Kliphnote: Who in their right mind cares what Krugman says? He's a Liar! He said just The opposite when Bush was president. But if you're a Left-head you will believe anything from Loon land. "Hatred of Bush + love for Obama = intellectual dishonesty." Read about it below or click the link. Krugman, Bushs_deficit_bad, Obamas_deficit_good.
Op-Ed Columnist
Dwindling Deficit Disorder
By PAUL KRUGMAN
Published: March 10, 2013 703 Comments
For three years and more, policy debate in Washington has been dominated
by warnings about the dangers of budget deficits. A few lonely
economists have tried from the beginning to point out that this fixation
is all wrong, that deficit spending is actually appropriate in a
depressed economy. But even though the deficit scolds have been wrong
about everything so far — where are the soaring interest rates we were
promised? — protests that we are having the wrong conversation have
consistently fallen on deaf ears.
What’s really remarkable at this point, however, is the persistence of
the deficit fixation in the face of rapidly changing facts. People still
talk as if the deficit were exploding, as if the United States budget
were on an unsustainable path; in fact, the deficit is falling more
rapidly than it has for generations, it is already down to sustainable
levels, and it is too small given the state of the economy.
Start with the raw numbers. America’s budget deficit soared after the
2008 financial crisis and the recession that went with it, as revenue
plunged and spending on unemployment benefits and other safety-net
programs rose. And this rise in the deficit was a good thing! Federal
spending helped sustain the economy at a time when the private sector
was in panicked retreat; arguably, the stabilizing role of a large
government was the main reason the Great Recession didn’t turn into a
full replay of the Great Depression.
But after peaking in 2009 at $1.4 trillion, the deficit began coming down. The Congressional Budget Office expects
the deficit for fiscal 2013 (which began in October and is almost half
over) to be $845 billion. That may still sound like a big number, but
given the state of the economy it really isn’t.
Bear in mind that the budget doesn’t have to be balanced to put us on a
fiscally sustainable path; all we need is a deficit small enough that
debt grows more slowly than the economy. To take the classic example,
America never did pay off the debt from World War II — in fact, our debt doubled in the 30 years that followed the war. But debt as a percentage of G.D.P. fell by three-quarters over the same period.
Right now, a sustainable deficit would be around $460 billion.
The actual deficit is bigger than that. But according to new estimates
by the budget office, half of our current deficit reflects the effects
of a still-depressed economy. The “cyclically adjusted” deficit — what
the deficit would be if we were near full employment — is only about
$423 billion, which puts it in the sustainable range; next year the
budget office expects that number to fall to just $172 billion. And
that’s why budget office projections show the nation’s debt position
more or less stable over the next decade.
So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.
There are, of course, longer-term fiscal issues: rising health costs and
an aging population will put the budget under growing pressure over the
course of the 2020s. But I have yet to see any coherent explanation of
why these longer-run concerns should determine budget policy right now.
And as I said, given the needs of the economy, the deficit is currently
too small.
Put it this way: Smart fiscal policy involves having the government
spend when the private sector won’t, supporting the economy when it is
weak and reducing debt only when it is strong. Yet the cyclically
adjusted deficit as a share of G.D.P. is currently about what it was in
2006, at the height of the housing boom — and it is headed down.
Yes, we’ll want to reduce deficits once the economy recovers, and there
are gratifying signs that a solid recovery is finally under way. But
unemployment, especially long-term unemployment, is still unacceptably
high. “The boom, not the slump, is the time for austerity,” John Maynard Keynes declared many years ago. He was right — all you have to do is look at Europe to see the disastrous effects of austerity on weak economies. And this is still nothing like a boom.
Now, I’m aware that the facts about our dwindling deficit are unwelcome
in many quarters. Fiscal fearmongering is a major industry inside the
Beltway, especially among those looking for excuses to do what they
really want, namely dismantle Medicare, Medicaid and Social Security.
People whose careers are heavily invested in the deficit-scold industry
don’t want to let evidence undermine their scare tactics; as the deficit
dwindles, we’re sure to encounter a blizzard of bogus numbers
purporting to show that we’re still in some kind of fiscal crisis.
