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August 07, 2010

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Ed Dolan

Maybe they're just following the Keynes/Lenin dictum that "the best way to destroy capitalism is to debauch the currency." :)

Left Outside

Hmmm,

Well personally the pro-debt arguments seem more convincing than the anti-debt arguments. Paul Krugman is more convincing than Paul Ryan.

One explanation, which would show on aggregate, is that the right includes more traditionalists than the left, traditionalists tend to view borrowing as immoral and saving as moral (and to hang with any logical inconsistencies!).

Government debt, tax x borrowing is just too much for them morally, so they discount it as a policy option without really looking into it. The left take a marginally more evidence based approach.

Gordon

In the past I've seen deficit-reduction outlines from both the SWP and the SSP (and I'd presume there have been others). This implies an acceptance that deficits aren't desirable (or at least that one needs to say this in order to be taken seriously by the public).

The outlines themselves do roughly what you suggest in point 3 by attacking funding, subsidies and tax-breaks to capitalist projects like the military, PFI and private pensions, while defending public spending as a general principle.

Who says you can't have your cake and eat it?


SSP: http://scottishsocialistparty.org/economic-crisis/ssp-alternative-budget.html

SWP: https://www.socialistworker.co.uk/graphics/2010/2196/2196_08_09.pdf

Jason Ruspini

I completely agree that running victory laps on the invisible bond vigilantes is unwise, and part of a strategy for ultimate failure. I mean, everyone understands that you can sell a "30 year" bond tomorrow or the next day, right? Debt is implicit inflation as surely as burning hydrocarbons will tend to raise, not lower, temperatures.

On a deeper level, my sense is that low "long term" yields are reflecting the emerging demographic bust. @Left Outside, don't be so sure of the "evidence" you think you have observed. Demographic structure is moving us out-of-sample and my sense is that economists on the left are trying to sweep this idea under the rug. Paul Krugman uses the term "demographic nonsense." I suppose it is hard to argue for more spending when not only is the public balance sheet impaired *, but there are reasons to believe that prospective "cash flow" and growth rates will also be impaired relative to the 20th century.

* Because it was mismanaged by government, which also suffers from short-termism agency problems. You can clawback money, at least, but not political power.

Shuggy

I wasn't aware that anyone was suggesting that government debt was synonymous with 'political radicalism'. Mr Calder doesn't provide any links to go with the question and neither have you.

Jason Ruspini

After looking for the quote, I find that what Krugman actually said was: "Talk to German officials about high unemployment and the looming threat of deflation, and they ramble on about the demographic challenge and the cost of pensions."

http://krugman.blogs.nytimes.com/2010/06/25/in-the-long-run-we-are-still-all-dead/

My message is that high unemployment and deflation are perhaps symptoms of the demographic challenge.

ExtraBold

Just to add some perspective, the coalition government is borrowing to spend £320bn over 5 years for fiscal stimulus. This is hardly anti-debt. And the opposing arguments are not so much pro-debt, but that £320bn isn't nearly enough.

Point 4. The higher the public debt, the more the views of bond traders and credit agencies matter. These people are not usually seen as natural allies of the left.

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