It is not 95 theses nailed to a church door, but it is five these that make a good deal of sense: Jason Furman and Lawrence H. Summers: Further Thinking on the Costs and Benefits of Deficits: "1. IS THE POLITICAL SYSTEM SO BIASED TOWARDS DEFICIT INCREASES THAT ECONOMISTS HAVE A RESPONSIBILITY TO OVEREMPHASIZE THE COSTS OF DEFICITS?... The political system can be biased towards greater deficits. But the opposite is often the case as well.... The fiscal stimulus was too small in the wake of the Great Recession.... Deficit reduction in the late 1990s was probably excessive, especially in light of the license it gave for unproductive tax cuts. Germany is one of many countries that has also shown that politicians can generate excessive fiscal prudence. Japan has done the same at many points.... With interest rates so low that they could limit central banks’ ability to respond in a downturn everywhere in the industrial world, the dangers posed by anti-deficit dogma in the next recession could be enormous.... The role of economists is to analyze the economy and not to lean one way or the other to counteract some presumed bias of politicians.... 2. DO THE CHANGING ECONOMICS OF DEFICITS MEAN THAT ANYTHING GOES AND WE DO NOT NEED TO PAY ANY ATTENTION TO FISCAL CONSTRAINTS?... No. The costs and benefits of deficits have changed, but we still need a limiting principle in order to conduct fiscal policy.... YOU ADVOCATE DOING NO HARM, BUT IS THAT ENOUGH TO STABILIZE THE DEBT AT A REASONABLE LEVEL? Yes, it likely is enough, if we also do what is widely agreed, which is to eventually close the shortfalls in both Social Security and Medicare hospital insurance and not use the savings to pay for other priorities.... 4. ISN’T ACTION ON THE DEFICIT URGENT IN ORDER TO REDUCE THE RISK OF A FISCAL CRISIS? No.... 5. DO YOU THINK ANYTHING ABOUT FISCAL POLICY IS URGENT? Yes. We should be making contingency plans for the next recession...
#noted
