Here.
I can save face by maintaining what I have been from the beginning pointing out the good points that Nick Rowe and Don Boudreaux have been making, and actually suggesting it's not all as conflicting as it's being presented as.
I thought - and I still think - that Krugman's point was not that public debt is a free lunch, but rather that unless we're thinking about weird scenarios (like no-growth consumption-funding debt) the "man on the street" view that "national debt = burden on future" is very naive. Public debt isn't just something we have to pay for. It's also an asset we hold and it's also a source of investment. Big debt = bad debt doesn't follow from that automatically.
That sounds like a #4 position from Nick Rowe to me.
Daniel wrote:
ReplyDeleteI thought - and I still think - that Krugman's point was not that public debt is a free lunch...
Well, he is saying that it doesn't impose a burden on future taxpayers (if they hold the bonds). Nick Rowe et al. are saying yes, it does.
Now acknowledging that doesn't mean all deficit spending is bad. After all, benefits can exceed costs. It is simply showing that there are costs involved through the "naive" mechanism held by the layperson.