Friday, September 4, 2009

Economist Brad Delong on long term deficit...

Deficit

If global investors lose confidence in governments tomorrow, then we have a huge crisis--and they are right to lose confidence. If global investors do not lose confidence, then we are fine--and those crying "the sky is falling" are wrong and will lose money--as long as we don't let fear of a loss of confidence panic us into prematurely cutting the government deficits that are maintaining demand.

The right policy, therefore, is (a) big deficits now, and (b) big automatic tax increases enacted now to take effect in the future if we then fail to grow our way out of the debt.

But are we smart enough to enact such policies? Certainly not with today's Republican Party.

Posted via web from Jim Nichols

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