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Sunday, November 22, 2020

Debt Scolds Warming Up

The chatter around Biden's Treasury Secretary appointment has unsurprisingly coincided with various commentators harping on about government debt levels in the United States. Meanwhile, some Canadian opposition politicians are complaining about deficits.

None of the comments I saw were particularly interesting, so I will not bother responding to any in detail. I just want to point out it makes no sense to float such concerns in November 2020.

Right now, the news flow around vaccines looks promising: a few vaccines seem to be effective and safe, and protection looks to last for a a reasonable time. The rolling out process will take time, but it looks like it will be mid-2021 for developed countries. At which point, one could very well imagine that repressed consumer spending will ramp up, particularly travel. 

There is no point in debating sustainability metrics on this side of that prospective boom, since we have no idea what the growth numbers will be. At the same time, it is a distraction from the more important task, which is bridging the gap between now and that brighter future. Right now, we need to navigate another wave of infections -- which seems tied to the return to school. My provincial government is hoping that adding an extra week of Christmas holidays to school will be enough to bring cases under control, but I am not sure that will be enough. 

Otherwise, it seems like we are due for a replay of the post-2010 arguments about fiscal policy, with MMT proponents on one side, and neoclassicals on the other, busy waving their hands and telling fables about debt sustainability. Although that will be a good environment to plug my upcoming book, I think it is too early to take those arguments seriously.

(c) Brian Romanchuk 2020

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