Creating jobs while reducing the deficit: hard but possible
Just because deficit spending in general can be helpful in a recession and recovery and harmful in general in a recovered economy, doesn鈥檛 mean all deficit spending is equally good in a recession and recovery, or all deficit spending is equally bad in a full-employment economy. There are benefits and costs in either situation.
Just because deficit spending in general can be helpful in a recession and recovery and harmful in general in a recovered economy, doesn鈥檛 mean all deficit spending is equally good in a recession and recovery, or all deficit spending is equally bad in a full-employment economy. There are benefits and costs in either situation.
This is an old theme聽 here, but the issue and the confusion persists, as I have just come from attending the Peter G. Peterson Foundation鈥檚 fiscal summit today, complete with a protest/press conference聽 on the front steps of the summit venue, with the protesters arguing against the 鈥渁usterity鈥� measures they think the summit participants and attendees advocate.
Just coincidentally, here is a blog聽post I wrote on Concord鈥檚 blog today.聽 In it, I say deficits can sometimes be good, and deficits can sometimes be bad, depending on the condition of the economy (emphasis added):
And just because deficit spending in general can be helpful in a recession and recovery and harmful in general in a recovered economy, doesn鈥檛 mean all deficit spending is equally good in a recession and recovery, or all deficit spending is equally bad in a full-employment economy.聽 There are benefits and costs in either situation that should be evaluated as thoughtfully as possible in order to maximize the net benefits of the policy.
So I don鈥檛 support 鈥渁ustere鈥� fiscal policy, but I do keep hoping for 鈥渟marter鈥� and (net) beneficial fiscal policy.聽 It is not at all hard to do in economic theory.聽 The difficulty lies mostly in political practice.聽 I鈥檒l explain more on that soon when I write more about what happened at today鈥檚 fiscal summit.