Friday, May 24, 2013

Michael Stephens — This Time Is Indifferent

Yet, revealingly, there are some deficit hawks who are treating the rapid shrinking of the deficit as bad news — and not for the Keynesian reason that this indicates the government is failing to do its part in supporting the economy, as Bernanke stressed in his remarks yesterday, but because the disappearing deficit is easing congressional pressure to pass “entitlement reform” (which, as we’ll see below, does belong in scare quotes)....
For the fauxsterian, the question of whether austerity can be expansionary, or whether economic growth falls off a cliff when countries’ public debt ratios surpass 90 percent of GDP, is really all beside the point. Deficit and debt hysteria have simply been a useful tool for pushing specific legislative changes that may or may or may not be related to the budget balance — changes that might be difficult to pass outside an atmosphere of imminent crisis.
A recent Washington Post column by Steven Pearlstein, “The Case for Austerity Isn’t Dead Yet,” more or less endorses this line. The problem with fiscal stimulus, the column tells us, is that it works: it boosts short-term economic growth, thus easing the pressure to pass “structural reform.”
Multiplier Effect
This Time Is Indifferent
Michael Stephens

1 comment:

F. Beard said...

" ... The problem with fiscal stimulus, the column tells us, is that it works: it boosts short-term economic growth, thus easing the pressure to pass “structural reform.” Washington Post

They want "structural reform?" Then let's give it to them. Let's abolish all government privileges for the banks and provide restitution for its victims, virtually the entire US population.