Krugman: Our debt is no crisis (unless politicians turn it into a crisis)

[Kurt_and_Hunter]

March 27, 2010, 4:11 pm
Dealing With The Debt: A Brief Note

I get a lot of worried mail along the lines of “how on earth will we ever be able to pay off our debt”? Look, there are real worries — but the math per se isn’t very hard.

The Obama administration’s budget (pdf) predicts that by 2020 we’ll have net federal debt of around 70% of GDP and a budget deficit of around 4 percent of GDP. Now, you don’t have to go to a zero budget deficit to make headway on the debt — a budget deficit of 2-3 percent of GDP would imply a steadily declining debt/GDP ratio. So if you believe the administration’s budget estimates, we’ll need to find another 1-2 percent of GDP in revenue or cost savings.

Many independent sources are moderately more pessimistic; they think that on current policies we’d be looking at a deficit of 5-6 percent of GDP. So that makes it more like a 3 or 4 percent of GDP adjustment.

That’s not, in economic terms, a huge number. We could raise taxes that much and still be one of the lowest-tax nations in the advanced world. Or we could save a significant share of that total by not being totally prepared for the day when Soviet tanks sweep across the North German plain.

The only reason to doubt our ability to get things under control a decade from now is politics: if we’re still deadlocked, if sane Republicans are cowed by the Tea Party, then sure, we can have a fiscal crisis. And longer term, we’ll be in a mess unless we get health care costs under control — which is exactly what we’re trying to do, in the face of cries about death panels.

http://krugman.blogs.nytimes.com/2010/03/27/dealing-with-the-debt-a-brief-note/

[midnight]

1. Oops. Sound like our budget/debt. crisis is going to have to be solved

with work from the Republicans.

[Possumpoint]

2. You Mean

The just say "NO" Republicans? Oh My!

[HughMoran]

3. Republicans - intent on crippling America for political gain

What else is new?

[Odin2005]

4. In proportion to GDP our debt is actually not that bad.

Especially compared to many European countries. it only LOOKS bad because of the sheer size of the US economy. Debt hysteria is RW Libertarian stupidity mixed in with common ignorance about macroeconomics by the average person (who naively compares government budgets to household budgets).