Monday, 13 September 2010

A genuinely illuminating discussion about deficits and stimulus

American macroeconomist Brad DeLong (Professor of Economics, Berkeley, ex-Clinton administration) on US political phone-in show the Washington Journal. For those interested in our current economic situation, it’s gripping viewing. Honest guv! Yes, Prof DeLong speaks exclusively about the US but his arguments have much wider relevance.

Five minutes in he outlines the two valid reasons why it might be appropriate to worry about large Government deficits: inflation and the ‘crowding out’ of productive private investment. Brad explains why both are so irrelevant in the current context that they might as ‘well be in the gamma quadrant’. Quite. He goes onto explain, in compelling detail, why the Obama administration’s response to the Great Recession has been inadequate.

Perusing the web I’ve seen references to similar, if not quite so lengthy, US TV pieces involving Paul Krugman, Yves Smith and others. And yet I can’t recall a single instance since the start of the credit crunch when British TV has afforded an economist (of any political persuasion) the opportunity to develop a coherent overview of the crisis and the government’s response and then take questions. The narrow and highly political coverage provides cover of sorts for an administration relying on a credulous public to swallow its line on the deficit.

Disgraceful really.

Stephen Boyd

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