Nobel Prizewinning Economist Paul Krugman Spanking Opponents Again?
First, do you believe interest rates soaring?
PBS Headline:
Paul Krugman on Debt, but Are Soaring Interest Rates Running Against Him?
Moreover, whether May's rise is a temporary blip or the long-predicted bursting of the bond bubble, only a fool would dare declare. But it's certainly dramatic.
It's also a great pretext for excerpting part of an interview I did with Paul Krugman, much of which will run soon on the PBS NewsHour. And that's what the bulk of this post consists of. So, on to the first question:
Paul Solman: Is the U.S. government uncontrollable, borrowing more and more, getting deeper and deeper into debt?
Paul Krugman: Funny thing is, every president between (not including) [Franklin Roosevelt] and Ronald Reagan left the debt-to-GDP ratio -- the usual measure of the government's position -- lower when he left office than when he came into office. So we actually had a long stretch of very fiscally responsible government. Then we had a big increase under Reagan/[George H. W.] Bush, then it fell sharply under Bill Clinton, then it rose some under George W. Bush and then of course we had the worst economic crisis since the Great Depression.
So looking at this on the government side, it's not that we have an addiction to debt and deficits; it's that Republican presidents run up the debt. That's a very different story right?
We actually don't have a problem with government debt, not yet, but people are worried about the rise. Of course you can throw around big numbers. So you say "eight trillion dollars" or "10 trillion dollars" but the fact of the matter is that the US is a 16-trillion dollar-a-year economy and the numbers are not as overwhelming as they sound if you just give the raw numbers.
Paul Krugman on Debt, but Are Soaring Interest Rates Running Against Him? | The Business Desk with Paul Solman | PBS NewsHour | PBS
Letter to PK
Economic Principals
Economics and Politics by Paul Krugman - The Conscience of a Liberal - NYTimes.com Economics and Politics by Paul Krugman - The Conscience of a Liberal - NYTimes.com
Also on Sunday, Krugman responded sharply several times on his blog to Reinhart/Rogoff, as did Berkeley's excellent economist Brad DeLong, backing Krugman on his blog,Grasping Reality with Both Invisible Hands.
Brad DeLong
Accurate and Inaccurate Ways of Portraying the Debt-and-Growth Association
Accurate Ways of Portraying the Debt-and-Growth Association:
Let me highlight a passage from the "Understanding Our Adversaries" evolution-of-economists'-views talk that I started giving three five months ago, a passage based on work by Owen Zidar summarized by the graph above:
The argument for fiscal contraction and against fiscal expansion in the short run is now: never mind why, the costs of debt accumulation are very high. This is the argument made by Reinhart, Reinhart, and Rogoff: when your debt to annual GDP ratio rises above 90%, your growth tends to be slow.
This is the most live argument today. So let me nibble away at it. And let me start by presenting the RRR case in the form of Owen Zidar's graph.
First: note well: no cliff at 90%.
Second, RRR present a correlation--not a causal mechanism, and not a properly-instrumented regression. Their argument is a claim that high debt-to-GDP and slow subsequent growth go together, without answering the question of which way causation runs. Let us answer that question.
The third thing to note is how small the correlation is. Suppose that we consider a multiplier of Brad DeLong : Accurate and Inaccurate Ways of Portraying the Debt-and-Growth Association
First, do you believe interest rates soaring?
PBS Headline:
Paul Krugman on Debt, but Are Soaring Interest Rates Running Against Him?
Moreover, whether May's rise is a temporary blip or the long-predicted bursting of the bond bubble, only a fool would dare declare. But it's certainly dramatic.
It's also a great pretext for excerpting part of an interview I did with Paul Krugman, much of which will run soon on the PBS NewsHour. And that's what the bulk of this post consists of. So, on to the first question:
Paul Solman: Is the U.S. government uncontrollable, borrowing more and more, getting deeper and deeper into debt?
Paul Krugman: Funny thing is, every president between (not including) [Franklin Roosevelt] and Ronald Reagan left the debt-to-GDP ratio -- the usual measure of the government's position -- lower when he left office than when he came into office. So we actually had a long stretch of very fiscally responsible government. Then we had a big increase under Reagan/[George H. W.] Bush, then it fell sharply under Bill Clinton, then it rose some under George W. Bush and then of course we had the worst economic crisis since the Great Depression.
So looking at this on the government side, it's not that we have an addiction to debt and deficits; it's that Republican presidents run up the debt. That's a very different story right?
We actually don't have a problem with government debt, not yet, but people are worried about the rise. Of course you can throw around big numbers. So you say "eight trillion dollars" or "10 trillion dollars" but the fact of the matter is that the US is a 16-trillion dollar-a-year economy and the numbers are not as overwhelming as they sound if you just give the raw numbers.
Paul Krugman on Debt, but Are Soaring Interest Rates Running Against Him? | The Business Desk with Paul Solman | PBS NewsHour | PBS
Letter to PK
Economic Principals
Economics and Politics by Paul Krugman - The Conscience of a Liberal - NYTimes.com Economics and Politics by Paul Krugman - The Conscience of a Liberal - NYTimes.com
Also on Sunday, Krugman responded sharply several times on his blog to Reinhart/Rogoff, as did Berkeley's excellent economist Brad DeLong, backing Krugman on his blog,Grasping Reality with Both Invisible Hands.
Brad DeLong
Accurate and Inaccurate Ways of Portraying the Debt-and-Growth Association
Accurate Ways of Portraying the Debt-and-Growth Association:
Let me highlight a passage from the "Understanding Our Adversaries" evolution-of-economists'-views talk that I started giving three five months ago, a passage based on work by Owen Zidar summarized by the graph above:
The argument for fiscal contraction and against fiscal expansion in the short run is now: never mind why, the costs of debt accumulation are very high. This is the argument made by Reinhart, Reinhart, and Rogoff: when your debt to annual GDP ratio rises above 90%, your growth tends to be slow.
This is the most live argument today. So let me nibble away at it. And let me start by presenting the RRR case in the form of Owen Zidar's graph.
First: note well: no cliff at 90%.
Second, RRR present a correlation--not a causal mechanism, and not a properly-instrumented regression. Their argument is a claim that high debt-to-GDP and slow subsequent growth go together, without answering the question of which way causation runs. Let us answer that question.
The third thing to note is how small the correlation is. Suppose that we consider a multiplier of Brad DeLong : Accurate and Inaccurate Ways of Portraying the Debt-and-Growth Association
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