Hack Economist Paul Krugman’s Accounting of the National Debt is Jailworthy
James D. Agresti
February 17, 2023
In recent years, the national debt has increased at an alarming rate and is now Now higher than any era of the nation’s history—even when adjusted for inflation, population growth, and economic growth (GDP).
You cannot deny this fact Nobel Prize-winning Recent work by Paul Krugman, economist Submitted Two Columns In an interview with the New York Times, he stated that the debt was an “overhyped issue” “isn’t all that unusual” From a historical perspective. His claims to support them use fraudulent accounting techniques that could land an executive in prison.
Projections vs. Realities
Krugman Insist! The art of taming the “federal debt should be well down the list” The government “priorities” after “climate change” “child poverty” Because debt projections are now commonplace “much less dire” Over the past decade. In reality, the debt is far higher than projected, and Krugman’s own words prove it.
In 2009, President Obama and the Democrat-controlled Congress began Securing debt Krugman projects a deficit of $9 trillion over the next decade. Submitted That “even if we do run these deficits,” In 2019, the federal debt would equal 90% of GDP “substantially less than it was at the end of World War II.”
The 2019 debt turned out to be 109% of GDPKrugman’s projection was 21% higher than Krugman expected and is only 8% lower than the World War II-era debt.
This was one year before the government’s reaction to the Covid-19 pandemic led to an unprecedented increase in the ratio of debt to GDP. This was due primarily to state government lockdowns. crushed The GDP The federal government Spend liberally On “Covid relief.”
Even though The GDP rebounded As lockdowns were liftedThe worst inflation in 40+ Years Has a href=”https://www.stlouisfed.org/on-the-economy/2022/aug/inflation-real-value-debt-double-edged-sword”>temporarily Reduced It is still higher that any other period in terms of the ratio debt/GDP. U.S. historyAt 123% of the GDP, this figure is at the end 2022
Worse, the national debt has a ahref=”https://www.justfacts.com/nationaldebt#politics-current”>trajectory That makes current debt appear small in comparison. Under CBO’s decade-old projections, which have thus far Undershot RealityThe U.S.’s debt/GDP ratio is poised to surpass a href=”https://fred.stlouisfed.org/series/PSDOTUKA”>Britain’s After it was a>=”https://www.britannica.com/event/the-Blitz”>intensely Feuerbombed During World War II.
Because of the high level of US debt from WW II, Krugman and other scholars used to argue that the modern debt situation isn’t awful by comparison. They forgot to mention that the war debt was an anomaly due to the ahref=”https://www.britannica.com/event/World-War-II/Yalta”>deadliest The most popular Conflict in world history is common, but the modern debt is an affront. systemic, escalating Continuing federal policies are the root cause of this problem
If you leave the autopilot on, your debt will be automatically accumulated On track To increase WWII levels by approximately 95% in the following three decades.
Current Law v. Current Policy
Beyond ignoring his own debt projection, Krugman spins a yarn that is diametrically opposed to reality by exploiting his readers’ ignorance about differing types of debt estimates published by the Congressional Budget Office (CBO).
CBO has calculated different times at different times Two major types These projections are for the national debt. The first represents current. Law It is also known as the “extended baseline,” The other, however, is based on current events policy It is also known as the “extended alternative fiscal scenario.” As shown in this chart on page a, there are often significant differences between these projections. CBO Report 2011:
These differences can be attributed to the fact federal laws are often rife in accounting tricks and other provisions that understate future liabilities.
The 2010 Affordable Care Act (often referred to as Obamacare) is a prime example. This legislation It was adopted with a Analysis of the CBO It would be a great idea to show it. “produce a net reduction in federal deficits of $143 billion” Over the next decade. The bill’s deficit-reducing provisions are, in reality, the majority of the bill’s provisions.https://www.justfacts.com/healthcare#aca_costs”>weren’t ImplementedWhile almost all of the deficit-increasing ones were,
The discrepancy between what the Affordable Care Act stated and what actually happened, is so large that their true costs are not yet known. Congress’ Joint Committee on Taxation that it hasn’t calculated the realized budgetary impact of Obamacare “because of the many modifications to that law,” CBO It “cannot readily provide a retrospective analysis” The law.
Bottom line: The current is the best. Law scenario made the Affordable Care Act seem like it would lower the debt, but the actual outcome was so different that federal budget agencies don’t know the real number.
Bait and Switch
Keeping these facts in mind, Krugman cleverly jumps between currents. law Current policy projections.
Krugman wrote another column about debt, which proved to be a grave mistake. In 2013 That “budget office projections show the nation’s debt position more or less stable over the next decade.” He stressed this point in his writings. “So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.”
