Paul Krugman's column in today's New York Times, entitled, "Kick That Can" tries to make the case that it is "irresponsible and destructive" not to kick the can down the road when it comes to fixing our national debt. He says the dangers of cutting government spending isn't a "debatable proposition" anymore, and argues that spending cuts are worse than a fiscal crisis. Better to do nothing at all. Better to kick the can. Here's his main argument:
But aren't we facing a fiscal crisis? No, not at all. The federal government can borrow more cheaply than at almost any point in history, and medium-term forecasts, like the 10-year projections released Tuesday by the Congressional Budget Office, are distinctly not alarming. Yes, there's a long-term fiscal problem, but it's not urgent that we resolve that long-term problem right now. The alleged fiscal crisis exists only in the minds of Beltway insiders.
Let's take a look at those "distinctly not alarming" CBO projections:
- Economic growth will remain slow this year; if nothing changes, growth may speed up after next year.
- The unemployment rate is expected to remain above 7.5 percent through next year. We'll be in our sixth consecutive year with unemployment above 7.5 percent, "the longest such period in the past 70 years."
- If no changes in federal policy are made, the deficit this year may shrink, but overall federal debt held by the public will reach 76 percent of GDP by the end of this fiscal year—the largest percentage since 1950. In 10 years, it will hit 77 percent and continue on an upward track from there.
One look at this CBO graph makes you realize that his overall position is actually very debatable. And, unlike Krugman, I actually do find this level of debt alarming.
Krugman arrogantly says it's "not urgent" that we do anything. But the CBO outlines the serious negative consequences of taking his advice and doing nothing: As interest rates rise again with a rising economy, federal spending on interest payments will go up as well. Increased federal borrowing to pay the interest will reduce national saving, which means there will be less capital for investing and total wages will be lower.
Fewer people will be able to start businesses, and workers, especially young people—already hit hard by high unemployment rates and above-market interest rates on their federal student loans—will make less money and pay higher taxes. Twenty- and 30-somethings will have to wait longer to buy their first house or afford their first car or start a retirement account. Organizations like TheCanKicksBack.org are making young people aware that doing what Krugman suggests, meaning kicking the can down the road, which he says is the "responsible thing" to do, will be nothing short of a financial disaster for them. I'd like Krugman to tell my two teenage daughters that a future like that is "not distinctly alarming."
Paul Krugman says that the "alleged" fiscal crisis exists "only in the minds of Beltway insiders." I don't think many Americans would agree with him: in January, Americans' concerns about the economy and the federal budget deficit knocked unemployment out of the No. 1 ranking on Gallup's "most important problem" list for the first time since 2009. Gallup polls Americans in all 50 states, not Beltway insiders.
It's Paul Krugman who is out of touch with the very real economic concerns of most working Americans. The "severe" damage he predicts from reining in government spending pales in comparison to the looming economic crisis that awaits us if we simply do nothing. Maybe his advice is what needs to be kicked down the road.
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