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Monday, December 17, 2012

Paul Krugman: That Terrible Trillion

Deficit scolds long for "frickin' sharks with frickin' laser beams attached to their frickin' heads" to use against "programs that shield both poor and middle-class Americans from harm":

That Terrible Trillion, by Paul Krugman, Commentary, NYTimes: ...I find myself in a lot of discussions about U.S. fiscal policy, and the budget deficit in particular. And there’s one thing I can count on..: At some point someone will announce, in dire tones, that we have a ONE TRILLION DOLLAR deficit.
No, I don’t think the people making this pronouncement realize that they sound just like Dr. Evil in the Austin Powers movies.
Anyway, we do indeed have a ONE TRILLION DOLLAR deficit,... actually $1.089 trillion. ... What the Dr. Evil types think, and want you to think, is that the big current deficit is a sign that ... a debt crisis is just around the corner, although they’ve been predicting that for years and it keeps not happening. ... But more often they use the deficit to argue that we can’t afford ... programs like Social Security, Medicare and Medicaid. So it’s important to understand that this is completely wrong. ...
So, let’s talk about the numbers. The first thing we need to ask is what a sustainable budget would look like. The answer is that in a growing economy, budgets don’t have to be balanced to be sustainable. ... Right now, given reasonable estimates of likely future growth and inflation, we would have a stable or declining ratio of debt to G.D.P. even if we had a $400 billion deficit. You ... should take $400 billion off the table right away.
That still leaves $600 billion or so. What’s that about? It’s the depressed economy — full stop.
First of all, the weakness of the economy has led directly to lower revenues ... by at least $450 billion. Meanwhile, the depressed economy has ... temporarily raised spending ... by at least $150 billion.
Putting all this together, it turns out that the trillion-dollar deficit isn’t a sign of unsustainable finances at all. ... We do indeed have a big budget deficit, and other things equal it would be better if the deficit were a lot smaller. But other things aren’t equal; the deficit is a side-effect of an economic depression, and the first order of business should be to end that depression — which means, among other things, leaving the deficit alone for now.
And you should recognize all the hyped-up talk about the deficit for what it is: yet another disingenuous attempt to scare and bully the body politic into abandoning programs that shield both poor and middle-class Americans from harm.

    Posted by on Monday, December 17, 2012 at 12:33 AM in Budget Deficit, Economics, Fiscal Policy, Politics | Permalink  Comments (47)


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