Menzie Chin piles on the years long and miles deep criticism of Bush era fiscal policy
the results based on the small-scale regressions suggest that economies with larger current account deficits, rising inflation, and a deteriorating fiscal balance before a crisis experienced significantly larger output losses [from financial crises].
but he also adds the presumably still applicable
[America] needs a combination of policies to reduce the deficit substantially so that its indebtedness to the rest of the world stops rising at some point. These policies include… A concerted effort to reduce the federal budget deficit…
I applaud Chin for still pushing balanced budgets even after his political foes have lost the reigns of power.
I am becoming more convinced that silence from the center on fiscal soundness is a bad policy. Yes, the current administration should be given a chance. Yes, these are the worst of times to curtail spending or more realistically raise taxes. And, yes the loud elements of the opposition are spouting all brand of insanity.
At a minimum, however, the admin has less leverage to push deficit reducing policies when reasonable people are silent about the long run budget imbalance. General statements that “when this is all over we’ll definitely work on the deficit” are not enough.
Ideally I’d like to see long run deficit targets floated. I understand that in the middle of this fight, no one wants to talk about actually cutting entitlements. Of course no one ever wants to talk about tax hikes when political tensions are high. However, what level deficits do they see as generally achievable over a 10, 20, or 30 year horizon?