is krugman arguing that if most govt expenditures were to be covered
by tax revenues in full rather than new borrowings in large part,
there would then be less govt demand pressure on long term bonds? In
fact my sense is that Krugman is not arguing against deficits in
principle, and certainly not at present. I think he is suggesting
that the Bush has so wrecked the fiscal situation of the govt that it
will be forced to turn to the bond market on a permanent basis and
thus continue to exert upward pressure on the long term interest
rates. Of course the govt could in response radically trim its
expenses, but this will lead to other problems.
Rakesh
