Krugman Doesn’t Understand History

Paul Krugman’s NYT column of yesterday, “Nobody Understands Debt,” is a good example of deceptive propaganda. Krugman believes that government should spend more, not less, and the spending will be good for the economy, put people to work, etc., etc.

Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

This is, however, a really bad analogy in at least two ways.

First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base.

Mr Krugman, we do understand that. At least I do. And it is correct, except in unusual circumstances. However, there is a small problem with your argument. Other than the immediate post-WW II years up to about 1980, the U.S. has consistently expanded debt faster than its tax base. And continues to do so, with the forecast level of entitlement spending not offering any realistic hope of improvement. Federal debt recently passed the 100% of GDP level, to say nothing of the 80% threshold that is known to effectively strangle further economic growth. Nearly half of government spending this year is supported by borrowing, rather than taxation.

Those post-war years were a result of the unique international competitive position of the U.S, when it was the only major nation with an intact industrial base and a largely intact workforce. This competitive position is now reversed, as a result of a lack of investment (savings) and the widespread failure of the education system. Now one might argue that further spending could accelerate growth and right this situation, but you don’t make that argument, you simply ignore the historical facts and current trends. This, to my mind, makes your writing deceptive propaganda rather than a serious argument. Please take your condescending attitude and put it elsewhere. You know where.

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