Paul Krugman is arguing that the Democrats should not spend political capital on reducing the deficit right now. (Full text at Brad DeLong).
To me, this kind of argument misses the point. I have no problem with the government borrowing money for important spending initiatives. But when the government is borrowing money, we need to look very closely at what the money is being spent on, to see how important it is. This money all has to be re-paid with interest, so it is especially important to spend it on something useful (fighting a world war, for example).
Given current wasteful government spending, though, I would argue that any money borrowed simply can't be said to be going to anything useful. Is there any doubt that billions of dollars are being wasted right now? Farm subsidies are just one example. Since the borrowed money is just going to a general fund, and the money received by the government through taxes and borrowing is fungible, the deficit spending effectively is being used for the wasteful projects.
I assume Krugman would agree that most, if not all, of our farm subsidies are bad policy. So, it seems to me that, in effect, Krugman is saying that the government should borrow money to subsidize big agricultural corporations.
I suppose his point is that it makes sense politically for the Democrats to spend money and not worry about the deficit. That's a fair point. However, it is a little depressing to hear this from someone like Krugman. It's somewhat expected for politicians to act this way. But when prominent economists lose their idealism, and give up good policy for practical policy, I get a little discouraged.