Wednesday, November 25, 2009
Krugman's Deficit Rationalization
An alcoholic is someone you don't like who drinks more than you do; a 'fun guy' is someone you like who drinks more than you do. The relativity is important to the degree 'other things' are different.
So, when Krugman notes that, in three years, our debt/GDP ratio will be comparable with other decent economies (Belgium and Italy), we have no worries! It is true that Debt/GDP does not have a strong correlation with GDP/capita, or something. Yet, like drinking too much, it's still not good to be adding 10% of your GDP to debt every year.