"Deficits are Worrisome, but Not as Worrisome as an Economy that is Not Growing and is Rapidly Shedding Jobs"

What do you think of this administration's arguments for deficit spending to spur the economy?:

Remarks of the Chair of the Council of Economic Advisers: ...I very much appreciate the opportunity to speak with you today. I will take this time to discuss recent developments in the economy, and some of the challenges the nation faces going forward. I ... also ... want to discuss some larger issues about how fiscal policy should be evaluated...

I view the economy as experiencing something similar to a tug of war. ... On the contraction end of the rope are the shocks that the U.S. economy has experienced... Pulling hard on the other end of the rope are the expansionary forces of monetary and fiscal policy—the Federal Reserve’s series of interest rate cuts and the Administration’s ... stimulus package...

Monetary and fiscal policy – the two main levers of macroeconomic stabilization policy – are both actively engaged..., both leaning hard against the headwinds...I will not say much today about monetary policy. This is not to diminish in any way the crucial role of the Federal Reserve in helping to counter the adverse forces in this recession. But fiscal policy is my beat as CEA chair, so that will be the focus of my comments. ...

[A]nalysis done within the Administration has shown ... that ... the ... job market is not what we would like it to be right now, but it would have been worse without the Administration’s actions.

One can view the short-run effects [of our policies]... from a classic Keynesian perspective. ... This ... helps maintain the aggregate demand for goods and services. There is nothing novel about this. It is very conventional short-run stabilization policy: You can find it in all of the leading textbooks. ...

The qualitative effects ... on the short-run output gap ... are not controversial. There is less agreement on quantifying these effects—how many jobs are created, how much growth is increased, and so on. To answer these questions, one would normally turn to a macroeconomic model such as those maintained by private forecasting firms, the Federal Reserve, and other institutions. I view such models as being very useful at relatively short time horizons such as one or two years. ...

Of course, the expansionary effects ... will be offset to some degree by the effects of the budget deficits that arise... Deficits can raise interest rates and crowd out of investment, although I should note that the magnitude of this effect is much debated in the economics literature. The main problem now facing the U.S. economy is not high interest rates...

The Administration would prefer not to have deficits, but deficit reduction is only one of many goals. ... Deficits are worrisome, but not as worrisome as an economy that is not growing and is rapidly shedding jobs. ...

The most important fiscal challenge facing the United States is not the current short-term deficits,... but instead the looming long-term deficits associated with the rise in entitlement spending ...

We do not yet have all the answers to the problems posed by entitlement costs, but we are hard at work. ... These longer-term issues, however, should not blind us to the immediate needs of the economy. The President came into office inheriting an economy ...[in] a recession. He has responded vigorously to the challenges and, as a result, the current outlook for the U.S. economy is bright...

That was Greg Mankiw, on September 15, 2003 in a speech to the NABE. [Note: verb tense changed from past to present in a few places, 'chairman' was changed to 'chair,' and he is, of course, mainly promoting tax cuts, not government spending.]