Ah. I missed it. Auerbach and Gale did their model, who are respected sources. Their model is real, though I think they use some rather politicized data sources--it's an awful situation when the Social Security and Medicare actuaries slant their data but, after all, they are subject to political pressure.
However, I think the bottom line on this comes from Auerbach and Gale's own papers:
The current U.S. fiscal deficit is enormous, but its enormity is temporary--or at least is expected to be. The real concerns lie in the ten-year projection and long-term outlook. The medium-term and long-term budget shortfalls will create growing burdens on the economy.
However, if we don't address employment (and through employment, aggregate demand) in the short term, the medium and long-term problems become much worse, because tax revenues will fall and transfer payments will rise. I fear we may end up with the worst of both worlds: harsh austerity in the short term, and medium and long-term debt.
Why we are talking about balancing the budget in the short term when the short-term issue so clearly is jobs is a source of wonder and horror to most economists I respect.
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Date: 2010-11-18 07:20 am (UTC)However, I think the bottom line on this comes from Auerbach and Gale's own papers: However, if we don't address employment (and through employment, aggregate demand) in the short term, the medium and long-term problems become much worse, because tax revenues will fall and transfer payments will rise. I fear we may end up with the worst of both worlds: harsh austerity in the short term, and medium and long-term debt.
Why we are talking about balancing the budget in the short term when the short-term issue so clearly is jobs is a source of wonder and horror to most economists I respect.