Somebody on ThinkProgress.org recently produced this attempt to an argument for more deficit spending called “Six Charts That Show It’s Time To Reset The Budget Debate” (in which case by the way he must be happy about what’s been going and will continue to go on for a while).
It’s not like anything of what he’s saying there is surprising or new since liberal and conservative propaganda both seem to continue to have a hard time coming up with one original idea or thought that has not already been used and refuted ad infinitum.
For the most part he relies on projections, and then in the end he gives us a bonus nugget of knowledge which is the apparently in his mind surprising news that the government bond yield (which I have been consistently and correctly expecting to go lower over the past years) is unusually low.
What this guy is proposing is in short the continuation of government budget deficits because they’re “only” going to be at around 3% in the projections for the next few years (the years after that he seems to ignore because I presume he’s still feverishly working on a solution for those). The money raised he then of course wants to see poured into infrastructure projects, so that shovel ready projects can be launched, roads fixed, equipment employed, people put to work, money earned, which (and I am now supporting his case by adding my own words to his stereotypical Keynesian narrative) will then of course trickle through the entire economy and through the multiplier effect produce wealth and get the economy jumpstarted again so that the government can earn more tax money to then pay off their debts which is as we all know what governments do all the time; in other words, all the unoriginal, mindless, boring, embarrassing, childish, dumb-ass Keynesian nonsense that many of us, myself included, were taught and swallowed at face value in undergraduate economics.
I’m not even going to harp on the fact that he’s going with projections which are highly questionable (and which I have by the way in the past accurately predicted to be way off). But let’s just assume for the sake of making the case as easy as possible for this amateur economist that these are 100% accurate predictions.
If you’re unclear on the fundamentals about what it is you’re writing about, it sometimes helps to go way back to the very basics of what it is that you’re proposing, and that is in this case the problem with government budget deficits (I’ll just post the conclusion here, but read the entire article if this is new to you):
This is very important: When people say something like “the deficit is damaging/bad/a problem/etc.” what it ultimately means is that the money used for more spending and favors and owed by the government to investors will be taken from you or your children in the future via the threat of kidnapping and imprisonment if you don’t comply. This is really at the root of all the problems around public debt owed, and the deficit that we hear about every year is just piled on top of that existing debt.
Due to the fact that the effects of deficits are not immediately noticeable to the general public they are an incredibly convenient way of funding government programs and shifting involuntary burdens on to future disenfranchised generations. Thus public debts will always continue to grow along with rising taxes, until a level is reached where the required tax burden becomes untenable, where creditors can no longer be paid off, the government can no longer fund itself, where social tensions rise between recipients and payers, and where the whole superstructure that is the government collapses in its entirety.
“Solutions” to Deficits
As I explained, the ultimate damage caused by public budget deficits occurs at that point in time when taxpayers are forced to restrict their consumption and unjustly bear the cost of malinvestments from the past.
And regarding the low interest rates argument, I will take you back to what I wrote over a year ago, which by the way includes a little prediction of what’s happening in Japan right now:
And yes, they can rollover debt for as long as interest rates are low. I may note that I have consistently and correctly predicted record low Treasury rates for years to come.
All these low rates will do is allow the debt to get even more bloated. And interest rates won’t remain low forever, as you can see in Greece and similar situations. Did people like the above author see any of those sovereign debt crises coming?
What about Japan? Their debt is the most crushing of all industrialized nations, and I’m predicting that their time of low rates will be drawing to an end any day now, with their debt and pension crisis having entered its final stage. Then what?
They have been running deficits for two decades, people like this author ought to love what they did. Now what? … All you’ll hear is chirping crickets.
Deficits never matter … until they do. The party is always fun, the hangover never is.