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News Link • Government Debt & Financing

Krugman's Zombie Idea: We Owe It To Ourselves

• https://www.zerohedge.com, Tyler Durden

Krugman has revived one of his favorite zombies: the notion that high government deficits aren't dangerous in the way that an individual incurring heavy debt is because the national debt is "money we owe to ourselves." He doubled down on his claims in response to an article comparing the dangers the debt poses to future generations to climate change.

Krugman has repeatedly written on this topic at his blog (see here and here). It was a common refrain of his during the Eurozone crisis and in the aftermath of the Great Recession when there was a bipartisan push to cut future deficits to prevent future Greek-style debt crises. 

As with most myths, there is a grain of truth to the claim. National debt does differ from the debt individuals and households incur in a few notable ways. Individuals have a finite lifetime to incur and repay their debts. Governments don't; they can pass debt onto future generations. So long as people are willing to lend it money and the government can service debt as it comes due, government debt can persist in perpetuity. And to the extent that the debt is owned by domestic citizens, the money that is used to repay the debt needn't leave the economy.


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