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Why it might be dangerous for Paul Krugman to mock debt and deficit hawks

Paul Krugman
Paul Krugman

As he has for a long while, Paul Krugman (in his column Monday) uses the latest CBO report to once again mock debt and deficit hawks.

I generally like Krugman’s work. And there are idiotic debt and deficit hawks who seem to want to use the debt/deficit numbers only as scare tactics to advance their real cause, which is to shrink government. Someone who was concerned primarily with the rising debt would not rule out tax increases as part of the long-term solution. A lot of righty debt/deficit hawks are phonies.

And yet I consider myself a moderate debt hawk. I’m open to the argument that, in the aftermath of the Great Recession, we need to concentrate on stimulating the economy, and that includes deficit spending which, if done right, can have the added advantage of relieving some of the most severe suffering caused by the recession. Up to that point, I’m a Krugmanite.

Krugman claims once the immediate problem of slow growth is solved, there will be time to focus on debt/deficit. But I’ve become skeptical that he really means it.

In the weakest section of Monday’s column, Krugman writes:

“Debt in 2039 — a quarter-century from now! — is projected to be no higher, as a percentage of G.D.P., than the debt America had at the end of World War II.”

I guess that’s supposed to be reassuring, since the debt has been that high before and the nation survived and went on to new heights of prosperity.

But as this chart makes clear, the debt-to-GDP ratio at the end of World War II is a huge historical anomaly. Before that, debt-to-GDP ratio was never above 50 percent. The enormous deficit spending of the war years was tied to the considerable emergency presented by the war. The success of the war effort, which left the United States as virtually the only standing great industrial economy in the world, kicked off a long glorious economic boom that immediately drove the debt back to levels much closer to the historical norms.

To me, saying that the current projection for the future debt would lead to a figure that is merely tied with the highest in U.S. history is not all that reassuring, especially if Krugman is not predicting a similar future boom that will drive the debt back to more sustainable levels.

Among the reasons that the current huge debt is a bit less alarming than it otherwise might be is that interest rates are low, which means the annual cost to the treasury of paying the interest on the debt are, let’s say, manageable.

In his column, Krugman writes:

“Oh, and the budget office [CBO] now expects interest rates to remain fairly low, not much higher than the economy’s rate of growth. This in turn weakens, indeed almost eliminates, the risk of a debt spiral, in which the cost of servicing debt drives debt even higher.”

I hope that’s right, but one of the reasons that I am a moderate debt hawk is that I don’t have confidence in anyone’s ability to project what interest rates will be far in the future. If you are sitting on a ton of debt and interest rates go up faster than expected, that’s when the you-know-what hits the fan. The old bonds come due and have to be rolled over at the new higher rates.

Interest on the debt, even at today’s low rates, is costing the government  $252 billion a year. It is projected to become, in 2023, the third biggest item of federal spending behind only Social Security and Medicare. Getting that debt-to-GDP ratio turned south before a (probably unpredicted) big rise in interest rates is the biggest reason I am a moderate debt hawk.

Krugman is (this is the actual figure) one million times smarter than me about this stuff. But I’d worry a bit less about that scenario in the paragraph above, if he and a few other people would worry more.

Correction: The original version of this post said that interest on the debt was the third largest item of federal spending. That was incorrect and the error was entirely mine for misreading the source of the data. It should have said, and now does say, that interest was projected to become the third biggest item in 2023. That’s according to an OMB projection. I thank commenter Jay Willemssen for pointing out the error. Willemssen also noted that the deficit, as a percentage of GDP, has come down dramatically during the Obama years. Also true, although those ratios during the financial crisis of 2008 were anomalous. To me, the key long term figure is the ratio of total national debt to GDP, since we have to pay interest on the total debt. That figure continues to go up every year and is at the highest level since immediately after World War II.

Comments (46)

  1. Submitted by Thomas Swift on 07/21/2014 - 11:32 am.

    Krugman has burned up any credibility he ever had. Not only is he no longer taken seriously by them, Forbes suggests his latest public evisceration by peers is behind his hasty departure from Princeton.

    Leftists are going to have to dig up another sacrificial lamb to champion their pie in the sky vision of how world economies work.

    • Submitted by RB Holbrook on 07/21/2014 - 01:12 pm.

