It’s hard to open a newspaper or
turn on the TV without being bombarded with narratives suggesting that
fiscal policy didn’t work and that we therefore need discipline in the
form of balanced budget amendments and debt limits. Even those who see
themselves as moderates on the issue are embracing a commitment to
“eventually” slash deficit spending once recovery gets underway.
But most of this talk arises from a fundamental misunderstanding about the way debt and deficits actually operate.
Private v. Public Debt
When
people talk about reducing the deficit, the message is that the U.S.
government is running out of money. Virtually everyone in Washington
accepts this idea—from the progressive think tanks to the nuttiest free
marketeers; from the politicians to NPR’s reporters; from Pete
Peterson’s hedge fund cronies to organized labor. All present a unified
front against budget deficits—particularly those that supposedly result
from “entitlements.”
They all
warn we have to cut excessive debt. But what kind of debt? Public or
private? And excessive in relation to what? Time? Some threshold? READ MORE
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