Krugman: U.S. budget is fine if nothing goes wrong. What?

August 28, 2009

What a weird column from Paul Krugman. He says Americans shouldn’t worry about the ten-year budget forecasts ($9tr debt,  70 percent of GDP) because a) plenty of other nations have had far higher ratios, b) other countries continue to lend to the US, and c) it’s the longer-term liabilities that are the problem.

But at what point do interest rates rise — especially since huge current deficits give markets scant confidence that America is serious about fiscal soundness? And the current deficits make the fixes to entitlements harder to do. Clearly Krugman wants a Stimulus 2.0 program. He should take a look at my plan to create fiscal space in the present by dealing with entitlements now. And heaven help us if we get another financial crisis within the next generation …

2 comments

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Who is more idiotic: the fool, or the man who argues with him?

Posted by Patrick E. | Report as abusive

I understand your criticisms of his article, but you should look at it two ways.

First, he was emphasizing that we should not reign in various stimuli too quickly, since this could further damage the economic recovery. Second, while US debt will be a high ratio, it must be perceived from a relative perspective. Countries like Japan and Italy, have not collapsed under the weight of massive debt, yet….

I believe Krugman does not want the spectre of future debt to cloud present judgment. While he does endorse addressing long term entitlements in other articles, I think he is not yet comfortable with the current economic rebound, and is still in “staring into the abyss” mode.

He often has many good insights and opinions, but I will admit that lately he has been off his game. Its almost as if since Obama became president, he no longer has a Bush administration to eviscerate. This makes some of his arguments seems contradictory and aimless, like he is just thinking out loud.

Posted by Greg | Report as abusive