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Paul Krugman: The Problem With Deficit-Mania

May 9, 2012 12:01 am Category: Economy, Memo Pad 22 Comments A+ / A-
Paul Krugman: The Problem With Deficit-Mania

The following is an excerpt from End This Depression Now!, the recently published book by Nobel Prize-winning economist and New York Times columnist Paul Krugman. Purchase it here.

By the fall of 2009 it was already obvious that those who had warned that the original stimulus plan was much too small had been right. True, the economy was no longer in free fall. But the decline had been steep, and there were no signs of a recovery fast enough to bring unemployment down at anything more than a glacial pace.

This was exactly the kind of situation in which White House aides had originally envisaged going back to Congress for more stimulus. But that didn’t happen. Why not?

One reason was that they had misjudged the politics: just as some had feared when the original plan came out, the inadequacy of the first stimulus had discredited the whole notion of stimulus in the minds of most Americans and had emboldened Republicans in their scorched-earth opposition.

There was, however, another reason: much of the discussion inWashingtonhad shifted from a focus on unemployment to a focus on debt and deficits. Ominous warnings about the danger of excessive deficits became a staple of political posturing; they were used by people who considered themselves serious to proclaim their seriousness. As the opening quotation makes clear, Obama himself got into this game; his first State of the Union address, in early 2010, proposed spending cuts rather than new stimulus. And by 2011 blood-curdling warnings of disaster unless we dealt with deficits immediately (as opposed to taking longer-term measures that wouldn’t depress the economy further) were heard across the land.

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Paul Krugman: The Problem With Deficit-Mania Reviewed by on . The following is an excerpt from End This Depression Now!, the recently published book by Nobel Prize-winning economist and New York Times columnist Paul Krugma The following is an excerpt from End This Depression Now!, the recently published book by Nobel Prize-winning economist and New York Times columnist Paul Krugma Rating:

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  • ObozoMustGo

    Paul Krugman is a complete idiot! Anything that moron has said has been disproven time and again. Google “Paul Krugman is wrong” and you get 6.2 MILLION responses. Google “Paul Krugman is an idiot” and you get 973 THOUSAND responses. This fool’s tactic is to give his desired conclusions and then go seeking any combination of data to support them that he can come up with, even when he defies common sense.

    Any idiot that still believes in the Keynesian theories of economics after 100 years of evidence to the contrary should be removed from the public spotlight and put into a rubber room.

    Have a nice day!

    • http://profile.yahoo.com/ZJ5BBSQIGTUMERPZFALES6HQNY Bill

      Het Bozo I guess we should believe you over a Nobel prize winning economist. You must know more about economic than he does. So tell us what the country should be doing.

      • ObozoMustGo

        Uhhhh…. Billy…… the Obozo won a Nobel Prize before he did a damned thing. The Nobel committee has had ZERO credibility for decades. Those are the same morons that gave Yassar Arafat, renowned terrorist, a Nobel Peace Price. What kind of friggin moron are you?

        And yes, I am waaayyy smarter than that idiot Krugman. Any economist that says we should be going into more debt is either a complete idiot or is intentionally attempting to subvert America. Which one is it, dope?

        Have a nice day!

    • http://pulse.yahoo.com/_UNRSOQB7TEU2XBPPAZ7GZPVNXM EdC

      You really must think you are a skin diver in a fish barrel shooting at liberals, but your spears are failing here because you don’t know what you are talking about. The evidence of the stupidity of the Conservatives has been documented even since the birth of Christ. but your hero’s continue to twist the facts, or make up their own and you are, I’m sorry, stupid enough to believe them. But please stick around, you provide the joke of the day, even when we try not to laugh at you. Just to show you how out of the realm of inteligent discussion, we will take your last sentence. Keynesian Theories have not been around for a hundred years, and actually do not exist except in recent Conservative rhetoric, and that only as spin to get those of less inteligence to believe in their B.S.

      • ObozoMustGo

        Ed… forgive me on the “100 years” comment. Actually, it’s more like 80 – 90 years. By the way…. JMK was born in 1883 and I dont think he just suddenly became an economist in the 1930s. But I’ll give you the point just for hahas.

        Ed… what are smoking? You’re actually trying to say that “conservatives invented Keynesian theory” in recent rhetoric? Are you high? Probably drunk! You must be.

        There’s a bottle with a bottom waiting for you to reach it, Ed.

        Have a nice day!

        • http://pulse.yahoo.com/_UNRSOQB7TEU2XBPPAZ7GZPVNXM EdC

          apparently trying to help you understand your dying retribute, is like talking to the same box of Rocks that make up the Republican party. If the republicans win, it is already written in stone via the Ryan Budget that the country will got back to the ways that got us into the great depression and the more recent recession, If the democrates win, while we will climb out of the problems of today and create again a better future, with already proven ideas and ideals, for your children, yet there will be people like you, that if Obama actually walked on water you would complain that he couldn’t swim, yet you champion people who would not only re-establish the two wars we can’t afford, but also are willing to start three more, while the man who was the decider sold our soul to Chinaeese Store.

