Paul Krugman suggests a three-pronged approach to paying for new Democratic programs: borrow at the current low interest rates for investments with a relatively high rate of return; tax the wealthy to pay for new, fairly small-bore social programs; and create new, broad-based taxes to pay for massive expansions of the welfare state, such as Medicare-for-All. Does that make conceptual sense?
Yes, but I have questions about some GND “investments.” To the extent that these expenditures result in clear efficiencies, and thus generate a predictable rate of return, they aren’t a problem. Some expenditures, however, are only intended to improve the quality of life for everyone over the long run. Some may fail entirely. You can reasonably expect investors to demand higher interest rates for securities intended to finance these kinds of programs. That could present some issues for the economy as a whole down the road.
GND advocates would say that GND bonds should be viewed as the equivalent of war bonds, which offered relatively low interest rates. The problem with this argument is that the public in general does not view climate change as a reasonable analogy to World War II. More on that in a subsequent post.