Paul Krugman: Time to Borrow

We should be investing in infrastructure:

Time to Borrow, by Paul Krugman, NY Times: …There are, of course, many ways our economic policy could be improved. But the most important thing we need is sharply increased public investment in everything from energy to transportation to wastewater treatment.

How should we pay for this investment? We shouldn’t — not now, or any time soon. Right now there is an overwhelming case for more government borrowing. …

First, we have obvious, pressing needs for public investment in many areas. … Meanwhile, the federal government can borrow at incredibly low interest rates: 10-year, inflation-protected bonds yielded just 0.09 percent on Friday. …

Spending more now would mean a bigger economy later, which would mean more tax revenue…, probably be larger than any rise in future interest payments. And this analysis doesn’t even take into account the potential role of public investment in job creation…

So why aren’t we borrowing and investing? Here are some of the usual objections, and why they’re wrong.

We can’t borrow because we already have too much debt. … But … what matters is the comparison between the cost of servicing our debt and our ability to pay. And federal interest payments are only 1.3 percent of G.D.P., low by historical standards.

Borrowing costs … might rise. Yes, maybe. But we’re talking about long-term borrowing that locks in today’s low rates. If 10 years isn’t long enough for you, how about 30-year, inflation-protected bonds? They’re only yielding 0.64 percent.

The government can’t do anything right. … But to hold that view you have to turn your back on our own history: American greatness was in large part created by government investment or private investment shaped by public support, from the Erie Canal, to the transcontinental railroads, to the Interstate Highway System. …

But will the next president be able to act…?

The good news is that elite discourse seems, finally, to be moving in the right direction. Five years ago the Beltway crowd was fixated on debt and deficits as the great evils. Today, not so much.

The bad news is that even if Hillary Clinton wins, she may well face the same kind of scorched-earth Republican opposition President Obama faced from day one. … Will there be a strong enough Democratic wave to give Mrs. Clinton the ability to act?

But while the politics remain uncertain, it’s clear what we should be doing. It’s time for the federal government to borrow and invest.