The Blogosphere Debt Cold War Turned Hot Again

The international community is scrambling to figure out whether Nick Rowe or Dean Baker is the aggressor.

Nick initially counted on Brad DeLong as an ally, mistaking his Swissesque (how's that - I adjectivized an adjective) neutrality for sympathy. But it was not to be.

Last time this came up I took my usual cowardly "you all have a point" position. I felt that people were talking past each other in what they meant when they referred to "generations" or "the future". Are we talking about an economy at a point in time in the future? Or are we talking about a future cohort? The various possibilities seem to have different implications and different people could be "right" depending on how they frame the question.

Bob Murphy, who insisted that Baker, Landsburg, Krugman, Callahan, and I were crazy back then, had a masterful summary of the arguments here which (if I remember correctly) captures my view of things very well. It really is one of my favorite blog posts of all time. If you want to get back up to speed, make sure you read that.

Krugman and Baker's point back then is that if you think of future GDP, the only real cost was distributional.

DeLong's contribution now, as I read it, is that the other potential cost is crowding out of private investment. That wasn't even considered in the OLG models we were running through. That's probably fine, because it's hard to convince most people that crowding out presents a real cost for thinking about the deficit today (long-term problems are another story, of course).

I don't plan on jumping into this anymore except to re-present what I think the meaningful contours of the discussion are.