Krugman's politics > economics (cont'd)

More on Paul Krugman, the subject of debt, his subjective beliefs, and selective fact choices-- from Political Math...

I'll start with PM's "quick visual of the difference in the budgets in 1945 and 2016"...

Then, PM describes Paul Krugman's recent post: "How Big is $9 Trillion” where he tries to defend the Obama administration’s projected $9 trillion addition to national debt. In a word, Krugman avers that it's not that much money when compared to GDP. Krugman is correct in noting that debt should be normed-- to account for inflation and the size of an economy. But he leaves out some crucial facts...

I defer to Paul Krugman on a lot of things because he is transparently smarter than I am. But it is precisely because of this fact that I know he is conscious of the obvious reasons his analysis is hogwash.

First of all, the national debt in WWII was initiated by an existential threat to the very continuation of our country. Mr. Krugman does not make even attempt to make the case that we have a similar crisis that justifies this kind of debt.

Second, implicit in his observation is the concept that since we did fine after WWII, we’ll do fine now. But the years after WWII saw drastic reductions in the inflation-adjusted debt driven by drastic reductions in spending. Mr. Krugman points to no similar possibility in the post-Obama world.

Third, we have something now that we didn’t have in the 1940’s. Back in the 1945, at the height of the spending that saw our national debt rise so dramatically, entitlement spending and interest on the national debt made up a meager 5% of our total budget.

By the end of President Obama’s term (if he runs two terms) we’ll be looking at a federal budget that is 70% mandatory spending.

If you look at the 1945 budget with the single question “How are we going to reduce our debt?” you can identify the major problem. It’s the defense budget, which is almost 90% of the budget. Interestingly, reducing the defense budget is exactly what we did in order to reduce the debt, cutting it over 80% in 3 years (it helped that we won the war).

As a contrast, President Obama’s solution to reducing overall spending is… well, I don’t think he really has a plan. His projected budget in 2016 has reduced the defense budget as a percentage of the overall budget from 20% to 14%, but military spending isn’t what is killing us. The president has no plans to reduce mandatory spending whatsoever. In fact, his only change to entitlement spending is to increase it.

My problem with Mr. Krugman’s “How big is $9 trillion?” is that he is aware of all the problems I pointed out. He didn’t explain how much $9 trillion is; he obfuscated it. By comparing the debt load in the heart of a world-shaking war to a debt load that was accumulated in (relative) peacetime, he has misled his readers to the real significance of the data.