James Galbraith weighs in with a very uncommon take on the deficit.
The headline he puts on the story:
Galbraith: The danger posed by the deficit ‘is zero’
Here’s are some excerpts from Galbraith in their exchange:
At this point, the whole thing is completely incoherent. You cannot write checks to 20 percent to anybody without that money entering the economy and increasing employment and inflation. And if it does that, then debt-to-GDP has to be lower, because inflation figures into how much debt we have. These numbers need to come together in a coherent story, and the CBO’s forecast does not give us a coherent story. So everything that is said that is based on the CBO’s baseline is, strictly speaking, nonsense…
What people worry about is that the federal government won’t be able to buy bonds. But there can never be a problem for the federal government selling bonds. It goes the other way. The government’s spending creates the bank’s demand for bonds, because they want a higher return on the money that the government is putting into the economy. My father said this process is so simple that the mind recoils from it…
Since the 1790s, how often has the federal government not run a deficit? Six short periods, all leading to recession. Why? Because the government needs to run a deficit, it’s the only way to inject financial resources into the economy. If you’re not running a deficit, it’s draining the pockets of the private sector.
Nothing groundbreaking here, at least for this blog’s commenters and folks who read billyblog. The reason Ezra brands this take “uncommon” is because among “respected voices” (pardon my use of scare quotes), it really is uncommon. It’s very difficult to be a respected liberal or progressive if you don’t cow at least a little to deficit hawkery. The good news is that Ezra has a lot of readers in the mainstream, and Galbraith did an excellent job making digestable the sensible view on deficits.