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dcrednek (73.51)

Dr. Paul Krugman: Economic Hitman



March 25, 2013 – Comments (5)

Take a few moments to read the latest column written by Nobel Prize winning economist Dr. Paul Krugman:

 It should frighten many Americans to read his opinions and to know that he has the ear of many decisionmakers in the US federal government.  What about this latest column is remarkable?  Here are a few phrases that I find remarkable:

 "There are, of course, longer-term fiscal issues: rising health costs and an aging population will put the budget under growing pressure over the course of the 2020s. But I have yet to see any coherent explanation of why these longer-run concerns should determine budget policy right now."

To me that's like saying that one shouldn't ring the warning siren until the tsunami hits the shore.  


 "The Congressional Budget Office expects the deficit for fiscal 2013 (which began in October and is almost half over) to be $845 billion. That may still sound like a big number, but given the state of the economy it really isn’t."

Seriously? That may 'sound' like a big number?  In 2012 total federal revenues were approximately $2.9T. About $1.8T of that goes to pensions and healthcare, leaving some $1.1T to cover the rest --- defense, infrastructure, education, etc.  And that $2.9T was taken from an economy that produces about $15T of GDP  (taxes are about 19.3% of GDP).  So how big would the economy need to be in order to cover the $845B deficit?  Our GDP would need to grow by $4.38T in order to cover this gap. So our economy needs to expand by almost a third to cover the current gap between government revenues (i.e. taxes) and government spending?  Sure, no sweat.

 Where I am going with this is simple:  Krugman is dead wrong when he suggests that the US economy can consume its way (and by consumption, he means the US government as the largest entity consumer within the economy) out of the near-term budget deficit problems.  And stating that long-term concerns shouldn't be permitted to determine near-term policy is irresponsible.

 He ends the column with a very un-academic, blatantly partisan comment:

" Fiscal fearmongering is a major industry inside the Beltway, especially among those looking for excuses to do what they really want, namely dismantle Medicare, Medicaid and Social Security."

I worry that Dr. Krugman is too deep into the partisan debate to objectively assess the economic situation we face today and that which we will face over the coming decade.   

5 Comments – Post Your Own

#1) On March 25, 2013 at 7:13 PM, chk999 (99.96) wrote:

Krugman takes Keynes' idea of deficit spending during a recession and adds the innovation of deficit spending during an expansion too!

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#2) On March 25, 2013 at 8:50 PM, BillFromNY (< 20) wrote:

I found the title of your piece humorous, since when Krugman first took his position as a regular Times columnist I immediately labeled him as a hit man for the Times editorial board. The Board, when gifting us with its opinion on an economic matter, had to maintain an air of decorum.

Dr. Krugman, usually on the day of the editorial, would come out throwing punches at the villains of the Board, backed by the prestige of his Nobel prize. (I have never understood why they award Nobel prizes to economists each year. Did an economist theorize radioactivity at the expense of her life or discover a vaccine that saved millions?)

Dr. Krugman is no longer on his leash as much and writes many thoughtful columns.  This column, which I don't think that he would have written during the Reagan administration, takes the current liberal viewpoint that some deficit is OK and actually helpful to the economy, thus supporting higher government expenditures right now. And he takes a few jabs at the right in the process. But is his observation on current interest rates not a most interesting one that will have deficit theoreticians re-evaluating some long held theories?

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#3) On March 26, 2013 at 1:58 AM, Dean47 (< 20) wrote:

"Dr. Krugman is no longer on his leash as much and writes many thoughtful columns."

BWHAHAHAHA!!!  Thanks buddy!!!  I haven't had that strong a gut laugh in a long time!!!


Ask google.  Google knows.

"Krugman is a" 





All of the above. 


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#4) On March 26, 2013 at 4:38 AM, GraemesPSP (99.45) wrote:

I'd love to know if Krugman runs his household budget the same way as he believes governments should run theirs. I suspect he'd not be very popular with his bank manager if he did.

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#5) On March 26, 2013 at 3:57 PM, ChrisGraley (28.48) wrote:

Obama won the peace prize before he did anything too.

Marraige made in heaven. 

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