Collective Conscious

Bet­ter now than next summer:

Though Trea­sury can buy itself time by mov­ing assets around, it is already com­ing close to the cur­rent debt ceil­ing of $12.1 tril­lion. Last spring, the Democratic-​​backed bud­get pro­posed to raise this to about $13 tril­lion, but given the cur­rent pace of bor­row­ing, no one now expects that will be suf­fi­cient to get through 2010.

I don’t think it was ever enough. The pro­jec­tion may have saved face dur­ing bud­get sea­son, but the stim­u­lus alone pretty much used up what was left. $14T is the new num­ber for next year.

On the issue of national debt, I fall solidly in the Paul Krug­man camp: the U.S. debt level is of lit­tle or no con­cern, and we should keep bor­row­ing as long as our rates are as low as they are. The fol­low­ing chart puts the total debt into the per­spec­tive of the entire U.S. economy:

It’s that sec­ond chart that really mat­ters. It’s clear that the government’s bal­ance sheet can sup­port quite a bit more debt in rela­tion to the size of our econ­omy — and as in the 1940’s, more gov­ern­ment spend­ing will actu­ally work to improve our eco­nomic sit­u­a­tion. In a time of reces­sion, we need more gov­ern­ment; it can recede again once the econ­omy recov­ers and bor­row­ing becomes costly for the Treasury.