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Aug 25 2015

Don’t Panic

Or rather, panic about the right things-

The GOP’s austerity hawks are throwing away a golden opportunity (again)

by David Dayen, Salon

Tuesday, Aug 25, 2015 05:58 AM EST

The U.S. Congress should have gaveled in an emergency session yesterday to react on the latest twist in the capital markets. Failure to do so creates unnecessary pain and will damage American competitiveness for the next generation.

I’m not talking about the stock market.



Right now, the U.S. can borrow money for 10 years at around 2 percent – a staggeringly low number, made so by an increase in global demand for Treasury bonds. When the economic winds shake globally, investors lead a “flight to safety,” looking for any instrument that won’t lose money. And despite the tumult of the past decade, investors still see Treasury bonds as the safest investment in the world.

What this means is that investors will hand over cash to the U.S. government with effectively no interest in real terms.



Significant borrowing, to repair crumbling infrastructure like bridges and water systems, or upgrade the electrical grid and broadband capacity for the entire nation, would have a seriously stimulative impact on an economy that’s already showing some labor market success. It would help arrest the persistent demand deficit that has existed in our economy since the outset of the Great Recession.



The lack of government debt is a problem for the world, as Paul Krugman pointed out recently. Former White House economist Jared Bernstein goes further, explaining that budget deficits lead to smoother and stronger economic growth. Our deficit is falling fast, and the government not only can handle throwing a couple hundred billion at upgrading the basic structures that make the country go, but would benefit handsomely from it.



This actively harms our economic potential over the next several years. We can’t have nice things because we’re still governed by a backwards ideology that thinks the government should run the country like a family manages their budget. But if a family could borrow money for free and use it to make all kinds of improvements in their lives, they’d jump at the chance. If we ever want to make America great again, we have to get over this dysfunction and get out our checkbook.

Those letters nice and friendly enough for you?

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