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Thursday, October 9, 2014

Paul Krugman, "Secret Deficit Lovers": Krugman Tries to Pull a Fast One

In his latest New York Times op-ed entitled "Secret Deficit Lovers," Paul Krugman tells us:

"[T]he Congressional Budget Office has tallied up the totals for fiscal 2014, which ran through the end of September, and reports that the deficit plunge of the past several years continues. You still hear politicians ranting about “trillion dollar deficits,” but last year’s deficit was less than half-a-trillion dollars — or, a more meaningful number, just 2.8 percent of G.D.P. — and it’s still falling.

. . . .

Yes, current projections still show a rising ratio of debt to G.D.P. starting some years from now, and uncomfortable levels of debt a generation from now. But given all the clear and present dangers we face, it’s hard to see why dealing with that distant and uncertain prospect should be any kind of policy priority."

Victory over the deficit? Not so fast. What does Krugman mean when he says that the ratio of debt to G.D.P. will start to rise "some years from now"? How many years? Should we be concerned?

See what Fred Hiatt, editorial page editor of the Washington Post, had to say about America's debt in an October 5 opinion piece entitled "Obama’s false victory over the deficit":

"Now look into the future as seen by the scrupulously nonpartisan Congressional Budget Office.

Federal debt has reached 74 percent of the economy’s annual output (GDP), “a higher percentage than at any point in U.S. history except a brief period around World War II,” the CBO says, “and almost twice the percentage at the end of 2008.” With no change in policy, that percentage will hold steady or decline a bit for a couple of years and then start rising again, to a dangerous 78 percent by 2024 and an insupportable 106 percent by 2039."

So, whereas Krugman is telling us "Live for today!," Hiatt is explaining that "some years from now" means in another decade with catastrophe predicted by the Congressional Budget Office in 2039.

Yes, 2039 is 25 years into the future, and at that time no one will remember what Krugman wrote in 2014. But when the CBO, cited by Krugman, is warning that America's deficit could put an end to America as we currently know it, why is he crowing?

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