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Debt crisis? What debt crisis?

Myth_truth11

Paul Krugman NAILS IT:

Pundits who spent years trying to foster a sense of panic over the deficit have begun writing pieces lamenting the likelihood that there won’t be a crisis, after all. Maybe it wasn’t that significant when President Obama declared that we don’t face any “immediate” debt crisis, but it did represent a change in tone from his previous deficit-hawk rhetoric. And it was startling, indeed, when John Boehner, the speaker of the House, said exactly the same thing a few days later.

What happened? Basically, the numbers refuse to cooperate: Interest rates remain stubbornly low, deficits are declining and even 10-year budget projections basically show a stable fiscal outlook rather than exploding debt.

So talk of a fiscal crisis has subsided. Yet the deficit scolds haven’t given up on their determination to bully the nation into slashing Social Security and Medicare. So they have a new line: We must bring down the deficit right away because it’s “generational warfare,” imposing a crippling burden on the next generation.

What’s wrong with this argument? For one thing, it involves a fundamental misunderstanding of what debt does to the economy.

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7 Comments

  1. It’s not the debt, it’s the unfunded liabilities. The Fed continues to purchase bad debt to increase money supply, but it does not appear to be working. We are in the financial equivalent of “no man’s land”.

  2. You know you live in a Country run by IDIOTS if…. Your government believes that the best way to eradicate trillions of dollars of debt is to spend trillions more of our money.

  3. Neftali

    Soon we will be paying more money on interest than we do in many necessary government programs. There is no question we have a debt problem.

  4. Neftali,
    How soon? How much? What necessary programs? How about some facts and figures and solid predictions instead of wild opinions.

  5. Neftali

    Jerry – I don’t make wild opinions. Everything I state is backed up with fact. You should know that by now.

    Read this:

    http://www.usnews.com/news/articles/2012/11/19/how-the-nations-interest-spending-stacks-up

  6. As your reference says, we are currently spending about 6% of our annual budget and about 1.4% of GDP. They say it will increase by about 5’times by 2020, but provide no backup for that number except to say interest rates will go up as the economy improves.

    What they fail to note is that as the economy goes up the annual deficit will go down and the debt will stabilize. The interest rate on the current debt is locked in. Treasury bonds are not variable rate. Thus a five times increase in interest rate will not increase debt interest payments by 5 times.

  7. Umm… 17 trillion debt… No problem. 10,000 people retiring a day living to 90 expecting social security and Medicare …. No problem. Most useless workforce in a long time…. No problem. Obama are pushing firms to offshore or shrink or fold and individuals to pay more for healthcare…no problem. More shit imported than we exported for years and years. No problem. Nothing to see here, keep moving. We’re a mix of Fukushima and Greece.

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