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Wednesday, May 22, 2013

'Stop Celebrating Our Falling Deficits'

Ezra Klein is correct:

Stop celebrating our falling deficits: It’s time to stop celebrating last week’s Congressional Budget Office report. Our deficits aren’t dropping because we’re doing something right. They’re dropping because we’re doing everything wrong. ...
The CBO is saying that the federal government will be pulling demand out of the economy in 2013, 2014 and 2015. It will then start adding demand back in again — meaning we’ll be increasing the deficit — from 2016 through 2023, and presumably beyond.
That is literally the opposite of what we should want. Textbook economics says the government should add demand when the economy is weak and pull back when the economy is strong. The economy — and particularly the labor market — will remain weaker than we’d like in 2013, 2014 and 2015. That’s when the government should be helping, or at least making sure not to hurt too fast. It should be much stronger from 2016 to 2023. That’s when the government should be backing off. ...

Ben Bernanke also made this point -- yet again -- in his testimony today.

    Posted by on Wednesday, May 22, 2013 at 02:24 PM in Budget Deficit, Economics, Fiscal Policy | Permalink  Comments (18)


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