I am of course referring to this: "Consensus Emerges to Let Deficit Rise." And it's about time that people realize this is a pragmatic, sensible position, backed not just by leftist economics but by plenty of empirical data. Even a lot of budget hawks understand that spending needs to shore up the economy through the recession: Some are quoted in the article, and James Galbraith catches some others hiding out at the Pete Peterson Institute, of all places. Also for your consideration:
The nation's debt as a percentage of all economic activity, while growing alarmingly now, is not at historic highs. The portion held outside the American government, here and abroad, in the form of Treasury securities was $5.8 trillion at the end of last month.
That is a relatively modest 40.8 percent of the nation's annual income, far below the 109 percent coming out of World War II or the nearly 50 percent in much of the 1990s.
If the nineties offer any lessons, it's not inconceivable that responsible spending and reform could lead the U.S. out of this recession and toward a substantial cut in the the budget deficit and even the national debt in the next two presidential terms.
One thing to keep in mind: Consensus is also a vague word -- is it a majority? 51 percent? 75? There are going to be people out there (the McCain campaign, the House GOP) who want to support fiscal austerity, either rhetorically or substantively. Making it clear that they are outside the consensus and not to be taken seriously is the key task for progressive economic policy in the coming months.
--Tim Fernholz
