Here’s what he said in 2003, when George Bush was in the White House:
With war looming, it’s time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.
From a fiscal point of view the impending war is a lose-lose proposition. If it goes badly, the resulting mess will be a disaster for the budget. If it goes well, administration officials have made it clear that they will use any bump in the polls to ram through more big tax cuts, which will also be a disaster for the budget. Either way, the tide of red ink will keep on rising.
Last week the Congressional Budget Office marked down its estimates yet again. Just two years ago, you may remember, the C.B.O. was projecting a 10-year surplus of $5.6 trillion. Now it projects a 10-year deficit of $1.8 trillion.
And that’s way too optimistic. The Congressional Budget Office operates under ground rules that force it to wear rose-colored lenses. If you take into account — as the C.B.O. cannot — the effects of likely changes in the alternative minimum tax, include realistic estimates of future spending and allow for the cost of war and reconstruction, it’s clear that the 10-year deficit will be at least $3 trillion.
In fact, the deficit at the end of the Bush administration was $438 billion and even today it’s “only” $1.3 trillion, but now that a Democrat’s in the White House, why worry about deficits at all?
People who worry about deficits are fools.
For years, allegedly serious people have been issuing dire warnings about the consequences of large budget deficits — deficits that are overwhelmingly the result of our ongoing economic crisis. In May 2009, Niall Ferguson of Harvard declared that the “tidal wave of debt issuance” would cause U.S. interest rates to soar. In March 2011, Erskine Bowles, the co-chairman of President Obama’s ill-fated deficit commission, warned that unless action was taken on the deficit soon, “the markets will devastate us,” probably within two years. And so on.
It doesnt get any more delusional and agenda driven than Paul Krugman. I’m certain I could find more common ground with James Carville or Harry Reid.
Bla… Japanese debt to GDP is over 200% and mortgage rates hover around 2%. I know little about the economics of nations, certainly not enough to spout BS for the NYT or on CNBC, but I know how to project graphs into the future and the trend in the US points decidedly in the direction of Japan’s.
Paul Krugman – if he was actually intellectually honest and didn’t reverse himself to support his political/emotional inclinations – is a testimony to the observation that “some ideas are so stupid that only an intellectual can believe them.”
Well, apparently the market also is a Bush-hating hypocrite. Yields on 5-year U.S. debt the day Krugman wrote that column were 2.66%. Today? 0.58%. Bond investors must be part of that stupid lib “I blame Bush” crowd!
Classic flip flopper depending how the wind is blowing.
“Luckily” for the US lots of other countries made even worse decisions.
How does that go… you don;t have to the fastest buffalo to outrun the wolves, just faster than the slowest one….
Fiscal ending Debt Deficit
9/30/2010 13,561,623,030,891.70 1,651,794,027,380.00
__________________________________________________
9/30/2009 11,909,829,003,511.70 1,885,104,106,599.30
9/30/2008 10,024,724,896,912.40 1,017,071,524,649.92
9/30/2007 9,007,653,372,262.48 500,679,473,047.25
9/30/2006 8,506,973,899,215.23 574,264,237,491.73
9/30/2005 7,932,709,661,723.50 553,656,965,393.18
9/30/2004 7,379,052,696,330.32 595,821,633,586.70
9/30/2003 6,783,231,062,743.62 554,995,097,146.46
9/30/2002 6,228,235,965,597.16 420,772,553,397.10
Fiscal ending . . . Deficit
9/30/2010……….1,651,794,027,380.00
______________________________
9/30/2009……….1,885,104,106,599.30
9/30/2008……….1,017,071,524,649.92
9/30/2007……….500,679,473,047.25
9/30/2006……….574,264,237,491.73
9/30/2005……….553,656,965,393.18
9/30/2004……….595,821,633,586.70
9/30/2003……….554,995,097,146.46
9/30/2002……….420,772,553,397.10
Christopher, you found a perfect example of why Krugman is a pathetic, zero substance, extension of the Obama administration columnist these days. His integrity level is non-existent.
And, I might add, Krugman is also a fine example of how the NYTimes is a shadow of the paper it used to be. How could a reputable news organization keep someone who clearly is writing due to politics and without a shred of thought to his own theories and principles? Answer – a reputable service would not.
JRH, so no comment on Krugman’s flip flop? I’ll shorten CF’s presentation; budget deficits under GBush=terrified, budget deficits under Obama=only fools worry.
And yes, thanks for pointing out how wrong Krugman was about interest rates.
I wonder if he’s refinanced that 2003 fixed-rate that he thought was such a clever move at the time?
Krugman has lost ALL credibility with his hypocrisy.
Cos Cobber, looks like you missed my point. My point is that the actual market was, like Krugman, more concerned with deficits at that time than they are now, even though today’s deficits are larger. That’s because deficits are not inherently bad, and no sane economist would tell you they are. (Cf. Cheney, “Deficits don’t matter.”) Deficits can be bad when they crowd out private investment. But that only happens when interest rates are high!
That’s the point. If Krugman is a hypocrite blinded by politics, then by implication, the bond market is too. Which, of course, you don’t believe. That’s why it’s relevant that interest rates were higher at the time Krugman wrote than they are now. That’s his damn point.
The Economist did a short piece on Krugman a few years ago, the gist of which was that being an expert in the economics of FX doesn’t mean you know jack about anything else. They also related an interesting item about his history. When Clinton first took office a lot of liberals were pushing Bubba to give Krugman a high level economic policy job in his administration. Clinton met with him in private and decided he’d be more of a liability than an asset.
