23 Sep 2009

The Worst Sentence I Read Today

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From the poor man’s Brad DeLong, Matt Yglesias, who writes:

And in economic terms, there’s really very little difference between spending down a reserve of accumulated cash and in taking advantage of an opportunity to borrow at an extremely low interest rate.

I think by “economic terms,” Yglesias means, “If you stop thinking about it the way a household or company would.”

I warn you, as patently false as you think that statement is, standing alone, if you click on the context you’ll see it’s much worse.

The problem here is that Yglesias thinks the one bad effect of deficit spending is a hike in interest rates. He completely ignores the growth in the federal debt. And what’s worse, he “zings” someone (Michael Boldrin) who wasn’t talking about crowding out, but instead was referring to people trying to save for the future and then having their actions offset by federal profligacy. So even if the government literally borrowed all its money at zero percent, that wouldn’t affect Boldrin’s argument against deficit spending as a means to “stimulate” the economy.

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