And remember everyone, Obama can run up the deficit and national debt as much as he wants, regardless of the consequences, because Reagan did. No one needs to show any fiscal restraint, because Reagan didn't, and Bush 43 didn't. So when the economic collapse occurs, even though President Obama could have prevented it by adopting sane fiscal policy, he is not obligated to because Republicans haven't.
Originally Posted by CuteOldGuy
Yep, the hypocrisy can get pretty deep when one is a blind partisan who always thinks that only one party is ever irresponsible.
In the investment world, we often enjoy making fun of the astonishingly clueless and hypocritical Paul Krugman. Nine years ago, he mused about the tendency of irresponsible governments to "print money", both to pay current bills and eventually to inflate away debt. At the time, he worried about 10-year deficit projections that in his opinion were in the neighborhood of $3 trillion.
But now that that they are several times that high, he has no problem with endless deficit spending and money-printing. In fact, he has been calling for much more of it, claiming that we need it to stimulate the economy more by stacking up even more deficit spending! (Even though at no time in history have such efforts ever turned out well.)
While Krugman blasted Bush for large tax cuts (which went primarily to lower-income groups, not the wealthy, contrary to popular belief), he says nary a word in opposition to Obama's decision to leave them in place while adding large payroll tax cuts, which are likely to be politically very difficult to restore. For some of these clowns, perspective always depends on which party is in power.
You just can't make this stuff up!
Here's the article from 2003:
A Fiscal Train Wreck
By PAUL KRUGMAN
Published: March 11, 2003
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.
So what? Two years ago the administration promised to run large surpluses. A year ago it said the deficit was only temporary. Now it says deficits don't matter. But we're looking at a fiscal crisis that will drive interest rates sky-high.
A leading economist recently summed up one reason why: ''When the government reduces saving by running a budget deficit, the interest rate rises.'' Yes, that's from a textbook by the chief administration economist, Gregory Mankiw.
But what's really scary -- what makes a fixed-rate mortgage seem like such a good idea -- is the looming threat to the federal government's solvency.
That may sound alarmist: right now the deficit, while huge in absolute terms, is only 2 -- make that 3, O.K., maybe 4 -- percent of G.D.P. But that misses the point. ''Think of the federal government as a gigantic insurance company (with a sideline business in national defense and homeland security), which does its accounting on a cash basis, only counting premiums and payouts as they go in and out the door. An insurance company with cash accounting . . . is an accident waiting to happen.'' So says the Treasury under secretary Peter Fisher; his point is that because of the future liabilities of Social Security and Medicare, the true budget picture is much worse than the conventional deficit numbers suggest.
Of course, Mr. Fisher isn't allowed to draw the obvious implication: that his boss's push for big permanent tax cuts is completely crazy. But the conclusion is inescapable. Without the Bush tax cuts, it would have been difficult to cope with the fiscal implications of an aging population. With those tax cuts, the task is simply impossible. The accident -- the fiscal train wreck -- is already under way.
How will the train wreck play itself out? Maybe a future administration will use butterfly ballots to disenfranchise retirees, making it possible to slash Social Security and Medicare. Or maybe a repentant Rush Limbaugh will lead the drive to raise taxes on the rich. But my prediction is that politicians will eventually be tempted to resolve the crisis the way irresponsible governments usually do: by printing money, both to pay current bills and to inflate away debt.
And as that temptation becomes obvious, interest rates will soar. It won't happen right away. With the economy stalling and the stock market plunging, short-term rates are probably headed down, not up, in the next few months, and mortgage rates may not have hit bottom yet. But unless we slide into Japanese-style deflation, there are much higher interest rates in our future.
I think that the main thing keeping long-term interest rates low right now is cognitive dissonance. Even though the business community is starting to get scared -- the ultra-establishment Committee for Economic Development now warns that ''a fiscal crisis threatens our future standard of living'' -- investors still can't believe that the leaders of the United States are acting like the rulers of a banana republic. But I've done the math, and reached my own conclusions -- and I've locked in my rate.
E-mail:
krugman@nytimes.com
