Paul Krugman: Till Debt Does Its Part

[cal04]

http://www.nytimes.com/2009/08/28/opinion/28krugman.html

So new budget projections show a cumulative deficit of $9 trillion over the next decade. According to many commentators, that’s a terrifying number, requiring drastic action — in particular, of course, canceling efforts to boost the economy and calling off health care reform.

The truth is more complicated and less frightening. Right now deficits are actually helping the economy. In fact, deficits here and in other major economies saved the world from a much deeper slump. The longer-term outlook is worrying, but it’s not catastrophic.

The only real reason for concern is political. The United States can deal with its debts if politicians of both parties are, in the end, willing to show at least a bit of maturity. Need I say more?

(snip)
As I’ve said, those 10-year projections aren’t as bad as you may have heard. Over the really long term, however, the U.S. government will have big problems unless it makes some major changes. In particular, it has to rein in the growth of Medicare and Medicaid spending.

That shouldn’t be hard in the context of overall health care reform. After all, America spends far more on health care than other advanced countries, without better results, so we should be able to make our system more cost-efficient.

But that won’t happen, of course, if even the most modest attempts to improve the system are successfully demagogued — by conservatives! — as efforts to “pull the plug on grandma.”

So don’t fret about this year’s deficit; we actually need to run up federal debt right now and need to keep doing it until the economy is on a solid path to recovery. And the extra debt should be manageable. If we face a potential problem, it’s not because the economy can’t handle the extra debt. Instead, it’s the politics, stupid.

[FrenchieCat]

1. It's nearly always politics.........

[AdHocSolver]

2. The time when such a large debt can cause a problem is if creditors all demand repayment in full.

Meaningful health care reform would send a positive message to our foreign creditors that the U.S. is serious about putting its financial house in order.

Failure to implement meaningful reform, including a meaningful public option, which is the only way to reduce the absurdly high health care costs, will cause U.S. creditors to bailout of supplying anymore credit to the U.S. That would cause a swift collapse in the U.S. economy.

Saying we can't afford a public option in health care is a total fraud. This country cannot afford NOT to have a public option.

[avaistheone1]

3. A Single payer health plan would be a good stimulus for the economy.