Krugman in "I was wrong"

[JHB]

2. This part, I think...

You can make the case that US long-term growth prospects have worsened substantially. But it’s hard to make that case without thinking that we will be at least flirting with secular stagnation, which will mean persistently very low interest rates.

One way to think about why this matters this is in terms of the relationship between “r”, the real interest rate, and “g”, the economy’s long-run growth rate. The extent to which public debt is a problem depends a lot of this relationship. If r is close to or even below g, debt is hardly a burden at all; if revenues pay for non-interest outlays, debt as a share of GDP will steadily erode. Only if r>>g should we worry about debt spirals and all that.

So what CBO has in effect done is mark down its estimate of g but not of r. And that’s surely not right. As Floyd says, we should expect lower g to lower r too. In fact, I think there’s good reason to believe that a fall in g will reduce r more than one for one, so that slow projected growth actually reduces the urgency of doing anything about debt. More about that when I have time to get to it.

http://krugman.blogs.nytimes.com/2014/03/01/cbo-mix-and-match/

It's the apology of a reasonable person who pointed out a flaw in someone's reasoning, only to look more closely at it and find out that the flaw isn't as clear as he thought it was.