No, we can't spend our way out of trouble this time

It’s hard to assess Greider’s argument too specifically, because he never quite says how much money we need to borrow for how long, or what rate of growth, for how many years, would be required to pay it back after our economy is back in shape. Some economists think today’s deficits are already dangerous because they are projected to grow faster than the economy itself for the indefinite future…

To repeat a point in the Post editorial that Greider does not really address, World War II was financed out of domestic resources. Some $185 billion came from selling low-interest war bonds to the public. Post-war inflation then eliminated much of this debt. Today, by contrast, we depend on foreigners who hold almost half of its $7.5 trillion public debt. Anybody think we can play the same borrow-and-inflate game with the Chinese central bank? Our foreign creditors are tolerant for now. But if the federal government offers no prospect of near-term fiscal discipline, they will demand higher interest, which could bring our economy to a screeching halt.

Today’s deficit, unlike the one we ran up in World War II, is not only discretionary but also structural. It includes mandatory spending on entitlements such as Social Security and Medicare for an aging population. I suppose Greider’s suggestion would be a bit more convincing if it included a proposal to cut these expenditures and shift the money to his giant national investment scheme. But it does not.