A reader writes, " I enjoy your philosophical and theological views, but unfortunately disagree with your political and economic views. I recommend large doses of Paul Krugman, beginning with Nobody Understands Debt. "
I got a kick out of that because I should think that the febrile Krugman is absolutely the last person to convince me of anything. I tend to see him as living proof that the Nobel Prize, except perhaps in the hard sciences, is a meaningless accolade bestowed by the politically correct upon their own. I consider the man a fool on the level of Nancy Pelosi, Harry Reid, and Joe Biden.
The column cited is one I read when it first appeared. Now, thanks to the reader, I have an opportunity to comment on it. But first we need to back up a step for a wide-angle view. Why is the national debt such a big deal to conservatives, but of relatively little concern to leftists? Dennis Prager provides a cogent answer in his new book, Still the Best Hope (Broadside 2012, p. 29, emphasis in original):
The Left's great fight is with material inequality, not with evil as normally understood. Thus, the Left has always been less interested in fighting tyranny than in fighting inequality. That is why Leftist dictators -- from Lenin to Mao to Pol Pot to Ho Chi Minh to Fidel Castro and Hugo Chavez -- have had so much support from Leftists around the world . . . .
This explains the Left's relative disinterest in creating wealth. The enormous and unsustainable debts facing the individual American states and the United States as a country from 2009 on have disturbed the American Right far more than the American Left [. . .] The reason is that the Left is not nearly as interested in creating wealth as it is in erasing inequality.
Prager's explanation fits Krugman well. The latter thinks that the focus on deficit and debt reduction is "misplaced." I disagree vehemently. Not only is this a very serious matter if we want to survive as a nation, but also one on which we all ought to agree. Left and Right will never agree about abortion, capital punishment, gun control, and a host of other issues, but one would think that when "money talks, ideology walks." Unfortunately our leftist pals will hold to their ideology even unto fiscal doom.
Krugman's 'argument,' if you want to call it that, consists in an attack on an analogy between individual and government debt:
Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.
This is, however, a really bad analogy in at least two ways.
Krugman's first reason is that families have to pay off their mortgages, but governments don't have to pay back what they borrow. First of all, it is false that mortgage holders have to pay back their loans. One can easily structure a mortgage in such a way that it is held indefinitely and passed on to heirs. One pays interest month by month without reducing the principal. There are also negative amortization loans in which the borrower digs his hole deeper month by month.
Ready for Krugman's second reason? It's a real winner: "Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves."
That's bullshit, which is presumably why nobody gets it except him of the simian countenance. It makes no clear sense to say that the debt is money we owe ourselves. So each of us owes a portion of the debt to every other one of us?
Suppose I decide to invest in treasuries, T-bills, say. I buy 10 at $10,000 a pop. What I have done is loaned the government $100 K. In return I get two things; a safe haven for my money and a bit of interest. There is probably no safer place to park your cash since it is, as they say, "backed up by the full faith and credit of the U. S. government," a phrase that means rather less than it used to, but still means something.
It is the government that owes me the money I lent it. The government, which is not to be confused with the citizenry. Furthermore it owes these debts only to those who loaned the government money by buying T-bills and T-bonds and such. It is simply not the case that we owe that money to ourselves. The government owes it to some of us. Only some of us get a return on that investment, and only some of us help the government out by loaning it money.
Now the interest paid by the government to foreign and domestic bond holders is money that is pissed away and can't be used for constructive purposes. The analogy with the homeowner is apt: money one spends on mortgage interest can't be used for constructive purposes. The truly foolish home buyer overextends himself and ends up losing his house to foreclosure. The U. S. does not of course face foreclosure, but it faces something analogously dire: turning into Greece -- or California.
The homeowner analogy is pretty good.
No analogy is perfect, of course. A perfect analogy would be an identity, and you can't compare a thing to itself --except vacuously.
Krugman is a hate-America leftist whose fetishization of material equality blinds him to obvious realities.