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09:56 AM on 02/05/2010
With this kind of reasoning, would any of you trust Mr Krugman to manage your family's money and life savings if he were a money manager instead of an academic? if you held US dollars since the end of the Clinton Era, you would be down nearly 50% in purchasing power compared to the Euro. a devasting loss to your net worth. Deficits don't matter to paul, but they sure as heck matter to the people that trade dollars on the global markets.
anothervoice2
332 electoral votes is a mandate
10:14 AM on 02/05/2010
Attacking Krugman because he speaks the truth?!
GWB and the GOP ran up a deficit of 8 trillion - that was when they left. The repercussions of their mismanagement are still in play - and the deficit is adding up. Obama's spending has been mostly to restart the economy. There is no private money anymore with the credit freeze. The only way the Govt can ensure that this doesn't turn into a depression is by spending. McCain's economic advisor said that the deficit spending would have been the same under McCain.
The media spin and hysteria is disingenous at best.
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10:34 AM on 02/05/2010
Yuu have been "punked" by Obama if you believe that the government spending trillions of dollars is needed to jumpstart the economy. Small busineses create 100% of the net new jobs in this country.

Please stop believing the lies that your politicians are telling you. Taxing investors and small business owners and instead giving that money to washington does not create a SINGLE job. Remember when Obama promised you that gov't spending was needed to keep the unemployment rate below 8%? how did that work for you, now that the unemployment rate is 9.7%?
11:26 AM on 02/05/2010
pwhunter- then why are people still investing in markets. Why have the markets risen??

Managing money on a market is far different than macro economics. The analogy is fairly inaccurate.

Did you read the article?? You seemed to have missed the point.
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12:02 PM on 02/05/2010
The markets have risen because our government has borrowed dollars from china and printed trillions of dollars and flooded the economy with it. When you nearly DOUBLE the supply of dollars in circulation, you will see a rise in the stock market because that money needs to find a destination. It is a short lived illusion that is paid for on the back of your children and grandchildren. Their share of the debt has risen in lockstep with this rise in the markets.
09:51 AM on 02/05/2010
****There is a group of senators pushing for a mandatory Constitutional Amendment requiring a balanced federal budget with no deficit spending unless in a time of declared war or other emergency. Currently 49 states have laws that require a balanced budget. Why don't we have one at the federal level? Check this link below to see if your representative supports a mandatory balanced budget,, and if not,,,then why?

http://senateconservatives.com/v1/index.php?p=post&id=71
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Peter007
09:57 AM on 02/05/2010
This was the same story when Bush ran against Clinton in 1992. The deficit wasn't on the table until Ross Perot ran and got about 17% of the vote. Without Perot, the deficit would not even have been discussed. Clinton got rid of the deficit as a result of all the attention brought about by that third party candidate.
10:01 AM on 02/05/2010
No, Clinton did not get rid of the deficit. He balanced the budget.
Very different.
10:04 AM on 02/05/2010
We all know that Clinton "got rid" of the deficit, by stealing all the surplus money from Social Security and throwing it into the General Operating Fund,,,and SS is now insolvent.
09:59 AM on 02/05/2010
We are always at war, so how will this help us. Let's stop the fear mongering and the empire building and cut the military budget or at the very least let's audit the pentagon and see where all this money is going.
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10:06 AM on 02/05/2010
The defense budget is not the problem now and really wont even count going forward compared to the other spending we are going to be on the hook for.
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Peter007
09:50 AM on 02/05/2010
Krugman is saying. Don't worry be happy. Things were bad before and they got better. He speaks more like a politician than an economist. Krugman compares debt service to GDP. GDP also includes private production. A better measure would be to look at debt service to Total federal revenues. That number is too high now and is expected to rise in the next decade. Krugman also fails to mention unfunded liabilities in SS and Medicare. Those items alone can sink this economic ship. Its really very simple. We are spending more than we are making. The borrowering rate is accelerating. Every household knows their budget and when Dad and Mom have lost income and they are out buying a new car and a big screen TV before their trip to Europe, even the kids know something bad will be happening in the future months. Bills do come DUE.
09:40 AM on 02/05/2010
The crushing national debt is a greater threat to this nation than any threat from terrorists. We have had deficits before,,,but never this high,,,and never escalating as fast as it is now. What is happening in the bond markets to Spain, Greece, and Portugal could easily happen here.
09:44 AM on 02/05/2010
Yep, agreed.

