Debt Is Good

Paul Krugman had reached a degree of cheerleading for the Obama Administration that leads to him now saying that debt is an asset. Debt is good for you, is something to be desired. Debt is even better when you have a lot of it, so lets add to our debt as fast as we can.

“Right now deficits are actually helping the economy.”

Deficit spending is helping the economy, but it’s the spending part of that which is helping, not the deficit part. If we had trillions in reserve and were spending from that reserve the spending would be just as effective. Of course, if we had trillions in reserve we would not have spent ourselves into this mess to begin with, but…

Krugman’s column today in the New York Times is saying, in effect, that the mortgage on my house is good for me, that in and of itself it benefits me in some undefinable way. I submit that my mortgage is a liability that reduces my net worth and benefits me only in that it permits me to maintain the overlying asset, which is my house. My house would be a more valuable asset if it were not encumbered by that mortgage, and the smaller that mortgage becomes the larger is the net value of the house to me.

What we are doing nationally is what many homeowners did; namely, taking out equity in the home (nation) to maintain an otherwise unaffordable lifestyle. Not only does Paul Krugman say that is a good thing, in his column he says that the debt itself is good. I am maintaining that it may be necessary, but it is not good and, regardless of the borrowing impetus or the level of debt, the debt itself is a liability that devalues the asset.

I would certainly agree with Paul Krugman if he said that the spending which is causing the deficit is helping the economy, and that the deficit is an acceptable byproduct of that spending. I might well agree with him if he said that we do not need to worry about the current deficit. I would defer to his superior knowledge (no snark intended) if he said that we do not need to worry about running up a debt amounting to 70% of GDP. I worry about running up that kind of national debt, but I believe him when he says I don’t need to worry about it.

I’m still going to vote against any fool politician that proposes doing it.