There is a significant view being expressed lately, fortunately to date a minority opinion, that federal government deficits do not matter much. Or in any event, there is no urgency in coming to grips with them. In fact, deficits do matter. Over the long term, they have a corrosive effect on the economy, and it is from this perspective that the case for bringing down the deficit is compelling. More important, the long run is rapidly turning into the short run. If one does not act promptly, the imbalances in the economy are such that the effects of the deficit will be increasingly felt and with some immediacy. The effects of the federal budget deficits over the past several years have been muted by two circumstances, both of which are currently changing rapidly. One was the rather large degree of slack in the economy in the early years of the current expansion. This slack meant that the economy could accommodate growing demands from both the private and public sectors. In addition, to the extent that these demands could not be accommodated from U.S. resources, the industrialists went abroad and imported them. This can be seen in our large trade and current-account deficits.
CITATION STYLE
Bussing-Burks, M. (2012). Deficits Do Matter. In Deficit (pp. 77–88). Apress. https://doi.org/10.1007/978-1-4302-4840-8_7
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