sure.
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@David Underwood - There is no need to sell treasury securities to the public, no need to create debt to the public at all. Just sell the securities to the FED which can create as much money as it wants by a keystroke. BTW the FED returns the interest on these securities to the Treasury, so there is no cost.
Also you're a smart guy. You should realize that a million today means a lot less than it did in 1946 or 1820. If you want to compare the size of the debt with other times or other countries, your should us the debt RATIO, debt/GDP. And a good part of that $22 TRILLION is debt one part of the gov owes to another part. The part that is held by the public is about $17 TRILLION which is 79% of GDP.
In 1946 the debt owed to the public was 109% of GDP, which was about 39% larger than today. What happened to that enormous debt. Did we pay it down?
No, from 1946 to 1973 we increased that debt (in dollars) by 75%.
And had great prosperity.
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Of all the Democrats running, only Sanders and Warren have committed to clawing it all back and then some.
Bloomberg likes paying less.
What the gop did in 2017 needs to be undone. Then, we need a new deal.
Anything less is unacceptable.
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@Rima Regas
The Democrats want to raise taxes, but they want to raise spending even more than their proposed tax increases. That will increase deficits.
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@ebmem
We’re so far behind after forty years of neoliberalism that a lot more spending is a must, along with realigning investment and trade.
It’s time for reverse osmosis.
This is why the establishment is scared of Sanders.
Just vote. With a third of Americans just barely surviving, more centrism will lead to another revolution.
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No, every top Democratic candidate, including Bloomberg, has promised to reverse the 2017 tax giveaway. Biden also promises to tax investment income at the same rate as wages, which I think is a better way to approach closing the wealth gap.
All the candidates have their policy proposals on their web sites.
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If the voters don’t pay attention, it’s not surprising that such tactics work.
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@John M Most voters don't understand the vastness of the economics of an entire country much less global economics. What they finally do understand is when they have to buy a new washer or dryer and find out it costs a couple hundred dollars more than it did 3 years ago.
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Just another reason why republicans hate educated voters and why so few educated voters outside the 1 percent support them.
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@John M democracy fails if the electorate is ignorant.
we are probably half way there now.
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