“Deficits Are Wonderful”: Woody Brock Explains His $10 Trillion ‘Domestic Marshall Plan’

Here's the analogy: 1) good debt - you borrow money to buy an income property with positive cash flow; 2) OK debt - you borrower money to buy your own home or fix your roof (you have to live somewhere, right?); 3) bad debt - you rack up credit card bills for short term consumer conveniences and have nothing to show for it.

The trouble with government debt is that almost none of it is productive (like #1 above). You don't get a return on investment, like you do in the private sector. And while I agree that spending money building infrastructure is better than just paying out entitlement benefits without anything to show for it, the trouble is that we already have too much debt. So, going back to the analogy, it's hard to go borrow "good" debt if you already owe too much on your credit cards.

He's true about the distinction between "good" and "bad" deficits, which is a universal maxim. That is debt that is created for investment that increases productivity and economic growth potential is good, such as building a factory (that presumably will sell products at net profits to repay that investment) or getting an education that increase one's earning potential. Debt that is created for consumption is bad debt. It is bad because that money is simply gone and must be paid out of future productivity at the expense of future consumption - you still have to pay for that consumption, if not now then in the future plus interest.

But the thing is this. If the "deficit" spending on infrastructure is of the good variety, then it pays itself back with future economic profits. The fundamental issue is that if it returns profits, then private investors will be more than happy to pony up their money on that investment so they can get a "piece of that action" of future return on that investment. The point is, such "deficits" don't even need any government spending or involvement because private money would be made available if it is such a fiscally sound idea. If there was profit to be made on a "government" program from the economic growth, then there would already be private money available seeking to capitalize on that profit opportunity (oh, there's that word "capitalism").

But this leads to another conclusion too. If private "profit seeking" money would naturally be made available for such economically profitable enterprises, then by extension, that means that government infrastructure spending for which private funding cannot be obtained must not be economically profitable. If it was economically profitable, then private money would want in on the profit opportunity. If there is no private money being made available, then it must not be economically profitable. Which raises the question, if it is not economically profitable, why are we spending public money on a project that is an "economic loser"?

The conclusion then is that government infrastructure spending programs are always and only economic losers since no private money thinks there is a net benefit (ie. profit) to such investment. If a project can be accomplished only by government depending, then it must be a loser or else it could be accomplished with private money seeking to capitalize on the economic benefit it is was an economic winner rather than an economic loser.

Consider the California high speed train. If people thought ticket prices could cover the cost to repay the investment and operating costs, then private money would be available to build the train. If it was such good economic idea, then it would be able to return a profit - a profit that private money would be available seeking to tap that profit opportunity. But, alas, there is not much if any private money forthcoming or expressing interest, so what does that tell you about the expected economic viability of that project?

The point being - if it's really economically beneficial (ie the economic benefits justify the economic cost) then there will be a profit opportunity for which there will be private investment forthcoming. If there is no private investment forthcoming, then the economic benefit must not be worth the cost so why are we spending public money on something that is not worth the cost?

The $1T dollar question that must be asked for EVERY government spending program is "if it was such a good economic idea, why isn't private money available for the investment such that it has to be done with public money?" There may be reasons that justify government spending programs, but failing to ask the question is what leads to $15T in debt and growing.

It all sounds good. Borrowing money for investments in infrastructure is not necessaryily bad, but we've already maxed out our borrowing for non-productive purposes. The War on Poverty, The Great Society, The Vietnam War, Food Stamps, The Earned Income Tax Credit, invading Iraq, etc. It's too bad THAT money wasn't spent on all the stuff that makes our economy better.

Until we do something like this, this country is going to sink into sewer sink holes until we are worse than any third world country!

"The key to his plan, he says, is to only invest in projects that are economically justifiable"

Kind of like Solyndra?

I agree with Brock (debt can be good or bad), but is this really news? Perhaps that is why we are in such bad shape.

However, the problem is not just politicians: it has much to do with the short-sightedness of the poipulation in general. Even our stock markets punish stocks that don't deliver earnings to the penny and reward ones that do, without as much attention paid to the long term effects of the short term decisions.

And the goverment will make sound investments!! More likely they will give a billion or so to their co-conspritors to study an investment and we the people will get nothing but the bill.

at the end of the day,in the end of the story and the end of the capitalism glory, Debt is the way to go to pick up the pieces when 'an economics of scarcity not working' any more,and the business capitals not making money to finance taxation,then 'The Future of Money' is simulation in 'debt' formation,borrowing to finance the domestic marshall plan,this plan can be sustained by US GDP growth of 2.5% plus World growth of 4 to 8.5%

News flash, we are half way through a lost decade. We need to figure out how to not have two lost decades back to back

If America spends an "extra" $10 Trillion, you can bet the deciding factor for most of the money will not be "economic justifiability". It will just be another wealth transfer from "some Americans" to "other Americans". You can bet your house that most of the "some Americans" aren't old enough to vote yet.

And war spending are they good deficits or bad? There is not a return to bondholders but the Republican establishment thinks war is a money making machine and I have seen it work also. This is a question that needs to be addressed TODAY.

There is no need even for good debt if you reform the entiltlements. Why Mr. buffet needs social security and Medicare from poor and middle class working Americans?

Another Baby Boomer with a great idea. Please just go away, you've guys have done enough damage.

Good deficits make a country more efficient and productive while employing the population. Bad deficits take a country to war.

This is the Modern Monetary Theory with a different name, Keynesian economics redux. So do Canada and Australia have it wrong not running deficits?

Ideally, he is correct. However, politically, it would never work. Any bill to create useful infrastructure will always include riders for pet projects that simply waste money. That's how congressmen get other congressmen to vote for their bills. Congress is just broken.

Good luck trying to convince people who feel $20/week is the answer. Seeing the Big picture requires inspirational leadership. The current idiot is neither inspirational or a leader.

This guy is a complete nut. Try this: we will never be able to pay back our current debt unless we destroy the dollar and ignite massive inflation. We bring in 2 trillion a year in revenues and we spend 3.6 trillion. Currently we owe 15 trillion and rising rapidly. If we stopped running deficits today (nearly impossible) and paid down our debt 1/2 a trillion/year for 30 years we could just maybe do it if we bagged most entitlements and shrunk our military by over 50%; but then we would have to pray that interest rates would never rise because servicing costs would eat up any advantage. It's amazing how "experts" like this can't (refuse?) to do the simple math and face existential risk to our economy from our debt bubble.

maybe the ancient aliens will come back and rebuild our power grid. maybe they will teach us all how to educate our young. maybe they will tell us all how they got through this nasty period we are going through right now with wars all over the earth. or maybe it would just be simpler to eat us.

we all suffer from lack of vision. both sides of the asile. we learn nothing from history. if an idea came up and bit our pols on the #$%$ they would be too blind to see it or instantly oppose it just out of pure pleasure. a person is smart but people are insane. everyone out for their selves. 4000 years ago pyrimids were built just to keep people in the habit of working year round. and pyrimids don't really have any use other than keeping the builders at a high level of skill. i am not suggesting that we build pyrimids. just find some plan to keep people working. it won't be many years off and all the baby boomers will be in the ground and no young people will have the skills or inclination to fill their spots.