Tuesday , May 21 2019
Home / EconLog Library / Who’s Afraid of Budget Deficits?

Who’s Afraid of Budget Deficits?

Summary:
In a provocative article in Foreign Affairs titled “Who’s Afraid of Budget Deficits?” Jason Furman and Lawrence H. Summers argue that we should not worry much about the federal government’s large and growing budget deficits.  While they admit that politicians and policymakers “shouldn’t ignore fiscal constraints entirely,” they say that they “should focus on urgent social problems, not deficits.” And throughout the piece, they assume, for every single problem they address, that the solution is more spending. It’s not surprising that they don’t worry much about deficits. Furman and Summers aren’t just rank and file economists. Furman, an economics professor at Harvard University’s Kennedy School, was the chairman of former President Barack Obama’s Council of

Topics:
David Henderson considers the following as important: , , , , ,

This could be interesting, too:

Scott Sumner writes A little bit of knowledge is a dangerous thing

Scott Sumner writes How not to save for college

David Henderson writes Robert Pear RIP

Scott Sumner writes Sebastian Edwards on MMT and Latin American populism

In a provocative article in Foreign Affairs titled “Who’s Afraid of Budget Deficits?” Jason Furman and Lawrence H. Summers argue that we should not worry much about the federal government’s large and growing budget deficits.  While they admit that politicians and policymakers “shouldn’t ignore fiscal constraints entirely,” they say that they “should focus on urgent social problems, not deficits.” And throughout the piece, they assume, for every single problem they address, that the solution is more spending. It’s not surprising that they don’t worry much about deficits.

Furman and Summers aren’t just rank and file economists. Furman, an economics professor at Harvard University’s Kennedy School, was the chairman of former President Barack Obama’s Council of Economic Advisers. Summers, who is president emeritus of Harvard, was the Treasury Secretary under former President Clinton and head of the National Economic Council under former President Obama. I know Summers from when we were both economists with President Reagan’s Council of Economic Advisers and I know Furman from his work. These are not, to put it mildly, dumb guys. And if you dismiss them as such, you make a big mistake. It’s important to look at their argument.

I’ve studied their argument, and I find it unpersuasive in two respects: (1) their main case, which is that we shouldn’t worry much about deficits and (2) their subsidiary point, which is that we need at least the amount of government spending we have now and should be ready and willing to increase government spending.

This is from my latest Defining Ideas article, “Who’s Afraid of Budget Deficits? I Am,” February 20, 2019.

That middle paragraph is there because I sometimes get comments on Facebook and elsewhere to the effect that we can ignore these guys because they’re idiots. They’re not. And I had to read their Foreign Affairs piece 4 times before making my own judgment about it.

David Henderson
David Henderson is a British economist. He was the Head of the Economics and Statistics Department at the OECD in 1984–1992. Before that he worked as an academic economist in Britain, first at Oxford (Fellow of Lincoln College) and later at University College London (Professor of Economics, 1975–1983); as a British civil servant (first as an Economic Advisor in HM Treasury, and later as Chief Economist in the Ministry of Aviation); and as a staff member of the World Bank (1969–1975). In 1985 he gave the BBC Reith Lectures, which were published in the book Innocence and Design: The Influence of Economic Ideas on Policy (Blackwell, 1986).

Leave a Reply

Your email address will not be published. Required fields are marked *