      Not exactly

      The “colleagues” mentioned in the Forbes article are Niall Ferguson (actually, a historian at Harvard, which stretches the definition of “colleague”) and Paul Volcker. There are also some goldbug crackpots who are given a surprising amount of space in the article.

      Ferguson and Volcker are both conservative ideologues, so I would hardly think of them as representative of anyone’s “peers.”

      There are people who relocate across state lines for reasons other than being loathed by the community. Food for thought.

    • Submitted by Jonathan Ecklund on 07/21/2014 - 01:27 pm.

      He remains highly credible, and is insightful and experienced in economics. Which is why a lot of people pay attention to what he says… just not demagogues.

    • Submitted by Jackson Cage on 07/21/2014 - 04:25 pm.

      I love the irony

      Using phrases like “burned up credibility”, “not taken seriously” and “public evisceration”, then going on to cite Forbes. Did Forbes comment on Krugman before or after their hard-hitting piece on the “10 Best Places in America To Buy Ice Cream”?

  2. Submitted by Hal Davis on 07/21/2014 - 11:48 am.

    Then again…

    Housing Wire, which retailed the Forbes speculation, published a followup by Executive Editor Jacob Gaffney that says, in part:

    In July 2011, HousingWire magazine ran a profile of Krugman on our cover. It won awards then, but even more amazing is that Krugman made several economic predictions that proved to be accurate, unlike CNBC’s Santelli.

    Here are those three predictions:

    1. No writedowns at Fannie and Freddie

    In 2011, people were pushing for writedowns. Hard. The FHFA acting director Ed DeMarco held his ground and resisted forcing writedowns at the government-sponsored enterprises. A year later, there was a huge push to get him out.

    Today, we still seem no closer to such homeowner relief.

    In the interview Krugman said he favored the writedowns, but pragmatically knew it would never happen. Nailed it.

    2. There would be a third round of quantitative easing

    Krugman even had advice on how to best do this, more than a year before the Fed went ahead with its plans:

    “I recommend government bond purchases being focused on buying agency debt, corporate debt. I’m still of the belief there is only so much that can be done with the federal balance sheet.”

    “The only way the government can get traction is if QE3 is accompanied by signals that the Fed has somewhat raised its inflation target. If we made it 3 or 4% would be the really effective thing.”

    (Last I checked it stood at 2%, but still. Wow.)

    3. The end is not near

    Krugman’s accompanying slide show presentation at a HousingWire event was titled “The Mess We’re In,” and warned about thinking it would be an easy fix.

    “People make the mistake of thinking this environment is so weird it can’t last much longer. This can go on for quite awhile, far longer than most people are currently thinking.”

    Three years later, still no end in sight. Bam.

  3. Submitted by Bill Gleason on 07/21/2014 - 12:22 pm.

    Ah, yes, Krugman’s hasty departure from

    Princeton …

    My recollection is that Professor Krugman will be around through the next academic year.

    For some time his residence has been New York City. Presumably his residence was purchased with some of the loot he got from his Nobel Prize or maybe from some of his excellent books.

    He also has a sweet gig and bully pulpit in his New York Times columns, etc. As well as a constant stream of speaking engagements around the world.

    And what is wrong with teaching at a public university? Especially one with the wonderful history of the City University of New York? And Professor Krugman is not the only economist of first rank to teach at a public university, to name but one, Prof Brad DeLong at Berkeley is as sharp as they come.

    Why does the right wing hate Professor Krugman so much?

    Because he has been right so often.

  4. Submitted by Richard Bonde on 07/21/2014 - 12:54 pm.

    To Mr. Swift:Which economist

    To Mr. Swift:
    Which economist has the current situation figured out?

  5. Submitted by RB Holbrook on 07/21/2014 - 01:04 pm.

    Apart from those two points . . .

    Actually, one factual point and one “I don’t know . . .”

    Professor Krugman points out that the Congressional Budget Office estimates that the deficit–widely known to be spiraling out of control–is projected to be 2.8% of the GDP this year. That is down from 9.8% in 2009 (or, somewhat over 10% in 2010). He also notes that the debt could be stabilized by tax hikes or spending cuts of 1.2%, if done now.

    It isn’t quite time to panic.

    • Submitted by Tom Anderson on 07/21/2014 - 07:39 pm.

      Care to guess which is more likely to happen?

