Simple, In Theory
Ezra Klein argues that "the best way to solve your deficit problems is simple, at least in theory: Increase how fast your economy is growing." Douthat thinks this "argument is correct, but it’s also potentially dangerous ... because it’s a line of thinking that can persuade politicians that their favored stimulative policies — whether tax cuts, spending increases, or some combination thereof — will turn out to be a free lunch ..." He elaborates:
As liberals have enjoyed pointing out, Bush’s first term policies amounted to a kind of right-wing Keynesianism — and as of 2006 or so, the administration could credibly argue that its unfunded tax cuts and spending increases, while budget-busting in the short term, had played some role in pulling the economy up out of its post-Internet-bubble, post-9/11 doldrums. Yes, they’d piled up debt for a few years, but the important thing was that the economy was growing (not that quickly, but what wouldn’t we give for Bush-era growth rates today?), which in turn was gradually bringing the budget back into balance and laying the necessary foundation for future deficit reduction.
I don’t think that argument looks nearly as credible today. Which is why I’m cautiously optimistic that the Cameron government is taking the right course in Britain — and somewhat more pessimistic about America’s capacity to follow suit.
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