美国需要刺激而非美德

The Obama administration’s insistence on fiscal rectitude is dictated not by financial necessity but by political considerations. The US is not in the position of Europe’s heavily indebted countries, which must pay hefty premiums over the price at which Germany can borrow. Interest rates on US government bonds have been falling and are near record lows, which means that financial markets anticipate deflation, not inflation.

President Barack Obama is under political pressure. Americans are deeply troubled by the accumulation of public debt. The Republican opposition has been extremely successful in blaming the crash of 2008 and the subsequent recession and high unemployment on government ineptitude.

But the crash of 2008 was primarily a failure of the private sector. US (and other) regulators should be faulted for failing to regulate. Without a bail-out, the financial system would have remained paralysed, making the subsequent recession much deeper and longer. Similarly, the US stimulus package was a necessary measure. The fact that most of it was spent to sustain consumption rather than on correcting the underlying imbalances was unavoidable due to time pressure.

Where the Obama administration went wrong was in how it bailed out the banking system: it helped the banks earn their way out of a hole by purchasing some of their bad assets and supplying them with cheap money. This, too, was guided by political considerations: it would have been more efficient to inject new equity into the banks but the president feared accusations of nationalisation and socialism.

That decision backfired, with serious political repercussions. The public, facing a jump in credit card charges from 8 per cent to nearly 30 per cent, saw the banks earning bumper profits and paying large bonuses. The Tea Party movement has exploited this resentment and Mr. Obama is now on the defensive. The Republicans campaign against any further stimulus and the administration now pays lip service to fiscal rectitude, even if it recognises that deficit reduction may be premature.

I believe there is a strong case for further stimulus. Admittedly, consumption cannot be sustained indefinitely by running up the national debt. The imbalance between consumption and investment must be corrected. But to cut government spending at a time of large-scale unemployment would be to ignore the lessons of history.

The obvious solution is to distinguish between investments and current consumption, and increase the former while reducing the latter. But that seems politically untenable. Most Americans are convinced that government is incapable of managing investments aimed at improving the country’s physical and human capital.

Again, this belief is not without justification: a quarter-century of calling the government bad has resulted in bad government. But the argument that stimulus spending is inevitably wasted is patently false: the New Deal produced the Tennessee Valley Authority, the Triborough Bridge in New York and many other public utilities still in use today.

Moreover, the simple truth is that the private sector does not employ available resources. Mr. Obama has in fact been very friendly to business, and corporations are operating profitably. But instead of investing, they are building up liquidity. Perhaps a Republican victory will boost their confidence but, in the meantime, investment and employment require fiscal stimulus (monetary stimulus, by contrast, would be more likely to stimulate corporations to devour each other than to hire workers).

How much government debt is too much is an open question because tolerance for public debt is highly dependent on prevailing perception. The risk premium attached to the interest rate is the critical variable: once it starts rising, the existing rate of deficit financing becomes unsustainable. But the tipping point is reflexive and therefore indeterminate.

Consider Japan, with a debt-to-gross-domestic-product ratio approaching 200 per cent, one of the highest in the world. Yet 10-year bonds yield little more than 1 per cent. The reason is that Japan’s private sector has little appetite for investing abroad and prefers 10-year government bonds at 1 per cent to cash at 0 per cent. As long as US banks can borrow at near zero and buy government bonds without having to commit equity, and the dollar does not depreciate against the renminbi, interest rates on US government bonds may well be heading in the same direction.

That does not mean that the US should maintain the discount rate close to zero and run up debt indefinitely. The right policy is to reduce imbalances as quickly as possible while minimising the increase in borrowing. This can be done in several ways, but the Obama administration’s stated goal of halving the budget deficit by 2013 while the economy is operating far below capacity is not one of them. Investing in infrastructure and education makes more sense. So does engineering a moderate rate of inflation by depreciating the dollar against the renminbi.

What stands in the way is not economics but misconceptions about budget deficits that are exploited for partisan and ideological purposes.