Yglesias

Saving The Economy Reduced The Deficit

CREDIT:

An important point from my colleague Heather Boushey who wants you to realize that far from causing the current budget deficit, the policy responses that put a floor under economic collapse have made the deficit smaller:

zandiblinderdeficit1

The more general point is that a deficit is a ratio, and the denominator—determined by growth—is very important. Austerity policies that boost growth by allowing for steep cuts in interest rates can reduce the deficit. But austerity policies that merely reduce demand and stifle growth won’t get you anywhere.