Paul Krugman’s Deficient Perspective

by Don Boudreaux on August 28, 2009

in Debt and Deficits

Here’s a letter that I sent earlier today to the Gray Lady:

Noting that “it’s important to have some perspective,” Paul Krugman argues that while Uncle Sam’s budget deficit is now large, “we also have a huge economy, which means that things aren’t as scary as you might think” (“Till Debt Does Its Part,” August 28).  Whew!  No cause for much concern, for the size of America’s GDP swamps the size of the budget deficit.

During the Bush years, however, Mr. Krugman preached a different gospel.  For example, in his February 11, 2005 column – devoted to condemning tax cuts – he insisted that “the deficit is indeed a major problem.”

So let’s take Mr. Krugman’s advice and get some perspective.  In 2005, when Mr. Krugman insisted that government’s budget deficit was “indeed a major problem,” that deficit was 2.5 percent of GDP.  Today, when Mr. Krugman no longer is very concerned about the budget deficit, that deficit will be about 11 percent of GDP.  Hmmmm….

Sincerely,
Donald J. Boudreaux

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