Seeking Alpha

Paul Krugman on the federal deficit: "The budget deficit isn’t our biggest problem, by a...

Paul Krugman on the federal deficit: "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 case for urgent action now to reduce spending decades in the future is far weaker than conventional rhetoric might lead you to suspect... So, no big problem in the medium term, no strong case for worrying now about long-run budget issues."
Comments (20)
  • Household debt service plus Government debt service is 1.664 trillion
    or 10.54% of GDP....


    1q 1980 it was 10.95%


    4q 1988 13.44%


    4q 2007 13.32%


    All time high was 1q 1991 14.05%
    19 Jan 2013, 08:35 AM Reply Like
  • And when interest rates drift back to more reasonable 4% to 5% once the Fed quits buying 80% of new debt.....what then?
    19 Jan 2013, 09:40 AM Reply Like
  • And the denominator will be???
    19 Jan 2013, 09:50 AM Reply Like
  • With Obama on schedule to add another $1 trillion per year to the debt, that puts us around $20 trillion by the end of his Presidency. At a 2% yield, that amounts to $400 billion per year we'll be paying in 2016. Our tax receipts (2011) are around $2.3 by my crude calculation, we will be paying 33% of our total Federal income in debt service by the end of his Presidency. Why would you, Krugman or any sane person think that's OK?
    19 Jan 2013, 11:25 AM Reply Like
  • engineer.........
    And that's at 2%. When interest returns to a normal 4 or 5% we are to put it simply, f***ed.
    19 Jan 2013, 11:37 AM Reply Like
  • 1 trillion possible by 2020

    19 Jan 2013, 11:46 AM Reply Like


    Quite a divergence
    19 Jan 2013, 01:46 PM Reply Like
  • Mr. Obama has also won a Nobel prize, so he must know what he;s doing, right?
    19 Jan 2013, 02:27 PM Reply Like
  • Here is some homework...

    19 Jan 2013, 03:56 PM Reply Like
  • We all know how trustworthy govt projections are. With the world as complex as it is, black swans will always be with us. These 10-20 year
    projections are meaningless.

    19 Jan 2013, 05:41 PM Reply Like
  • I didn't say accept it as gospel...there are some important points of data to study...that is if you want to do the homework...
    20 Jan 2013, 01:02 AM Reply Like
  • He's completely right. Modern Monetary Theory has found the holy grail of economics; the ability to spend as much as you like without consequences. As bbro points out, the Fed is buying all the long term government bonds and keeping rates low so what's to worry about?
    Congress should get off it's backside and start spending like there is no tomorrow. Halib^H^H^H^H^HThe economy won't be hurt by the additional boost.
    19 Jan 2013, 08:49 AM Reply Like
  • The deficit problem is solved, good to know, I will let my kids know they have nothing to worry about. What an idiot!
    19 Jan 2013, 09:32 AM Reply Like
  • Krugman also thinks Govt spending should be 50% of GDP, man only has credibility for those who believe the U.S. should be more like Greece.
    19 Jan 2013, 09:39 AM Reply Like
  • Its the "theory" of debt vs the "reality" of debt. I dont think anyones knows what the outcome will be. The printing presses of the world will be running 24/7 - no doubt about that. If all the curriencies grow by trillions and trillions - what will be the effects on the world balance.
    If everyone does it, what will change. Is a 20 trillion dollar debt any worse than a 16 trillion dollar debt ?? Many say no - many say yes.
    High(increasing) debt levels go on for years,decades or it could collapse overnight.
    19 Jan 2013, 11:17 AM Reply Like
  • Shocking that any rational person would take this position, let alone a "learned" economist. The world is in uncharted waters when it comes to total debt vs GDP. It will look ok until the markets say we don't believe in the system anymore. Risk events can happen very quickly. Economists are disconnected from the markets.
    19 Jan 2013, 01:52 PM Reply Like
  • The issue I have with Krugman is that he willingly leaves out vital information in most of his political arguements (and thats what this is).


    The CBO is a linnear group - they are upfront about it - they score whatever the law says. Irregardless of whether or not it will happen.


    So when Krugman says " the spending cuts agreed to in 2011, amounting to almost $1.5 trillion over the next decade", he knows he's being disenguenuous. So we really are going to cut re-imbursement to doctors by 30 or 40%? Just like we've done each of the past 15 years? Oops - you mean every year for the past 15 years Congress passes a reprieve and then we spend that money? You mean the money the CBO "scored" as not being spent?


    And we - the common man - all know it!


    How about we start to make these numbers personal. How much does your newborn child owe? Its over 50K. If your the head of a household - how much would you have to write a check for - to pay off your family's "fair share" - its over 200K.


    Now if someone knocked on your door and served you a legal notice saying you owe over 200K to someone - would you think thats something to be concerned about?? Would you still be concerned if you were told - don't worry, you only have to pay the interest for a while - so just pay us 6K a year. No problem right?


    People like Krugman have mainly political objectives. And one of the largest to is shift power from the people to the government. To further govern those they (being the self-proclaimed elite) believe need to be governed (that would be the rest of the people). They realize that by creating an overpaid bureaucracy they are building a natural constituency, and by combining that with those that come to depend on government they can dominate politically.


    Krugman doesn't write about your economics - he writes about taking your freedom and liberty.
    19 Jan 2013, 02:55 PM Reply Like
  • Bureacracy is the cancer of civilizations. Once one starts, it grows forever, always seeking more scope, more power, and in the process slowly crushing the productivity of everything it controls - until the civilization dies.
    19 Jan 2013, 11:12 PM Reply Like
  • David, just a thought. Family of 4 debt being $200K in the hole - if that same family lost home equity and retirement savings of that amount in the 'event' is that almost the same thing? I know that I lost more than my $50K - at least have gained it back (on paper) and more - but still down on the housing. It seems to me sometimes it is all numbers ....and digital ones at that. Just a comment on the times I have lived in.
    20 Jan 2013, 12:19 PM Reply Like
  • Krugman won his Nobel Prize for Trade, I'm not sure why everyone thinks he is a genius on everything related to economics.
    19 Jan 2013, 11:37 PM Reply Like
DJIA (DIA) S&P 500 (SPY)