Even with the recent partial retreat in long-term real and nominal interest rates, they remain well above the ultra-low levels to which policymakers had grown accustomed, and they are likely to stay at such levels even as inflation retreats. It is now past time to revisit the widely prevailing “free lunch” view of government debt.

The idea that interest rates would be low forever seemed to support the view that any concern about debt was an endorsement of “austerity”. Many came to believe that governments should run large deficits during recessions and only slightly smaller deficits in ...