      “He also notes that the debt could be stabilized by tax hikes or spending cuts of 1.2%, if done now.”

      Since Mr. Krugman always (yes always) advocates more spending I know his vote. Just to prove how easy it is to be right about our government, I’ll say for the record that neither will be done by this Congress and President. And are those “spending cuts” actually spending less than last year, or just reducing the annual spending increase by 1.2%? Are the “tax hikes” just on the rich, or across the board? When the debt is in the trillions it is wise to talk about the deficit, smaller numbers look so much better…

      • Submitted by RB Holbrook on 07/22/2014 - 09:24 am.

        Which is more likely to happen?

        Given the state of the infrastructure in this country, and given our persistent slow economic growth, I would say that more spending would be a good thing. The 1.2% tax increase is an aggregate increase. It could be targeted to the wealthiest taxpayers, who would thus see their taxes go up by more than 1.2% while most taxpayers would see no or a minimal increase.

  6. Submitted by Neal Rovick on 07/21/2014 - 01:18 pm.

    The debt becomes a problem when interest rates return to a normal range. At that point debt service become a much too large a proportion of the budget.

    While there has been a program to extend out the duration of federal debt, the average debt duration is around 6 years (up from about 3-1/2 years.

    That means that as interest rates rise, over half of the debt will come due (to be repaid or refinanced) within 6 years. As interest rates increase, the debt payment increases if the debt is not paid off.

    In my mind, it is a question–can interest rates ever be allowed to increase if there is no practical way of paying off debt.

    Japan comes to mind–96 trillion yen budget, 41 trillion raise via bond sales, debt service at 23 trillion yen of the budget–and the interest rate for the debt is at 1%. If interest rates were allowed to climb to internationally “normal” rates, the entire current budget would have to be devoted to debt service.

    The question is whether the relationship between growth and artificially low interest rates acts to create a defacto lid on economic activity That is the Japan trap.

    • Submitted by Paul Brandon on 07/21/2014 - 05:37 pm.


      With the cost of debt service as low as it is now (around 1%), it makes sense to accumulate debt that will be paid off with inflated dollars.
      And of course most of the debt is held by American citizens, making it an allocation problem, not a systemic one.

  7. Submitted by Paul Udstrand on 07/21/2014 - 01:22 pm.

    Two things for Eric to consider

    First, regarding that post WWII debt. Yes, the war New Deal created a huge debt no doubt, BUT, if you want to look at pre-war debt levels as some kind of “normalcy” then you have to accept all those pre-war depressions as normal as well. I wouldn’t be too enthusiastic about returning to pre-war economic policy.

    Second, we’re looking at structural policies, obviously there’s a limit to how much debt any nation can shoulder, but on national levels zero debt seems to trigger inflation and recession as well, as it did in the 1950 after we paid off the post war debt. And remember, most of our current debt was contrived by a series of idiotic tax cuts and spending without revenue increases. Our economy is large enough to pay off a lot of this debt, and shoulder a considerable debt burden.

    I’d say Krugmen is still on the money regarding debt spending, we KNOW it can create jobs and boost the economy. I think the only thing he’s missing is that one or another somehow we have to get wages and salaries rising for the 80% of the population that’s stuck right now. The way we did after WWII was by strengthening labor laws so workers could negotiate better wages and compensation, and creating a progressive tax structure that essentially had a leveling effect on wealth distribution. Executive compensation dropped because they were taxed as such high rates (94%) that it didn’t pay to make 1,000 time more than than your employees. A National Living Wage law of around $10-$12 an hour could also work given the low union participation rates.

  8. Submitted by Ron Gotzman on 07/21/2014 - 01:40 pm.

    just asking…

    Eric – you championed the phrase “deficit hawk” as describing your view.

    Why now the sudden change to “ moderate debt hawk?”

    If there are “righty” deficit hawks – are there “lefty” deficit hawks?

    Is Al Franken a “lefty deficit hawk?” Is Al Franken running on the platform of increasing taxes in order to lower the deficit?

  9. Submitted by Karen Sandness on 07/21/2014 - 03:06 pm.

    Anyone who is a self-styled “deficit hawk” and supports

    the military-industrial complex is a hypocrite.

