Upside-Down Economics

By Michael Kinsley
WashPost
Friday, February 20, 2009

In January, Suze Orman, the blonde financial adviser who's all over TV telling you to cut up your credit cards, went on "Oprah" to discuss how to cope with the recession. Orman recommended not eating in restaurants for a month. The appalled National Restaurant Association pointed out that if every "Oprah" watcher took this advice, it would cost 53,000 jobs.

But what are we supposed to do? Hoard our pennies, or spend them? For decades we've been told -- correctly -- that we're a profligate people with a profligate government, all living beyond our means. Some day, they said (okay, okay, I, among many others, said) that we would pay for all this profligacy. Now the black day has arrived, and we're told that the best way out of this mess is for the government to shovel money out the door even faster than before, with preference given to projects that can spend it as quickly as possible.

There has been less emphasis on what we, as individuals, should do. President Obama ducked the question at his news conference last week. But logic suggests that we should be gluing those credit cards back together. The government is actually going to pay us to buy a new house or car. Borrow and spend, borrow and spend is what got us into this mess. Apparently, borrow and spend will get us out of it.

It sounds too good to be true, but it is true. By now we all know about the "paradox of thrift": If everyone stops spending because times are bad, times get even worse. An economist writing in the New York Times the other day addressed the wonderfully inverted problem of people who feel guilty about not spending enough. His advice: Don't feel guilty about saving money, because it's the government's job, not yours, to make sure that we spend enough. But what if you don't feel guilty about reckless borrowing and spending? What if you actually enjoy it? This has been a more common attitude in recent years. Is it still okay? Or does the medicine have to taste bad to be any good?