Debt Is Not of the Devil

Today Paul Krugman has one of those columns that you wish you could make everybody in Washington–and for that matter, London and Berlin–read. It’s about public debt as a Good Thing. Here’s an excerpt:

Rand Paul said something funny the other day. No, really — although of course it wasn’t intentional. On his Twitter account he decried the irresponsibility of American fiscal policy, declaring, “The last time the United States was debt free was 1835.”

Wags quickly noted that the U.S. economy has, on the whole, done pretty well these past 180 years, suggesting that having the government owe the private sector money might not be all that bad a thing. The British government, by the way, has been in debt for more than three centuries, an era spanning the Industrial Revolution, victory over Napoleon, and more.

But is the point simply that public debt isn’t as bad as legend has it? Or can government debt actually be a good thing?

Believe it or not, many economists argue that the economy needs a sufficient amount of public debt out there to function well. And how much is sufficient? Maybe more than we currently have. That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt.

But economics and human experience and common sense are often powerless against the morality tales we imbibe like mother’s milk about the evils of public and private debt–without which we probably would have an economy resembling that of 1835. In reality, being “debt-free,” as an individual and as a society, often means the infamous freedom of having nothing left to lose. But still we hear from our collective unconscious the lectures from Shakespeare via Gilligan’s Island:

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.