Krugman is not right when it is convenient. He is just right.

[cthulu2016]

If one wants to be the Party of arithmetic it will require some arithmetic.

There is no benefit to the US economy in reducing the deficit now, and most likely no economic benefit to reducing it in 2013, 2014, or perhaps even for years beyond that, given what European austerity is doing globally right now.

No. Benefit.

In fact, not merely no benefit but active harm.

Anybody talking about the deficit right now is either woefully under-informed or a charlatan.

These are facts. They are not optional. They are not subject to ideology.

Cutting net spending is damaging in today's economy, even in an extreme case where every penny being cut was waste. Wasted money is still money. Eliminating waste is good. Cutting spending in the world of today is bad. The solution is easy... cut the waste and replace it with something more productive.

But for god sakes don't cut waste to reduce the deficit in our curent conomy. We are trying to avoid being dragged by Europe into anothe recession. Cutting the deficit is litterally the last thing we should be thinking about.

The point is that the deficit is what is keeping the US ahead of Europe right now. The deficit is good.

Raising taxes on the rich will not help the economy. It will, however, hurt the economy much less than the rich claim. It is not, however, an economic positive in and of itself.

Raising taxes on the rich? I'm all for it... as long as the additional revenue is not used to reduce the deficit.

The direct effect of raising taxes and cutting spending is to reduce economic growth—versus not doing those things. This is not a political stance, it is a fact. Unavoidable.

Raising taxes on the rich and then handing out all the revenue gained to the poor is somewhat stimulative. It creates some net demand. Raising taxes on the rich to reduce the deficit has some appearance of justice, but since reducing the deficit in the next few years harms everybody it is pure cutting to spite the face.

Politics does not always follow fact, but politically inconvenient facts do not become less true.

It was irresponsible in 2011 to agree to reduce the deficit. It remained irresponsible in 2012. It will continue to be irresponsible in 2013. If we are lucky it will become a good idea someday, but since nobody can say when that will be, creating a time-table is seriously stupid.

The only thing being negotiated today is not whether we will hurt the economy to assuage widespread economic ignorance, but how badly. That is what is on the table... how badly.

Was this politically necessary? Perhaps so. I am not saying that it is categorically wrong to be engaged in deficit reduction negotiations.

It is, however, categorically economically wrong. It is dreadful economic policy being pursued, on both sides, as a political stunt.

Perhaps a necessary political stunt. Perhaps a political stunt that will have kept the Supreme Court from going full-wingnut.

But nobody should pretend the stunt is wise policy. (Unless their actual job is to flak for the unwise policy.)

It is fine to argue for a deficit reduction plan as a concession to politics as long as one recognizes that doing so is the same as arguing for teaching creationism in the schools because it is popular with the people. Or arguing that global warming is a hoax because a lot of people in your district think so.

[Fumesucker]

1. I would like to subscribe to your newsletter

And I think I need a cigarette..

[n2doc]

2. Cutting waste and abuse is not damaging

However, it is hard to identify those things, especially in a corrupt environment.

FDR raised taxes. Clinton raised taxes. Reagan raised taxes. Growth did not slow. So your statement of 'fact' is wrong.

Raising taxes can be stimulative, if it re-directs those funds that might have gone into executive pay back into other areas. Or if those funds are spent by the government instead of sitting in a Cayman Islands account. Money kept by those who already have so much that they cannot spend it is not stimulative.

[cthulu2016]

3. Sigh.

Almost everything you just said is false, but you are part of the populace these unwise policies are designed to appeal to.

Politicians will continue to pander to your misconceptions, rather than correcting them.

And that is politics.

[n2doc]

6. live in your own, republican-fueld dream world then

typically, no data is provided. just "everything is false" bye.

[Blecht]

10. Maybe if you two would take the time to read what the other said

instead of dismissing each other out of hand, you will find that you are in pretty good agreement.

cthulu2016: "Raising taxes on the rich and then handing out all the revenue gained to the poor is somewhat stimulative. It creates some net demand."

n2doc: "Raising taxes can be stimulative, if it re-directs those funds that might have gone into executive pay back into other areas."

When I see two people who are on the same side failing to communicate with each other, I get even more depressed.

[Egalitarian Thug]

12. Hear, hear! Well said. n/t

[Lefty Thinker]

16. Sorry, cthulu2016 is right on this one

Bill Mitchell (link) has helpfully provided all the data and analysis I could imagine you'd need (and then some -- the guy is unbelievably prolific).

