Yesterday in class, Buie Seawell had a grand ol' time lampooning the Grand Old Party about the deficit. He wanted to show how many Americans no longer believe that they have ownership over the government, and he told a story about his 1990 run for the Senate. He was in a focus group, talking about the federal deficit, and the people in the group seemed to regard the federal debt as the federal government's problem, not their own. He was flabbergasted that people didn't realize that the federal debt was every bit as much theirs as their own credit card balance.

A fair point. So I wonder what he would make of Wayne Angell's column in today's WSJ arguing that it was Robert Rubin's attempt to pay down the federal debt that led to the recession. Mr. Angell is not to be trifled with. He's a former Fed governor, and former chief economist for Bear Stearns.

Essentially, Mr. Angell's analysis boils down to the relationship between debt and growth. In business, as in economics, there's a concept of "sustainable growth." Given a certain amount of debt, how fast can my company grow? Larger debt means a faster growth rate is possible, but it also means a faster growth rate is necessary in order to pay off the current debt and to make interest payments. As the business grows, its total debt will also grow, although not necessarily its debt as a percentage of sales.

For an economy, its debt is not just the federal debt, but also household and business debt. As in a business, for the economy to grow, its debt must grow, if not as a percentage of GDP. So if the federal debt declines, the only way the economy can continue to grow is if business debt and household debt make up the difference. The problem is that is household debt doesn't grow, businesses will have no reason (or ability) to acquire more debt of their own. Total debt as a percentage of the GDP will shrink, and economic growth will slow or reverse.

Mr. Angell's claim, bolstered by a raft of debt statistics, is that essentially this is what happened in 2000-01. He's not particularly concerned about the debt, but is concerned about spending, which will crowd out other, more productive spending. Moreover, the only way we can avoid deflation is by keeping interest rates low, allowing people to borrow at low rates against increasing real estate and stock prices.

I'm sure the Journal will give Mr. Rubin a chance to reply, but for the moment, it's worth acknowledging that Mr. Angell has a point. And next time Buie wants to ask a focus group about debt levels, he should be sure to include all debt, not just the federal debt.