Wednesday, September 02, 2009

Krugman vs. Krugman on US debt

The Krugman truth squad has a big job following his stretches of the truth. Now he is at battle against himself. In 2003 he was terrified by a deficit of 3% of GDP. Now he isn't bothered by deficits more than 3 times that size. So which Krugman are we supposed to believe? [] Krugman 2003 [deficit at 3% of GDP, 10-year deficit projection $1.8 trillion]: "I'm terrified ... we're looking at a fiscal crisis that will drive interest rates sky-high ... the conclusion is inescapable ... the task is simply impossible ... the fiscal train wreck, is already under way." Or, [] Krugman 2009 [deficit at 11% of GDP, 10-year deficit projection $9 trillion]: What's to worry? The Ozzie & Harriet era of government finance will be easy enough to bring back. Just stabilize the debt in terms of GDP and be happy! goes into the details

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