Trump's Big Beautiful Debt Bomb
By: Paul Krugman
Paul Krugman demonstrates that we cannot depend on neo-Keynesian lies any more than neoliberal lies for government regulating the economy.. Krugman's economic theories are as bankrupt as any other neoliberal globalized sell-out welfare program for the wealthy.
The damned tax cuts Democrats, liberals, far-left loonies, and Paul Krugman are whining about were in place during Joe Biden's entire term in office. So, why weren't these tax cuts a problem for Biden and why didn't a Democratic controlled congress eliminate them? Joe Biden got the benefit of those tax cuts with full employment (one of Krugman's favorite talking points to prove the deficit doesn't matter).
Joe Biden was quite liberal with government spending and creation of government debt. It was Joe Biden's profligate spending that raised concerns about fiscal management and future debt that brought the bears to the bond market. Joe Biden, single handedly, made deficits matter again. Joe Biden is directly responsible for a trillion dollar deficit just to service the national debt.
If deficits don't matter when liberals, like Joe Biden, are throwing boatloads of free money at every problem then why are deficits a problem when taxes are cut? Both approaches stimulate the economy and allows money to float to the top of the economy. Deficit spending, no matter the cause, is a welfare program for the wealthy. Krugman's neo-Keynesian theories combined with neoliberal theories have rigged the economy to always favor the wealthy. Paul Krugman is no friend to the poor.
Under the guidance of neo-Keynesian and neoliberal economic regulation and management, the state of our currency is so bad that the United States cannot even manufacture pennies. The value of the penny has been undermined that much. Krugman's advocacy to expand welfare for the wealthy has brought the country to the brink of another liquidity crisis because we can't borrow enough and print enough money to keep the economy afloat. Krugman calling for ever more government stimulus to sustain full employment regardless of increasing debt is deliberately intended to be a welfare program for the wealthy. No one dependent on TANF, food assistance, section 8 housing, Medicaid, or any of the other social safety net programs ever died rich. All that social spending floats to the top of the economy as welfare for the wealthy.
Paul Krugman is going to get his wish. There aren't any more taxes to eliminate and there isn't any more spending to cut without pushing the country over the edge. The asinine economic apologists for globalization have run out of free money. The rest of the world recognizes that the United States can't produce anything, can't create wealth, can't sustain itself. The United States runs on IOUs and monetary policies deliberately intended to devalue the currency in perpetuity. The United States has become a debtor nation that cannot compete in international markets. The United States economy has died on the hill of neo-Keynesian and neoliberal economic theories dependent upon free money to provide welfare for the wealthy.
S E E D E D C O N T E N T
Do readers remember the debt panic of the early Obama years? For a while scare stories about national debt dominated discussion in the media and inside the Beltway.
I got a lot of grief at the time for bucking that consensus, urging people to relax about government debt. The United States, I argued, had lots of "fiscal space" — ability to run up debt without losing investor confidence — so it should focus instead on the importance of restoring full employment, which required running substantial deficits.
These days, however, many though not all of the people who were screaming about debt back then have gone quiet. Funny how that happens when there's a Republican in the White House.
Yet there is much more reason to be worried about debt now than there was then. On one side, there's no longer any good economic reason to be running large deficits. On the other, America has changed in ways that have greatly reduced our fiscal space, our ability to get away with a high level of debt.
And the One Big Beautiful Bill Act, which just passed the Senate and will probably pass the House, will make things even worse.
Why was I relatively relaxed about debt back in the day? Largely because history tells us that advanced nations can normally run up large debts without experiencing crises of confidence that send interest rates soaring.
Look, for example, at the debt history of the UK, which ran up huge debts relative to GDP during the Napoleonic Wars and the two world wars without losing investor confidence:
Why are advanced countries normally able to pull this off?
First, they're normally run by serious people, who don't try to govern on the basis of crackpot economic doctrines and will take responsible action if necessary to stabilize their nations' debt.
