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Thinking fast and slow on government debt
Internet searches on Indonesian debt have sharply increased in volume, indicating that people in the country have been paying much attention to the issue.
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workers finish the construction of Istora Senayan Sport Complex in Jakarta, Tuesday, July 4, 2017. the venue will be use for the upcoming Asian Games. 2018 and expected to be finished in OCtober 2017. (JP/Seto Wardhana)
T
he House of Representatives recently approved a revision to the 2017 state budget (APBN) with a deficit of Rp 397.2 trillion, (US$ 29.7 billion) or 2.92 percent of gross domestic product (GDP). The budget deficit has received much public attention, as the deficit almost reaches the legal threshold of 3 percent.
Internet searches on Indonesian debt have sharply increased in volume, indicating that people in the country have been paying much attention to the issue.
Several debates have surfaced on social media, with some worried that the country might experience a debt crisis. Others advocate that the country should not create debt, because debt is bad. It is interesting to note that, a quick comparison of Google searches for Indonesian government debt seem to outnumber the searches on “revised state budget.”
Daniel Kahneman, a 2002 Noble laureate, has identified two modes of thought. System 1 is the fast one; it is instinctive and emotional. System 2 is the slower one; compared to system 1, system 2 is more dispassionate and logical. It is a natural response for people to worry about government debt. But it is also important to have a rational response about it, so that the budget debate is not lopsided, focusing only on debt and in isolation.
Under the influence of fast thinking, it is also easy to become caught up by seemingly parallel or analogous arguments.
For example, media coverage on the relatively recent debt crisis in Greece is likely to result in fears, prejudice and negative views on other governments’ debts, tax and welfare programs.
To clarify, Greece is different from hundreds of other countries on this planet. For one, it is a part of a monetary union without fiscal unity: so while some lessons from Greece’s case are transferrable, others are not.
