Paul Krugman has been campaigning against taking action on the US debt until the recession is over. I would be more supportive if there were some plan to address the debt in the future, but I don’t see any plan. Krugman seems to claim that addressing the debt is and will be painless. We shouldn’t do it now while we are in a recession, and when the recession ends, growth in the economy and tax receipts will automatically take care of the problem. But this is not the government of the 1970s, Medicare is huge, and tax rates have been slashed. The recession was imposed on a country that was already badly out of whack.
It looks like Krugman’s plan is to wait for inflation. It is relatively painless to run up debt now, while interest rates are low. When interest rates go up, or when we decide that our debt is unsustainable, we will just allow (or encourage) inflation to take off. Then we can pay off our huge debt with dollars worth much less than they are today. However, that does not bode well for whoever is living in the US when that time comes.
We need a plan now to address the budget deficit and the national debt, even if it doesn’t go into effect immediately. Obama’s decision to accept the Republican definition of $450,000 income annually as middle class does not help.