    The Department of “Defense” is only part of the story. Homeland Security, The Department of Energy, and Veterans Affairs are all part of the equation, as is the money borrowed to fight the Iraq and Afghanistan wars and the sweetheart deals that gave away no-bid contracts worth billions of dollars to supply (or fail to supply) the troops in those wars.

    Those kinds of self-styled “deficit hawks” need to come clean and admit that they have no trouble spending money to kill people they disapprove of (whoever the international enemy of the week is supposed to be) and indeed are eager to spend even more to attack more kinds of people. However, they cannot stand to spend any money to sustain Americans they disapprove of (anyone with a low-income, including the elderly who have worked hard all their lives, anyone they consider morally unworthy).

    • Submitted by Dennis Tester on 07/21/2014 - 06:56 pm.

      National defense

      is a valid constitutional function of the federal government. If we used that as the criteria for what gets funded, they’d be no budget deficit and very little debt.

      • Submitted by jason myron on 07/22/2014 - 12:58 pm.

        Check a calendar, Dennis

        I’m beyond tired of reading posts from people who think we should still pretend it’s 1776.

      • Submitted by John Appelen on 07/22/2014 - 03:44 pm.


        I always find it amusing that people here think the Feds should be caring for the citizens who live within the States… As Dennis notes, the Federal gov’t is tasked with national issues. National defense being one of the primary tasks.

        If one wants to pay more to the poor, start working at the local and states levels.

        Or should we get rid of state governments and become a national democracy?

        • Submitted by Paul Brandon on 07/22/2014 - 05:28 pm.

          The Preamble of the Constitution

          of the United States says
          “…promote the general welfare….”
          Or are you saying the the Constitution applies only to people who don’t live in one of the States?

  10. Submitted by Jon Kingstad on 07/21/2014 - 03:29 pm.


    Eric is right to look at the issue of federal deficits in historical and long term future perspectives. But I don’t think that should be any reason to succumb to any degree of deficit hawkness because, as Prof. Krugman has stated time and again, the deficit is not a problem today or the foreseeable future. Prof. Krugman has made many significant contributions to economic discussion and debate today, above and beyond his contributions as a scholar for which he won the Nobel Prize. His main contribution has been to fault the government’s timid approach to spending to counteracting the devastating effects of the 2008 depression. This country has still not emerged from that depression.

    Professor Krugman has been proved right that Obama’s stimulus was far short of what was necessary to bring about a recovery. Nothing has convinced me to doubt his advice that the deficit is the last thing we need to be worrying about during these times.

  11. Submitted by Ray Schoch on 07/21/2014 - 04:56 pm.

    Mr. Krugman

    …might need to be a little careful simply because Mr. Swift’s intellectual brethren are numerous. Wrong, but numerous.

    I tend to be a hawk about personal debt, maybe a little less about corporate debt, and even less about the national debt. I’m not aware of a modern industrial nation that has had zero debt since the end of World War II. As long as the government massages the economy in reasonable fashion, there don’t seem to be dramatic negative effects, even when the debt reaches a point that would alarm me – if it were my personal debt. That’s not to say there are NO negative effects, but since every industrial economy is the antithesis of the “free market” so beloved by Mr. Swift and his fellow ideologues, when sensible people enact sensible measures, even genuine issues like national debt can be dealt with… um… sensibly.

    In that light, I can only endorse the usual suspects: Rovick, Udstrand, Holbrook, Kingstad, Davis, et al, with a shout-out to Karen Sandness. As long as we continue to maintain a military establishment dozens of times the size necessary to defend the country, and as long as Congressional debt “hawks” continue to squawk every time a defense contract in their district gets cancelled, or a military base threatened with closure, any rhetoric decrying the nation’s debt level is just so much horsefeathers, with another heaping pile of hypocrisy on the side.

    • Submitted by Paul Brandon on 07/22/2014 - 10:33 am.

      A specific

      If we cancel the disastrous F-35 project (talking about corporate welfare) and instead purchase the superior Eurofighter equipped with American avionics we could reduce the national debt substantially while at the same time improving our defense.

  12. Submitted by Dan Berg on 07/21/2014 - 06:41 pm.

    Paul Krugman 8/2/2002

    “The basic point is that the recession of 2001 wasn’t a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble”

  13. Submitted by William Beyer on 07/22/2014 - 06:46 am.

    Money Power

    Much like the Strib reports on the latest DOJ settlement with Citigroup, which assiduously avoided the word “fraud” despite the staggering evidence of it, you appear to accept all the myths of money creation pushed by the Fed and the political class, and write as if we still operate under the gold standard.

