Non Sequitur: High debt ⇒ Low demand ∴ the public sector should borrow to fill the spending gap

Cecchetti et al, again, 2011 (PDF; page 4):

In principle, as highly indebted borrowers stop spending, less indebted borrowers or lenders could take up the slack. For example, wealthy households could purchase goods at reduced prices and cash-rich firms could invest at improved expected return. But they need not. As Eggertson and Krugman (2011) point out, it is the asymmetry between those who are highly indebted and those who are not that leads to a decline in aggregate demand. Those authors suggest that, in order to avoid high unemployment and deflation, the public sector should borrow to fill the spending gap left by private sector borrowers as the latter repair their balance sheets.

Here's what I get from that paragraph:

1. There is a lot of debt.
2. Higher debt service (or a decision to cut back on borrowing) means people with lots of debt must spend less than they did before.
3. People without a lot of debt could spend more and "take up the slack" but they do not.
4. The "asymmetry" between items 2 and 3 "leads to a decline in aggregate demand." And
5. "the public sector should borrow to fill the spending gap left by private sector borrowers"

But you can't really expect savers to turn around and bail out debtors just for the sake of improving the economy. People are not that altruistic. So it is nonsense to bring up "the asymmetry between those who are highly indebted and those who are not" and say that the asymmetry, rather than the cost of the debt, is what "leads to a decline in aggregate demand."

Don't fall for it. They're bullshitting you: Hey look over here! There's an asymmetry here that's making people spend less.

What? No! The problem is not that people who are heavily in debt cannot afford to "fill the spending gap" and people who are not don't want to. That's not the problem. The problem is there is so much debt it's choking off spending. The problem is the debt. Asymmetry is the distraction.

The problem is the high level of debt. Servicing it takes money that people would have spent on other things. So spending is listless. "Aggregate demand" is listless. And the economy is listless.

Since the private sector cannot solve the problem, Eggertson and Krugman say, "the public sector should borrow to fill the spending gap". Who else can fill the gap? The public sector, of course.

Again, no. When did we decide we should fill the spending gap? We didn't. The spending gap is not the problem. The high level of debt is the problem. The spending gap is a result of the debt problem. The spending gap is a result. Eggertson and Krugman want to fix a result. But what we need to do is fix the problem.

Eggertson and what's-his-name shift the focus away from the high level of debt. They shift the focus from the problem to the consequence -- "a decline in aggregate demand" -- and call this the problem. And then they propose a solution to this problem. But it isn't the problem. It is a consequence of the problem. Therefore, their proposed solution is a non sequitur. It doesn't follow from the given facts.