But we aren’t. The deficit is indeed dwindling, and the case for making
the deficit a central policy concern, which was never very strong given
low borrowing costs and high unemployment, has now completely vanished.
February 11, 2010
Krugman: Bush's Deficit Bad, Obama's Deficit Good
By Larry Elder
Left-wing
economist, Nobel laureate and New York Times columnist Paul Krugman
hates deficits in tough economic times -- when the president of the
United States is named George W. Bush.
Krugman, in a November 2004 interview, criticized the "enormous" Bush deficit. "We have a world-class budget deficit," he said, "not just as in absolute terms, of course -- it's the biggest budget deficit in the history of the world -- but it's a budget deficit that, as a share of GDP, is right up there."
The numbers? The deficit in fiscal year 2004 -- $413 billion, 3.5 percent of the gross domestic product.
Back then, a disapproving Krugman called the deficit "comparable to the worst we've ever seen in this country. ... The only time postwar that the United States has had anything like these deficits is the middle Reagan years, and that was with unemployment close to 10 percent." Take away the Social Security surplus spent by the government, he said, and "we're running at a deficit of more than 6 percent of GDP, and that is unprecedented."
He considered the Bush tax cuts irresponsible and a major contributor -- along with two wars -- to the deficit. But he also warned of the growing cost of autopilot entitlements: "We have the huge bulge in the population that starts to collect benefits. ... If there isn't a clear path towards fiscal sanity well before (the next decade), then I think the financial markets are going to say, 'Well, gee, where is this going?'"
Three months earlier, Krugman said, "Here we are more than 2 1/2 years after the official end of the recession, and we're still well below, of course, pre-Bush employment." In October 2004, unemployment was 5.5 percent and continued to slowly decline. At the time, Krugman described the economy as "weak," with "job creation ... essentially nonexistent."
How bad will it get? If we don't get our "financial house in order," he said, "I think we're looking for a collapse of confidence some time in the not-too-distant future."
Fast-forward to 2010.
The numbers: projected deficit for fiscal year 2010 -- over $1.5 trillion, more than 10 percent of GDP.
This sets a post-WWII record in both absolute numbers and as a percentage of GDP. And if the Obama administration's optimistic projections of the economic growth fall short, things will get much worse. So what does Krugman say now?
We must guard against "deficit hysteria." In "Fiscal Scare Tactics," his recent column, Krugman writes: "These days it's hard to pick up a newspaper or turn on a news program without encountering stern warnings about the federal budget deficit. The deficit threatens economic recovery, we're told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren't stated as opinions, as views held by some analysts but disputed by others. Instead, they're reported as if they were facts, plain and simple."
He continues, "And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction." Krugman believes Bush lied us into the Iraq War. Just as people unreasonably feared Saddam Hussein, they now have an unwarranted fear of today's deficit.
Questions: Didn't Krugman, less than six years ago, call the deficit "enormous"? Wouldn't he, therefore, consider a $1.5 trillion deficit at 10 percent of GDP mega-normous? Didn't he describe the economy with 5.5 percent unemployment as "weak"? Isn't the current economy, at 9.7 percent unemployment, even weaker? If the 2004 deficit was "comparable to the worst we've ever seen in this country," wouldn't today's much bigger deficit cause even more heartburn?
Nope. Now a huge deficit is actually a good thing: "The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs." The deficit "should be bigger"?!
Long term, Krugman says, we've got concerns about revenue and spending. But as for now? "There's no reason to panic about budget prospects for the next few years, or even for the next decade." In 2004, Krugman warned that without a "clear path towards fiscal sanity" before "the next decade," we faced a "crunch." Presumably, we now have this "clear path."
Let's review. In 2004, an unhappy Krugman criticized Bush's "weak" economy and "miserable" job creation. Running an "enormous" deficit was a bad thing. Times were awful -- "by a large margin" the worst job crash and performance since
Herbert Hoover. Today the deficit is four times as large in an even weaker economy with much higher unemployment. Times are awful. Now, though, the deficit is a good thing and should be even bigger.
Krugman's flip-flop on the deficit demonstrates a modern economic equation. Hatred of Bush + love for Obama = intellectual dishonesty.
