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.