- Let me place this year's budget in historical perspective. The most relevant number in measuring deficits is not the nominal figure. It's the deficit as a percentage of the economy, or what I just referred to as gross domestic product.
Paul Krugman says:
- Right now the U.S. government is running deficits bigger, as a share of G.D.P., than those that plunged Argentina into crisis. The reason we don't face a comparable crisis is that markets, extrapolating from our responsible past, trust us to get our house in order.
Krugman also notes that
- Some point out that Ronald Reagan ran even bigger deficits as a share of G.D.P. But they hope people won't remember that in the face of those deficits, Mr. Reagan raised taxes, reversing part of his initial tax cut.
Will Bolten et al. follow suit? In the briefing I quoted above, he's still talking up more tax cuts. And he testified before the House budget committee that
- I think the art and science of economics has not yet advanced to the stage where we can really properly capture all the positive effects the tax cuts do have on the economy.
So, that's Krugman's problem. As a mere expert in the art and science of economics, he's not qualified to evaluate the benefits of tax cuts, as he lacks the further enlightenment that Bolten got from -- what?
Update: corrected typo in Bolten's name...