Krugman: The Dwindling Deficit

[ProSense]

The Dwindling Deficit

By PAUL KRUGMAN

It’s hard to turn on your TV or read an editorial page these days without encountering someone declaring, with an air of great seriousness, that excessive spending and the resulting budget deficit is our biggest problem. Such declarations are rarely accompanied by any argument about why we should believe this; it’s supposed to be part of what everyone knows.

This is, however, a case in which what everyone knows just ain’t so. The budget deficit isn’t our biggest problem, by a long shot. Furthermore, it’s a problem that is already, to a large degree, solved. The medium-term budget outlook isn’t great, but it’s not terrible either — and the long-term outlook gets much more attention than it should.

It’s true that right now we have a large federal budget deficit. But that deficit is mainly the result of a depressed economy — and you’re actually supposed to run deficits in a depressed economy to help support overall demand. The deficit will come down as the economy recovers: Revenue will rise while some categories of spending, such as unemployment benefits, will fall. Indeed, that’s already happening. (And similar things are happening at the state and local levels — for example, California appears to be back in budget surplus.)

Still, will economic recovery be enough to stabilize the fiscal outlook? The answer is, pretty much.

Recently the nonpartisan Center on Budget and Policy Priorities took Congressional Budget Office projections for the next decade and updated them to take account of two major deficit-reduction actions: the spending cuts agreed to in 2011, amounting to almost $1.5 trillion over the next decade; and the roughly $600 billion in tax increases on the affluent agreed to at the beginning of this year. What the center finds is a budget outlook that, as I said, isn’t great but isn’t terrible: It projects that the ratio of debt to G.D.P., the standard measure of America’s debt position, will be only modestly higher in 2022 than it is now.

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http://www.nytimes.com/2013/01/18/opinion/krugman-the-dwindling-deficit.html

[Orrex]

1. As always, the economy will strengthen as Democratic policies take hold

And, as always, we'll probably have a Republican president by then, and, as always, he will claim and will receive full credit for the recovery.


Lather, rinse, repeat.

[beerandjesus]

2. Remember how Romney...

was positioning himself to take credit for the recovery, by promising to create the number of jobs that were projected to be created anyway? If I were a little more conspiratorially-inclined, I'd wonder if this whole debt kabuki--ginned up, after all, by Republicans--were merely the same thing on a larger scale.

[HereSince1628]

3. Krugman is struggling against the elites' silencing of the Keynesian model

which Krugman believes in and which is the foundation of his Nobel Prize. The dissonance in his head must be terrible.

Krugman is like a conservationist struggling for sustainable harvest in a world where the means of production have shifted to favor absolute complete harvest. No one is saving seeds for planting, and, frankly, no one is worried about maintaining space for the livestock which once created the demand for the crops.

[ProSense]

4. Republicans are blocking jobs bills to prevent the recovery from gaining more steam. n/t

[HereSince1628]

5. Republicans don't support demand side remedies. Their economic model is Bain's business model

which is all about transforming every asset into money.

Throwing money at the demand side is like fertilizing, it's seen as a cost that reduces profitability.

It's no way to run a country. But it IS the way that pirates like Romney see as the path to wealth, and those people have LOTS of influence in republican politics.