White House Sees $9 Trillion in Deficits Over Decade

[GRG55]

Re: White House Sees $9 Trillion in Deficits Over Decade

returning to the subject of the thread [if anyone is interested in that]

---

August 23, 2009, 5:54 pm How big is $9 trillion?

There’s been some hysteria about the administration’s new estimate that the cumulative deficit will be $9 trillion over the next decade. Don’t get me wrong: this is bad. But it’s being treated as an inconceivable sum, far beyond anything that could possibly be handled. And it isn’t.
What you have to bear in mind is that the economy — and hence the federal tax base — is enormous, too. Right now GDP is around $14 trillion. If economic growth averages 2.5% a year, which has been the norm, and inflation is 2% a year, which is the target (and which the bond market seems to believe), GDP will be around $22 trillion a decade from now. So we’re talking about adding debt that’s equal to around 40% of GDP.
Right now, federal debt is about 50% of GDP. So even if we do run these deficits, federal debt as a share of GDP will be substantially less than it was at the end of World War II. It will also be substantially less than, say, debt in several European countries in the mid to late 1990s. (There are some technical issues in comparing these various numbers — gross debt versus net (mainly about Social Security) and overall government debt versus federal, but they don’t change the basic picture.)
Again, the debt outlook is bad. But we’re not looking at something inconceivable, impossible to deal with; we’re looking at debt levels that a number of advanced countries, the US included, have had in the past, and dealt with.


http://krugman.blogs.nytimes.com/200...is-9-trillion/

First reaction: Krugman is starting to paraphrase Dick "Deficits Don't Matter" Cheney...:eek:

Second reaction: Doesn't the $14 trillion economy figure include a lot of fictitious FIRE-economy related "GDP"? And didn't EJ make a case some time back that the US economy would probably shrink until GDP was closer to where it was a decade ago...something like $9 Trillion [metal can you find it]??

Third reaction: Does anybody actually believe these deficits will be the actual upper limit?

[flintlock]

Re: White House Sees $9 Trillion in Deficits Over Decade

First reaction: Krugman is starting to paraphrase Dick "Deficits Don't Matter" Cheney...:eek:

Second reaction: Doesn't the $14 trillion economy figure include a lot of fictitious FIRE-economy related "GDP"? And didn't EJ make a case some time back that the US economy would probably shrink until GDP was closer to where it was a decade ago...something like $9 Trillion [metal can you find it]??

Third reaction: Does anybody actually believe these deficits will be the actual upper limit?

Couldn't have said it better.

"Deficits don't matter". Thinking like that is nothing more than foolish rationalization to spend now and dump the consequences on the future generation. Only the future is now here.

The death of the FIRE economy certainly will lead to lower GDP, not larger! More predictions based on nothing more than wishful thinking.

Of course deficits are only going to climb. There hasn't even been any serious talk of cutting the deficit. They only want to spend more and more.

This country is screwed, and will bring down a lot of the world with it. I now think any talk of turning things around is fantasy talk.

[MulaMan]

Re: White House Sees $9 Trillion in Deficits Over Decade

Larry Flint is a great American.

He has spent an enormous amount of his money and energy behind the scences fighting against the American oligarchs, cartels, neocons, neolibs, Fox News watching anti-American crowd, religious anti-freedom retards, ect..

[audrey_girl]

Re: White House Sees $9 Trillion in Deficits Over Decade

returning to the subject of the thread [if anyone is interested in that]

---

August 23, 2009, 5:54 pm How big is $9 trillion?

There’s been some hysteria about the administration’s new estimate that the cumulative deficit will be $9 trillion over the next decade. Don’t get me wrong: this is bad. But it’s being treated as an inconceivable sum, far beyond anything that could possibly be handled. And it isn’t.
What you have to bear in mind is that the economy — and hence the federal tax base — is enormous, too. Right now GDP is around $14 trillion. If economic growth averages 2.5% a year, which has been the norm, and inflation is 2% a year, which is the target (and which the bond market seems to believe), GDP will be around $22 trillion a decade from now. So we’re talking about adding debt that’s equal to around 40% of GDP.
Right now, federal debt is about 50% of GDP. So even if we do run these deficits, federal debt as a share of GDP will be substantially less than it was at the end of World War II. It will also be substantially less than, say, debt in several European countries in the mid to late 1990s. (There are some technical issues in comparing these various numbers — gross debt versus net (mainly about Social Security) and overall government debt versus federal, but they don’t change the basic picture.)
Again, the debt outlook is bad. But we’re not looking at something inconceivable, impossible to deal with; we’re looking at debt levels that a number of advanced countries, the US included, have had in the past, and dealt with.