Second, they're competent: They have strong administrative states that can collect a lot of tax revenue if necessary. The United States collects 25 percent of GDP in taxes, but could collect much more if it chose. Some European nations collect more than 40 percent.
These factors normally lead investors to give advanced countries the benefit of the doubt, even when they run big deficits. That is, investors assume that the people running these countries will take action to rein in debt once the emergency justifying deficits ends, and that they will be able to take effective action because they have effective governance.
And that's why I was a deficit dove in, say, 2011. America needed to run substantial deficits to recover from the 2008 financial crisis. But I didn't think this would cause trouble down the road, because we were a serious country run by serious people, easily able to do what was necessary to stabilize the debt once the economic emergency was past.
But that, as I said, was then.
Right now we are running big budget deficits even though we aren't fighting a war, facing high unemployment, or dealing with a pandemic. We should be taking action to bring those deficits down. Instead, Republicans have rammed through the One Big Beautiful Bill Act, which will add trillions to the deficit even as it causes mass misery. Money aside, the way Congress was bullied into passing that bill and the lies used to sell it show that we are no longer a serious country run by serious people.
Republicans are using transparently dishonest accounting to hide just how much they're adding to debt — hey, we aren't really cutting taxes, just extending tax cuts that were scheduled to expire. And they're also claiming that the OBBBA's tax cuts (the ones that they say aren't really happening) will generate a miraculous surge in economic growth. I've had my differences with the Committee for a Responsible Federal Budget, but it's an honest, highly competent think tank, and its (appropriately) incredulous analysis of Trump officials' economic projections is titled "CEA's fantastical economic assumptions."
Add in Trump's bizarro claims about what his tariffs will achieve. Again, do we look like a serious country run by serious people?
Moreover, mass deportation and incarceration of immigrants, aside from being a civil liberties nightmare, will inflict severe economic damage and significantly worsen our debt position.
Finally, how long will we have an effective government that can collect taxes when necessary? Elon Musk's DOGE failed to find significant amounts of waste, fraud and abuse, but it did degrade the functioning of the federal government and demoralize hundreds of thousands of civil servants. Republicans have done all they can to eviscerate the IRS and make tax evasion great again. Even if control of the government is eventually returned to people who want to govern the country rather than pillage it, it will take years to recover competence in tax collection and other mundane government functions, which we used to take for granted.
The falling dollar is an indication that foreign investors are losing faith in America. But I don't think they fully realize, even now, that the risk of a U.S. debt crisis is vastly higher now than it was when Republicans were yelling about Obama's deficits.
Tags
Who is online
397 visitors
Paul Krugman helped to kill capitalism to provide welfare for the wealthy. Krugman attempting to gaslight the country into blaming Republicans is as bankrupt as Krugman's brand of economics. Krugman tells us that deficits don't matter so why is Krugman complaining about deficits?
I can still recall when the chief architect of Obamacare said that the American people had to be lied to
According to Krugman we should be in recession right now and depression in Trump's first term. Instead Trump just had probably the best month of any President in modern times.
What is astounding is that Paul Krugman seems unaware that Joe Biden was President. Trump's tax cuts and Trump's tariffs were in place for Biden's entire term. Krugman wasn't griping about taxes and tariffs then; he was defending Biden's stimulus spending.
How did Paul Krugman win a Nobel Prize?
We are screwed. It’s simply impossible to reign in spending in this environment when democrats demagogue every cut in the rate of growth of entitlements as killing Americans etc etc.. politicians have to win elections and and democrats figured out a hundred fifty plus years ago with Tammany hall hall that taxpayer money and favors can be used to buy votes.
the debt is going to keep growing. We can’t even agree to common sense restrictions like no funding for non citizens and able bodied working age adults with no dependents shouldn’t get free healthcare. Entitlements and other future obligations will continue to skyrocket and when the bubble bursts some time in the next few decades it’s going to be really, really ugly.