A letter in the London Times, signed by Ken Rogoff, among others:

in order to be credible, the government’s goal should be to eliminate the structural current budget deficit over the course of a parliament, and there is a compelling case, all else being equal, for the first measures beginning to take effect in the 2010-11 fiscal year.

In response, a letter in the Financial Times appears under the signature of Lord Skidelsky (Keynes’ biographer) and others:

The Treasury has committed itself to more than halving the budget deficit by 2013-14, with most of the consolidation taking place when recovery is firmly established. In urging a faster pace of deficit reduction to reassure the financial markets, the signatories of the Sunday Times letter implicitly accept as binding the views of the same financial markets whose mistakes precipitated the crisis in the first place!

This is an argument about the UK, but the same argument applies in the United States. The Keynesians are certain that deficit spending is contributing much to short-term economic performance, and they are uncertain that it is contributing much to long-term fiscal instability. The Rogoffians are certain that deficit spending is contributing much to long-term fiscal instability, and they are uncertain that it is contributing much to short-term economic performance.

I am to the right of the Rogoffians. That is, the U.S. fiscal stimulus is so poorly designed that I doubt that it is contributing anything positive to short-term economic performance. And, given the outlook for Medicare (stare at the table), we cannot afford to be casual about deficits.

Look, I may be wrong, and the Keynesians could turn out to be right. But they do not seem to me to have thought through how you can pull back from the sorts of heavy deficits that they advocate.

If the fiscal stimulus is meant to be temporary, that is hard to see in the Budget–the spending forecast looks more like a permanently higher plateau. And health care reform, which is financed by gimmicks and by cuts in Medicare that at best should be used to save Medicare and it worst will never take place, is not adding to my confidence in our fiscal path.

Part of me wishes that folks like Brad DeLong and Paul Krugman could be forced to put their money where their mouths are and sell credit default swaps on U.S. government debt. My advice to everyone else would be to take the other side of that trade.