Greece is undergoing ridiculous deficits and is on the brink of insolvency, and the government is trying to cut union salaries....and the unions are threatening a general strike!
anothervoice2
332 electoral votes is a mandate
09:48 AM on 02/05/2010
And yet not a word from Foxsnooze or their unhinged mobs when GWB and the GOP increased the deficit over 8 trillion. This country's deficit is a direct result of their mismanagement of this country. Even with all that spending, they drove the country into a ditch. Net loss of jobs over the past decade. Congrats GOP! Hypocrites and the worst capitalists ever!
09:51 AM on 02/05/2010
Let's not forget "deficits don't matter" mantra of the Reagan years. Oh wait, i think Reagan was a GOP also.
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Peter007
09:53 AM on 02/05/2010
Been on vacation? Bush had a 28% approval rating and the people that voted for Republicans were so fed up that they started their own political party. Tea Party. If they were happy with Bush, McCain may have won and there would not be a large tea party forming.
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09:35 AM on 02/05/2010
The only time deficits matter is when one party (or the other) thinks they can score political points by being (a) for --- or (b) against deficit spending.

Unemployment .... should matter. Lack of affordable health care.... should matter. Americans fighting and dying in two senseless wars..... should matter.

However, because political points can be scored by scaring people with "your kids and grandkids are going to have to pay for this" ...... now that "they are going to kill grandma" no longer works.....suddenly .... deficit spending is..... (a) socialistic..... or (b) just irresponsible...... take your pick.

But be afraid....... be very afraid..... because they (deficits) are probably hiding under your bed....along with the "islamofacist terrorists" who want to take away our freedoms..... and ..... all the other scardy cat things that Rush and Hannity, Palin, and O'Rielly harp on..... daily. On Faux News.
09:47 AM on 02/05/2010
Yeah, you are totally right. It's not like every other country who has had deficits this large have not gone under or anything.
Plus, the little matter of the 99 trillion dollar underfunding of SS and medicare is out there too. But Im sure thats just another boogey man to you.
anothervoice2
332 electoral votes is a mandate
09:53 AM on 02/05/2010
And yes, all those other countries have a currency like the dollar too.
GWB wanted to privatize SS - imagine the disaster after the crash of Sept 08.
How convenient it is to cherry pick facts - to support the Fixed Noise spin.
09:54 AM on 02/05/2010
Can you please post the link to the 99 trillion dollar underfunding of SS and medicare, i would be interested in reading it. Also, SS was a closed fund until Reagan and Greenspan got ahold of it in 1983. After that it has been a watering trough for both sides.
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09:50 AM on 02/05/2010
The difference is that no one else has run up debt this big this fast before. and the budget and other programs that barry wants to push through will sooo much more to the debt it will cripple this country.
09:28 AM on 02/05/2010
Backing away from the it's your fault, left/right exchange for a second, deficit spending has been a very powerful economic stimulator in our country's history. In times of crisis, it is imperative that the government has the ability to prop up the system. In this situation, the issue that I take with Mr. Krugman's analysis is that he does not consider where the money is coming from. Some estimates that I have seen estimate that the Fed purchased up to 80% of the treasuries in 2009. I'm assuming 2010, 2011 will be similar. It is creating new money to do so. Every single government who has gone down this road has created a much bigger problem than they began with.
The issue should be not deficit spending. It should be how to manage inflation. I cannot see any way that we can possibly begin to balance our budget without higher taxes and lower services. I also cannot see any possible way to even begin to repay our debt without significantly deflating the dollar. Right now, everyone is in the same boat, so the dollar holds. Once the rest of the investing nations around the world get their house in order, the check will come.
10:19 AM on 02/05/2010
Exactly. The interest rates are being artificially depressed, because the Fed is repurchasing the treasuries from primary dealers. It's a shell game. If a donut maker could only clear his inventory of donuts by promising to buy them back from his customers, would anyone predict a bright future for that baker?
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laxfamily
09:12 AM on 02/05/2010
Boy, is this spot on. I have been teaching finance for over 10 years and I have beeen speaking to my students for years about the importance of understanding the trends in national debt. I actually had a student comment "but Rush said" and "Bill ' O’Reilly said" XYZ. I suggested that these men, although certainly entertaining, were not solid academic sources and he needed to spend some time reading instead of listening to the noise. The reality is that many people do not have enoght economic knowledge to sort out fact from opinion.
09:20 AM on 02/05/2010
I suppose by "educating" you mean only reading leftist economists like Krugman-is that what you mean?
Grunty1
Micro-bio this
09:23 AM on 02/05/2010
He means stop paying attention to people with no measurable skills other than spreading hatred.
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mtracy9
09:23 AM on 02/05/2010
Krugman is not a leftist economist -- more or a liberal. If you want to read leftist economists type into Google keywords: "Marx, economics."
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Kimberly SanMartin
09:09 AM on 02/05/2010
I agree with Krugman. While the economy is still going in fits and starts, deficit spending is the only way to develop consumer demand. We did it successfully in the 1950's. When demand begins to strengthen, we will get growth in our industry and manufacturing. The trade deficit is something that desperately needs to be addressed, if we are going to make a real difference. If we continue to buy imported goods, with little of our own being exported, our efforts to revive our economy will be in vain. The money that we put into our economy HAS to stay here, or the economy will continue to flounder. We have to get back to producing something besides debt.
anothervoice2
332 electoral votes is a mandate
10:07 AM on 02/05/2010
Agreed.
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10:10 AM on 02/05/2010
The only way????? What about......ohhhhh letting people keep their own money and spend it themselves????????????
anothervoice2
332 electoral votes is a mandate
10:20 AM on 02/05/2010
Have you been sleeping these past two years?!
The folks who saved and spent wisely over the past decade are under water with their savings too! Where is this money that we can access? Savings accounts, college funds and 401ks have all been devastated. The only money that is in circulation is the money that the Govt is spending.
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Kimberly SanMartin
11:01 AM on 02/05/2010
The citizenry does not have the capital to create the necessary momentum to move this economy, the Government does.
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VoteLibertarian
Despite your politics, I like you anyway.
09:07 AM on 02/05/2010
we're 14 triilion in the hole...at what price point does Krugman think enough's enough....?
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mtracy9
09:15 AM on 02/05/2010
Don't think of it in absolute terms. Look at the debt in terms of GDP. In these terms, our debt is much lower than it was at the end of World War 2. Interesting, that after World War 2 with a high debt, America's economy took off.
09:19 AM on 02/05/2010
It took off because we were the only industrialized nation in the world not bombed to smithereens, and who had functioning factories, as well as the ability to loan money to the rest of the rebuilding world.
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marshhen
Northern by birth, southern by choice
09:19 AM on 02/05/2010
Geez.... not because of high debt, but because the US was the only country left as an industrial power and infrastructure after WWII. There was no where else to go to buy anything.
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mtracy9
09:16 AM on 02/05/2010
I meant to say as a percentage of GDP.
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08:58 AM on 02/05/2010
Defecits only matter when Democrats run government, the same debt that the republicans structuralized the first place. If there is a time for public debt, its during a financial crisis, to cushion the lack of private sector contributions to the economy, or a defense crisis, for which Iraq wasn't.