          • ObozoMustGo

            Ed, my lefty friend, you are delusional today!

            Have a nice day!

    • perplejado

      First of all, John Maynard Keynes expounded his economic theory during the depression era of the 1930s, so it has not been around for 100 years. Next, Keynesian economics has not been disproven, but has been shown to be a viable and productive means of addressing an economy in recession or depression. After the new deal, the big deal followed, which was World War II, and massive amounts of public spending lifted the country out of depression. Even economists such as the archconservative Alan Greenspan believe that monetary policy should be used to combat economies in recession. Finally, even because millions may believe an individual is an “idiot” does not mean that it is true, that is a logical fallacy, for if we were to go back into history, we could find a time when most people on the earth believed that the earth was flat. Even though most people believed it, did not make it true. Using derogatory terms to describe individuals who do not agree with your political philosophy, only shows that you are ignorant and believe that others are willing to accept your folderol at face value. Have a nice day

      • ObozoMustGo

        Hey perp… nice to hear from you again. I stand corrected… it’s not 100 years, it’s between 80 – 90 years… CRITICAL difference… my mistake…

        Keynes’ theories were NOT developed within the context of a government that is $16 TRILLION DOLLARS IN DEBT! AND THAT’S JUST WHAT’S ON THE BOOKS. We all know that the debt to Medicare and Soc Sec are NOT even on the books. The total debt is estimated at $50 TRILLION.

        You leftist nutjobs fail to understand that Keynes’ theories of public spending may work IF the government has been running a surplus in revenues. The other point that you leftist nutjobs forget is that the government only spends money that it must first get from one of three ways:

        1) Tax revenues
        2) Debt funding
        3) Printing money

        The government produces nothing so it must get money somehow. Either through current taxes or through future taxes to pay off today’s debts. The third way is to print money and we all know where that leads us, right.

        The point is that if the government can only get money from those 3 methods above, and because all spending must be paid for in tax revenue ultimately levied on the people, the truth is that there is NO real government stimulus, only government spending of future taxpayer earnings today. Keynesian “stimulus” spending isnt even a zero sum game, it’s a negative game because the costs are always higher in the long run than if the government did nothing.

        Therein lies the problems with Keynesian theories: they’re only good in the classroom, but not in the real world. No wonder politicians like them.

        Have a nice day!

  • RodgerMitchell

    He may or may not be an idiot, but he is right about one thing: There is no debt crisis, and has not been a debt crisis since we became Monetarily Sovereign on August 15, 1971. Those who do not understand the difference between Monetary Sovereignty and monetary non-sovereignty do not understand economics, but they do call people idiots.

  • RodgerMitchell

    Not only is federal debt not a problem, but it’s not even necessary. A Monetarily Sovereign nation has the unlimited ability to create its sovereign currency. It has zero need to borrow what it has the unlimited ability to create.

    If federal borrowing (and taxing) were $0, this would not affect by even one penny, the federal government’s ability to spend.

    Federal borrowing is a relic of the gold standard days, when the U.S. government was monetarily non-sovereign, and did not have the unlimited ability to create dollars. The whole “debt crisis” is derived from ignorance about the difference between Monetary Sovereignty and monetary non-sovereignty.

  • http://pulse.yahoo.com/_UNRSOQB7TEU2XBPPAZ7GZPVNXM EdC

    The way to pay the bills is to get Americans working FOR DECENT WAGES. the way to do that is to vote out the people who want to turn us (U.S.) into a third world country, the same people who want to give everything else to the people that have most of it already. Where were these deficet Hawks when Bush had already spent all our treasury on a War to make himself look good, and then borrowed from China. Why are they now trying give even bigger tax cuts to the rich. It’s obivious, they want to create a cast system, much like the days of King Arther and Robin Hood. WE need to re-elect Obama and give him not a super majority, but a super, super majority in congress. These represenitives do have to listen to the so far idiots of the Conserveative (or as I like to call them {The Plutocratic Nationalist Party}) just in case they do come up with a good idea. However just to get this country even in the running with Cuba. let alone China, WE Have to make Obama care, a one payer system, and re push the stimulas, to UNION construction of the infostructure. Once again Union, to school the un-inteligent, If a man working for low, and not viable wages for the work done, gets eight dollars an hour, he only buys food, and steals what he can. However if he is paid twenty dollars an hour (still to low in todays economy) he takes his family out to dinner, providing a job for a waitress, who in turn provides a job for a dress store clerk, all of whom pay taxes, lowering the debt. It’s time to bring back the middle class, to create hope for the poor, and start to lift the country back to an actual prosperity.

