Government spending must be mindful of growing debt
(Last updated: 10/21/09 7:09pm)To get out of this recession, the government needs to do more to create jobs, help struggling state and local governments such as those in Michigan and help homeowners avoid foreclosures, said Robert Kuttner in a talk in the Worldview Lecture Series on Monday night. All of these take more money.
What about the accompanying increase in public debt? Kuttner’s reply is “Debt is not so bad.” That might be, but it worries a lot of Americans just the same.
I wish he had gone further and asked why we use interest-bearing public debt to finance the needed public spending. Why not have the Federal Reserve Bank loan dollars to the government as they did to rescue the big banks?
The Fed just created dollars when it added to the banks’ accounts at the Fed. If the Fed can do this for the big banks, it can do it for the U.S. Treasury.
The government must not fail to spend enough to stop this recession. But the answer is not to stop worrying about the debt. Just don’t create it in the first place.
A. Allan Schmid
professor emeritus
Originally Published: 10/21/09 7:09pm
Todd
10/22/09 2:48pmMr. Schmid,
The government already has failed PRECISELY because it’s spending money trying to end the recession, and the recession began because government was spending money (in both cases money it doesn’t have.)
It is impossible to spend one’s way to prosperity. Just ask anyone with credit card debt.
Our entire nation has become a bridge loan to nowhere.
MaximumBob
10/23/09 9:27amThe government creates jobs?
News to me.
The government takes capital from productive sectors of the economy (taxes), takes its cut (pork) and then redistributes the rest to politically-expedient sectors that aren’t doing so well (“green jobs”, et al).
Meanwhile, the productive and taxed sector loses capital for maintenance and expansion. Jobs are lost. The looted capital is redistributed towards unproductive and temporary jobs that will vaporize when funding dries up.
So how is that creating jobs?
Only on a college campus would this be considered “job creation”.