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Wrong Deficit Jobs, Deficits, and the Misguided Squabble over the Debt Ceiling

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  • Tim Koechlin
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    The US economy and the people it ought to serve are suffering first and foremost from a jobs deficit. The focus by Congress and the White House on the debt ceiling and the national debt does nothing to address this employment crisis. To the contrary, it is sure to make things worse. Insufficient demand explains the jobs deficit; in a stagnant economy, slashing spending is a terrible idea. An intelligent response to this crisis would include larger budget deficits in the short term. The specific terms of the recent budget deal are very troubling. But more importantly, the entire enterprise is misguided. Much of the debate over the budget deficit reflects a thinly veiled attempt by Republicans to cut taxes for the rich and gut social spending. It also reflects a misunderstanding of the meaning and consequences of budget deficits. Wise deficit spending today can in fact be a gift to future generations, by providing them with a more prosperous and productive economy.

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    Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp264.

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    Date of creation: 2011
    Handle: RePEc:uma:periwp:wp264
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