http://krugman.blogs.nytimes.com/200...is-9-trillion/

as an American, I really do not want to believe my country is doomed

as an American, I really do not want to see the middle class wiped out and imporverished overnight

as an American, I really do want to believe in my government and its leaders - but each time I see something like this on tv or read something like this,
I despair, because I know in my heart we are going over the cliff, that most of my friends and family are going to be economically wiped out in whats coming, and that our leaders are no better than fools and charlatans

[Ghent12]

Re: White House Sees $9 Trillion in Deficits Over Decade

as an American, I really do not want to believe my country is doomed

as an American, I really do not want to see the middle class wiped out and imporverished overnight

as an American, I really do want to believe in my government and its leaders - but each time I see something like this on tv or read something like this,
I despair, because I know in my heart we are going over the cliff, that most of my friends and family are going to be economically wiped out in whats coming, and that our leaders are no better than fools and charlatans

I share your sentiments. Truth hurts. Knowing that the soothsayers are lying is of little comfort.

[we_are_toast]

Re: White House Sees $9 Trillion in Deficits Over Decade

I agree with Krugman most of the time. Like EJ, his positions are usually supported by historical and current data. But the deficit is one issue where I simply don't understand his lack of concern and we have a deep disagreement.

But lets put things in perspective. With the TARP bailout of the banks, George Bush left Obama with a $1.2 trillion deficit and great depression II. Extrapolate that out 10 years and we would have a $12 trillion deficit and probably a complete economic and social collapse. In that light, a $9 trillion deficit with a "possibility" we will turn to a more productive economy, things don't seem quite so bad. Trying very hard to find a silver lining.

[Slimprofits]

Re: White House Sees $9 Trillion in Deficits Over Decade

Krugman...

Pathetic.

He used to be concerned about deficits, but that was when Republicans ran the show. Now it's all good dudes! He is another well-compensated author of political agitprop. A real piece of shit, but an effective one at that. Usually his columns and blog entries are followed up by 500 praise-filled comments posted by brainwashed liberals.

I would normally say something about the NYT archives being used to damn one of their own, but it doesn't matter. Krugman's fans are true believers, cheerleaders if you will.

Deficits and Deceit

By PAUL KRUGMAN
Published: March 4, 2005

http://www.nytimes.com/2005/03/04/op...gman.html?_r=1

Bad for the Country

By PAUL KRUGMAN
Published: November 25, 2005

http://select.nytimes.com/2005/11/25...25krugman.html

Democrats and the Deficit

By PAUL KRUGMAN
Published: December 22, 2006

http://select.nytimes.com/2006/12/22...22krugman.html

[we_are_toast]

Re: White House Sees $9 Trillion in Deficits Over Decade

Krugman...

Pathetic.

He used to be concerned about deficits, but that was when Republicans ran the show. Now it's all good dudes! He is another well-compensated author of political agitprop. A real piece of shit, but an effective one at that. Usually his columns and blog entries are followed up by 500 praise-filled comments posted by brainwashed liberals.

I would normally say something about the NYT archives being used to damn one of their own, but it doesn't matter. Krugman's fans are true believers, cheerleaders if you will.

If you reread his column, he says the debt is bad, twice.



From the March 4, 2005 link;

According to starve-the-beast doctrine, right-wing politicians can use the big deficits generated by tax cuts as an excuse to slash social insurance programs. ...

And the consequence of the failure of the starve-the-beast theory is a looming fiscal crisis - Mr. Greenspan isn't wrong about that. The middle class won't give up programs that are essential to its financial security; the right won't give up tax cuts that it sold on false pretenses. The only question now is when foreign investors, who have financed our deficits so far, will decide to pull the plug.

From the Nov. 25, 2005 link;

...But job losses at General Motors are part of the broader weakness of U.S. manufacturing, especially the part of U.S. manufacturing that offers workers decent wages and benefits. And some of that weakness reflects two big distortions in our economy: a dysfunctional health care system and an unsustainable trade deficit.

The trade deficit isn't sustainable. We can run huge deficits for the time being, because foreigners - in particular, foreign governments - are willing to lend us huge sums. But one of these days the easy credit will come to an end, and the United States will have to start paying its way in the world economy.


To do that, we'll have to reorient our economy back toward producing things we can export or use to replace imports. And that will mean pulling a lot of workers back into manufacturing. So the rapid downsizing of manufacturing since 2000 - of which G.M.'s job cuts are a symptom - amounts to dismantling a sector we'll just have to rebuild a few years from now.