I fell for the small government con-job and embarrassingly enough, was a republican until 2003. That was whenl I realized that the definition of small government does not include a government that tells people who they can worship, who they can love or marry, who can raise children, who gets to drink safe drinking water or breathe safe air. Small government also does not include, which innocents get tortured, what companies get no bid contracts, what religious stories are taught in place of science, whether a citizen even has the right to die with dignity.

I apologize to America that I was a republican for as long as I was, but once I actually researched politics beyond soundbites, I had no choice but to change parties to the party of less government, comparatively that is, the Democrats. The difference between Democrats' and Republicans' idea of good government is the difference between Norway and North Korea, respectively. All hail Kim Jung Cheney.
09:08 AM on 02/05/2010
Ok, so what happens when we remove the private sector, then?

If more government is the answer, can you explain why leftist command economies fail miserably?

Think about it. If more government is good, wouldn't it then follow that if EVERYONE worked for the government, in our common interest, it would be better for us all?

We could all share private property, and we each could work to our own ability. We could reliably depend on the government to issue us cars and food coupons, and tell us where to work and when.

Sounds terrific.
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mtracy9
09:12 AM on 02/05/2010
No one said that command economies are good; only that governments sometimes play a useful role in capitalism's excesses.
Grunty1
Micro-bio this
09:24 AM on 02/05/2010
[Ok, so what happens when we remove the private sector, then?]

No one is saying to do that, other than, ironically, the private sector itself as it ships jobs to Mexico, India, and China.
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08:43 AM on 02/05/2010
Mr Krugman, of course you aren't concerned about deficits. WIthout deficit spending, you entire big government liberal nirvana can never exist . After all, you can't promise cradle to grave entitlements without being able to borrow the money from somewhere.

