Making debt and deficit reduction our nation’s top priority while the economy is still recovering from the Great Recession is a “completely misguided” strategy for growth, University of Michigan economist Betsey Stevenson said Wednesday. Instead of pursuing deficit reduction, policymakers should be taking advantage of historically low borrowing costs to make investments into strategic investments into education, infrastructure, and other areas, Stevenson told ThinkProgress:
STEVENSON: Pursuing deficit reduction given the current economic climate is completely misguided. We need to be thinking about investing in the future of the country. If we borrow today, if we borrow today and we invest that money wisely, it’s going to be cheap to pay it in the future because the economy’s going to grow and we’re all going to be earning more. [...]
We need to be saying that there are costs that come with this. It’s not a free lunch to cut the debt. It’s certainly not a free lunch to cut the debt at a time when we have such high unemployment and we know that there’s the potential for us to be in a situation where these workers are never able to get integrated back into our economy. That has big, permanent, long-lasting effects on our productivity, on our overall economy, and if we could spend money now to prevent that from happening, that money will be well-spent. I think there are programs, and I outlined them when I was talking, the President has proposed getting teachers back into the classroom. Why would be reducing spending on education at a time when we need it more than ever? Why would we be cutting important community service positions like firefighters and policemen at a time where, you know, we need those services and people need those jobs?
Treasury Secretary Tim Geithner echoed those thoughts in an interview with Bloomberg this week, saying low borrowing costs should spur government investment into the economy. “It’s sensible for us to take advantage of this moment to do things that will make the economy stronger,” Geithner said.
Meanwhile, Republicans have led the deficit reduction push in Congress, where they have proposed massive spending cuts that would draw most of their savings from programs that benefit the middle class.
Stevenson was even more critical of the focus on spending cuts while speaking on a panel at the Center for American Progress’ conference on the middle class and American economy. “This idea that we can cut and cut and cut and have a government that can support a modern economy doesn’t make sense,” she said, adding that government “should spend during recessions. That’s why you do things like the (stimulus). It works.”