By Arnold Kling
Jeff Faux and Brad DeLong revisit fiscal history. In particular, they ask whether Democratic President Clinton sold his soul for deficit reduction. Faux writes,
Hopes that the peace dividend from the end of the Cold War would finance major new programs in health care, education, and other areas of public need were dashed. Social investments as a share of the country’s national income actually declined over the Clinton years. Fights over free trade split the party and contributed to the loss of the House of Representatives, from which Democrats have still not recovered. And deregulation led to an orgy of irresponsible speculation and fraud
Brad DeLong differs.
Running surpluses now, giving the country the debt capacity to finance these forthcoming rises in social-insurance expenditures, seemed to us a wise policy. The alternative — to merely stabilize the debt-to-GDP ratio and make no special provision for the generational future — seemed to us likely to create a situation in which a) the elderly programs eat the rest of the social-insurance state alive and b) they then self-destruct.
The entire exchange is interesting.
For Discussion. Jeff Faux asks, “Does anyone believe that more investment in health care and education would have been less productive for the American economy in the 1990s than yet more private investment in financial derivatives or shopping malls increasingly loading up consumers with imported toys and unsustainable debt? “