Dimitri B. Papadimitriou assumes that government spending creates growth. It may create growth in the drone-building industry or in public pensions, but we have to question whether that’s good for the economy.
Papadimitriou compares adding to our deficit to the hopeful action of a private borrower getting a home mortgage. There are important differences. A home buyer can refinance only a few times, while the government can add debt endlessly. A home buyer finances an asset that might gain in value, while government’s finances pay current entitlements. A home buyer faces foreclosure if he defaults. So far, federal lands have not been seized by foreign creditors.
Our debt problem is so severe that President Obama’s 5% salary donation to the U.S. Treasury seems ridiculous. It could be enough to add raisins to the morning oatmeal at our military bases for a while.
Papadimitriou presents the traditional Keynesian view about counteracting an economic recession: worry about deficits long term rather than short term.
The problem is that the Keynesian answer of lower taxes and higher government spending during a recession — followed by higher taxes and lower government spending during recovery, therefore paying down the debt — is unworkable. It conflicts with the basic views on both sides of the aisle.
Conservatives favor lower taxes but not higher government spending, while liberals favor higher taxes but not lower government spending. So Keynesianism never gets implemented.
Papadimitriou is on the right track, but instead of trying to create jobs, we should be creating income. As he says, we are in a jobless recovery. The jobs are not coming back. Technology is making millions of jobs obsolete.
The answer is for the government to provide every American adult with a basic income guarantee, enough for food, clothing and other basic necessities. We can afford it.
Then each of us can try to find work to earn more, but at least we won’t wind up living in poverty, as 46 million of our fellow Americans do today.