When going into debt is common sense

Matt is frustrated by the "common sense" idea of cutting back government spending precisely when we need the government to stimulate the economy:

If it defies common sense to borrow money, then what’s the deal with all these mortgages people have on their homes? Why are young people encouraged to take out student loans and attend college instead of working at Taco Bell? And when you’re in a thrifty frame of mind and accumulating net savings, what’s that for? Presumably it’s because you think there are moments (bad luck, hard times, promising investment opportunity) when a bit of dissaving is the right strategy. New business startups are commonly financed with credit card debt.

He's right, but common sense enthusiasts can always justify their own debt on the basis of fairness. It's not fair that I can't live in a house as nice as my brother-in-law's just because my parents couldn't afford to give me one. It's not fair that I can't start my own business just because I didn't win the lottery. And it's not fair that I can't go to college just because that teacher who hates me for no reason didn't recommend me for a scholarship. People never see their own debt as risky or as the result of wasteful spending, but they often dismiss government debt as unnecessary. (Or even threatening. If I'm taking out loans to avoid a career at Taco Bell, why should the government help other people avoid careers at Taco Bell?)

It doesn't help that few politicians are able or willing to articulate the long-range benefits of deficit spending. Or that the media reinforces the popular view that individuals going into debt (not you, the people on the other side of town) caused the Great Recession.

Comments

[Chris VanHaight]

Deficit spending now would make sense if the Bush administration had kept up the Clinton surpluses. Instead, reckless tax breaks led to a ballooning deficit, leaving little room for the kind of spending needed now. I agree that Republican "Voodoo Economics" (lower taxes ALWAYS encourages growth) is ridiculous, but with the debt so huge Obama has little choice but to propose budget cuts. Raising taxes is political poison, no matter how reasonable, and S&P, among other corporate overlords, won't tolerate more debt. If he tried raising taxes on anyone other than multi-millionaires (not enough without also taxing Joe Six-Pack), we'll be inaugurating President Romney in January 2014. We're all Portugal now.