Benn Steil


A graphical take on geoeconomic issues, with links to the news and expert commentary.

Print Print Cite Cite
Style: MLA APA Chicago Close


Krugman’s Data-Picking Downplays U.S. Debt

by Benn Steil and Dinah Walker
April 16, 2013


Paul Krugman recently dismissed concerns about America’s large international debt.  “America’s debtor position,” he writes, “isn’t actually that deep, because of capital gains.”

When Krugman talks about “America’s debtor position” he is referring to the net international investment position (NIIP), which is the difference between the value of the U.S. portfolio of foreign assets and the value of the foreign portfolio of U.S. assets.  Krugman demonstrates that the NIIP is fairly flat over the period 2002 to 2010, which presumably shows that concern over U.S. debt is uninformed or disingenuous.  Or does it?

As with Krugman’s “Icelandic Miracle” posts, his conclusion is just an artifact of the starting and ending dates he chooses.  In today’s Geo-Graphic above, note what happens to the trend line when Krugman’s data are brought up to date – adding the data, which he had easy access to, for 2011 and 2012.  Now, the trend is decidedly downward – considerably worse than his.

And what about when we back up the starting date to the mid-1980s, as we do in our graphic?  Now we can clearly see the effect of Krugman’s chosen data period – it wipes off the steep decline in U.S. NIIP before 2002 and after 2010.

Note that in 2009 the U.S. portfolio of foreign securities, which is riskier than the foreign portfolio of U.S. securities, outperformed the foreign portfolio by such a significant margin that the NIIP shrank by nearly $1 trillion – this despite the fact that foreigners continued to buy more assets in the U.S. than the U.S. bought abroad.  This is captured in Krugman’s data.  But in 2011, which Krugman leaves out, this U.S. outperformance was reversed and then some: the NIIP deteriorated by a whopping $1.6 trillion, bringing the NIIP to a record negative $4 trillion.  It continued further down to a record negative $4.4 trillion in 2012.

Which all goes to show that not all graphics are as reliable as Geo-Graphics . . .

Krugman: America the Debtor
Wall Street Journal: For U.S., Big Foreign Investment Is a Mixed Blessing
Chart Book: Foreign Ownership of U.S. Assets
BEA: Quarterly and Year-End Update on U.S. Net International Investment Position

Post a Comment 8 Comments

  • Posted by Charles Wolf

    Benn Steil’s graphics are devastating ! Krugman’s dissembling illustrates the old adage: “Figures don’t lie, but liars figure”!

  • Posted by Willem Buiter

    I was familiar wish the concept of policy-based evidence making, but the 2002-2010 sample selection really is a class of its own.

  • Posted by dazzer

    Krugman says he expects trends to improve at some point. Not sure you have represented his full argument well.

  • Posted by Chris Garroway

    Just a hunch, but doesn’t exorbitant privilege make most of this discussion moot?

  • Posted by James

    Absolutely galling.

  • Posted by Ryan Lynn

    I don’t think he was trying to “represent” Krugman’s point. He was trying to illustrate that Krugman is a liar which he did rather convincingly.

  • Posted by ike

    The author is taking a shot. Krug used a time frame showing a leveling off, the author throws in the end when investment portfolios went negative.

    So who’s the liar? We’ll have to see if the author’s dependance on an outlier holds up, they usually don’t.

    Further, as even the author had to admit, those portfolios change dramatically in the short run, so I’ll take Krug for the limit as to who winds up being right five years from now.

  • Posted by Frank

    could you compare the US debt to US Assets in a fashion resembling GAAP accounting. I am tired of pundits throwing around large numbers of debt without context.

Post a Comment

CFR seeks to foster civil and informed discussion of foreign policy issues. Opinions expressed on CFR blogs are solely those of the author or commenter, not of CFR, which takes no institutional positions. All comments must abide by CFR's guidelines and will be moderated prior to posting.

* Required