    For the past century, we have lived in a monetary regime of elaborate charade, now rapidly descending into pernicious fraud. The Fed bumbled its way through the first Great Depression, and only did limited damage after the Congress and Roosevelt finally established some controls on our money system. Unfortunately, the deregulation of finance allowed the congenitally-criminal banks to virtually destroy the world economy again.

    As a constitutional scholar and able writer about that useful document, you should remind yourself that the power to control money and regulate its value belongs to the Congress and is one of the core principles of national power. Even Professor Krugman manages to acknowledge that such nations can’t run out of cash. And, when it’s your own money, you really don’t need to pretend to “borrow” it; you only need to “manage” it. Lincoln nicely managed Civil War finance by refusing to pay the banks their rip-off rates and issuing Greenbacks instead.

    My advice to you is to ditch Krugman and start reading some real economists, like Randy Wray and Stephanie Kelton at the University of Missouri Kansas City, who actually understand sovereign currency. Neither hawks nor doves, they call themselves “deficit owls.” Worried that they’re not Nobel-Prize-winning economists like Krugman? Remind yourself that there is no real Nobel Prize in economics except as a supporting player in our fraudulent, ongoing monetary soap-operas.

    And, while you’re at it, pick up Bill Hogeland’s fantastic book, “Founding Finance.” Or check out “Lords of Creation,” the just-reissued account of the aftermath of the Great Depression by former editor of Harpers Frederick Lewis Allen. Deja-vu all over again.

    Perhaps then you’ll begin to get a clue.

  14. Submitted by Thomas Swift on 07/22/2014 - 07:34 am.

    All his scary smart fans might forget that Krugman’s theories have been put to the test and remain on display for all to see in Greece.

    Yeah, we want some of that.

    • Submitted by Paul Brandon on 07/22/2014 - 09:20 am.

      “Greece, I tell you, Greece!”

      Just proving that you haven’t actually read Krugman.

    • Submitted by RB Holbrook on 07/22/2014 - 09:35 am.

      Timeamus Danae!

      Not exactly.

      Greece is in an entirely different situation than the US. Because it uses the Euro, it’s use of monetary remedies is limited. Its economy is subject to more manipulation by other, stronger European nations. The US uses the dollar* as its currency, so has more freedom of action.

      Greece also has a problem with not collecting enough taxes, due to corruption. The problem here is politics: let the IRS take any steps to make sure tax laws are enforced, and the right-wing squalls like a toddler whose blanky is being taken away from them (a good image for the tea party, don’t you think?).

      *Remember when the right-wing lunatic rant of the day was about the Islamofascist Kenyan usurper getting rid of the dollar? Whatever happened to that? Was it an issue too hard to understand, or is the attention span of the right-wing just that short?

    • Submitted by Bill Gleason on 07/22/2014 - 10:25 am.

      In Krugman’s own words

      “Are Greek-type crises likely or even possible for countries that, unlike Greece and other European debtors, retain their own currencies, borrow in those currencies, and let their exchange rates float? What I will argue is that the answer is “no”…. First, countries that retain their own currencies are less vulnerable to sudden losses of confidence than members of a monetary union–a point effectively made by Paul De Grauwe (2011). Beyond that… even if a sudden loss of confidence does take place, countries that have their own currencies and borrow in those currencies are simply not vulnerable to the kind of crisis so widely envisaged…. Nobody seems to have laid out exactly how a Greek-style crisis is supposed to happen in a country like Britain, the United States, or Japan–and I don’t believe that there is any plausible mechanism for such a crisis.”

      Paul Krugman, October 2013

    • Submitted by Dan Landherr on 07/22/2014 - 10:34 am.

      In which article does Krugman argue for rampant corruption?

      The problem in Greece is corruption and non-payment of taxes.

      • Submitted by Bill Gleason on 07/22/2014 - 11:04 am.