Whatever else you say about Clinton, he could read people.
Never thought I’d say this but I’ve begun to miss ol’ William Jefferson.
Interesting find CF…..you do have a way of uncovering what is not researched or reported in the mainstream.
Keith Koffler over at WH Dossier has a great article about Obama and the economy – along the same lines of Krugman losing credibility.
http://www.whitehousedossier.com/2012/07/27/reelected-economy/#comments
The bonus feature in the article is the funny Biden and Obama photo as Gilligan and The Skipper.
Keith has an equally interesting article about Romney’s fund raising and how it affects Obama’s lead, with email attached from DNCC begging for more $. Seems the Dems are broke. No surprise. The country is broke under Obama’s “leadership.” So it only follows to reason that his campaign funding model would also fall short.
JRH, All I see is that a flip-flop is staring you in the face and you refuse to acknowledge it. In 2003 we were still climbing out of the 2001-02 recession and by some measures, no different than today. So in 2003 Krugman called this deficit spending (which dont get me wrong, i didnt like it then either) terrifying, but today – under Obama – its the only way to go.
The problem with the 2000s is that we shouldnt have done the fed tax cuts, but we also should not have had the run-away federal spending either. Bush traded his tax cuts and military spending for unbridled domestic spending resulting in budget deficits that were probably needed in 2001-2004 to get the economy going, but should have been eliminated with the 2005-2007 budgets once the economy was moving.
CF, Billy Clinton is looking like a genius relative to current golfer in chief and excutive order mistro.
Krugman is also notorious for being a top ENRON advisor.
That worked out so well.
You’re still missing the point, Cos Cobber. You can be against deficits at one time and think they’re unimportant or even necessary at another time. That’s not hypocrisy. That’s economics. You’re a free market guy, so you should see interest rates and the market’s view as the best way of judging the dangerousness of a deficit. (Actually, deficits cannot be dangerous if they’re not accompanied by high interest rates. That’s the only reason they can be dangerous, after all.)
So if the market was demanding higher interest to lend to the government at the deficit it was running in 2003, the market by definition thought the 2003 deficit was more problematic than today’s deficit — which is being met by investors paying to lend the government money.
And to compare the 2001-02 recession to the greatest economic crisis since the Great Depression is laughable. You’re comparing a regular business cycle recession to a global financial crisis that wiped out trillions of dollars of public and private wealth and led to the loss of tens of millions of jobs. They don’t compare — not even a little bit.
Note, though, that the 2001/2003 Bush tax cuts were justified by the GOP and the Democrats who voted for them as — wait for it — economic stimulus measures. “We’re all Keynesians now,” Republicans used to say (as late as 2008).
Not as notorious as Wendy Phucking Gramm.
“Actually, deficits cannot be dangerous if they’re not accompanied by high interest rates. That’s the only reason they can be dangerous, after all.”
JRH: deficits are dangerous because they create debt. In business we try to remember that debt is risky not due to the interest rate, which is minor, but because ultimately the principal must be repaid, which is major. Krugman seems to have forgotten this. Don’t make his mistake.
Krugman hasn’t forgotten that debt must be repaid, he just hides behind the smokescreen of “deficit reduction later”. If I understand him, he wants us to pile up the spending – double, even triple what it is now, paying little interest on it for the next couple of years and then paying it all off with the increased tax revenues he imagines will be forthcoming. Here’s one problem with that (and JRH, feel free to chime in): what social spending program has ever been reduced since 1965? We don’t reduce spending – we reduce a budgeted increase in spending from, say 8% to 5% and call that a cut. Once the press is finished howling we restore that increase and continue on our merry way, every time. To pretend that we’ll cut our debt in 2017 by reducing spending is just errant nonsense at best.
Krugman was on the radio this morning advocating (facetiously) the invention of a phony alien invasion so that we would whip up the political will to triple our spending on hardening our infrastructure, building new highways, dams, etc. An honest man, which Krugman is not, would have mentioned that (a) just such spending was planned in 2009 and was derailed when Obama’s feminist base protested against jobs going to “burley men” and forced the money to be spent instead on short-term aid that kept teachers and nurses in their jobs for 18 months and (b) environmentalists will never permit another dam to be built in this country and any proposed highway or even (cough cough) high speed railway won’t break ground for at lest a decade, if ever.
So we’ll have the new debt, but nothing to show for it, just like a pay raise being spent on expensive dinners and a premium upgrade package from the cable provider. Only fools spend their money that way, which makes Krugman a fool.
Errant nonsense is exactly what Krugman peddles. You’re right,Chris, Krugman says let’s spend like fools now – there’s plenty of time to wise up later……..
Question: when liberals draw a line through 20,000 jobs available if the Keystone pipeline were approved, do they think about the 20,000 families deprived of the dignity and the income?
Jrh, our interest rates are low not because of faith in our ability to repay our federal debt, but because we are one of the better houses on a bad street to quote fly angler. In the current global economy, money managers have few alternatives to the dollar – particularly any alternatives in any apprciable scale. What the dems are learning in the current environment is that there is seemingly no punishment for endless deficits and as I said once before – in these uncharted waters – they may be right – just long enough for all of us to lose it all.
The 2001-02 recession pales to the current depression, and so didnt the deficits.
And yes, Of course I am a free market guy, just like krugman is a total political animal of the highest order.