Who's Afraid of Budget Deficits?
In a provocative article in Foreign Affairs titled “Who’s Afraid of Budget Deficits?” Jason Furman and Lawrence H. Summers argue that we should not worry much about the federal government’s large and growing budget deficits. While they admit that politicians and policymakers “shouldn’t ignore fiscal constraints entirely,” they say that they “should focus on urgent social problems, not deficits.” And throughout the piece, they assume, for every single problem they address, that the solution is more spending. It’s not surprising that they don’t worry much about deficits.
Furman and Summers aren’t just rank and file economists. Furman, an economics professor at Harvard University’s Kennedy School, was the chairman of former President Barack Obama’s Council of Economic Advisers. Summers, who is president emeritus of Harvard, was the Treasury Secretary under former President Clinton and head of the National Economic Council under former President Obama. I know Summers from when we were both economists with President Reagan’s Council of Economic Advisers and I know Furman from his work. These are not, to put it mildly, dumb guys. And if you dismiss them as such, you make a big mistake. It’s important to look at their argument.
I’ve studied their argument, and I find it unpersuasive in two respects: (1) their main case, which is that we shouldn’t worry much about deficits and (2) their subsidiary point, which is that we need at least the amount of government spending we have now and should be ready and willing to increase government spending.
This is from my latest Defining Ideas article, “Who’s Afraid of Budget Deficits? I Am,” February 20, 2019.
That middle paragraph is there because I sometimes get comments on Facebook and elsewhere to the effect that we can ignore these guys because they’re idiots. They’re not. And I had to read their Foreign Affairs piece 4 times before making my own judgment about it.