Comment on Bradford DeLong on ‘Debt Derangement Syndrome’
Blog-Reference and Blog-Reference
After some name-dropping (Rogoff, Blanchard) and False-Hero-Worshipping (eminent, highly knowledgeable) the applause-troll Bradford DeLong offers a piece of economic wisdom: “Whenever the private sector stops spending enough to keep unemployment low and jobs easy to find, the public sector needs to fill the gap in aggregate demand.”
Now, good old Keynesianism stood under the premise of temporary deficit spending with budget-balancing over the business cycle. Somehow this did not happen and government debt rose worldwide faster than GDP. A permanently growing public debt means that a market economy is on the permanent life-support of the State. Some people got the uneasy feeling that permanent debt growth is unhealthy and cannot go on forever. They blew the panic whistle several times in the past decade but were always proven wrong.
At present, the loudspeakers of the profession are deeply relaxed and Bradford DeLong scolds the scaremongers: ”I now have hope that future economists will remember the sorry history of this past decade and prevent it from being repeated.”
In his utter scientific incompetence, Bradford DeLong completely ignores the massive immediate and delayed distributional effects of growing public debt.
To make the argument short, the macroeconomic Profit Law is given as Q≡Yd+(I−S)+(G−T)+(X−M) which reduces to Q=(G−T) with Yd, I, S, X, M blanked out for a moment. The reduced Profit Law says that the profit of the business sector as a whole Q is equal to the deficit (G−T) of the public sector. In a nutshell: Public Deficit = Private Profit. In other words, permanent public deficit-spending is a permanent free lunch for the Oligarchy.
As a rule of thumb, the financial wealth of the Oligarchy grows in lockstep with the public debt. In other words, fabulous wealth is the mirror image of fabulous public debt ($21.5 trillion).
The deficit spending on social measures does NOT benefit WeThePeople as a whole because the benefits of one group are paid for in real terms through unnoticeable stealth taxation via the price mechanism by the complementary group.
The permanent free lunch for the Oligarchy is beefed up with interest on a permanently rolled-over growing public debt. This amounts to reversed progressive taxation of WeThePeople by the IRS on behalf of the Oligarchy.
Finally, the national debt is NOT savings of WeThePeople but deferred taxes. In order to eventually redeem the national debt, the government has to eventually tax WeThePeople. This will be the day when WeThePeople sends debt-deranged economists to hell.
Egmont Kakarot-Handtke