J. W. Mason — Borrowing ≠ Debt

Most practically, the idea that the long-run "sustainability" of the debt requires efforts to control government borrowing -- an idea which goes unquestioned even at the far liberal-Keynesian end of the policy spectrum -- is a serious fetter on proposals for more stimulus in the short run, and is a convenient justification for all sorts of appalling ideas. And in general, I just reject the whole idea of responsibility. It's ideology in the strict sense -- treating the conditions of existence of the dominant class as if they were natural law. Keynes was right to see this tendency to view of all of life through a financial lens -- to see saving and accumulating as the highest goals in life, to think we should forego real goods to improve our financial position -- as "one of those semicriminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease."

On a methodological level, I see reframing the question of the evolution of debt in terms of the independent contributions of primary deficits, growth, inflation and interest rates as part of a larger effort to think about the economy in historical, dynamic terms, rather than in terms of equilibrium. But we'll save that thought for another time.

The important point is that, historically, changes in government borrowing have not been the main factor in the evolution of debt-GDP ratios. Acknowledging that fact should be the price of admission to any serious discussion of fiscal policy.

The Slack Wire
Borrowing ≠ Debt
J. W. Mason