So, about that fiscal crisis the one that would, any day now, turn us into Greece. Greece, I tell you: Never mind.
Over the past few weeks, there has been a remarkable change of position among the deficit scolds who have dominated economic policy debate for more than three years. Its as if someone sent out a memo saying that the Chicken Little act, with its repeated warnings of a U.S. debt crisis that keeps not happening, has outlived its usefulness. Suddenly, the argument has changed: Its not about the crisis next month; its about the long run, about not cheating our children. The deficit, were told, is really a moral issue.
There has, of course, been no explicit announcement of a change in position. But the signs are everywhere. Pundits who spent years trying to foster a sense of panic over the deficit have begun writing pieces lamenting the likelihood that there wont be a crisis, after all. Maybe it wasnt that significant when President Barack Obama declared that we dont face any immediate debt crisis, but it did represent a change in tone.
What happened? Basically, the numbers refuse to cooperate: Interest rates remain stubbornly low, deficits are declining and even 10-year budget projections basically show a stable fiscal outlook rather than exploding debt.
Contrary to almost everything you read in the papers or see on TV, debt doesnt directly make our nation poorer; its essentially money we owe to ourselves. Deficits would indirectly be making us poorer if they were either leading to big trade deficits, increasing our overseas borrowing, or crowding out investment, reducing future productive capacity. But they arent: Trade deficits are down, not up, while business investment has actually recovered fairly strongly from the slump. And the main reason businesses arent investing more is inadequate demand.
Yet there is a lot of truth to the charge that were cheating our children. How? By neglecting public investment and failing to provide jobs.
You dont have to be a civil engineer to realize that America needs more and better infrastructure, but the latest report card from the American Society of Civil Engineers with its tally of deficient dams, bridges, and more, and its overall grade of D+ still makes startling and depressing reading. And right now, with vast numbers of unemployed construction workers and vast amounts of cash sitting idle, would be a great time to rebuild our infrastructure. Yet public investment has actually plunged since the slump began.
Or what about investing in our young? Were cutting back there, too, having laid off hundreds of thousands of schoolteachers and slashed the aid that used to make college affordable for children of less-affluent families.
Last but not least, think of the waste of human potential caused by high unemployment among younger Americans for example, among recent college graduates who cant start their careers and will probably never make up the lost ground.
And why are we shortchanging the future so dramatically and inexcusably? Blame the deficit scolds, who weep crocodile tears over the supposed burden of debt on the next generation, but whose constant inveighing against the risks of government borrowing, by undercutting political support for public investment and job creation, has done far more to cheat our children than deficits ever did.
Fiscal policy is, indeed, a moral issue, and we should be ashamed of what were doing to the next generations economic prospects. But our sin involves investing too little, not borrowing too much and the deficit scolds, for all their claims to have our childrens interests at heart, are actually the bad guys in this story.
Paul Krugman is a columnist for The New York Times, 620 Eighth Ave., New York, NY 10018-1405.
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