Real World

Galbraith: The danger posed by the deficit ‘is zero’

James Galbraith is an economist and the Lloyd M. Bentsen Jr. chair in government and business relations at the University of Texas at Austin. He's also a skeptic of the prevailing concern over America's long-term deficit. With many people now comparing America's fiscal condition to Greece, I spoke with Galbraith to get the other side of the argument. An edited transcript of our conversation follows.

EK: You think the danger posed by the long-term deficit is overstated by most economists and economic commentators.

JG: No, I think the danger is zero. It's not overstated. It's completely misstated.

EK: Why?


Read his reasoning here:


Ezra Klein - Galbraith: The danger posed by the deficit ?is zero?

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"The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him."
Leo Tolstoy, 1897

khayos

Well, if anyone tries to hold us to repay our debts, we'll just nuke 'em

PatriotsReign

His explanation is easily explained by the fact that Galbraith is a huge believer of Keynsian economic theory which states that gov't should "spend, spend, spend" during recessions.

For him to say there is any threat would go against the fundamentals of his work and that of his peers.

Ask the same question to a conservative economists. I GUARANTEE you they will not say "there is zero threat"...because the fact is, Europe is proving exactly the opposite of what Galbraith is saying.

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"No one walking this earth knows what is truly righteous"

Real World

I agree with, and understand his point about Greece being different, since it no longer has a sovereign currency to manipulate. His notion that country's with their own currency can run up debts more freely, or safely, is correct. However, the notion that there is "zero" danger, is outright laughable. If that principle were sound, then the US could tell everyone to stay home, or not pay taxes, as the fed could simply print all the money it needs. Furthermore, the interest on the debt is paid annually. Therefore that money has to come from taxpayers. I just found his logic absolutely mind-boggling. If gubmit spending exessive, or unmitigated amounts of cash were without recourse, then why not print money to the point of bailing out anyone and everyone? Am I missing something here?

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"The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him."
Leo Tolstoy, 1897

PatriotsReign

No, nothing at all. But he would NEVER want to dis the current administration AND he actually believes unmitigated spending is the right thing to do!

But then again, keep in mind that Galbraith had no idea we were headed for disaster back in 2006.

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"No one walking this earth knows what is truly righteous"

khayos

His theory completely exempts borrowing from foreign governments. If the debt and the bonds were applied soley to US citizens, I can see a fringe reasonability -- it'd also be total isolationalism.

sdaniels7114

Think of how sweet your life would be if the interest rate on your mortgage was 1%

Think of how sweet your life would be if every time you paid on your BoA Visa card you could turn around and 'tax' BoA for like 30% of that payment.

The government collects money from employed people and gives it to unemployed people and then taxes some of it back from the unemployed.

The government gets 18.4 cents for every gallon of gas you buy and then it and only it decides if its gonna spend the money on road repair.

And in a pinch the government can just whistle up a few billion by turning on the printing presses for a while, of course excessive use of that leads to a bad place, but still getting to print money anytime you want?

I don't agree with this guy who says there are no limits at all, but thinking of the government's finances as just a larger version of a person's doesn't get you anywhere.

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Give a man a gun and he can rob a bank, give a man a bank and he can rob everyone.

Patters

Actually, it's too early to tell, but Europe was struggling royally until it announced a $1 trillion rescue package and the markets started soaring. Thus, at least at this moment it appears that deficits are helpful. Europe was actually for more than a year far more conservative than the U.S., and that did them no good, so I'm not sure what you're talking about.

PatsFanInVa

That's okay Patters. He doesn't know either

PatriotsReign

HUH????

Can you be more specific please Patters?

First, you say Europe was struggling before the rescue package (last week) and then you wrote "and the markets are soaring"? Hello? So, then you believe Europe is now fine & dandy and everything's "back on track"?

Are you serious with this analysis? I'll tell you straight up that it make absolutely no sense whatsoever.

Patters Reasoning/Conclusion: Europe and markets are crashing due to soaring deficits. Massive Bailout approved, markets come back...DEFICITS ARE GOOD.

Care to try again?

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