This started off as a comment in bonddad's diary about Paul Krugman, which currently is on the rec list. I decided to turn it into a diary because I am more than a little flummoxed at how spectacularly bonddad has misread Krugman's editorial, and because I think bonddad has unintentionally misrepresented Krugman by failing to quote him in context. This is a major problem because folks reading bondad's diary are coming away with an incorrect perception of what Krugman says, and it may be difficult to read the actual editorial given that it is behind the NYT subscription firewall.
First, bonddad appears to believe Krugman is saying that deficits and/or debt are either unimportant or are not negative things. From that premise, bondad spends a great deal of time explaining with charts and graphs how terrible deficits and debt truly are.
But bonddad is battling a strawman. Krugman's editorial is not an attempt to argue deficits away as unimportant. Rather, Krugman simply acknowledges the reality that any attempt to balance the budget in the current political environment will only pave the way for more tax cuts (which, in turn will worsen the deficit problem by causing long-term structural problems with revenue):
Now that the Democrats have regained some power, they have to decide what to do. One of the biggest questions is whether the party should return to Rubinomics — the doctrine, associated with former Treasury Secretary Robert Rubin, that placed a very high priority on reducing the budget deficit.
The answer, I believe, is no.
. . .
And 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.
In a saner political environment, the economic logic behind Rubinomics would have been compelling. Basic fiscal principles tell us that the government should run budget deficits only when it faces unusually high expenses, mainly during wartime. In other periods it should try to run a surplus, paying down its debt.
. . .
But the realities of American politics ensured that it was all for naught. The second President Bush quickly squandered the surplus on tax cuts that heavily favored the wealthy, then plunged the budget deep into deficit by cutting taxes on dividends and capital gains even as he took the country into a disastrous war.
Bondad also says:
Krugman wrote that Dems should spend on things like health care, etc... That's a good idea. But -- where is the money for that going to come from? Thanks to Bush's policies we are in debt. There ain't any money there
But it's almost as if bondad hasn't actually read Krugman's editorial, because Krugman answers his question. He says that Democrats shouldn't go hog-wild as the republicans under Bush have, but that additional spending could come from, among other things, rolling back Bush's tax cuts:
With the benefit of hindsight, it’s clear that conservatives who claimed to care about deficits when Democrats were in power never meant it. Let’s not forget how Alan Greenspan, who posed as the high priest of fiscal rectitude as long as Bill Clinton was in the White House, became an apologist for tax cuts — even in the face of budget deficits — once a Republican took up residence.
. . .
I’m for pay-as-you-go. The question, however, is whether to go further. Suppose the Democrats can free up some money by fixing the Medicare drug program, by ending the Iraq war and/or clamping down on war profiteering, or by rolling back some of the Bush tax cuts. Should they use the reclaimed revenue to reduce the deficit, or spend it on other things?
The answer, I now think, is to spend the money — while taking great care to ensure that it is spent well, not squandered — and let the deficit be. By spending money well, Democrats can both improve Americans’ lives and, more broadly, offer a demonstration of the benefits of good government. Deficit reduction, on the other hand, might just end up playing into the hands of the next irresponsible president.
Respectfully, it seems to me that bonddad's diary completely misrepresents Krugman's editoral, and I wonder how many people that have recommended his diary have actually read the whole thing, which is behind a firewall.