        Krugman on corruption in Greece

        “Greece does indeed have a lot of corruption and a lot of tax evasion, and the Greek government has had a habit of living beyond its means.”


        he goes on to say:

        “So Greece, although not without sin, is mainly in trouble thanks to the arrogance of European officials, mostly from richer countries, who convinced themselves that they could make a single currency work without a single government. And these same officials have made the situation even worse by insisting, in the teeth of the evidence, that all the currency’s troubles were caused by irresponsible behavior on the part of those Southern Europeans, and that everything would work out if only people were willing to suffer some more.”

        From which I take it that Krugman believes that, although corruption is a problem, Brussels and the euro are a bigger one for Greece.

        I’ll point out that it is difficult to separate the effects of corruption and political system from an economy.
        Is communism intrinsically corrupt? Is capitalism? Examples of corruption can be found in both systems. I’m not sure how economic theory or practice can deal rationally with corruption. The cost of doing business?

    • Submitted by jason myron on 07/22/2014 - 12:19 pm.


      Chicago and Detroit….the ever trusty”go-to” bench called upon by feckless conservatives when confronted by issues that require more thought than the content of a Hannity talking point. Curious…why does smart scare you people?

  15. Submitted by Solly Johnson on 07/22/2014 - 07:58 am.


    Karen, very well said.

    Right wingers often complain about political correctness, but they have no trouble calling our military spending defense when actually many of our campaigns over the past few decades have been offense. Perhaps we should return to a title of War Department and a Secretary of War, which would be more appropriate.

  16. Submitted by Jay Willemssen on 07/22/2014 - 09:50 am.

    Large error in this piece, plus context

    “Interest on the debt, even at today’s low rates, is the third biggest item of federal spending behind only Social Security and Medicare.”

    This is very much incorrect.

    In fiscal year 2013, the top six outlay categories in the US federal budget were as follows, with share of total federal outlays and change since 2008 in parentheses:

    1) Social Security (23.5%, +2.9)
    2) National Defense (18.3%, -2.3)
    3) Income Security (15.5%, +1.1)
    4) Medicare (14.4%, +1.3)
    5) Health (10.4%, +1.0)
    6) Net Interest (6.4%, -2.1)

    So National Defense spending was tied with Social Security for the top federal outlay category in 2008 and is now second. Net Interest is barely 1/3 of National Defense spending and considerably lower than when Obama took office, and is the 6th largest category, not 3rd.

    This is also keeping in mind, as others have alluded to, that “National Defense” in OMB budget data doesn’t fully encapsulate total military spending (eg, spending on veteran care and “supplemental” military expenditures for Iraq and Afghanistan), nor the fact that it’s the largest discretionary spending category by far as is, comprising a whopping 52% of discretionary federal outlays. So when speaking of the debt levels as well and the interest burdens from it, one needs to pay close attention to the discretionary federal spending which is responsible for the bulk of it over time.

    As for deficit levels, in fiscal year 2013, the federal deficit was 4.0% of US GDP, down a remarkable 70% from the level Obama inherited. The median deficit share of GDP under Reagan was 4.8%, HW Bush 5.9%, and W Bush 4.5% — all higher levels than it is currently. Among the 6 latest US presidents, the deficit’s share of GDP has gone up under all three GOP presidents and gone down under all 3 Democratic ones.


    • Submitted by Paul Brandon on 07/22/2014 - 12:44 pm.


      ‘Net interest’ is not the same as ‘interest on the debt’.
      The government (particularly the Fed) moves a lot of money around, accruing as well as incurring interest.
      Net interest is the total interest owed minus interest earned.

      • Submitted by Jay Willemssen on 07/22/2014 - 02:03 pm.

        On-budget v off-budget and intragovernmental debt

        29% of the total public debt outstanding is intragovernmental debt (ie, money it lent to itself), the majority of which is money that Social Security lent the government over many years of running surpluses – and making the budget deficits look much smaller than they were during those years, as deficits are normally reported from the unified, not on-budget, balance.

        If you’ll notice the balance of -$106 billion for off-budget interest, you’ll see it’s about 1/4 of the absolute value of both interest payments and receipts – in line with intragovernmental debt’s share of total public debt.

        For details on SS and Medicare trust funds, try this:

        The “invested balance” is over $3 trillion. Total intragovernmental debt is $5 trillion.

      • Submitted by Jay Willemssen on 07/22/2014 - 02:10 pm.


        Even if one allowed that “interest on the debt” is to mean the on-budget interest outlays (which is not its normal usage), it still remains the 6th largest outlay category, not the 3rd, and still only about 1/2 of national defense outlays.

