Originally posted by Palynka
[b]Krugman in 2004 was concerned because of the deficits that were occurring during a boom
Is that why he says the economy is depressed?
Now - much of the current deficit reflects temporary increases in spending on things like stimulus programs and bailouts. I would not expect Krugman to be concerned about these sorts of things. But looking furthe is VERY biased in his political commentary. But there is no inconsistency in this case.
[/b]Krugman did state that the economy was "depressed" in 2004 - not sure why - but this period was clearly not a major business cycle event such as the downturns of 2000 and 2008+ -- and Krugman's stated point was that the deficit was NOT cyclical (only a "little bit" was due to the so-called depressed economy).
In the 2004 statement, Krugman was taking a very alarmist position - calling the deficit "the worst we've ever seen in this country - it's bigger than Argentina in 2001" -- and regarding US' ability to sustain these deficits, he predicted that "we're looking for a collapse in confidence some time in the not-too-distant future"
But in the 2009 statement, he pointedly DISAGREES with commentators who consider a cumulative deficit of $9 trillion to be a terrifying number. And he says that the longer-term outlook is "worrying but it's not catastrophic".
It is quite clear that despite a longer-term outlook that is much WORSE now than it was in 2004, Krugman's tone has clearly moved from "imminent collapse" to "no big deal".
I agree that it's not a good time, at this moment, to be cutting structural deficits. And I would expect Krugman to agree. But Krugman's ho-hum attitude about the longer term is VERY perplexing in light of what he said a mere five years ago.
It is possible that instead of being motivated by "politics", he might simply be deliberately downplaying the gravity of the situation because he doesn't want to encourage the politicians to crack down on the budget before the economy has recovered. But once recovery has set in, he may well return to his alarmist position in say 2011.