On the same evening that Bill Clinton was holding court in Little Rock earlier this month we were treated to a very refined and stimulating discussion on the federal deficit, courtesy of William F. Buckley's "Firing Line."

The players, four economists from the left and right, discussed whether we really have a deficit, whether it matters, and whether anyone has any real idea of how to deal with it.

It became clear from the very earliest moments that neither liberals nor conservatives have any monopoly on virtue when it comes to deficit spending. Moderator Michael Kinsley kicked things off by quoting Ronald Reagan in his 1981 inaugural address warning that "social, cultural, political, and economic upheaval" would occur if we didn't reduce a deficit that then stood at $80 billion a year. Now the deficit is $300 billion, Kinsley noted, and none of Reagan's fears have come true.

On the other hand, as Kinsley said later, in the last election, liberal Democrats spent a great deal of time criticizing President Bush about the deficit. Yet now that Democrat Bill Clinton is about to take office, their concern about overspending has abated considerably.

In fact, it is clear that much of the disagreement has to do, not with the deficit itself, but the question of your deficit versus mine. Lester Thurow, captain of the "liberal team," was perfectly willing to admit that he only wants to see spending reordered, not necessarily reduced. "The problem with this budget deficit, which was constructed in the past 12 years, is that it was a budget deficit that went principally into consumption - defense and social security - as opposed to a budget which went into investment."

Thurow and the other three liberals - journalist Robert Kuttner, Robert Eisner of Northwestern University, and David Levy of Bard College - were all agreed on the idea that infrastructure investment is the way out of the current doldrums.

"We have all kinds of exciting new technologies on the horizon," said Levy, "new kinds of communication, biotechnology." He saw "an enormous boom coming just a few years down the road. But right now we have too much on the negative side in terms of collapsing construction and retrenchments by corporation like General Motors, so that the wave of the future has not yet taken hold." To hasten that wave, Levy argued, we need federal investment - meaning bigger deficits.

There is a great deal of slippery language on display here. Let's start with Thurow's definition of defense spending as "consumption." Is defense really consumption, the way social security and other entitlement programs are?

You could argue it is, in that it doesn't create permanent infrastructure. But you could argue just the opposite as well. You could say the defense build-up of the 1980s was a vast investment in America's future. Reagan's strategy was to raise the stakes until the Soviets would have to pack their cards and fold. It worked, and now the money spent on Star Wars during the 1980s has relieved America of having to maintain a huge nuclear defense force into the indefinite future.

But what Thurow and the liberals call "investment," infrastructure spending, is by no means a guaranteed payoff. A public works official investing in a new bridge or bullet train has no more certainty that the investment will prove economical than does a banker when he invests in a new factory. To say that public investment is more likely to pay off than private investment is to impute some kind of special wisdom to public officials - despite ample evidence to the contrary.

The real key to understanding the deficit can be seen in economist Robert Eisner's assertion that there really isn't any "national deficit," as opposed to a federal deficit, because "we owe it to ourselves."

First of all, we can't really say that anymore. A great deal of our debt is now owned by the Japanese, who may not be as amenable to the idea that a deficit is nothing more than a handshake among friends.

One of the unnoticed outcomes of the end of the cold war has been that the Japanese are not as dependent upon us as they were before the Soviet Union collapsed. After World War II, we limited Japan's military capacity, with the tacit assumption that we would protect them from the Soviet Union ourselves. As it turned out, the Japanese eventually returned the favor by buying up a lot of our Treasury notes. The trade-phobes' argument that the Japanese don't have to support a military is not on target. Since the early 1980s, at least, the Japanese have tacitly been supporting our military by lending us the money to cover our deficits.

With the Soviet threat gone, however, this quid pro quo no longer applies. None of this has really sunk in yet, but as the Japanese economy turns sour, the obligation the Japanese feel to finance our debt may wane. At that point, the fallacies of "We owe it to ourselves" will become clear.

Here's another frequently repeated line: "What difference does it make how much the government borrows or taxes, since it is all being spent in this country? But the issue is not where the money gets spent, but who gets to spend it. As Gertrude Stein put it: "Money is always there. It's the pockets that change."

Deficit spending takes power out of the hands of private spenders and puts it in the hands of public officials. To spend is to choose, even if money must be borrowed from all over the world to cover the balances. That is why the party out of power always believes deficits are a disgrace, while the party in power finds them really not so much to get upset about.

The real problem is that, as with money, the supply of decision-making power is finite. If Congress squanders too much of our decision-making power through unproductive spending, the nation as a whole will eventually have very few choices left.

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