krugman's banana republic: ny times

  1. 12,910 Posts.
    lightbulb Created with Sketch. 69
    Paul Krugman is Financial Editor at the NY Times. This clip from today's edition...

    "Yet by pushing through another huge tax cut in the face of record deficits, the administration clearly demonstrates either that it is completely feckless, or that it actually wants a fiscal crisis (or both).

    "Here's one way to look at the situation: Although you wouldn't know it from the rhetoric, federal taxes are already historically low as a share of GDP. Once the new round of cuts takes effect, federal taxes will be lower than their average during the Eisenhower Administration. How then, can the government pay for Medicare and Medicaid, which didn't exist in the 1950s -- and Social Security, which will become more expensive as the population ages? (Defense spending has fallen compared with the economy, but not that much, and it's on the rise again).

    "The answer is that it can't. The government can borrow to make up the difference as long as investors remain in denial, unable to believe that the world's only superpower is turning into a banana republic.

    "How can this be happening? Most people, even most liberals, are complacent. They don't realize how dire the fiscal outlook is, and the don't read what the ideologues write. . . . . But the people now running America aren't conservatives; they're radicals who want to do away with the social and economic system we have, and the fiscal crisis they are concocting may give them the excuse they need. The Financial Times, it seems, now understands what is going on, but when will the public wake up?"

arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.