Public debt & the left

Jonathan Calder asks a good question: why has political radicalism become synonymous with wanting to see a permanent and massive public debt?
Let me deepen the puzzle. In three ways, the left should be more concerned about government debt than many on the right:
1. The left tends to be more sceptical about the rationality of financial markets. They should therefore take less comfort in the fact that bond yields are low, for fear that market opinion might turn quickly. This argues for cutting public spending in a considered, orderly way, for fear of having to make emergency cuts if sentiment does change. (Of course, governments could monetise borrowing rather than tap bond markets, but the costs and benefits of doing this shouldn’t be a left-right issue).
2. Government debt is analogous to climate change - both are burdens we impose upon future generations. If you’re concerned about climate change - and the left tends to be more so than many on the right - then you should also be concerned about government debt*.
3. Big government is no friend of the working class. What’s wrong with cutting public debt if it means ending the subsidy to arms companies that is military procurement? Why not slash spending on an organization that seems to have degenerated into a gang of thugs? Why not nationalize the banks and use some of their profits to reduce government debt?
On these grounds, we’d expect the many on the left to want to reduce government debt. So why aren’t they?
I think it’s because these factors are outweighed by another. What distinguishes left from right is that the left is more sceptical of the right about the self-righting capacity of capitalism. The left therefore thinks that cuts in public spending will not crowd in exports or business investment, but instead depress the economy, which will hurt workers disproportionately.
But this raises a question. What if we had more adequate insurance mechanisms - either more generous unemployment benefits or Shiller-style macro markets - which better cushioned workers from recession? Would some on the left then be less supportive of public debt, because the weight of factors 1-3 would increase relative to the costs of jeopardising economic growth?
* Of course, it could be that climate change is a left-right issue because the left believes capitalism must have all sorts of bad effects, whilst the right believes this is impossible.  But leave this aside.

Comments

[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.