In Paul Krugman’s column in the New York Times yesterday, the headline asserted “Debt is Good.”
At the risk of nitpicking over an otherwise excellent article, is debt really “good”? Debt can be used to finance all kinds of things – such as routine government expenditures or unnecessary foreign wars.
As most economics majors will tell you, debt that yields a positive future return is good – debt that doesn’t yield a positive return – well, not so much.
Of course, a big question becomes – how do you measure future returns?
Well, as one measure, how about the impact on economic growth?
Public investment in infrastructure typically has a positive impact on economic growth. It creates jobs, improves mobility and stimulates future economic activity. That’s good.
Debt – well that is just a means to an end – and some debt is better than others – in other words, some debt yields high returns; some debt yields marginal or negative returns.
So how about we focus the discussion on the need for high-return investment in public infrastructure to stimulate jobs creation and economic growth?
A big mistake this country is making, in the opinion of TDV, is to conflate debt and investment. Let’s invest for growth – and if we need debt to make that happen, so be it.