Trade Deficit Scarier Than Gov't. Deficit

Community (This content is not subject to review by Daily Kos staff prior to publication.)

Wednesday December 27, 2006 · 9:07 AM PST

2006/12/27 · 09:07

As everybody knows by now, Paul Krugman favors paying more attention to social spending than cutting the Federal deficit. Our fellow Kossack bonddad (whose interest, as his name indicates, is in a healthy bond market) says that lowering the deficit must come before anything else.

So who's right? Thing is, both their arguments sound good to me, econo-peasant that I am. But I favor Krugman's side of things, and luckily for me, my co-blogger Charles over at Mercury Rising was able to provide some justification -- economic, political and moral -- for my stance. Besides, if we default, we can always ask Hugo Chavez to help prop up our currency. (Just kidding! Well, not really.)

Charles' arguments are after the jump.

Here's what my buddy Charles has to say about this:

For the next two years, the Democrats do not have the majorities necessary to force through tax legislation, even if Bushenomics causes a global meltdown. They can, however, decide what spending happens.

The big problem is that a lot of it is already set. Maybe $20B in pork can be cut. Maybe $20B in unnecessary weapons development. Ending the Iraq war, maybe $50B (the rest of the region will need stabilization).

But the reality is that spending on essential infrastructure like levees for NOLA, is too low, spending on veterans is too low. And if we are heading into a hard recession, we need to do countercyclical spending no matter what the bond market says. If the Dems let people lose their homes and face destitution for want of a public works program, they will lose the next election.

I think that:
1. The trade deficit is more worrisome than the governmental deficit.
2. The governmental deficit should be limited in growth, so that it does grow less than GDP, no matter what tax policy is.
3. We should not panic about the governmental debt.
4. I think we can raise about $200B per year by cracking down on tax havens. We would have to do this in concert with our allies, since the British run many of them.

So, put me down as leaning Krugman.

--
Posted by Charles to Mercury Rising at 12/27/2006 08:15:00 AM

Now, I want to say that I admire Krugman, bonddad and Charles pretty much equally, and for pretty much the same reasons. We all want the same thing, it's just a matter of the details of getting it. I don't want this diary to be seen as a call-out; it's just that I felt that Charles' thoughts deserved a diary of their own, and not just get buried deep in bonddad's. So here 'tis. :-)

Poll
27 votes Show Results
So who is right on this?

Charles

Krugman

Bonddad

Where's the pie, dammit?

27 votes Vote Now!
So who is right on this?

Charles

6 votes

Krugman

5 votes

Bonddad

7 votes

Where's the pie, dammit?

9 votes

This content was created by a Daily Kos Community member.

Make YOUR voice heard!

Comments are closed on this story.