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Wednesday, March 24, 2010

Is Deficit spending like steroids and narcotics?

When a patient comes to me with some sort of inflammatory disorder disaster and they are acutely ill, I always have treatment with systemic steroids as my ace in the hole... at least in the short term.  I frequently see patients who have gone to that well once too often and the long term effects can be devastating. However, in the short term, it takes care of conditions which are acutely uncomfortable. I think other physicians deal with a similar phenomena when dealing with patients with chronic pain and use narcotics.  The challenge is to wean people from steroid and narcotic dependency. It virtually always requires some other type of medication which has potential side effects, many very scary. In addition, it is a long, arduous, and frequently uncomfortable process.

In watching how governments deal with economic problems, I see many parallels between how physicians use, and patients demand steroids and narcotics and how politicians and public use deficit spending. Patients placed on steroids (and I am not talking about anabolic steroids) and narcotics generally feel great, no matter what you are treating. If the problem is not self limited, these drugs do little to treat the underlying problems. Similarly, there are few economic problems which won't be made much better (at least in the short term) by an nice hefty infusion of borrowed or printed money. Everybody feels better off, at least in the short run.

There are serious discussions regarding whether whether deficit spending is really bad for the economy. My gut feeling is well summarized by Michael Kinsey in his article in the Atlanta Monthly when he discusses the implications of the massive economic stimulus and deficit spending:
But this cure has been one ice-cream sundae after another. It can’t be that easy, can it? The puritan in me says that there has to be some pain. That’s not to say that there hasn’t been plenty of economic pain. But that pain has come from the recession itself, not the cure.
The entire article can be read at and the exchange between Paul Krugman and Kinsey is on Greg Mackiw's blog

Our politicians are behaving like physicians run a muck, operating a clinic where patients line up to get their fixes of steroids and oxycontin. As long as they can continue to dose everyone, everyone appears to be happy.  There is an element who believes that this situation can be managed without any real pain. I have my doubts. As Kinsey goes on to write in his response to Krugman and Matt Yglesias:
A final word to Matt Yglesias, who thinks my problem is "thinking too moralistically about the economy," because I express doubt that we can escape without pain from the dilemma we find ourselves in. Obviously (or perhaps not) this is a prediction and not a hope. I am not in favor of pain. I just don't see any way to avoid it. Yglesias apparently believes that we can escape our fiscal dilemma without pain. I would like to know how. And if there is such a way, why have we denied ourselves for so long? Why do we ever bother to show fiscal restraint? Why have taxes at all? Why deny ourselves anything money can buy? If $15 trillion in debt can be a freebie, why not $30 trillion or $60 trillion?
After another exchange with Krugman, who justifies his opinion by linking to his book chapter stating his opinion, Kinsey simply states " Meanwhile I (along with others of his fans) am still waiting for Paul’s inflation-free recipe for getting us out of this mess."

Like the doctor who  places a patient on steroids or narcotics, we need an exit strategy, something not well articulated by the Nobel laureate economist.  I share Kinsey's skepticism about how this will happen. It appears their approach is to give the sick patient  more and more drugs to make them feel good as opposed to treat their disorder. Sounds like hospice. 

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