Paul Krugman's Argument On Government Debt -- May 23, 2023

Locator: 44732DEFAULT.  

See this post.

I know a lot of folks will "consider the source" (Paul Krugman in this case) but it's an incredibly interesting argument.

I was first exposed to the argument some years ago (again, because of the blog, thank you very much) and it was at that point, the US debt bothered me a whole lot less (if it ever bothered me at all). 

Before we go on, there are two "new" issues now being discussed outside the debt ceiling itself:

• first: do governments even have to pay back their debt (and all the discussions that derive from that question)? And,
• second, what would happen if Janet Yellen "simply broke the law" to allow the government to continue paying its bills (and all the discussions that derive from that question)?

Now, back to Paul Krugman, link here.

In case the link eventually breaks, here's the first few paragraphs:

• The US government doesn't have to pay off its $31 trillion debt, Paul Krugman said.
• The government debt can't be compared to something like a household's finances, Krugman said. 
• "When governments for one reason or another run up large debts, it is, as far as I can tell, unusual to pay those debts off." 

The US doesn't actually have to pay off its $31 trillion mountain of debt, according to top economist Paul Krugman, hitting back at the idea that government finances can be compared to household balance sheets in an op-ed weeks before the US possibly defaults on some obligations.

Though individual borrowers are expected to pay off debts, the same isn't true for governments, Krugman argued in a column for the New York Times on Friday. That's because unlike people, governments don't die, and they gain more revenue with each passing generation."

Governments, then, must service their debts – pay interest and repay principal when bonds come due – but they don't necessarily have to pay them off; they can issue new bonds to pay principal on old bonds and even borrow to pay interest as long as overall debt doesn't rise too much faster than revenue," he added.

Though the debt-to-GDP ratio hovered around 97% last year, interest payments on that debt is only around $395 billion, according to the Office of Management and Budget, or around 1% of last year's GDP.

Historically, it's also unusual for governments to pay off large debts, Krugman said. Such was the case for Great Britain, which has largely held onto the debt it incurred as far back as the Napoleonic wars.

By the way, this is not a new "theory" by Krugman. He said years ago, probably the last time the debt ceiling became an issue.

In fact, the more and more I "study" this issue, the more it seems to be a manufactured Charlie-Brown-Lucy-kick-the-football political issue used by both parties to raise money and attract voters. 

At the end of the day, mixing metaphors, my hunch is that the sun will rise and set as predicted regardless of whether the debt ceiling is raised by "x-day." And at my age, I'm mostly interested in see another sunrise. 

Time for another one of my favorites. And one that seems appropriate for the times. Link here.

The movie came out in 1975, based on the 1973 stage musical.

2023 - 1973: fifty-year anniversary this year. Is that correct?

From broadwayworld.com:

2023 marks the 50th Anniversary of the legendary smash hit musical The Rocky Horror Show, as it continues to play a newly extended tour through 2023 to sell-out crowds.

Richard O'Brien's legendary rock 'n' roll musical celebrates 50 years of non-stop partying with this special anniversary production.

Since it first opened in London in June 1973 at The Royal Court Theatre The Rocky Horror Show has become the longest continuous run of a contemporary musical anywhere in the world.

The show has been seen by over 30 million people worldwide in more than 30 countries and translated into 20 languages as it continues to delight audiences on its sell-out international tour. Without doubt the Rocky Horror Show is as iconic as it gets.

Lighting up the stage this phenomenal cast will perform songs that are embedded in pop culture. With a whole host of special celebrations to be announced throughout the year, the cast are in full throttle and ready to honour this monumental moment, delivering a guaranteed party that leaps off the stage and transcends into the audience.

The tour remains sold out and has been extended.

It certainly seems some folks have not changed much since 1973. Just saying.