The truth is that the truth about budgets plays almost no role in real politics. Right now, Meg Whitman is campaigning for Governor of California on the claim that state spending has exploded over the last decade — when the fact is that it has fallen drastically in real per capita terms. Will she pay a price for this? Probably not.
Krugman is right of course. This is to be accepted when you have a large portion of the population that work backwards from political philosophy rather than work forward from observations. If there is a budget crisis, then is must be because government has gotten too big and taxes are too high. The actual rate of growth being negative and the taxes rate being below the historic average are irreverent to people who view the sole purpose of facts are to corroborate pre-conceived notions. If the facts contradict your world view, ignore them while you look for other facts.