But seriously, if this doesn't remind you of Bernie Madoff like ponzi scheme, then what does? If the finances of the american government were a corporation, would you put your life savings in it? Does Enron come to mind? Please tell how it is possible for us to maintain our standard of living when such a large portion of our tax revenue (and borrorwing) in the future will go towards paying the INTEREST on our debt? Does Greece offer any examples for the USA?
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mtracy9
08:45 AM on 02/05/2010
Ronnie RayGun said that deficits do matter and criticized Carter for them. Of course, Ronnie would become infamous for tripling the National Debt.

Cheney changed Republican orthodoxy by saying that deficits don't matter. Cheney/Bush then went on to double the National Debt.

Now that we have a Democratic President, Republicans are returning to the old orthodoxy, saying that deficits do matter.
08:47 AM on 02/05/2010
Deficits don't matter if the economy grows enough to outstrip them, which is Krugman's argument du jour.

If the economy does not grow enough, well, Houston, we have a problem.
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jingles32
09:13 AM on 02/05/2010
Dick Cheney said the same exact thing om 2004 with the firing of Paul O'Neill, that deficits don't matter!

http://www.ontheissues.org/2004/Dick_Cheney_Budget_+_Economy.htm

Cheney to Treasury: "Deficits don't matter"
Former Treasury Secretary Paul O'Neill was told "deficits don't matter" when he warned of a looming fiscal crisis.
O'Neill, fired in a shakeup of Bush's economic team in December 2002, raised objections to a new round of tax cuts and said the president balked at his more aggressive plan to combat corporate crime after a string of accounting scandals because of opposition from "the corporate crowd," a key constituency.

O'Neill said he tried to warn Vice President Dick Cheney that growing budget deficits-expected to top $500 billion this fiscal year alone-posed a threat to the economy. Cheney cut him off. "You know, Paul, Reagan proved deficits don't matter," he said, according to excerpts. Cheney continued: "We won the midterms (congressional elections). This is our due." A month later, Cheney told the Treasury secretary he was fired.

The vice president's office had no immediate comment, but John Snow, who replaced O'Neill, insisted that deficits "do matter" to the administration.

Source: [X-ref O'Neill] Adam Entous, Reuters, on AOL News Jan 11, 2004
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phoenixbc
My biographer is still working on my micro-bio.
08:58 AM on 02/05/2010
Wow. You entirely forgot to mention Satan, Communists, and rabid monkeys.

Krugman is a "big government liberal"? Have you read any of his writings, or are you basing your non-sequitur on editorials?

Was this your response when the Republican-controlled Congress and President Bush rubber-stamped successive budgets and budget supplements to fund the wars in Iraq and Afghanistan? Those budgets accounted for most of the current deficit. Did you complain when Bush blistered through the budget surplus left by the Clinton Administration? Did you cry "foul" when Cheney said that deficits weren't important?

I want my tax dollars to benefit me. After what Reaganomics and the last Administration did to this economy, my tax dollars should go to fix MY country. We either spend the money now or we spend it later. Either way, it has to be spent, and spending it now means fewer people out on the street and starving.
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Soulsurfer
Solar Electrician,Longtime Surfin'Fool
08:41 AM on 02/05/2010
Once again PK states the facts, but soft soaps the blame. The same methods used to sell the Iraq war, kill the HC bill, sell TARP, etc. are being used, and an uninformed public is once again herded into the pen for shearing.
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mtracy9
08:42 AM on 02/05/2010
The public is being misinformed by out great corporate media.
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mtracy9
08:38 AM on 02/05/2010
Early in his presidency, Reagan chose as his economic advisers a group that espoused a radical economic theory called "supply-side." The supply-siders told Reagan that if he gave tax cuts to the top brackets (the wealthiest individuals) the positive effects would "trickle down" to everyone else. Tax cuts, they argued, would produce so much growth in the economy that America could simply outgrow its deficits. Reagan bought into supply-side theory, which is why in 1981 he predicted that there would be a "drastic reduction in the deficit."

However, Reagan soon discovered that his supply-side advisers were wrong. Tax cuts, instead of reducing the deficit, caused the deficit to balloon.

At this point, Reagan would change strategy. He would blame the U.S. Congress for the record deficits that accrued during his years in office. Reagan would say that Congress was responsible, because Congress did not slash spending enough--meaning domestic spending, since Reagan always championed increased military spending.