From Dec. 22, 2006 link;

... But it’s now clear that while Rubinomics made sense in terms of pure economics, it failed to take account of the ugly realities of contemporary American politics.

And the lesson of the last six years is that the Democrats shouldn’t spend political capital trying to bring the deficit down. They should refrain from actions that make the deficit worse. But given a choice between cutting the deficit and spending more on good things like health care reform, they should choose the spending....

Since the 1990s were an era of peace, prosperity and favorable demographics (the baby boomers were still in the work force, not collecting Social Security and Medicare), it should have been a good time to put the federal budget in the black. And under Mr. Rubin, the huge deficits of the Reagan-Bush years were transformed into an impressive surplus.


But the realities of American politics ensured that it was all for naught. The second President Bush quickly squandered the surplus on tax cuts that heavily favored the wealthy, then plunged the budget deep into deficit by cutting taxes on dividends and capital gains even as he took the country into a disastrous war. And you can even argue that Mr. Rubin’s surplus was a bad thing, because it greased the rails for Mr. Bush’s irresponsibility.

...

The answer, I now think, is to spend the money — while taking great care to ensure that it is spent well, not squandered — and let the deficit be. By spending money well, Democrats can both improve Americans’ lives and, more broadly, offer a demonstration of the benefits of good government. Deficit reduction, on the other hand, might just end up playing into the hands of the next irresponsible president.


In the long run, something will have to be done about the deficit. But given the state of our politics, now is not the time.

Except for the comment about Rubin being pretty good, he is pretty much right on the money. Yep! this is why I like him and will continue to read him, but will be cautious due to his classical economic background. He clearly understands that economics is more about politics than any stringent supply/demand rules.

[Slimprofits]

Re: White House Sees $9 Trillion in Deficits Over Decade

If you reread his column, he says the debt is bad, twice.



From the March 4, 2005 link;
From the Nov. 25, 2005 link;
From Dec. 22, 2006 link;
Except for the comment about Rubin being pretty good, he is pretty much right on the money. Yep! this is why I like him and will continue to read him, but will be cautious due to his classical economic background. He clearly understands that economics is more about politics than any stringent supply/demand rules.

I don't find the new blog entry consistent with the three articles cited from the free archives.

Deficits are bad, but no longer unsustainable and now can be dealt with. Foreign investors are apparently not something to be worried about anymore. etc.

[skyson]

Re: White House Sees $9 Trillion in Deficits Over Decade

First reaction: Krugman is starting to paraphrase Dick "Deficits Don't Matter" Cheney...:eek:

Second reaction: Doesn't the $14 trillion economy figure include a lot of fictitious FIRE-economy related "GDP"? And didn't EJ make a case some time back that the US economy would probably shrink until GDP was closer to where it was a decade ago...something like $9 Trillion [metal can you find it]??

Third reaction: Does anybody actually believe these deficits will be the actual upper limit?

fourth reaction: how about the accumulative debt? does the debt add up year after year, plus interest, with no hope of repaying? we are talking about, err.... after a decade, that means 4-5 times of GDP more debt

[rjwjr]

Re: White House Sees $9 Trillion in Deficits Over Decade

First reaction: Krugman is starting to paraphrase Dick "Deficits Don't Matter" Cheney...:eek:

Second reaction: Doesn't the $14 trillion economy figure include a lot of fictitious FIRE-economy related "GDP"? And didn't EJ make a case some time back that the US economy would probably shrink until GDP was closer to where it was a decade ago...something like $9 Trillion [metal can you find it]??

Third reaction: Does anybody actually believe these deficits will be the actual upper limit?

Fifth reaction: So if I agree to sell my soul can I also be awarded the Nobel prize?

There seems to be a pre-prize Krugman that was more intellectually and historically honest than this post-prize, party-line, Stepford version.

[ax]

Re: White House Sees $9 Trillion in Deficits Over Decade

I don't find the new blog entry consistent with the three articles cited from the free archives.

Deficits are bad, but no longer unsustainable and now can be dealt with. Foreign investors are apparently not something to be worried about anymore. etc.

Any truth to this?

"Guess what? The Federal Reserve has not only stopped depositing copious amounts of liquidity into the economy -- it now appears to be in the process of making a sizable withdrawal."

"For example, the monetary base -- the raw material for the money supply -- has fallen at a seasonally adjusted annual rate of 8% from early April of this year through mid-August, after soaring at a 187% pace during the previous eight months.

And after ballooning from $100 billion to nearly $1 trillion between September 2008 and mid-May, adjusted reserves have since declined at a 43% clip, to just over $800 billion.

