Krugman rails against the conventional stupidity about government debt being all bad, all the time, and makes the case for more debt, right now, to rebuild our crumbling and inadequate infrastructure:
The power of the deficit scolds was always a triumph of ideology over evidence, and a growing number of genuinely serious people — most recently Narayana Kocherlakota, the departing president of the Minneapolis Fed — are making the case that we need more, not less, government debt.
Why?
One answer is that issuing debt is a way to pay for useful things, and we should do more of that when the price is right. The United States suffers from obvious deficiencies in roads, rails, water systems and more; meanwhile, the federal government can borrow at historically low interest rates. So this is a very good time to be borrowing and investing in the future, and a very bad time for what has actually happened: an unprecedented decline in public construction spending adjusted for population growth and inflation.
Beyond that, those very low interest rates are telling us something about what markets want. I’ve already mentioned that having at least some government debt outstanding helps the economy function better. How so? The answer, according to M.I.T.’s Ricardo Caballero and others, is that the debt of stable, reliable governments provides “safe assets” that help investors manage risks, make transactions easier and avoid a destructive scramble for cash.
And all those fiscal scolds – who have been proven wrong about everything time and again, and who will continue press for increased austerity and reducing the debt – are ‘kicking the economy when its down’, and pleading poverty when borrowing is at an all time low.
from Stowe Boyd http://stoweboyd.com/post/127225674027