Reagan chose to ignore the fact that his own Republican Party was in control of the Senate from January 1981 to January 1987, and that Congress actually spent less than what he originally had asked for.

Federal deficits would continue unabated until the presidency of Bill Clinton when fiscal responsibility would finally be restored. President Clinton would achieve a balanced budget (and even record surpluses) in large measure by restoring higher taxes on the wealthy.
08:46 AM on 02/05/2010
Tell me.....why didn't Clinton want to up rates back to Carter levels, if Democrats solely possess all the secrets to reviving an economy?
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phoenixbc
My biographer is still working on my micro-bio.
09:16 AM on 02/05/2010
First, raising or lowering interest rates is the function of the Federal Reserve, not of the President. Second, Volcker's Fed disagreed with the long-term supply-side approach taken by Reagan's Administration, and they took appropriate action to counter the impact of the tax burden shifts created under the budgets demanded by Reagan.

Reagan cut allocations to the states, which meant that the states now had to figure out how to either raise capital or cut spending. While cutting state spending sounded sexy, it adversely affected education, small business programs, and other infrastructure funds. The Fed anticipated this, while Reagan's supply-siders dismissed Volcker as an out-of-touch liberal.

The allocations were shifted from the states to increasing the military and making up for tax reductions to corporations and the wealthy (remember, it's trickle-down). There was not a reduction in personal taxes that corresponded to the amount that was diverted from the states, which now meant that real taxes for individuals would increase to make up for losses at the states to replace essential services.

It's not as simple as just raising or lowering rates.
08:59 AM on 02/05/2010
*However, Reagan soon discovered that his supply-side advisers were wrong. Tax cuts, instead of reducing the deficit, caused the deficit to balloon.*

rubbish. the deficit increased because spending increased. when you increase taxes on anyone, rich or poor, that just means they will have less disposable income to spend into the economy. that means less cars will be bought, fewer homes built, fewer vacations taken. that means less employment.

plus more taxes means more wars can be fought. more bases built. more money wasted.

the way to cut a deficit is to cut spending. the you don*t even have to raise taxes.
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mtracy9
09:03 AM on 02/05/2010
Rubbish. Spending on domestic programs decreased. Spending on the military increased -- something that RayGun supported.
Grunty1
Micro-bio this
09:27 AM on 02/05/2010
I have an idea for you: take a 20% paycut at work. Then try to argue that your revenue actually increased.
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mtracy9
08:37 AM on 02/05/2010
"America has a strong economy and a surplus.... Now is the time to reform the tax code and share some of the surplus with the people who pay the bills."
--George W. Bush, nomination acceptance speech, 3 August 2000

After the election of 2000, Bush and a Republican-led Congress reduced income taxes, with the majority of the tax cuts going to America's wealthiest individuals. With the introduction of Bush's tax cuts, the budget surplus immediately disappeared and deficits resumed. By the end of Bush's eight-year term, the national debt stood at $10 trillion -- double its level when Bush assumed office. And, as for the strong economy Bush talked about when he assumed the Presidency­..........

"This is an impressive crowd -- the haves and the have-mores. Some people call you the elites; I call you my base."
--George W. Bush, at the annual Al Smith Memorial Foundation Dinner, 19 October 2000
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marshhen
Northern by birth, southern by choice
08:50 AM on 02/05/2010
50% of the population are not paying federal taxes.
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mtracy9
09:03 AM on 02/05/2010
But they pay sales taxes, and all other sorts of taxes.
08:31 AM on 02/05/2010
Krugman, in 2004:

"Well, basically we have a world-class budget deficit not just as in absolute terms of course - it's the biggest budget deficit in the history of the world - but it's a budget deficit that as a share of GDP is right up there.

It's comparable to the worst we've ever seen in this country."

Yet now, of course, that the budget deficit is roughtly 4 times what 04's deficit is........he's cool with it.

Snort.
08:33 AM on 02/05/2010
hipp-Thank you for pointing out the hypocracy of Mr. K.
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mtracy9
08:40 AM on 02/05/2010
No hypocrisy. Krugman is right. The time to worry about the deficit is when we get past Bush's recession.
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mtracy9
08:34 AM on 02/05/2010
Krugman is right. The time to worry about the deficit is when we get past Bush's recession.
08:40 AM on 02/05/2010
mt-Who's recession? You are a KA sipper.