My contrarian side is active this morning--Brad DeLong and other liberals are arguing for major investments in infrastructure today because we need them and the real cost of borrowing (i.e., Treasury interest rate minus inflation) is zero.
Or maybe it's the bureaucrat in me: the nitty gritty is, if we borrow money today at an effective rate of zero, what is the term for which we're borrowing it? Say 10 years. So the logic is, we can borrow now and pay back in 10 years and the money didn't cost anything. However, the bureaucrat says: you're committing to either raising taxes and/or getting enough gain in GDP from the investment for which you're borrowing to be able to pay it back in 10 years. Otherwise, you're committing yourself to rolling over the debt 10 years from now, at possibly a higher rate of interest.
So my bottom line is: the liberals are spinning. IMHO it's not pure spin. I can agree that improving our transportation infrastructure would be a productive use of money. And if you don't fix it now, you're going to spend more down the line and probably face higher borrowing costs to boot. So overall I think the argument for more infrastructure spending today is valid; it's just the idea of costless borrowing seems to me to be spin.
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