It’s ‘Mad’ to Worry About Mounting Debt Now, Keynes Scholar Says

Now is not the time for governments to worry about the massive public debt they’ve run up to fight the pandemic, according to economic historian Robert Skidelsky.

Officials should instead keep programs to support wages and businesses in place, while preparing for the next stage of policies to revive economic growth and reduce unemployment, said Skidelsky, best known for his three-part biography of the British economist John Meynard Keynes. That could be done through job-guarantee programs, he said.

Skidelsky spoke hours after data on Friday showed U.K. public debt exceeded 2 trillion pounds ($2.6 trillion) for the first time, fueling a debate over how long the borrowing spree can be maintained.

That question is climbing up the political agenda all over the world, as economies return to growth with the help of an unprecedented injection of government cash to cushion the blow from Covid-19.

In the U.S., a top adviser to Joe Biden suggested this week that the country’s widening deficit could restrain the Democratic candidate’s spending plans if he defeats President Donald Trump in November.

“It’s mad to worry about debt at the moment,” Skidelsky, a member of the U.K. House of Lords, said in a phone interview. “The only way to reduce the debt burden for future generations is to get the economy to grow again. It’s paradoxical: you have to spend more to grow your revenue.”

While the details vary by country, fiscal authorities have mostly focused their efforts on supporting workers with wage subsidies or expanded benefits, and lent money to help businesses stay afloat during lockdowns.

Such measures have pushed budget deficits and debt levels to record highs — and they still weren’t enough to prevent the deepest recession in generations.

Read more:
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  • Biden Promises to Spend, Shrugs Off His History as Deficit Hawk
  • A Long-Despised and Risky Economic Doctrine Is Now a Hot Idea

There’s not much sign that the rescue effort — supported by central banks with interest-rate cuts and large-scale purchases of government debt — is setting off alarms on bond markets. Even after a rise in yields this month, the U.K. government can borrow over 10 years at around 0.2%, a historically rock-bottom level.

Economists, meanwhile, warn that an early withdrawal of fiscal spending could derail a fragile recovery and deepen the unemployment crisis — as it did in many developed economies in the years after the 2008 crash.

Skidelsky likened current government measures to “ambulance work,” and said he favors programs of local and regional public works to create jobs. That’s an idea also backed by supporters of Modern Monetary Theory in the U.S., where it echoes the New Deal policies of President Franklin D. Roosevelt to counter the Great Depression.

“You just have to look at all things that could be done, particularly at a local level, to be convinced that it’s not just a matter of sweeping leaves or filling up holes and digging them up again,” Skidelsky told Bloomberg TV’s Francine Lacqua and Tom Keene.

— With assistance by Sharna Hawkins

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