Search This Blog

Friday, October 01, 2004

Re: Lets' get fiscal

I nearly completely agree with article posted by Howie. Indeed, I've posted similar articles to this very blog. Nonetheless, I've gotten questions from others regarding this subject matter that I haven't been able to adequately address.

Deficit spending stimulates the economy. There's little argument about that. So the fact the Bush's fiscal policies have been followed by robust economic growth is not surprising. It's also not surprising that during previous eras, when the debt has been "paid down", economic growth has been relatively anemic.

But the counter argument is that if we run high enough deficits for long enough, eventually we have to pay the piper, which means reducing (or at least not increasing) the debt as a percentage of GDP. This will require lower deficit spending, and therefore less stimulus, and therefore lower GDP growth rates. Thus, everything Mr. Verjee says is true, yet leaves this whole in his argument for deficit spending.

Howie, I was wondering if you had any comments, arguments, or observations regarding this counter argument.

No comments: