A few years ago only members of the radical goldbug fringe were asking whether the government should stop dumping money into a giant hole. Now the idea has become so mainstream that billionaire currency speculator George Soros had to take a break from reorganizing the world's financial system at the New Bretton Woods Conference to address deficit concerns.
Soros told Bloomberg news Friday that the deficit hawks may "abort the very fragile economic recovery you are currently enjoying and push the economy once again into a slowdown or recession."
"In my opinion the country could actually absorb some more debt in order to get the economy going," Soros told Bloomberg. "But it's a question of how to use that money. If you just use it to reinforce consumption you don't really get any benefit of it. But if you were to use it for building infrastructure or to improve productivity, then I think it would be a very wise thing to do."
Not so, says the Wendy the Snapple Lady of blogging, Duncan "Atrios" Black. Here's the Eschatonian path to prosperity in a nutshell, cited with seeming approval by Brad DeLong:
All Spending Is Good Spending
At least from the perspective of the economy and unemployment. This isn't true in normal times, but we are not in normal times. If we can't act think of anything better to do with the money, we should be paying people to dig holes and other people to fill them up again. Or, perhaps, in more modern terms, pay people to build freedom bombs and other people to conduct controlled explosions of them. There are better or worse ways to spend money, but it still the case that if you cut spending on basically anything it will be a drag on the economy.
I never like to bigfoot a conversation, but this discussion is over. Ezra Chaitglesias and company can continue thumping the tub about low inflation and continuing federal solvency, but the fact that President Obama and the Republicans are now – however unpersuasively – competing to be seen as more fiscally responsible gives the game away. If you're still trying to get another stimulus rain dance going, you're just not in the debate anymore.
In the eight days preceding the $38.5 billion deficit reduction deal, the national debt of the United States increased $54 billion. The prices of gold and corn have never been higher. Even the L.A. Times has figured out that inflation is upon us (though strangely the paper had to send a reporter to Virginia to get the news). One in four U.S. households can now claim zero or negative net worth. Nationwide student debt is closing in on the $1 trillion mark. Even if we cut all defense and domestic discretionary spending to zero, we would just barely balance the current federal budget. Nobody has wanted our debt for quite some time now.
Like, I suspect, many of the folks who spend their days contemplating the bottomless evil of George Soros, I have only a vague idea what he actually does. But it makes sense that a wealthy-but-mortal man who deals in currency markets would focus on GDP while ignoring the actual U.S. economy's slow grind to a halt. For more local actors like DeLong, Paul Krugman, Black and the rest, there's a more immediate problem, and it's not coming from lunatics like me but from observable reality. The argument for Keynesian spending has been defeated in the court of your own two eyes. That will take some re-adjustment for believers. The title of this post comes from one of DeLong's commenters, who is concerned about the long-term discrediting of economic intervention. But it's too late to do anything about that; to make Keynesianism look ridiculous would be like blacking the chimney.