deficit spending
Jan. 30th, 2008 11:55 amAre you at all suspicious? Does it sound too good to be true? Here we are, plunging into a recession. The proximate cause is irresponsible mortgage loans made to people who can't pay the money back. The deeper cause is, at least in part, years of too much borrowing and spending by Americans, both as individuals and collectively through the government. But behold: there is—oh, joy!—bipartisan agreement on a solution. Although quibbling over the details, everyone—Republicans and Democrats, the White House and Congress, all the presidential candidates—agrees that what we need is a "fiscal stimulus."
In other words, the government should go out and borrow even more money and pass it around for us to spend. The experts caution that for maximum stimulus effect, we must be sure to spend it immediately. No squirreling it away for a rainy day. In drinking circles, they call this hair of the dog: to cure a hangover, you have another drink.
On NPR the other day they interviewed James Fallows on the American-Chinese economic relationship, the peculiar scheme by which China produces stuff and gives it to us in exchange for American dollars.... which they then loan back to us by buying American debt. It's as if China is working so feverishly for the U.S. and getting only I-O-U's in return. Why? I wish I understood it better.