Why isn’t gov’t borrowing MORE now that the ten year real yield curve has hit zero?

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Matt Yglesias asks a damn good question:

I’ve been talking a fair amount about the negative real interest rates on five-year and seven-year treasury bonds. I see that as of Friday, then ten-year bond has declined to a real yield of zero.

I don’t expect these facts to persuade people who view almost all government spending as consisting of low-return boondoggles to suddenly start loving it. But the fact remains that when it’s cheaper to pay for things by borrowing money than by taxing productive activity, it’s pretty foolish not to step up your borrowing. The issue we ought to be debating is whether we should increase borrowing by cutting taxes or increase borrowing by hiking spending. With the House controlled by Republicans and the White House controlled by Democrats, we’d end up compromising on a mix of the two. Instead we’re talking deficit reduction. Why?

Peter Schorsch is the President of Extensive Enterprises and is the publisher of some of Florida’s most influential new media websites, including SaintPetersBlog.com, FloridaPolitics.com, ContextFlorida.com, and Sunburn, the morning read of what’s hot in Florida politics. SaintPetersBlog has for three years running been ranked by the Washington Post as the best state-based blog in Florida. In addition to his publishing efforts, Peter is a political consultant to several of the state’s largest governmental affairs and public relations firms. Peter lives in St. Petersburg with his wife, Michelle, and their daughter, Ella.