So, yes deficits matter as they are part of the equation. But they don’t need to be eliminated just because a balanced budget sounds right, which is the typical argument.
Agreed. Again, let me point out how I entered this discussion: responding to a “deficits don’t matter” argument.
So, we’re on the same page. Politically, deficits (measured not in gross dollars, but as a % of GDP) as large as ours is currently need to be put on a trajectory to modest levels. Reasonable people can argue about the definition of “modest”.
If we look at the surplus from the 90s, the only reason that did not have immediate severe repercussions was due to massive credit expansion in the private sector.
Well, the budget was balanced on the back of what turned out to be an unsustainable bubble economy. The dot-com expansion generated a revenue bonanza to Treasury; Clinton never had as an objective to come to balance. What his economic plan would have done, sans the tech bubble, was bring the deficit to his definition of “modest”.
Even with high debt/GDP ratio we are not prospering due to high levels of financial inequality. The excess dollars are padding the fortunes at the top and not resulting in lower unemployment and economic activity.
Sign of the times. Workers without the necessary, high value skills bring less and less value to the economy due to automation and other factors.