Krugman's 'argument,' if you want to call it that, consists in an attack on an analogy between individual and government debt:Do read Vallicella's full take-down. But I have a shorter, or, at least, simpler --Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.Krugman's first reason is that families have to pay off their mortgages, but governments don't have to pay back what they borrow. ...
This is, however, a really bad analogy in at least two ways.
Ready for Krugman's second reason? It's a real winner: "Second - and this is the point almost nobody seems to get - an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves."
That's bullshit, which is presumably why nobody gets it except him of the simian countenance. It makes no clear sense to say that the debt is money we owe ourselves. So each of us owes a portion of the debt to every other one of us?
The homeowner analogy is pretty good.
No analogy is perfect, of course. A perfect analogy would be an identity, and you can't compare a thing to itself --except vacuously.
1) Krugman's first point of "refutation" of the applicability of the easily understood analogy between household debt and state debt is to assert that, states being sovereign, a state may simply repudiate its debts. Krugman's ultimate "solution" to the massive -- and continuously expanding -- debt of the United States is to repudiate it, to welch on it, at some point.
Now, we all know that debtors who are seen to welch on their debts tend to find it impossible to secure new loans. Absent some third party willing to legally assume the risk should the maxed-out debtor bug-out yet again, who would risk his own money with further lending to the known welcher? To put it another way, who is going to co-sign for the US government when it is known to welch its debts -- and who is going to legally enforce the terms of the (new) contract? Remember, states are sovereign -- until they collapse.
2) Krugman's second point of "refutation" of the applicability of the easily understood analogy between household debt and state debt is to assert that "an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves." ... and therefore, magically, it isn't a problem that the Federal government of the United States of American is currently borrowing about 40% of the monies it spends.
To put this point of his "refutation" of the applicability of the analogy into the terms of the analogy, he's saying that Mrs Welcher can loan the money to Mr Welcher to cover the (ever-expanding) family debt, and that Mr Welcher can loan the money to Mrs Welcher to cover the (ever-expanding) family debt, and that that will "solve" the family debt problem ... and that, anyway, ultimately, Mr and Mrs Welcher can simply decline to repay one another the debts they've contracted to one another.
That's what they're trying to do in "the European Union", isn't it?
NOW, combine his two point of "refutation" of the applicability of the easily understood analogy between household debt and state debt -- he's asserting that: unlike private entities, the Federal government of the United States of American can continuously expend more monies than to collects in taxes, and continuously expand the amount of the over-expense, because:
1) "we" are "borrowing" the monies from "ourselves";
2) and "we" don't have to repay the "loans", anyway.
"Liberals" seem to believe in perpetual motion.