Krugman, in a November 2004 interview, criticized the "enormous" Bush deficit. "We have a world-class budget deficit," he said, "not just as in absolute terms, of course -- it's the biggest budget deficit in the history of the world -- but it's a budget deficit that, as a share of GDP, is right up there."
The numbers? The deficit in fiscal year 2004 -- $413 billion, 3.5 percent of the gross domestic product.
Back then, a disapproving Krugman called the deficit "comparable to the worst we've ever seen in this country. ... The only time postwar that the United States has had anything like these deficits is the middle Reagan years, and that was with unemployment close to 10 percent." Take away the Social Security surplus spent by the government, he said, and "we're running at a deficit of more than 6 percent of GDP, and that is unprecedented."
He considered the Bush tax cuts irresponsible and a major contributor -- along with two wars -- to the deficit. But he also warned of the growing cost of autopilot entitlements: "We have the huge bulge in the population that starts to collect benefits. ... If there isn't a clear path towards fiscal sanity well before (the next decade), then I think the financial markets are going to say, 'Well, gee, where is this going?'"
Three months earlier, Krugman said, "Here we are more than 2 1/2 years after the official end of the recession, and we're still well below, of course, pre-Bush employment." In October 2004, unemployment was 5.5 percent and continued to slowly decline. At the time, Krugman described the economy as "weak," with "job creation ... essentially nonexistent."
How bad will it get? If we don't get our "financial house in order," he said, "I think we're looking for a collapse of confidence some time in the not-too-distant future."
Fast-forward to 2010.
The numbers: projected deficit for fiscal year 2010 -- over $1.5 trillion, more than 10 percent of GDP.
This sets a post-WWII record in both absolute numbers and as a percentage of GDP. And if the Obama administration's optimistic projections of the economic growth fall short, things will get much worse. So what does Krugman say now?
We must guard against "deficit hysteria." In "Fiscal Scare Tactics," his recent column, Krugman writes: "These days it's hard to pick up a newspaper or turn on a news program without encountering stern warnings about the federal budget deficit. The deficit threatens economic recovery, we're told; it puts American economic stability at risk; it will undermine our influence in the world. These claims generally aren't stated as opinions, as views held by some analysts but disputed by others. Instead, they're reported as if they were facts, plain and simple."
He continues, "And fear-mongering on the deficit may end up doing as much harm as the fear-mongering on weapons of mass destruction." Krugman believes Bush lied us into the Iraq War. Just as people unreasonably feared Saddam Hussein, they now have an unwarranted fear of today's deficit.
Questions: Didn't Krugman, less than six years ago, call the deficit "enormous"? Wouldn't he, therefore, consider a $1.5 trillion deficit at 10 percent of GDP mega-normous? Didn't he describe the economy with 5.5 percent unemployment as "weak"? Isn't the current economy, at 9.7 percent unemployment, even weaker? If the 2004 deficit was "comparable to the worst we've ever seen in this country," wouldn't today's much bigger deficit cause even more heartburn?
Nope. Now a huge deficit is actually a good thing: "The point is that running big deficits in the face of the worst economic slump since the 1930s is actually the right thing to do. If anything, deficits should be bigger than they are because the government should be doing more than it is to create jobs." The deficit "should be bigger"?!
Long term, Krugman says, we've got concerns about revenue and spending. But as for now? "There's no reason to panic about budget prospects for the next few years, or even for the next decade." In 2004, Krugman warned that without a "clear path towards fiscal sanity" before "the next decade," we faced a "crunch." Presumably, we now have this "clear path."
Let's review. In 2004, an unhappy Krugman criticized Bush's "weak" economy and "miserable" job creation. Running an "enormous" deficit was a bad thing. Times were awful -- "by a large margin" the worst job crash and performance since
Herbert Hoover. Today the deficit is four times as large in an even weaker economy with much higher unemployment. Times are awful. Now, though, the deficit is a good thing and should be even bigger.
Krugman's flip-flop on the deficit demonstrates a modern economic equation. Hatred of Bush + love for Obama = intellectual dishonesty.
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