"While economists generally agree that narrowing the government’s deficit and limiting the size of the debt are necessary in the long run, most argue that balancing the budget would not restore the nation’s still-weak economy to health in the near term."
The article mentions that it is more important to slow the deficit growth rather than eliminate it.
Economists in the article also suggested, "Closing the budget gap over the longer term could be vital to sustaining economic health, some stressed, by ensuring that the government did not crowd out private investment and by helping to keep interest rates low."
The article also gives a stat that public debt in the U.S. is about 76% of the size of the economy...
Republicans and Democrats fight on the deciding to get back to a balanced budget or not... what do you all think? There is talk about fiscal policy? Thoughts?
click here----> Balanced budget...
“The really important thing is to keep the debt from growing faster than the economy.”
ReplyDeleteThis article speaks a lot to the ideas of Koo for me. In Japan's last recession it was really government spending that kept the economy afloat. Yes growth was at 0% with government stimulus but it would have been -% growth if government had not intervened. I am worried that THe fiscal cuts we see in the US could hurt our just recovering economy.
I agree that we shouldn't immediately jump to a perfectly balanced budget. Too many things would have to be cut and too many sacrifices would have to be made. I certainly think that we should spend parts of the budget differently, such as creating jobs with government spending instead of spending a ton of money in the military.
ReplyDeleteNow is not the time, at least if you subscribe to Koo's theory, to worry about national debt. Koo provides three reasons for this, and I think the most interesting is that cutting fiscal spending too soon can actually force the economy further into a recession and require more government spending in the long run, as well as lengthening the economic struggle. Wait until the private sector is stronger to pull back fiscal expenditures.
ReplyDeleteLike Joe said, Koo's theory--which seems to have some truth to it--tells us that the government should borrow money and continue to spend (and I think it's money well-spent on infrastructure, fixing of roads, and other bottom-up industrial fixes). While corporations continue to pay off their debts, the government must continue to stimulate the economy.
ReplyDelete