Matt Yglesias

Borrow While It’s Cheap

Ben Furnas points out that with the government able to borrow money at low, low rates, now would be a good time to invest in education. He cites these rates of return:

That’s a good payoff. I think at this point there’s broad consensus that the government is going to wind up going deep into debt to try to avoid economic calamity. That’s the right call, but it’ll create problems down the road. Under the circumstances, it’d be really useful to spend the money on stuff that will be useful down the road — stuff like education.

20 Responses to “Borrow While It’s Cheap”

1. Steve LaBonne Says:
   November 22nd, 2008 at 10:17 am

   I think this will happen- Obama clearly gets that you have to use the borrowed money in a way that increases future economic activity. Notice that he never talks about economic stimulus without specifying that it will consist of investments in the country’s economic future. He’s been talking mostly about energy and infrastructure (and health care) so far, but I bet you’ll see education in there too.

2. kafka Says:
   November 22nd, 2008 at 11:25 am

   I hope more borrowed money doesn’t’ go into “stimulus” checks that just wind up as more granite counter tops, flat screen TVs, etc. If we’re going to burden our kids with more debt then we should at least give them something in return like better infrastructure, mass transit, better ways to produce energy, etc., and other things to better their lives.

3. Steve LaBonne Says:
   November 22nd, 2008 at 11:40 am

   I hope more borrowed money doesn’t’ go into “stimulus” checks that just wind up as more granite counter tops, flat screen TVs, etc.

   It would actually be even worse this time- people are really scared now (hell, I have a highly secure public-sector job and even I’m a little nervous), so it would almost all be saved, resulting in zero stimulus. But Obama has competent economic advisers who are well aware of this, so I don’t think there’s any danger of making that mistake again.

4. Glaivester Says:
   November 22nd, 2008 at 12:19 pm

   It would actually be even worse this time [i.e., worse than if people spent the money buying lots of crap]- people are really scared now (hell, I have a highly secure public-sector job and even I’m a little nervous), so it would almost all be saved, resulting in zero stimulus.

   That would be terrible. Beause, you know, getting people out of debt is such a horrible thing. Having them spend the money on crap would not be as bad for the economy.

5. Jasper Says:
   November 22nd, 2008 at 3:07 pm

   That would be terrible. Beause, you know, getting people out of debt is such a horrible thing.

   The size of the checks in the last round were not sufficiently large to make much of a dent in the debt loads of most Americans. These checks — to the extent that people used them to pay down debt — hardly made most people debt free. So yes, it would be terrible to waste public funds during an economic emergency via stimulus checks that don’t do much of anything — least of all “get people out of debt.”

6. yoyo Says:
   November 22nd, 2008 at 3:59 pm

   I’m fine with sending out checks as big as need be to get people out of debt. Changing the numbers on the front of the check is not a hard fix.

7. Senescent Says:
   November 22nd, 2008 at 4:22 pm

   That would be terrible. Beause, you know, getting people out of debt is such a horrible thing. Having them spend the money on crap would not be as bad for the economy.

   Drained of sarcasm, this is completely true.

8. Steve LaBonne Says:
   November 22nd, 2008 at 5:50 pm

   Yes it’s true, but public investment in things- education, infrastructure, new technology- that will increase future economic output is far, far better than EITHER of those alternatives. Which, of course, is why we shouldn’t repeat the gimmick of mailing out checks.

9. Doug Says:
   November 22nd, 2008 at 6:12 pm

   How much of the university salary premium can be chalked up to the unjustifiably high wages paid to bankers and traders, jobs that are unlikely to come back? After all, that premium is an average, not a median, so a few, very high wages have a big effect.

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