        If I lend myself $100 and pay myself back, the net effect on my net worth is zero. That is why “net interest” is used when discussing the nation’s degree of debt burden.

  17. Submitted by Richard Bonde on 07/22/2014 - 11:35 am.

    Thanks to Mr. Beyer for some suggestions for summer reading.

  18. Submitted by John Appelen on 07/22/2014 - 09:30 pm.

    Excellent Article

    Thanks. You stated that very well.

    I would also add that it sits wrong with me that we are living better than we should on borrowed money that may need to be paid back by the children’s generation. It just seems irresponsible and selfish to be spending more than we are willing to pay for.

    It is like the folks who leveraged themselves highly by doing several “cash out” refinances to buy nice cars and go on vacations. Then they lost their house when the recession hit and cried that it was not fair.

    I can’t even imagine what the debt service would be if the interest rates increased by 4% by 2024… I am guessing it would take the #1 spot.

    • Submitted by Paul Udstrand on 07/23/2014 - 09:58 am.


      “I would also add that it sits wrong with me that we are living better than we should on borrowed money that may need to be paid back by the children’s generation. ”

      Obviously your talking about the tax expenditures and war debt Bush and Cheney rang up? The only time in history we went to war and didn’t raise taxes to pay for it. You know, the Confederacy tried to run a government that way…

  19. Submitted by Connie Sullivan on 07/23/2014 - 10:32 am.

    Thank you, to Mr. Willemssen, for his really informative posts here! A learning experience of real import for those of us non-economists willing to learn from facts.

    • Submitted by jody rooney on 07/28/2014 - 01:10 pm.

      I agree

      Thanks for the sources Mr. Willemssen.

      I have never been a fan of Paul Krugman he uses more smoke an mirrors than necessary and it seems like he picks his data to support his point.

      FYI There are a number of Nobel prize winners in Economic who spent time at the University of Minnesota. Some were still there when they received the award and I met some when I was an under grad.

  20. Submitted by David Rasmussen on 07/27/2014 - 01:49 pm.

    Investment vs. Spending

    I agree with the overall opinions of the this article. Krugman certainly has the brainpower to not gloss over details. But, Krugman tends to delete uncomfortable details in his opinion pieces and to amplify arguments rather than to provide thoughtful and considered solutions.

    Krugman, to his credit, has preferred spending trillions in the US rather than on wars everywhere. However, I wish he would provide more rhetoric on the specifics of how money should be invested. Certainly following the financial crash of 2008, it was easy to justify spending for just about anything, and a great depression probably loomed otherwise.

    Krugman would seem to advocate spending money to dig a hole and fill it back up, and justifies this based on the concepts of John Maynard Keynes. Keynes likely figured that people would be better at justifying and prioritizing their expenses, and would use actual math.

    It is out of this environment, and consistent with the ideas of Krugman, that St. Paul got the Green Line which does offer nicer service for physically handicapped, but at least in my neighborhood, is generally less efficient than the buses it replaced. The train line was constructed in a way that does not efficiently move people. It moves slowly, and for example, there no longer are express routes between Snelling Avenue and the downtowns. Our love of environment justified it, just as our love of democracy justified Iraq. Both the love of environment and the love of democracy were hypothetical cases based on how other people might possibly behave. Now, we have a train which is for the same people who rode the bus. No problem was solved.

    People will say “no big deal”. A billion dollars is nothing compared to military spending in places like Iraq. However, on a per capita basis, it is a similar expense. And, a similar result.

    Ironically, the issue with the rail might well be that not enough money was spent to do it right. The technologies of tunnels and of elevated trains are quite old. (The John McCain case that more needed to be spent in Iraq rings less true.)

    One way to build train ridership would be to build ghettos (some propose) and to take away cars from poor people (some advocate). Please weigh in, Paul Krugman. Is it really that we just need to spend more money, or does it matter what we spend it on? The financial crisis of 2008 is over. How do we invest for the future?

    I would appreciate Krugman more if he spent more words acknowledging how spending does not equate to investment, if he acknowledged how creating more jobs does not always equate to creating more wealth, and if he were a stronger proponent for the science and technology that does make our world more prosperous. Certainly, Krugman understands these things. It is not clear that his readers would understand these things.

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