In Praise of Public Debt

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      s for the moral judgment that today’s policy makers are irresponsible spendthrifts there are several important counterarguments. Governments around the world have seen their debt to GDP ratios worsen dramatically, but in almost all cases this trend has been a consequence of the global financial crisis (GFC) occasioned by private megabanks and the burdens that crisis imposed on government balance sheets. (Spain for instance had an exemplary balance sheet before the Great Recession.)

      Imposing budget balancing austerity on economies before they are fully recovered is a tragic mistake. Recovery in the US has been tepid at best, and Europe, which swallowed an even harsher dose, has experienced an economic and political crisis.

      In an amusing discussion about how government could fund a pony for every citizen, economist Stephanie Kelton points out “Without raising a dime from the rest of us, the Senate quietly approved an $80-billion annual increase [in the military budget]… And just where did the government get the money to do that? It authorized it into existence . . . Congress has special powers: It’s the patent-holder on the U.S. dollar. No one else is legally allowed to create it. This means that Congress can always afford the pony because it can always create the money to pay for it. Now, that doesn’t mean the government can buy absolutely anything it wants … our economy has internal limits. If the government tries to buy too much of something, it will drive up prices … There are plenty of ways for the government to get a handle on inflation, though. For example, it can take money out of the economy through taxation.”

      For advocates of the Green New Deal more attention to fiscal politics is imperative. The world is awash in the savings of the wealthy, and interest rates are at historic lows. Tax policy can and should address anti-democratic extremes of wealth distribution, but governments must not wait for success in that endeavor to address the climate crisis. It is the height of moral and fiscal irresponsibility not to borrow massively to meet life- saving needs.

      Jesus: Hey, Dad? God: Yes, Son? Jesus: Western civilization followed me home. Can I keep it? God: Certainly not! And put it down this minute--you don't know where it's been! Tom Robbins in Another Roadside Attraction

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