All of the accounting agrees that there are three sectors to the American economy: private (including households, companies, and state and local governments), external (foreign trade), and governmental (federal government and the Federal Reserve). Each can be a source or sink of money in circulation: dis-saving/saving, exports/imports, and government spending/taxes, respectively. When the equation would fail to balance people lose jobs, thus increasing government spending on unemployment compensation and dis-saving by unemployed workers to re-balance the figures.

Cutting government spending, even wasteful or abusive spending, without increasing spending equivalently in another area will produce an economic imbalance that will be resolved with savings losses, job losses, or both.

Republicans, by the way, do not accept this line of reasoning at all. It leads to conclusions like "public debt is beneficial to the public" or even just "deficits are sometimes a good idea". Mr. Mitchell's blog has all the reasoning leading to these conclusions.

[PETRUS]

8. Taxes are half the story: FDR, Reagan, Clinton

Spending matters too. Deficits rose under FDR (from a surplus of a few hundred million in 1930 to yearly deficits between $2 and $5 billion between 1932 and 1937, then jumped to between $20 and $50 billion annually during WWII) and, as we all know, under Reagan as well (hundreds of billions annually). The Clinton years were a "bubble" economy - which, while unsustainable, were characterized by growth and low unemployment - so there weren't the pressing reasons for deficit spending that we have today.

[Blecht]

4. A-fucking-men

Your analogies are dead on: austerity as an economic solution during a downturn = creationism as science = climate change as a hoax.

All three are insanely ridiculous and are only embraced by the stupid, the greedy, or the political. And it really bothers me when the politicians I support talk in those terms.

Right now ALL our elected leaders are talking austerity, so we are going to be hurting the economy, and badly. It's really quite depressing.

[gravity]

5. There are always tradeoffs

I agree, except you can't dismiss the deficit completely. We should just understand that each attempt to lower the deficit will have an negative economic impact at least short term.

The focus should be in prioritizing our spending and taxing to have the most stimulative effect on the economy while having the least amount of impact on our budget.

Raising taxes on the rich might have some minor short term consequences which is why it wasn't pursued strongly in 2010 by Obama, but it will have a major long term impact on our future budgets and policy decisions.

[phantom power]

7. Until the economy improves, we absolutely can and should dismiss the deficit completely.

There is absolutely no good-faith argument being made about "reducing the deficit." It is 100% dogwhistling about cutting social security and medicare and other safety net programs that need expanding, not contracting.

The time to reduce deficits is when the economy is strong. That isn't just an ideological statement. It's an economic model, which Krugman has explained dozens of times.

There might be a good faith argument for cutting our eye-wateringly bloated military budget. And increasing taxes on the wealthy. The rest of it will do very little except make our already-historically-long recession last a lot longer.

[gravity]

14. Krugman doesn't dismiss the deficit completely

He just thinks that economic stimulus should be a higher priority.

Tax cuts on the wealthy is a terrible waste of money if you are trying to jump start the economy. You can argue that the amount of economic stimulus you get is not worth the debt they costs. That is why Krugman supports raising taxes on the rich.

Compared to spending on education, food stamps and infrastructure which will get more bang for the buck in economic growth.

[cthulu2016]

11. Good post.

I would be delighted to see the rich taxed at very high levels, but to do that without net harm requires a second component.

The thing cannot be viewed independently.

Whenever we talk about raising taxes we also talk about the purpose of the revenue.

So there is no right economic answer to "should we tax the rich more?"

Should we tax the rich for the purpose of then redistributing money in such a way as to increase net demand?

Yes. Absolutely.

Should we tax the rich more for the purpose of making the US economy smaller in 2014?

No. Of course not.

And I get frustrated that we have been in a demand crisis for four years and these questions are barely part of our national dialog because the electorate rejects the economic premises.

[Hydra]

17. People aren't taught how this really works

If they were taught this in school, they would probably ask, "Why aren't we funding social programs, infrastructure or free higher education then?"

I'm actually amazed how far the media and the politicians have stuck this out here now. 10 years ago there would be no mention about the importance of loaning payroll money to businesses.

[lumberjack_jeff]

9. Raising taxes on the rich also promotes philanthropy. n/t

[Egalitarian Thug]

13. Getting Americans to take an interest in the economics that literally determine

the shape of their lives is like trying to teach a turtle to recite poetry.

[tk2kewl]

15. Raise taxes on the rich and use the revenue to build and fix stuff

roads, trains, sewage treatment, renewable energy infrastructure, etc.

there is a lot of work that needs to be done