As a result, the Fed's two measures of the money supply, M2 and MZM, have begun to contract. M2 has shrunk at a 3% pace since the middle of June, while MZM, the St. Louis Fed's measure of liquid money, is down by 2% over the same period."

http://www.marketwatch.com/story/the...wal-2009-08-25


Bart?

[rjwjr]

Re: White House Sees $9 Trillion in Deficits Over Decade

Any truth to this?

"Guess what? The Federal Reserve has not only stopped depositing copious amounts of liquidity into the economy -- it now appears to be in the process of making a sizable withdrawal."

"For example, the monetary base -- the raw material for the money supply -- has fallen at a seasonally adjusted annual rate of 8% from early April of this year through mid-August, after soaring at a 187% pace during the previous eight months.

And after ballooning from $100 billion to nearly $1 trillion between September 2008 and mid-May, adjusted reserves have since declined at a 43% clip, to just over $800 billion.

As a result, the Fed's two measures of the money supply, M2 and MZM, have begun to contract. M2 has shrunk at a 3% pace since the middle of June, while MZM, the St. Louis Fed's measure of liquid money, is down by 2% over the same period."

http://www.marketwatch.com/story/the...wal-2009-08-25


Bart?

Here's what ShadowStats has to say about the issue...

"As noted in the July 31st Flash Update, the continued slack in broad money growth highlights an intensifying systemic solvency crisis and an intensifying downturn in economic activity (irrespective of any recovery mania being generated by Wall Street and the popular media)."

[GRG55]

Re: White House Sees $9 Trillion in Deficits Over Decade

returning to the subject of the thread [if anyone is interested in that]

---

August 23, 2009, 5:54 pm How big is $9 trillion?

There’s been some hysteria about the administration’s new estimate that the cumulative deficit will be $9 trillion over the next decade. Don’t get me wrong: this is bad. But it’s being treated as an inconceivable sum, far beyond anything that could possibly be handled. And it isn’t.
What you have to bear in mind is that the economy — and hence the federal tax base — is enormous, too. Right now GDP is around $14 trillion. If economic growth averages 2.5% a year, which has been the norm, and inflation is 2% a year, which is the target (and which the bond market seems to believe), GDP will be around $22 trillion a decade from now. So we’re talking about adding debt that’s equal to around 40% of GDP.
Right now, federal debt is about 50% of GDP. So even if we do run these deficits, federal debt as a share of GDP will be substantially less than it was at the end of World War II. It will also be substantially less than, say, debt in several European countries in the mid to late 1990s. (There are some technical issues in comparing these various numbers — gross debt versus net (mainly about Social Security) and overall government debt versus federal, but they don’t change the basic picture.)
Again, the debt outlook is bad. But we’re not looking at something inconceivable, impossible to deal with; we’re looking at debt levels that a number of advanced countries, the US included, have had in the past, and dealt with.


http://krugman.blogs.nytimes.com/200...is-9-trillion/

More from Krugman in the NYT [warning: 8 pages]:

How Did Economists Get It So Wrong?
By PAUL KRUGMAN
Published: September 2, 2009

It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making.

Last year, everything came apart.

Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy...

...As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth...

When I first started reading this it reminded me of someone else who asked the same question...

The Queen asks why no one saw the credit crunch coming
By Andrew Pierce
Published: 4:40PM GMT 05 Nov 2008

During a briefing by academics at the London School of Economics on the turmoil on the international markets the Queen asked: "Why did nobody notice it?"...

...Prof Garicano said: "She was asking me if these things were so large how come everyone missed it."...

Clearly Her Majesty was not amused...and, months later, in reply to her question received a nice letter filled with mealy-mouth words signed by a group of prominent toffs in the UK with an explanation that sounds much like the one Krugman starts with above...:p

Economists Apologize To Queen Over Failure To Foresee Recession

(RTTNews) - Some eminent British economists have apologized to Queen Elizabeth II, in writing, for failing to predict the timing, extent and severity of the financial crisis that has hit the country and the world, blaming it on “a failure of the collective imagination of many bright people,” reports say...

[ThePythonicCow]

Re: White House Sees $9 Trillion in Deficits Over Decade

The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.”

This reminds me of some famous declaration about a century ago that the major scientific questions had been solved. This came out just before Heinsenberg, Bohr, Planck, Dirac, Pauli, Schrödinger and Einstein, amongst others, rewrote physics from the ground up.

However I am less optimistic that the dismal "science" of economics is about to receive such a profoundly successful rewrite.