When I was on This Week yesterday, George Will tried his hand at the debt scare thing, saying that we’re in terrible shape because by 2019 the interest on the debt will be SEVEN HUNDRED BILLION DOLLARS. (That should be read in the voice of Dr. Evil). I get that a lot — people who talk about the big numbers which are supposed to imply that things are terrible, impossible, we’re doomed, etc.
The point, of course, is that everything about the United States is big. So you have to interpret numbers accordingly. As the graphic above shows — it’s taken from an article that managed to maintain a grim tone while reporting numbers that actually weren’t all that grim — what we’re talking about is a debt-service burden roughly comparable to that under the first President Bush. How many of the people now warning about the impossible burden of currently projected debt were issuing similar warnings back in 1992? Not many, I’d guess.
And bear in mind my point about causes of deficits: the deficits of the Reagan-Bush years were essentially gratuitous, the result of a desire to cut taxes while increasing military spending, rather than a response to a temporary emergency. So that debt burden should have been more worrying than what we’re facing now.
But people still seem to think that repeating those big numbers is enough to make their point. It’s the Dogbert theory: back in the runup to Y2K, Dogbert was saying things like this:
I've become a Doomsday Prophet so I can scare gullible people. I'm telling everyone the world will end in year 2000. My compelling logic is that 2000 is a big round number. It's B-I-I-I-G and R-O-O-UND . . .
And the sad, indeed tragic thing is that it’s apparently working.
This is hardly reassuring, Professor. The massive spending will only serve to protract our “temporary” emergency.
So… There is nothing wrong when it comes to huge debt payments and massive government intervention.. anyone saying something could possibly be wrong is an idiot… and does not understand economics…
also…there is everything wrong with the planet.. we are all going to die unless we listen to the all knowing IPCC…anyone who denies there is something wrong is an idiot and treasonous agaist the planet…
so… what we have is… economiclly we must leave it all to the government.. and those in power.. and for the safety of our planet…we must leave it all up to the people in government and those in power…
Strangely it is the same people who are in power..who are putting out all of these studies…and financing you…who are constantly telling us that if we dont follow them blindly we are all going to perish…
I just see something wrong with this scenerio… maybe its me.. but it always seems that throughout human history.. power has always lead to the lust for more and more power… things like this lead to the french reveloution..the soviet union..the nazis….destruction in africa….blood diamonds…
Just dont make thinking differently a thought Crime…
http://www.tnellen.com/westside/harrison.pdf
And what if the emergency is as temporary as the Japanese experience or the Great Depression? What if debt burdens and deficits around the world entrench the new normal? What if the govetrnment is already so big that cutting back will be politically unfeasible or disastrous.
But Paul, as you responded to George, the debt (and debt service) would be managable IF the GDP grows to $20 trillion. Makes sense.
But that implies an annual growth rate of over 3.5% for the next ten years. How do you reconcile this strong growth with the real possibility that the U.S. is turning Japanese (as YOU put it several months ago). In this case, we could face 1.0% annual growth rates and a GDP under $16 trillion in 10 years.
If so, then the same debt DOES pose a greater risk.
I know. Worrying isn’t it? Merkel and Cameron cutting taxes and public spending will ensure double dip recession. See Afoe - a fistful of euros - on German stats. Cameron/Osborne positively frightening for UK.
Sad indeed. Equally as sad is the same folks will ignore that last week we were reminded global credit issues still exist. And what did investors do at the first whiff of uncertainty? Run back to the USD and US Treasuries.
Actually, we did hear about the big bad debt all the time, for decades it seems to me. We had the original large National Debt ‘clock’ in Manhattan getting on TV all the time. Of course, the Republicans didn’t talk about it as much once Mr Reagan became president and fixed everything, as I recall. Seriously, though. Even though it continued skyward during Reagan’s terms, on your graph you can see it spiking by ‘79 and all through the presidential election year of 1980. Ted Tolkoff Forest Hills
It was good to hear you yesterday remind everyone Bush was the only president in history to cut taxes in time of war - for that reason alone, we should re-name these times the Bush Recession.
Dogbert (and Catbert) are just like the rest of Doonesbury - eerily prescient. The dishonest sophistry of the anti-government types makes them incapable of engaging in honest debate since they use straight-line number extrapolation to create sensational numbers they can drop into a discussion to poison that discussion.
The only way to confront this sophistry (often parrotted by opinion-makers who should know better) is to say “let’s pay for the Bush years just like we’re going to pay for healthcare; we’ll immediately reverse the $1.2 Trillion in Bush tax cuts, collect a war sur-tax to pay down another $1 Trillion for Iraq & Afghanistan, and a medicare prescription sur-tax of $400 billion for the other Bush budget bomb.”
Suddenly, all the deficit hawks turn into sputtering shrinking violets - ALL talk and posturing.
What does the tome you have been reading on the Roman Empire tell us politicians should do when faced with obstructionism for most of a decade, Professor ?
Deficits and debt only matter if you are a Democratic President, especially if you are creating debt to finance programs that help average Americans rather than worthwhile projects like tax cuts for the wealthiest 1% or unnecessary wars of aggression.
I caught that bit with you and George Will on TV. Thanks for injecting some reality into the discussion. I always wonder: do guys like George Will really believe all of this stuff?
Dr Krugman continues to disappoint in his simplistic assessments.
All his estimations and arguments rest on the National Debt figure which is about $12 trillion. He never ever mentions the “other debt”, which is the future fiscal liabilities — amounting to an all-out US debt of about $120 trillion. If this figure is included, the picture becomes somewhat less rosy than dr Krugman infers.
Why is Dr Krugman ignoring this all-inclusive Debt?
Whyb does he not address this ?
By not doing so, Dr Krugman’s estimation of debt payback, the current economic situation, and all things economic are completely inaccurate and trivial.
When will you address the real figure of Total Debt Dr Krugman ?
1992? Debt warnings? Does the name Ross Perot ring any bells? Seems to me his whole campaign was based on the debt.
Am I misremembering?
Oh, I guess NAFTA was in there with the giant sucking sound.
PL
Ummm, didn’t Clinton win because of that debt?
Krugman should get another Nobel Prize for discovering that interest-only loans are a free lunch. If you can pay the interest but don’t worry about paying back the principal, you can always roll it over, right? Brilliant!
It’s rather surprising that Pollyannish views on government debt persist after the collapse of private debt due to identical mathematics.
PK said: “And bear in mind my point about causes of deficits: the deficits of the Reagan-Bush years were essentially gratuitous, the result of a desire to cut taxes while increasing military spending, rather than a response to a temporary emergency.”
You always seem to forget that a large portion of those deficits were the result of continuing to pour money into entitlements and social services as well, while we should have been paying down debt during those “good times”. The only time we’ve ever been able to do that while I’ve been an adult is for a few years during the Clinton Administration when the Republican Congress dragged him kicking and screaming to a balanced budget.
Why plot federal debt against national GDP? That makes as much sense as me plotting my personal debt against my employer’s earnings.
Why not plot national debt against tax revenue or federal spending?
robob - The debt under Bush is not what caused this. Not even PK would assert that. He might blame Bush through other means, but he is NOT saying that he created it through the debt caused by the war/tax cuts. You are stating exactly the opposite of what PK is saying while trying to say the same. I don’t get it.
Sorry Paul,
YOU ASSUME THAT USA GOV WILL ALWAYS BE ABLE TO REFINANCE AT 3%.
Here are historical facts:
In 1981-84 the 30 yrs yield was over 12%. In 1980 3m yield was close to 15%. That played important role in propelling Mr. Reagan to While House.
What makes you believe that history will not repeat itself?
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