Re: Remedial

1

it's all opportunity cost.


Posted by: Ono | Link to this comment | 02- 9-05 11:14 PM
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2

If you would like a visual of the tradeoffs involved, you should check out the chart I snipped from a GAO report last week: http://fugop.blogspot.com/2005/02/declining-fiscal-situation.html

If Bush's tax cuts are made permanent, by 2040 servicing the debt will cost the entire federal budget, ~20% of GDP. And that's not assuming reform of the Alternative Minimum Tax or Bush's Social Security borrowing.

There are basically two progressive positions on deficits, one well represented by Delong, the other by Sawicky. Delong is more of the Rubinomics school that focuses on balanced budgets, arguing that public deficits drive up interest rates, trade-off with private investment, and exacerbate the trade deficit. Your mortgage will eventually rise, in short.

Sawicky, whose school I guess I would place myself, takes a more flexible approach to deficits. Every deficit has two sides, just like private borrowing: the risk is that you waste the money. If you use deficit spending to invest in infrastructure, education, programs that make the economy grow - that increase the economy's ability to pay deficits off in the future - they are generally acceptable. Wasting money on military adventurism, bloated contracts, and corporate welfare - no so much.

Apologies if I have distorted their positions.


Posted by: Dave M | Link to this comment | 02-10-05 1:52 AM
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