Thursday, July 19, 2012

REBLOG: The Beltway's Destructive Obsession with the Deficit

Having been in the federal budget, let me start by saying that deficits DO VERY MUCH MATTER.  But as I have written extensively here, how you meet them - and in particular whether you raise revenue to do so - is more important then their existence.   But given that we're in a DEMAND-SIDE recession, we can't afford to focus on deficits without actually dealing with Demand first.  And we can't deal with demand unless we get more people back to work.

It would be one thing if this group were pushing for long-term debt reduction and short-term economic relief. The centerpiece of President Obama's economic plan is the American Jobs Act, which calls for hundreds of billions in new stimulus, to jumpstart the economy. This would necessarily add to the deficit, but the gains from employing people—1 million additional workers, over the next year—would more than make up for the additional debt. Different sides might disagree about the best way to accomplish the long-term goal of reducing the debt, but focusing on short-term economic improvement is clearly the right thing to do.
Instead, these self-styled masters of consensus are entirely focused on reducing the deficit now. In the current economic environment—where demand is still lagging—this is a guarantee of disaster.

Read more here :  The Beltway's Destructive Obsession with the Deficit

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