Paul Krugman is in a channeling frenzy in today’s column, entitled “The Dwindling Deficit.” His inner Alfred E. Neuman says, ‘What, me worry?”:
The budget deficit isn’t our biggest problem, by a long shot. Furthermore, it’s a problem that is already, to a large degree, solved. The medium-term budget outlook isn’t great, but it’s not terrible either — and the long-term outlook gets much more attention than it should.
Who knew? He argues that economic recovery will raise federal revenues and decrease such costs as unemployment and food stamps. That’s usually true enough, except we’ve been in “recovery” since June 2009 and it hasn’t helped yet. Budget deficits for the last four fiscal years were $1.41 trillion (2009), $1.29 trillion, $1.3 trillion, and $1.08 trillion.
The administration shows no sign of pushing activities that would have an immediate positive effect on the economy, such as encouraging new oil and gas production, and many signs that it intends to continue its crony capitalist “investments” in green energy, which have been an expensive bust.
A slew of new regulations on business, and tens of thousands of pages more to come with Obamacare and Dodd Frank, will not speed up the recovery. Neither will higher taxes on capital gains and dividends. And the Fed will have to at some point start reining in the money creation (euphemistically termed quantitative easing) that is currently keeping interest rates historically low. That means the cost of servicing the debt will go up. Each one-percent rise in interest rates that the government has to pay raises annual interest costs $160 billion.
Krugman writes that, “. . . the budget outlook for the next 10 years doesn’t look at all alarming.” Of course, the budget outlook in 2000 foresaw nothing but budget surpluses for the next ten years. Krugman explains that, “George W. Bush squandered the Clinton surplus on tax cuts and wars.” (There were no Clinton surpluses, in fact, just phony accounting that called money borrowed from the Social Security Trust Fund income. But let that go.) It was the collapse of the Internet bubble in 2000 and the ensuing recession—which began on Clinton’s watch—that caused the “surpluses” to disappear. As for those tax cuts, they were nothing but a giveaway to the rich until, this year, they suddenly became vital to the middle class.
Most egregiously, he writes with regard to Social Security, “At this point, ‘reform’ proposals are all about things like raising the retirement age or changing the inflation adjustment, moves that would gradually reduce benefits relative to current law. What problem is this supposed to solve?”
Ummmm, perhaps the problem pointed out by the Social Security Administration itself that the system will run out of money in 2037? That’s not an economic projection; it’s a demographic one. All those who will be on Social Security in 2037 are, at least, now in their forties.
But Krugman, like, Scarlett O’Hara, wants to think about that tomorrow: “by moving too soon we might lock in benefit cuts that turn out not to have been necessary. And much the same logic applies to Medicare [now scheduled to go broke by 2024]. So there’s a reasonable argument for leaving the question of how to deal with future problems up to future politicians.”
Like Krugman, Wilkens Micawber, was quite certain that “something will turn up.” At least he was until the police turned up and he was arrested for debt.
"Alfred E. Newman, Scarlett O’Hara, and Wilkens Micawber…." n nYou forgot Dick Cheney: "Deficits don't matter."
Did Krugman identify where to borrow he next two trillion in debt? n nIn a mostly fine post, it is a state of denial to blame Bush43's annual deficits on Clinton. nYes, the Clinton surpluses were an accounting trick because of the PLANNED SocSec surpluses. I still remember that logic from when Reagan raised the FICA taxes. n nIt's not just the Israelis and palestinians who have duelling historical narratives…
I'd like to know where the heck the 6 trillion in extra spending by BHO went?! Anyone now that answer?
Let me propose a new regulation of my own: If you say or write more than three stupid things in a row, you must surrender your Nobel Prize and perform 1,000 hours of community service—in Swedish Norrbotten.
When we had a budget "surplus" (okay, it wasn't actually a surplus, but a deficit of $18 billion looks pretty damn nice at this point) at the end of Clinton's administration — does anyone think we never had a crushing deficit before that? Of course we had, and we earned our way out of it exactly as Paul Krugman predicts we can do it again: through economic growth and reasonable levels of taxation. Why is Krugman so stupid for predicting what has already happened before? You people are blinded by hatred and unencumbered by facts.
Past performance is no guarantee of future results. Anyhow, the idea that we can somehow grow our way out the the looming entitlements crisis with no sweat and no pain (except of course for millionaires and billionaires!) is sheer wishful thinking. Coming from the (self-described) reality-based party, this is rather hilarious.
Which entitlements are you referring to? The entitlement of military jobs that produce nothing of lasting value, a "defense" department that attacks everything in sight yet can't beat back a bunch of primitives in Toyota trucks? Where are the calls for a leaner, cheaper military that does't try to police the world? Or maybe you're referring to corporate welfare — billions given to successful agriculture and energy companies because, well, they're entitled. Or maybe you're referring to carried interest tax breaks? I mean, I'll happily talk about cuts to single mothers and children's school lunches — though I think it's sick, we can talk about it. But how about tossing in a few cuts on your side of the table?
Medicare, Medicaid and Social Security. Presumably you've heard of these programs…
Duh. I knew which ones you were referring to — programs for people you see as somehow less than you. You certainly didn't take any of your precious time answering my question. I admit it's a tough one.
The items you listed are not entitlements. Anyhow, they pale into insignificance by comparison with the trillions of dollars of unfunded liabilities represented by the three actual entitlement programs that I listed. As far as corporate welfare is concerned, I’m in favor of eliminating it completely—every single tax break and subsidy, including Obama’s misbegotten welfare payments to the auto industry, green energy companies, etc. But neither than nor defense cuts nor tax increases nor economic growth will do a thing to prevent entitlement spending from bankrupting the federal government, unless the relevant programs are radically reformed. That you refuse to acknowledge that reality pretty much cancels out your professed compassion for the proles.