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Friday, January 18, 2013

Paul Krugman, "The Dwindling Deficit": A Unicorn Felching a Centaur

Perhaps you recall my blog entry earlier this month (http://jgcaesarea.blogspot.co.il/2013/01/paul-krugman-coins-against-crazies-just.html) concerning Paul Krugman's advocacy on behalf of the US minting a trillion dollar coin. I wrote:

"Mint the coin? I'm certain world financial markets would highly appreciate this stunt, which could cause instant collapse of the American economy.

But heck, why go to the trouble of minting a platinum coin when an autographed picture of Obama, inscribed with the amount of $10 trillion, should do the trick?

Thanks, Paul. Keep those lucid ideas coming!"

Well, Jon Stewart apparently agrees with me. Instead of a one trillion coin, Stewart suggested that the US issue a 20 trillion dollar coin, or better still, a one hundred quillion dollar bill with a picture of a unicorn felching a centaur. Wounded by Stewart's taunt, Krugman accused Stewart of being "lazy," whereupon Stewart doubled down in a moment of comedic history, "It's a stupid f***ing idea" (http://www.thedailyshow.com/watch/mon-january-14-2013/paul-krugman---the-trillion-dollar-coin).

Support for Occupy Wall Street (http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html)? Trillion dollar coins? Apparently it's the stuff that makes for Nobel laureates. And not to worry: Krugman's creative juices continue to flow. In a New York Times op-ed entitled "The Dwindling Deficit" (http://www.nytimes.com/2013/01/18/opinion/krugman-the-dwindling-deficit.html?_r=0), Paul tells us that we need not occupy ourselves with concern for America's long-term deficit prospects:

"Recently the nonpartisan Center on Budget and Policy Priorities took Congressional Budget Office projections for the next decade and updated them to take account of two major deficit-reduction actions: the spending cuts agreed to in 2011, amounting to almost $1.5 trillion over the next decade; and the roughly $600 billion in tax increases on the affluent agreed to at the beginning of this year. What the center finds is a budget outlook that, as I said, isn’t great but isn’t terrible: It projects that the ratio of debt to G.D.P., the standard measure of America’s debt position, will be only modestly higher in 2022 than it is now.

. . . .

Now, projections that run further into the future do suggest trouble, as an aging population and rising health care costs continue to push federal spending higher. But here’s a question you almost never see seriously addressed: Why, exactly, should we believe that it’s necessary, or even possible, to decide right now how we will eventually address the budget issues of the 2030s?"

Yup, why should we care that by 2037 US debt will be double GDP (see: http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook)? That's our children's problem, and there's no need now to "address the budget issues of the 2030s." Heck, you might as well cash in your retirement plans now and spend it all on new Bentleys, given that it's all so far away.

Bottom line: Come the 2030s, the US could well need to issue that one hundred quillion dollar bill with a picture of a unicorn felching a centaur.

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