My boy Paul Krugman has a refreshing perspective on the urgency of our financial crisis. The overall debt and spending issues have been at the forefront of much of our Macroeconomic problems but Krugman argues, "are we correctly addressing the depressed state of the economy and unemployment?"
Take a read, someone play devil's advocate maybe?
http://www.nytimes.com/2013/01/18/opinion/krugman-the-dwindling-deficit.html?_r=0
Krugman brings up an interesting prospective. He claims that the focus should not be focused on our deficit, and goes on to explain that the issue is already solved. “The medium-term budget outlook isn’t great, but it’s not terrible either — and the long-term outlook gets much more attention than it should” (Krugman, 2013). His argument is that the reason for the large federal budget is the state of our economy. The solution, in his eyes, is to first fix the economy (through government spending or any means possible) and then the budget problem will fix itself. In term of socioeconomic wellbeing, I agree with this approach. The problem is that economist and politicians seem to be divided on which is a higher priority. Where conservative economists believe control the deficit will strengthen our economy, others like Krugman are pushing to address the wellbeing of our economy as a first priority.
ReplyDelete]My opinion is that yes, we need to strength the economy first and foremost! With that being said, I believe a huge problem we have in the United States is our dependency on credit. The United States government needs to be careful to set a proper example for its people.
Thanks Bianca-totally makes sense when addressing a credit problem in the U.S. A lot of this recession seems to be exacerbated by the lack of savings that occurred during the last expansionary time in economic history. Our real estate issues also are a great case study for the problem of credit in the states
ReplyDeleteKrugman's right, unemployment and economic malaise are much graver issues than deficits right now. But that doesn't change the fact that medical costs are still out of control, and will cause big budgetary headaches 15 years down the road. And once we're down that road, it will be by and large too late to turn back. Here's Tyler Cowen presenting a contrasting case to Krugman's argument.
ReplyDeleteIt also doesn't change the fact that our tax expenditures are wasteful (think deductions for mortgage interest and state and local taxes) and that the government generally spends too much money on people who are old and not poor and not enough on people who are young and poor.
ReplyDeleteFirst of all: Obamacare aims to cut 'medical costs' by astronomical numbers in the coming decade. With mandatory healthcare, it ensures that everyone carries some weight, and this helps to eliminate free-riders rampid throughout the system. The manner in which we pay hospitals today is sickening. Obamacare aims to cut costs and make for more efficient spending ventures.
ReplyDeleteFinancing a nation's expenses on 'credit', is the way the world works. It would be damn near impossible to fund all endeavours on current account balances, and is incredibly unrealistic given the nature of investments.
Obama pumped massive amount of money into our economy during the recession, running a large budget deficit to soften the blow of the overall recession. This quantitative easing shallowed the otherwise devastating business cycle trough we would have faced in 2009. We could not have funded this saving grace, through any other means besides 'credit'.
The real issue we need to combat in the coming years will be social security. But whether our government will be able to do anything, remains to be seen. Right now, social security remains an untouchable 'entitlement' regardless of how much its nature is actually drastically changing in reality. *Sigh*.
If we elected our politicians for terms longer than 2 years, perhaps this short-signtedness wouldn't be such a problem.