The Krugman writes:
But short-term interest rates are set by Fed policy; right now they’re more or less zero, but they will rise eventually — and hopefully sometime within the next 10 years — when the economy recovers sufficiently.
See, I wouldn't do that. I would keep interest rates near zero forever. Rather than raising interest rates -- which chokes off growth and raises cost in the whole economy, I would establish a variable tax rate. Someone with a lot of debt would pay higher taxes than someone with only a little debt. So only specific borrowers are targeted.
That probably doesn't sound good now, because now everybody has a lot of debt. But if that policy had been put in place before we had a lot of debt, it would have kept debt from accumulating. And that would have prevented the financial crisis.
Anyway, here's how it works: If you have a lot of debt you taxes are high. But you can lower your taxes by making extra payments on your debt. So it's not really as bad as it sounds. The goal of this plan is not to prevent people from borrowing. The goal is to get people to pay off debt, instead of rolling it over forever.
Oh -- paying off debt is a way to fight inflation. It destroys the money that borrowing creates. I think it would be way better to do that, than what we do now.