Giant, Happy-Fun, Credit Card Party

Mark Kleiman points to and excerpts a piece, Sustained Budget Deficits: Longer-Run U.S. Economic Performance and the Risk of Financial and Fiscal Disarray, by Peter Orzag (Brookings), Robert Rubin (Citigroup), and Allen Sinai (Decision Economics). (Synopsis here; full paper here.) I could blather on about the importance of inflation expectations, as well as consumer and investor confidence, to the smooth functioning of financial markets and the economy in general. But instead I’ll try an analogy.

If I were willing to max out my credit cards, I could have a really wild two or three week bender in Las Vegas. Not Dollar Bill Bennett style by any stretch, but a great time nonetheless. Until the supply of credit dwindles and the bills come due, at which point the good times cease.

If only there was some way I could pass the bills off to someone else, say my children and yours, and I didn’t particularly care about the well-being of those children, then everything would be fine and I could have my Las Vegas bender. This plan, in a nutshell, is precisely the economic policy of Bush and the Congressional Republicans.