An interesting blog post comparing the views of economists when it comes to deficit crisis. A comparison of those who are staunch supporters of deficit reduction and others who are more concerned with providing stimulus to a depressed economy. Their differing views help explain some of the theoretical differences in their answers to the debt.
http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/31/joe-scarborough-paul-krugman-and-the-economist-pundit-divide-on-debt-and-deficits/
"But to economists, deficits are simply the difference between revenues and outlays. A large deficit could be a good thing if it’s going toward a productive investment. A small deficit can be a bad thing if the economy needs more support. So if you’re worried about deficits, you need to say why"
"After the last few years we should certainly be aware that markets can misjudge risk, sometimes dramatically so (it was markets that placed a high value on subprime mortgage backed securities in 2007, after all). But if deficit hawks think the markets are wrong, they need to identify what exactly is wrong, and why they’re so certain they’re right."
Great article that addresses some of the common myths, hysteria, and sloppy arguments surrounding deficits. I think Tyler Cowen makes a more persuasive case for agreeing on a path of deficit reduction now here.
ReplyDeleteI think its a difficult issue to take a side on without political biases. Depending on your ideological adverseness to risk, deficit financing can be a great/scary endeavour.
ReplyDeleteGDP growth is typically viewed in the framework that the more it grows, the more a country's excellence grows alongside this. No country is concerned with sustainability, because sustainability does not yield high GDP figures. Because we are simply not bringing in the revenue we require outwardly to match our expenses, we rely on deficit financing alone to fund our country's agendas. If we were to cut deficit financing, this would necessitate equal cuts in expenditure ('G' element of GDP). Lower GDP numbers would consequently be met with the same sort of scrutiny we're seeing today, about the debt situation regardless. Moral of the story? One can't have it all in finances. Deficit reduction, alongside growing GDP numbers would necessitate changes to the entire structure of our country's economy.
An interesting article that gives me a deep glance of debts and what is behind deficits. May be this will open a solution for a depressed economy and deficit reduction.
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