A curious, but wonderful, thing sometimes occurs in my small sphere of interest on the inter-webs. Once in a while a relevant topic on a subject is brought up — politics, policy, the economy — that quickly becomes a festooned conversation. Joe Scarborough versus Paul Krugman on the debt and deficit was one such topic this week. I added my two-cents earlier, but here are some followup contributions to the debate:
- The Michael Kinsley attempt to show how “Mr. Deficit Panic and Mr. Don’t Worry are more alike than you think:”
[…] Krugman and Peterson are in agreement on the right formula: First, you run up the deficit in order to stimulate the economy, and then you reduce the deficit in order to bring the national debt into a safer range.
They just approach this solution from opposite directions. Peterson wants a balanced budget and only grudgingly acknowledges the need for stimulus. Krugman wants the stimulus and only grudgingly acknowledges that there are limits: You can’t borrow forever. Nevertheless, the two men — representing opposite ends of the spectrum in this debate — agree on how we should proceed.
- Kevin Drum disagrees:
Kinsley is exaggerating for rhetorical effect here, but there’s a kernel of truth to this. So if we (almost) all agree that the long-term deficit needs to be controlled, why is there such a massive difference of opinion about whether we should start now vs. putting off the hard decisions until the economy is fully recovered?
[…] I’d like to add two bullet points about why the political class is really more nervous about debt than the economists are:
- For conservatives: They aren’t. They just don’t like spending lots of money on poor people. Their real desire is to cut welfare spending, and deficit hawkery is a handy excuse for this.
- For centrists/lefties: They accept the economic argument in theory, but are more attuned to practical politics than economists are. The idea that we can safely ease the pressure for action on the debt today, but still count on politicians to virtuously cut borrowing in the future, strikes them as laughable. We’re humans, not Vulcans.
- Matt Yglesias writes why this discussion is a little off-base (emphasis mine):
So what are the real problems? Simple. One thing the government does is tax the labor and investment activities of non-seniors to cut checks to elderly people (Social Security). Another thing it does is tax the labor and investment activities of non-seniors to cut checks to elderly people’s doctors (Medicare). And a third thing it does is tax the labor and investment activities of non-seniors to cut checks to elderly people’s long-term care providers (one of Medicaid’s functions). In the future, the ratio of elderly people to non-elderly people is supposed to rise, and the ratio of doctors’ fees to average incomes is also supposed to rise. Which is to say that holding program functions constant the burden of placed on the non-elderly is expected to rise. But this increased burden exists whether the payment comes in the form of taxes (people don’t like paying taxes!) or in the form of borrowing (which will eventually lead to taxes people don’t like to pay!) so the issue is all about spending money on old people and not about debt or deficits.
- Neil Irwin highlights the general divide between economist and non-economist thinking (emphasis mine):
These worlds seem to be talking past each other, and for one reason in particular. There is, in the Washington conversation, a generalized aversion to deficits. It’s an aversion with an almost moral dimension. In fact, sometimes the moral dimension is explicit: Mitt Romney often called deficits a “moral crisis.”
But to economists, deficits are simply the difference between revenues and outlays. A large deficit could be a good thing if it’s going toward a productive investment. A small deficit can be a bad thing if the economy needs more support. So if you’re worried about deficits, you need to say why.
- Which prompted this string of tweets from Ezra Klein (these are just screenshots of the Storify):
There’s a lot to unpack in that stream of tweet-consciousness, touching on many interesting dimensions of this subject, but I’d like to pay particular attention to number five — “The biggest problem with the budget debate is people treat deficits as a moral question rather than an economic one.” This is where I see Very Serious Pundits like Joe Scarborough coming into play; unable to understand the conceptual difference between government and household and unwilling to extend questions of spending efficacy beyond denouncing ARRA, they categorize deficit spending on a federal level as a moral violation of Weberian-like asceticism. If that idea holds sway over you then the deficit is more than a budgetary emergency; it’s a moral emergency that must be addressed right now. In that regard it makes perfect sense to be hysterical about the whole thing and bankrupt on the context and empiricism necessary to heed Irwin’s contention that one should “need to say why.”
Now if you click through on Irwin’s piece he actually provides some ready-made arguments on why deficit hawks have legitimate points, and please don’t read anything I’ve said here as assuming those warnings don’t have legitimacy (even though I think they’re also easily disputed). Yet generally speaking that isn’t what we hear from VSP’s. Instead we get rhetoric about proverbial debt shackles on grandchildren and grandchildren’s grandchildren ad infinitum. That is a moral argument, not an economic one, as effectively-speaking the federal government will never require them to ‘pay our burdensome debt:’
How will our children, grandchildren, and sundry other friends and relatives too young to see an R-rated movie unaccompanied ever pay back the entire debt the government is piling up now? Easy. They won’t. The U.S. government is never completely debt-free (except for that one time it sold land seized from Native Americans).
There’s only one thing you need to know about the government. It’s not a household. The government, unlike us, doesn’t need to pay back its debts before it dies, because it doesn’t die (barring secession or a sneak attack from across the world’s longest unprotected border — a most unworthwhile initiative). In other words, the government can just roll over its debts in perpetuity.
~*Note: For more on the idea of perpetual debt see (again) Matt Yglesias here on “perpetual bonds.” It’s a fascinating idea in-an-off itself. ~
This isn’t to say that debt and deficits don’t matter, or have no meaning — they do. They matter because we all agree they matter and they have meaning because we all agree they have meaning. That’s the fun of social constructs; they’re important and arbitrary. Some of us happen to recognize this duality while others forget the latter. My point is simply that if we’re going to debate the merits of deficit spending then let’s just debate the merits rather than also treating the issue as a battle for the immortal soul of American society. Besides, if you’re looking for a macro-moral American quest then perhaps you should be focusing on the needless immiseration of the unemployed, underemployed, uninsured, and underpaid — a (dare I say morally repugnant) list of societal ills that could be greatly alleviated right now with…more deficit spending.
Oh, and Krugman hears what you deficit hawks are saying, he just thinks “it’s kinda dumb.“