Krugman’s Basis for that claim was CBO’s Current law Projections, which displayed the ahref=”https://www.justfacts.com/nationaldebt#government”>publicly-held The ratio of debt to GDP is barely changing 76.3% To be published in 2013 77.0% In 2023, there will be a 1% increase. Krugman did not reveal that the current Policy Projection showed the debt increasing by 14% During the same time period. It actually grew by a record. Around 28%This is 28 times the current law Krugman cited projection
Now fast forward to 2023 and Krugman appears. Argumentation that CBO’s latest debt projections have become “much less dire” Since 2011. He supports this claim by comparing Current policy CBO projections 2011 To Current law CBO projections 2022. Then he compares the projections. 2035It is not possible to compare actual outcomes with these results.
Krugman refers, in addition to being deceitful, to the 2011 current policy His projections Recent columns As “the most realistic scenario.” But he mentions the 2022 Current Law He uses the same column for his projections without giving the impression that he is using the most realistic scenario. His projections are the same. 2009 2013 columns.
In short, Krugman stealthily switches between CBO’s current law Current Policy He uses projections to create a counterfactual narrative, while also avoiding his own failure projections.
Interest Payments
Krugman is the exception in one case Comparable A projection of an actual outcome. This is CBO’s 2011 current policy Projections for interest payments on national debt in 2021. Krugman is correct in noting that CBO had projected that interest payments would be 4.4% of GDP They were not available in 2021. Less than half That is what it is.
Krugman ignores however the fact that such an outcome comes at a high cost. During the Great Recession of 2007–2009 and the Covid-19 pandemic, the Federal Reserve suppressed Interest rates By creating money to purchase federal debt. This temporary Lower Not only does it pay interest, but the debt also has to be paid. Shifts Wealth can be found in middle-income households as well as high-income households Stokes Inflation, which is bad for people now and can drive up interest costs for the future, is something that will hurt them.
Federal Reserve economist, ahref=”https://www.stlouisfed.org/on-the-economy/2022/aug/inflation-real-value-debt-double-edged-sword”>Christopher J. Neely, “unexpected inflation will tend to raise the cost of servicing future U.S. debt” because investors won’t buy it unless interest rates are high enough to account for the inflation.
Krugman offers a meek nod to this reality Writing Interest payments “will rise as existing debt is rolled over at higher interest rates,” However, this is still a long way from admitting the extent of the harm that this can do.
Consequences
One of the most nefarious aspects of government debt is that it hurts people through economic mechanisms that aren’t always obvious to them. Politicians who are unable to see the truth can exacerbate this murkiness. run up debt False Blame Others Excessive debt can have many negative effects.
Those effects—documented in publications of the Government Accountability Office, the Congressional Budget Office, the Brookings Institution, and Princeton University Press—can manifest gradually or abruptly in the form of:
- Reduced “living standards” “wages.”
- “higher inflation” That number is on the rise “the size of future budget deficits” Both increases and decreases “the purchasing power” of citizens’ savings and income.
- “losses for mutual funds, pension funds, insurance companies, banks, and other holders of federal debt.”
- Increasing “probability of a fiscal crisis in which investors would lose confidence in the government’s ability to manage its budget, and the government would be forced to pay much more to borrow money.”
There are potential dangers that government debt will have on the horizon. They may already be in the future. They may have already begun.http://www.justfacts.com/immigration.asp#association_causation”>association It does not prove causationThe rapid rise in national debt over the past several decades was accompanied by periods of historically low growth GDP, productivity, and “a href=”https://www.justfactsdaily.com/factual-obamas-presidency/”>household Income. These economic results cause a host negative impacts on human welfare in areas such as education, nutrition, and healthcare life expectancy.
When such problems arise, ahref=”https://www.whitehouse.gov/wp-content/uploads/2021/03/American-Rescue-Plan-Fact-Sheet.pdf”>politicians People love it. Krugman These hardships are used to justify increasing debt. Therefore, the negative effects of government debt continue to increase.
Conclusion
The scandalous Enron corporate accounting scandal in the late 1990s and early 2000s saw the federal government a>=”https://www.justice.gov/archive/opa/pr/2006/October/06_crm_723.html”>prosecuted And jailed Enron’s executives Because they “hid Enron’s true financial condition” “materially understated” The “amount of debt carried by Enron….”
Paul Krugman has been doing this for the U.S. National Debt over a decade. The right to Free speech forbids laws that would punish columnists who mislead their readers like executives who mislead their investors, Krugman’s actions have the potential to cause more harm than Enron’s. That’s because Enron’s deceptive statements were measured in Billions of dollars, while Krugman’s are in the trillions. Thus, Krugman’s disinformation can damage the entire country and generations to come if lawmakers and voters act on it.
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