  • http://pulse.yahoo.com/_ORMD5SX2NV7N7TXQJIOXQEU5RQ Dianrib

    Krugman is right but far right GOP has convinced the masses debt is our only problem Of course when Bush made massive DEBT it meant nothing GOP 6 yr congress gave W
    ALL he asked for and then some If voters are so deluded they fall for this scam they deserve a Romney Presidency which will further destroy the middle class, wages & benefits will stay low ALL States will be right to work ..FOR LESS states if GOP has its way . I say this as a former GOP voter. Forget Fox Hannity Rush Savage etc and their daily hate fest .Its all about corp money Nothing else matters to them anymore Morals values integrity ALL gone

  • SaneJane

    I am encouraged by the sensible and knowledgeable comments on this thread. With the exception of OMG (ObozoMustGo) we have a good discussion going. My constant fear is that we may be outnumbered. I live in the deep south and often feel that I am alone in my beliefs. I do not understand how so many of our fellow Americans continue to believe in nonsense and not just foolish nonsense but dangerous nonsense. Once they latch onto the radical right mindset that is all she wrote. Nothing else can penetrate. No facts, evidence, explanation or history can get through. This cult-like mindless following makes me wonder if zombies are real after all. What can we do? Is there anyway to reach these people?

    • http://profile.yahoo.com/XWNK5E33OIFUMQVAGQQA7GDM2M Bigspender

      I share your concerns regarding the foolish even slavish devotion of uneducated people to the lies and distortions distributed on a daily basis by people like Karl Rove and the republican right wing. Why otherwise normal Americans seem to bury themselves in ideological zealotry that promotes policies which do not benefit them in any way. But we also need to hear from posters like BOZO who, although silly and stupid, do represent a part of our society that have bought into the idea that what the Koch brothers and Karl Rove promote is best for them.

      Remember back in 2008 when nobel prize winning economist Paul Krugman said the republicans were the party of the stupid? I don’t believe he meant that all republicans are stupid. Far from it. But if you are stupid, you are probably a republican. Today the truly stupid can usually be found in the TEA PARTY.

    • http://pulse.yahoo.com/_UNRSOQB7TEU2XBPPAZ7GZPVNXM EdC

      Sometimes I can’t say it enough A Big Amen here

    • montanabill

      I don’t know, SaneJane. Maybe you could try real economics as opposed to Krugman’s ‘Spend Your Way Out of Debt’ , or math. Many of us zombies can do math. Maybe you could just explain what history you are referring to. Most of the time, the history I see on this site begins with the efforts to try to resolve the current economic problems rather than starting where it actually began with the Affordable Housing Act. Facts? It is hard to argue with facts. Unfortunately, too many people here confuse conjecture with facts. Then there are facts like, ‘the government reported unemployment rate is going down’. That’s true, but without context, you wouldn’t learn that the real unemployment rate is still going up.

      • http://pulse.yahoo.com/_UNRSOQB7TEU2XBPPAZ7GZPVNXM EdC

        I’m sorry are you using the new math becausse Republican math does not add up, If you give all the money to special few, the the rest of the people have no money, If they have no money they DON’T Buy stuff, If they don’t buy stuff the economy takes s dumb, The addition, and subtraction, in simple math prove that in two thousand and eight under bush, and in 1929 under hoover, it was proven again in 1990 under reagan, and the mess Nixon made is legendary. so in truth the onlyRepublican President you have had in now a hundred years has been Esinhower. Every single one of them has left us in RED ink, and bleeding profusly. If you can actually prove that the unemployment rate is going up, put in the blog, and don’t us the B.S. from Fox they don’t like real facts.

        • montanabill

          Just what on earth do you think the rich do with their money? They buy stuff. Cheap stuff and expensive stuff, lots of stuff. What they don’t spend, they invest. That money is used to fund new businesses and expand older businesses. They also give substantially to charity. They also hire lots of people. Your writing indicates that you somehow think people with money put it under a mattress or put it in offshore or foreign bank accounts. The latter is a very, very small percentage of the money the wealthy have. You also need to check your history and knowledge of government. The RED ink is complements of Democrat congresses. Only Congress has the power to allocate spending. The President can only approve or disapprove. Those are the REAL FACTS.
          Unemployment rate does not include Americans of working age no longer looking for employment. That number continues to increase and currently is at nearly 88 million people. The numbers come from the Department of Labor, Bureau of Labor Statistics. Look it up. Fox News did.

  • mssainsburys

    ohbozo, why have the tax rates and loopholes become so out of whack? Why did we pursue unfunded war in Iraq? Why was govt oversight and regulation slashed? Why have payroll taxes been cut at the expense of social security? Why Citizens United? Why are services to the poor and vulnerable on the chopping block to spare billionaire and millionaires any “sacrifice”? I may not know economics, but I do know something rotten has been going on for as long as the republican agenda is followed…

    • ObozoMustGo

      Hi sainsbury! I’m glad you’ve asked.

