Posted by WARREN MOSLER on May 22nd, 2009
by Aaron Task
With the federal budget deficits expected to exceed $1.8 trillion this fiscal year and borrowing expected to top $9.3 trillion over the next decade, it’s no wonder many policymakers, politicians, economists and everyday Americans fear the worst.
But rising federal budget deficits are “in every way a good thing,” according to University of Texas professor James Galbraith.
Higher budget deficits are a natural result of declining tax revenues and rising unemployment and serve as a “great stabilizer” to the consumer and the economy as a whole, he argues — as you’d expect from the son of famed Keynesian economist John Kenneth Galbraith.
The government’s bailout of the banks was an “unproductive use of Federal borrowing,” but Galbraith is otherwise fully supportive of the administration’s borrow-and-spend efforts so far.
Furthermore, he believes those calling for the government to reverse course soon are being “terribly imprudent,” noting it took more than 20 years for the private sector to fully recover after the 1929 crash.