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Posted at 6:34 PM ET, 02/ 1/2011


By Ezra Klein

Recap: An interview with the father of the individual mandate; an idea for Mitt Romney; and the two policy questions driving the legal battle over health-care reform.


1) Do deficits steal from our children?

2) Behavioral economics and the "culture of poverty."

3) Obama hasn't moved to "the center."

4) Kraft's 400,000-square-foot cheese cave.

By Ezra Klein  | February 1, 2011; 6:34 PM ET
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Next: Wonkbook: Simpson-Bowles making a comeback?


At link 1): "If the money would have been used for consumption goods or remained idle in bank accounts, and the government uses it to purchase needed infrastructure instead, then this is better from the perspective of future generations since it enhances the productive capacity that they will inherit."

There's that moronic "idle in bank accounts" again. Money stuffed in mattresses is idle. Money in bank accounts is loaned out or invested in working businesses. It isn't idle. Anyone using the "idle" argument is someone who hasn't really thought about things (or is dishonest), and is merely reciting some rote nonsense in an attempt to sway the credulous useful idiots and fellow travelers.

The person above is also wrong about spending on consumption. Such spending enhances the spender's life in some way, and the person receiving the money can use it to enhance his or her own life. All of *that* enhancing can only redound to the benefit of subsequent generations.

Posted by: msoja | February 1, 2011 7:36 PM | Report abuse

I will try to answer the question "do deficits steal from our children ?"

I have not clicked the link. It is not logically necessary for deficits to steal from our children. Imagine a closed economy so residents own the bonds issued to finance the deficit. The next generation will inherit the obligation to pay back the debt, but it will also inherit the bonds. So far they, on average, are neither better nor worse off because of the deficit.

However, in the real world, deficits hurt our children. The reason is that people do not understand that they are no better or worse off -- the people who own the bonds feel richer and the people who don't don't feel significantly poorer. That is the argument above depended on Ricardian equivalence which does not hold in the real world.

Deficits create an illusion of wealth which causes higher consumption. In normal times (when the safe short term nominal interest rate is above zero) this crowds out investment. That makes the country poorer in the future and steals from our children.

In current times (a liquidity trap) higher consumption causes higher investment. So at the moment, if we had a closed economy deficits would give to our children not steal from them.

Of course we don't have a closed economy. The bonds don't just belong to US residents. A whole lot of them belong to the People's Bank of China. I'd say that makes almost no difference as the US (in particular the Fed) can decide how much they are worth. The PBC is insane to invest so much in dollar denominated assets. I guess they will pay the price ($2000 per Chinese person) of the increase in our prices (a lot inflation is no fun but paying back debts isn't either).

Posted by: rjw88 | February 1, 2011 7:45 PM | Report abuse

ps. For all Klein and Mark Thoma know, the infrastructure they are so intent on building today(with stolen dollars that future generations will have to repay), will be obsolete before it is paid for. Pasty faced fudge packer Julius Genachowski of the FCC, for instance, wants to build *the world's fastest broadband* out to the very boondocks, over the next ten years. Only problem is, the systems and speeds he's inanely proposing, are already being beat elsewhere in the world. Genachowski is lying about the quality of the system he plans even before he's even begun. In ten years, the thing that looked so forward looking today, will be archaic. In fact, the technology he wants to lock the country into may be completely obsolete by then. And the government of the future will still be stealing money from working people to pay for it.

Klein and Thoma are ridiculous and incompetent frauds.

Posted by: msoja | February 1, 2011 7:48 PM | Report abuse

Good stuff:

Posted by: Chris_ | February 1, 2011 9:28 PM | Report abuse

I'm shocked, shocked that msoja is an unabashed bigot.

How does one sustain such bile and hatred for so long?

Posted by: pseudonymousinnc | February 1, 2011 9:37 PM | Report abuse

--*The next generation will inherit the obligation to pay back the debt, but it will also inherit the bonds.*--

Except that, given current law, the government demands a share of the deceased's estate, with no guarantee that the confiscated monies will be applied to deficit reduction.

Otherwise, much more learned than anything from Klein, and, I suspect, similarly of Thoma.

Posted by: msoja | February 2, 2011 1:03 AM | Report abuse

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