Intelligence squared debate: On the role of government in a recession.

The website is http://intelligencesquaredus.org/.

Nouriel Roubini comes out very well in this. Thank God he is on this panel. Laura Tyson engages with the supply-siders on their own terms — “the government must balance its books, just like households do” (I am paraphrasing). The job of a well-trained and well-historied economist is to explain exactly the falsity of this assertion.

The government budget is not like the household budget. The central government is the public coming together to accomplish things that cannot be accomplished alone. (The concept of ‘public goods’.) And NOW is the time for the central government to exercise that role. Ironically, it can borrow now much more cheaply than during ‘normal’ times. This makes it fiscally ‘prudent’ for the government to launch big infrastructure and education projects during a recession, that will have positive returns for the economy and the society. Moreover, in doing so, the government can assume the role that is normally played by the firm or household in the economy (being a borrower and spender), since those sectors of the economy are focused intensely on balance-sheet repair.

What amazes me is how we have lost this knowledge and experience gained from the Great Depression.