Saturday, July 02, 2016

Debt is Good

Yves Smith writes today at Naked Capitalism that today’s debt fears are unfounded; a premise which, I believe, is doubly flawed.

The first is that I see no evidence for the premise that there is any real fear of national debt, since governments everywhere talk about “austerity” and yet continue to crank out deficit spending at ever increasing levels. Republican control of Congress in this country cut our annual deficit from $1 trillion down to just under half that, but pandering in a national election year and fear mongering after a couple of European terrorist incidents has driven it right back up to the $1 trillion ballpark again.

Ms. Smith betrays her Harvard and Goldman Sachs background on an almost daily basis, and tells us in today’s exercise in delusion that (all emphasis is mine),

After the 2008-2009 financial meltdown brought many OECD economies to a standstill, there was a brief revival of fiscal activism. Many OECD governments initially responded with large fiscal stimulus packages, while bailing out influential financial institutions. Major developing countries also put in place well designed fiscal stimulus packages including public infrastructure investment and better social protection.

I would have liked for her to name one nation which did such a thing and describe the nature in which the package was “well designed,” the specific infrastructure in which it invested, and the social protection it provided, because I was paying attention and I didn’t see any.

She certainly wasn’t talking about the American “stimulus package,”  which was woefully small, was far too heavily invested in tax cuts which are pitiful in terms of stimulating the economy, and invested in such things as “high speed rail” projects, the first one of which broke ground seven years later and connects two small towns in California which are 85 miles apart.

She should go have lunch with Paul Krugman. They’d make a nice couple.

1 comment:

bruce said...

Meh... I think if a nation ever budgeted close to how a household or a business does (income = outgo), I'd fall over in a faint.

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