Only spending can save us now
Deficit worries distract from a more pressing issue: unemployment
By Dean Baker / NEW YORK DAILY NEWS
Published: Monday, February 18, 2013, 3:59 AM
Public debate over economic policy has unfortunately been buried in a pointless debate about deficits. This is unfortunate because it ignores the most urgent problem facing the country: an economy that remains severely depressed following the collapse of the housing bubble.
The 7.9% unemployment rate would at other times be viewed as a disaster. The first stimulus was passed under President George W. Bush when the unemployment rate was a mere 4.7%. Even the 7.9% figure understates the severity of the downturn, because it excludes millions of part-time workers and people who have given up looking for work.
Instead of focusing on unemployment, however, the national political debate has become centered on distant debt targets. The assumption in this debate is that the country has a chronic debt problem that is threatening to undermine its financial and economic stability.
But here’s the simple truth: there is no debt problem.
The deficits we were running before the downturn were quite modest. The debt-to-GDP ratio was actually falling, meaning that the country could run deficits of this size literally forever. While it may have been desirable to have a smaller deficit or even a surplus, you would have to turn reality on its head to claim that the country had a debt crisis before the downturn in 2008.
(More here.)
Published: Monday, February 18, 2013, 3:59 AM
Public debate over economic policy has unfortunately been buried in a pointless debate about deficits. This is unfortunate because it ignores the most urgent problem facing the country: an economy that remains severely depressed following the collapse of the housing bubble.
The 7.9% unemployment rate would at other times be viewed as a disaster. The first stimulus was passed under President George W. Bush when the unemployment rate was a mere 4.7%. Even the 7.9% figure understates the severity of the downturn, because it excludes millions of part-time workers and people who have given up looking for work.
Instead of focusing on unemployment, however, the national political debate has become centered on distant debt targets. The assumption in this debate is that the country has a chronic debt problem that is threatening to undermine its financial and economic stability.
But here’s the simple truth: there is no debt problem.
The deficits we were running before the downturn were quite modest. The debt-to-GDP ratio was actually falling, meaning that the country could run deficits of this size literally forever. While it may have been desirable to have a smaller deficit or even a surplus, you would have to turn reality on its head to claim that the country had a debt crisis before the downturn in 2008.
(More here.)
Powered by Blogger
0 Comments:
Post a Comment
<< Home