I did indeed used to hear that running up the national debt right now via expansionary fiscal policy would indeed turn the U.S. into "Greece" and deepen the current downturn. It is true that I am not hearing that nearly as much any more--that it is now the burden of financing the debt in future generations that is the problem.
When did the shift take place? Why did the shift take place? How did the shift take place?
Cheating Our Children: So, about that fiscal crisis — the one that would, any day now, turn us into Greece. Greece, I tell you: Never mind. It’s as if someone sent out a memo saying that the… repeated warnings of a U.S. debt crisis that keeps not happening has outlived its usefulness. Suddenly, the argument has changed…. The deficit, we’re told, is really a moral issue….
There has, of course, been no explicit announcement of a change…. But… pundits who spent years trying to foster a sense of panic over the deficit have begun writing pieces lamenting the likelihood that there won’t be a crisis, after all…. So they have a new line: We must bring down the deficit right away because it’s “generational warfare,” imposing a crippling burden on the next generation.
Deficits would indirectly be making us poorer if they were either leading to big trade deficits, increasing our overseas borrowing, or crowding out investment, reducing future productive capacity. But they aren’t: Trade deficits are down… business investment has actually recovered fairly strongly… the main reason businesses aren’t investing more is inadequate demand….
Yet there is… truth to the charge that we’re cheating our children. How? By neglecting public investment and failing to provide jobs. You don’t have to be a civil engineer to realize that America needs more and better infrastructure…. And right now — with vast numbers of unemployed construction workers and vast amounts of cash sitting idle — would be a great time to rebuild our infrastructure. Yet public investment has actually plunged since the slump began. Or what about investing in our young? We’re cutting back there, too, having laid off hundreds of thousands of schoolteachers and slashed the aid that used to make college affordable for children of less-affluent families. Last but not least, think of the waste of human potential caused by high unemployment….
And why are we shortchanging the future so dramatically and inexcusably? Blame the deficit scolds… whose constant inveighing against the risks of government borrowing… has done far more to cheat our children than deficits ever did. Fiscal policy is, indeed, a moral issue, and we should be ashamed of what we’re doing to the next generation’s economic prospects. But our sin involves investing too little, not borrowing too much — and the deficit scolds, for all their claims to have our children’s interests at heart, are actually the bad guys in this story.