Paul Krugman has a column yesterday in which he once more assures us that we should not worry about the debt. Eat, drink and be happy because big debt is good and bigger debt is even better.
To bolster this he shows a nice chart about the ratios of debt of GDP as calculated back in ancient history when economists were stupid and ignorant and now, six years later, when the wisdom of Solomon has descended upon them from God knows where.
There are several things wrong with his chart. The first is that the ratio of debt to GDP is an utterly meaningless figure that economists began using instead of the ratio of debt to federal revenue when the latter, which does have some meaning, became so high as to freak out the public. The current ratio of debt to federal revenue is 585% which would send the average taxpayer into heart failure, while the ratio of debt to GDP is 105%.
It also doesn’t occur to him to question why the projection has changed or to wonder if it might change again. Is he certain that we will not have another recession between now and 2046, or that Congress might mess around with federal revenues?
Nor does he seem to question the validity of his own chart, but perhaps he should. The current debt is $19.3 trillion, while the GDP is $18.4 trillion, giving me the 105% that I cited earlier. But if you look at his chart, it shows the ratio at somewhere near 75% from 2013 until at least 2022. If they can’t get the current numbers right, I don’t have a lot of confidence in their future projections.