The Corner

‘The Phantom Menace’

Paul Krugman outdid himself this Sunday in his New York Times column. Once again, the former economist is calling for a new stimulus, more aid, and more and bigger government. It’s not new — he has been asking for more government spending for over a year now. In fact, it is clear here that Krugman can’t conceive of any other way to create jobs than for the government to spend money.

However, this time he goes after Obama for being a wimp on the issue. He blames the president for being a little concerned about the level of debt facing America. Krugman writes:

However, Mr. Obama is lending his voice to those who say that we can’t create more jobs. And a report on suggests that deficit reduction, not job creation, will be the centerpiece of his first State of the Union address.

Krugman suggest that Obama is heeding the fears of Wall Street about high long-term interest rates, which he calls a “phantom menace.”

Interestingly, this morning’s New York Times has a front-page story today talking about the debt we all face. It doesn’t look like a phantom menace to me. According to the article, the U.S. government is “financing its more than trillion-dollar-a-year borrowing with i.o.u.’s on terms that seem too good to be true.” But Treasury officials “now face a trifecta of headaches: a mountain of new debt, a balloon of short-term borrowings that come due in the months ahead, and interest rates that are sure to climb back to normal as soon as the Federal Reserve decides that the emergency has passed.”

With the national debt “now topping $12 trillion, the White House estimates that the government’s tab for servicing the debt will exceed $700 billion a year in 2019, up from $202 billion this year, even if annual budget deficits shrink drastically.”

And it’s about to get much worse. The deficit and the debt have reached gigantic levels, with no hope of shrinking anytime soon, just at the time when the nation’s oldest baby boomers are approaching 65, setting off what will be a fiscal nightmare for the government. This retirement time bomb is upon us and yet Krugman is calling for more debts and more government spending.

Veronique de Rugy — Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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