James GalbraithIf we can all agree on one thing, it's that the federal budget deficit is a big problem, right?
After all, that's the basic position of both parties, and when the chairs of President Obama's debt commission unveiled their draft proposal last week, it was the talk of Washington, with every pundit worth his salt offering praise or criticism (mostly criticism). The issue is, indeed, so pressing that the New York Times created its own interactive tool to let readers balance the budget themselves. There's even an imaginary presidential candidate, Hugh Jidette (get it?) to help draw attention to the deficit crisis. Of course, the ratio of tax increases to spending cuts that you favor will likely depend on your political views. But to judge from most of the coverage, which totaled $1.4 trillion for this year alone, is a problem that needs to be solved sooner rather than later isn't up for debate.
Except that it is. Ever since concerns over the deficit took center-stage in Washington earlier this year, several prominent economists -- all progressives --- have been pushing back, claiming not simply that proposed spending cuts are too deep, or that the rich should be asked to sacrifice more. Rather, they've challenged the entire premise of the debate: that a budget shortfall caused by over-spending and under-taxation stands to put an undue burden on future generations, and that cuts to government programs, including Social Security, can help fix the problem. That view, they say, is based on a fundamental misunderstanding of what's driving the deficit and how government spending works. In fact, they argue, as one recently put it, that "the current deficit is a positive."Read More »from Not everyone agrees deficit is major problem