By Laurence Kotlikoff
There are four dangerous fiscal fables afloat. The first is that taxes can be cut to raise revenues and lower the deficit. The second is that spending can be raised to raise revenues and lower the deficit. The third is that the deficit can be financed by printing money with no real consequences. And the fourth, and most dangerous, is that the deficit's accumulated value -- the official debt -- is a meaningful measure of our country's or any country's true indebtedness.
Paul Krugman, who has been pleading for more deficit spending on a continuous basis in his New York Times column, is hawking all four fables. Pity our children if our policymakers continue to take his views seriously.
The Deficit and Reality
Let's start with the worst fable, namely that the debt Krugman is considering is, in fact, the right measure of our government's obligations. The measure Krugman is using is the official debt in the hands of the public, which is $11 trillion. But the true debt,Read More »from Krugman’s Four Dangerous Fiscal Fables