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Krugman Shifts on the Deficit

Posted by: Michael Mandel on December 25

For years, I’ve argued that the hardline anti-deficit position of the Democratic party was a political and economic loser. For example, here I wrote in December 2004:

From Walter Mondale’s promise to raise taxes in 1984 to John Kerry’s attacks on the deficit in 2004, a central thesis of the Democratic economic platform has been that Republican tax cuts can cause budget deficits, budget deficits are bad, vote for us. This position has been a disaster on several levels. Politically, the anti-deficit argument has garnered little support, producing only one Democratic President, and a string of congressional losses. Economically, little evidence shows that big budget deficits have impeded U.S. economic growth, the strongest among all major industrial countries over the last two decades. And because an anti-deficit stance makes it harder to fund social programs, it’s tough to understand how opposing the budget deficit makes the poor and minorities, the ostensible Democratic base, better off.

See also here , here, here , here , here, and here. (THe last one is an essay entitled “Faith, Hope, and Progress”).

Now Paul Krugman has written a NYT column which says in part:

The lesson of the last six years is that the Democrats shouldn’t spend political capital trying to bring the deficit down. They should refrain from actions that make the deficit worse. But given a choice between cutting the deficit and spending more on good things like health care reform, they should choose the spending.

Yes, Paul, you’ve got it. The Democrats have done themselves and the economy no favors by adopting hair-shirt economics. To the extent that the federal government has long run fiscal problems, they are connected with long-term medical spending, not the current deficit.

Greg Mankiw, Brad DeLong, and Mark Thoma respond to Krugman. William Grieder applauds Krugman, writing :

If Democrats stick with the Hooverite logic of Rubin—whacking entitlements and shrinking budget deficits— they will forfeit the opportunity to rebuild their party by restoring the country

A poster at Daily Kos objects to Krugman, writing that
“While his argument is clear and cogent, it is also 100% wrong.”

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Reader Comments


December 27, 2006 10:54 AM

Repeat 1000 times: it's not the tax cuts, it is the spending that causes deficits. Tax Revenues are up, up, up.


December 28, 2006 04:12 PM

Krugman - A broken clock who happens to be right twice a day. Neil Cavuto exposed him as being guilty of outright deception regarding the state of our current economy.

Brad DeLong - A person who cannot be taken seriously. Just about every day he says 'Bush is the worst President ever', and an 'idiot'.

Even amateur blogs have obliterated DeLong in debates. See here :

DailyKos - They still insist the 2000 and 2004 elections were stolen, and that Bush did 9/11.


December 29, 2006 06:20 AM

Dear all,
How are you ? I am o.k.
The deficit and its sources are to be justified from the effieciency and welfare criterion. We stand by Paul Krugman for supporting medical spending with caution for relatively inefficient government expenditure (compared to private sector).

Joshi Chetan K. J.


December 29, 2006 09:15 AM

Agreed Pat, but I would also take it a step further.

It's not the amount of spending it's that we don't get anything for it. Economists argue about whether the deficit should be measured against GDP or as a percentage of whatever. The point is that the government is completely incapable of managing its expenditures.

Joe Cushing

December 30, 2006 09:54 PM


Agreed, It all comes down to the pork. We have hundreds of lawmakers whose job it is to bring home the bacon. What we need is an anti pork bill to include the people's write to sue other congressional districts for repayment when their representative breaks the anti pork law. Can you imagine a congressperson keeping their seat after a local government has to raise a mileage to pay the federal government back for their pork law suite settlement?

M.T. Paige

January 3, 2007 06:26 PM


Your idea for a law that could lead to more litigation is perhaps the worst I have ever heard! The last thing this country needs is more litigation! Social programs need to be greatly reduced and replaced with other economically stimulating activities. Welfare programs lock people into poverty that often lasts for generations. If you want more revenue, then strenghten your tax base! Offer corporate tax breaks to businesses that set up shop in underdeveloped neighborhoods. If you the people who are both able minded and bodied working, your expenses for social programs decreases while tax revenue increases. This won't happen overnight but it seems to be a better solution to the problem than simply throwing money at it and expanding programs. Our founding fathers came to this country to escape a social the Democrats are trying to create one...

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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