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Sunday, November 11, 2012

Paul Krugman, "Hawks and Hypocrites": A Great Idea for Getting Even With Your Children

From Paul Krugman's latest New York Times op-ed entitled "Hawks and Hypocrites" (http://www.nytimes.com/2012/11/12/opinion/krugman-hawks-and-hypocrites.html):

"Contrary to the way it’s often portrayed, the looming prospect of spending cuts and tax increases isn’t a fiscal crisis. It is, instead, a political crisis brought on by the G.O.P.’s attempt to take the economy hostage. And just to be clear, the danger for next year is not that the deficit will be too large but that it will be too small, and hence plunge America back into recession."

My goodness, those nasty Republicans are still up to their tricks. Let's get even by allowing the federal government to orchestrate a few more Solyndras.

But what does the nonpartisan Congressional Budget Office have to say about this? Simple (http://www.cbo.gov/publication/43539):

"For fiscal year 2012 (which ends on September 30), the federal budget deficit will total $1.1 trillion, CBO estimates, marking the fourth year in a row with a deficit of more than $1 trillion. That projection is down slightly from the $1.2 trillion deficit that CBO projected in March. At 7.3 percent of gross domestic product (GDP), this year’s deficit will be three-quarters as large as the deficit in 2009 when measured relative to the size of the economy. Federal debt held by the public will reach 73 percent of GDP by the end of this fiscal year—the highest level since 1950 and about twice the share that it measured at the end of 2007, before the financial crisis and recent recession."

Or in plain English, US current-dollar GDP of some $15.8 trillion is less than US federal debt, which is in excess of $16 trillion. If the federal government increases spending, the only way it will ever be able to return its debt is by printing money, and this is not a bad idea if you are intent upon getting even with your children.

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