Niall Ferguson, the smart but lugubrious Harvard historian who never misses an opportunity to foresee an apocalypse, told Bloomberg TV at the Aspen Ideas Festival that the United States was on an unsustainable path, accumulating debt faster than we can pay for it. Unarguable stuff, that.

Then toward the 3:00 minute mark of the video below, he starts with the doomsday pyrotechnics, bashing Paul Krugman, and predicting that a new stimulus could "trigger" a bond market backlash.

Niall Ferguson is not the bond market, so he shouldn't speak for it with any degree of certainty. By the same token, I am not the bond market, and I won't speak for it with any degree of certainty, either. But let's assume for the moment that the bond market is not incredibly stupid. The stimulus bill voted down last week would have added about 0.3% to this decade's anticipated debt accumulation. Three-tenths of a percent isn't a trigger, it's a rounding error. And with Europe experimenting with economic self-immolation, I don't think the U.S. is in any short term danger of bond traders fleeing to ... um ... where would they even go, again?

The stimulus/extenders bill/jobs bill/family-and-state-relief plan/whatever-we're-calling-it isn't about reducing our long-term structural deficit. It's about trying to get the country back to normal quickly so that it can safely undergo the kind of targeted surgery we'll need to bring down our deficits later. Higher deficits now to cure the patient. Lower deficits later to wean the patient off the strong medication. That's not terribly complicated, and I trust the bond market would understand it if smart people like Niall Ferguson cared more about explaining the facts than using a Bloomberg TV spot to tickle liberals' indignation.

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