Tax Analysts Blog

Beware of Fair Weather Keynesians

Posted on Jan 8, 2010

Liberal analysts are bellowing loudly for continued fiscal stimulus. Among the most prominent are Nobel laureates Paul Krugman and Joseph Stiglitz. And the Economic Policy Institute has just issued a similarly themed briefing paper. All this is necessary counterpoint to Republicans' ridiculous anti-stimulus crusade and their born-again views on the dangers of big deficits.

But quite apart from the merits of Keynesian anti-recession policies, debt is debt. Whether to fight a necessary war or to feed children or to create jobs, debt drains future economic strength. Liberals must be extra careful to remind the debt-biased Congress that the need for stimulus is only an excuse for short-term deficits. If anything, the need for long-term deficit reduction is heightened by forceful stimulus. Unchecked, Keynesian stimulus moves federal debt-to-GDP levels to permanently higher levels. If stimulus advocates want to cool their critics, they need to pair their easy stimulus proposals with tough and credible plans for long-term deficit reduction.

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