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Monday, March 18, 2013

Paul Krugman, "Marches of Folly": Krugman Shoots Himself in the Foot

In his latest New York Times op-ed entitled "Marches of Folly" (http://www.nytimes.com/2013/03/18/opinion/krugman-marches-of-folly.html), Paul Krugman draws an analogy between the "groupthink" that led to America's entry into the Second Gulf War and the "obsession" with the US deficit:

"Now, I don’t want to push the analogy too far. Bad economic policy isn’t the moral equivalent of a war fought on false pretenses, and while the predictions of deficit scolds have been wrong time and again, there hasn’t been any development either as decisive or as shocking as the complete failure to find weapons of mass destruction.

. . . .

But now as then we have the illusion of consensus, an illusion based on a process in which anyone questioning the preferred narrative is immediately marginalized, no matter how strong his or her credentials. And now as then the press often seems to have taken sides. It has been especially striking how often questionable assertions are reported as fact. How many times, for example, have you seen news articles simply asserting that the United States has a 'debt crisis,' even though many economists would argue that it faces no such thing?"

Well, I opposed the Second Gulf War, which destroyed the equilibrium between a Sunni-dominated Iraq and a Shiite-ruled Iran. I have also opposed US ground involvement in Afghanistan, which was escalated by Obama, goes unmentioned by Krugman, and is costing the US some $6 billion per month. But no debt crisis?

However, as observed by Krugman in an earlier op-ed (http://www.nytimes.com/2012/12/17/opinion/krugman-that-terrible-trillion.html?_r=0), the ratio of debt to G.D.P. is "the best measure of our debt position."

US debt is currently some $16.7 trillion, which is more that 100% of America's G.D.P. Those "fools" at the nonpartisan Congressional Budget Office recently warned that "U.S. debt is on track to be nearly twice the size of the U.S. economy by 2037" (http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook). Sure, in the meantime the American Taxpayer Relief Act and the sequester may have delayed "achievement" of that 200% debt to G.D.P. ratio by a few years; however, as acknowledged by the Peterson Foundation (http://www.pgpf.org/Issues/Fiscal-Outlook/2013/01/fiscal-cliff-atra-2012-long-term-analysis.aspx), we're still headed for that astronomical percentage by 2040.

Compare US involvement in Iraq with attempts to rein in America's spiraling debt? Apples and oranges. No way, Jose!



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