      1) why have the tax rates and loopholes become so out of whack? –> because the tax code, after the imposition of the income tax, is the number 1 means that politicians have used to modify behavior. And the politicians desire to modify behavior brings rewards for some, and punishment for others, and is wholly a 100% insatiable desire for all politicians. It’s why the tax code is 72,536 pages as of 2011. There are also 2.5 MILLION pages of regulations backing that tax code. Who the heck, in their right mind, right or left, could support such nonsense let alone understand it? I say scrap it and go to a 2-tiered tax. 0% for the lowest income, 10% for everything over, say $50,000. Then its fair. Everyone pays the same rate. THAT is fair. We all have skin in the game. Right now, we are close to 50% of Americans that pay NO income tax whatsoever. 43% are NET TAKERS of money from the Feds. What the heck is fair about that? Nothing is fair about that, but you lefties keep screaming for more with the false mantra of “paying their fair share”.

      2) Clearly, the war in Iraq was funded with lawful budgets. Whether you agree with the premise of the war or not. It was lawfully funded with budgets and congressional resolutions that were supported by R’s and D’s alike. I agree with the war, but disagree with nation building which is the REAL long term cost in time and money and lives. I say blow ‘em to smithereens and get out!

      3) Not sure what you mean by government regulation and oversight being slashed. The 2009 edition of the Code of Federal Regulations was the largest ever, encompassing 163,333 pages in 226 individual books. That is the facts from the Federal Register dot gov website. How the heck can ANY sane and objective individual buy the political spin that “regulations were slashed” when clearly they are not. If you are referring to Glass-Steagall Act being repealed which allowed investment banks to get into banking and insurance, that was repealed by Clinton in his last year in office. Sorry to inform you of that truth because I know lefties dont like such truths.

      4) Why have payroll taxes been cut at the expense of SS? –> Well, you should ask Obozo that question. He’s the one that has played politics with this issue in an election year in an effort to drive a wedge between R’s and taxpayers. This one is a DumbocRAT issue, plain and simple.

      5) Why Citizens United –>because our Constitution does not allow for restrictions on political speech. I know you lefties dont like it because it gives conservatives the ability to match the fundraising extortion capabilities of the unions, but too damned bad. You have no right to limit my freedom of speech in any way just as I have no right to limit yours.

      6) Why are services to the poor and vulnerable on the chopping block to spare billionaire and millionaires any “sacrifice”? —> Complete BS! This is Obozo campaign hyperbole and populist appeal with NO basis in fact. At least not yet. You cannot say that an increase in spending on a program is a “cut in spending” just because you say next year I’ll spend $110 dollars, up from $100. Then you change and say I’ll spend $109. THAT IS NOT A CUT! It’s not a cut in your life and it’s not a cut in any real world terms that honest and objective people would agree on. Only in leftist nutjob world of polics is a smaller increase called a cut. But you lefties out there lick those lies up like a dog eats his own vomit.

      In addition, in case you have not noticed, we are $16 TRILLION IN DEBT! There is no money left, sainsbury. NONE! We could confiscate the ENTIRE wealth of the Forbes 400 richest people in America and the government could not run for 6 months! Did you know that? Probably not because these little math facts dont make for good fodder at the Union rally or the Obozo campaign trail speech. Only cliche’s and populist propaganda make for good rallies. You leftist nutjobs seem to thinkg that rich people are just hoarding all their money in mattresses or Swiss bank accounts. They are NOT! Most wealth is invested in assets like businesses that create jobs or real estate that provides work places and housing. But we are rapidly running out of those type of people as the climate in America becomes increasingly hostile to achievers and investment. This is why we have high unemployement. Not enough employers.

      7) I know you’re not an economist, but you are correct that your gutt is telling you something is wrong in America. It is wrong. What is wrong is that we have built a culture of corruption in America where many business people have become less than honorable in their dealings with others and employees. We have a culture of corruption in America where more and more people believe that they are entitled to the necessities of life to be paid for by the labor of their neighbor. We have culture of corruption in America that creates things like flash mobs overwhelming security at a store while they rob the place blind and run away. We have a culture of corruption in America where big businesses are protected from competition by the politicians they have supported on both sides of the aisle. I could go on and on and on about this but I think you get the point. That is the uneasy feeling you have, sainsbury. I think I’m right on this topic, as well.

      I hope this helps.

      Have a nice day!

  • http://pulse.yahoo.com/_4JK5UTBYBW34I6QZZXYEBMSTT4 TEN-OF-WANDS

    Ben from the BANK,
    when under DURESS:
    “Just turn the CRANK
    on the PRINTING PRESS”.

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