In “Preventing Another Lost Decade: Why Large Federal Deficits Should Be Welcomed, Not Feared, in Today’s Economy,” economist J.W. Mason explains that our economy’s central problem is weak demand and that high-price public initiatives are necessary to reignite it. He draws on lessons from the Great Recession to show how inadequate government spending during a crisis has lasting harmful effects on the economy. The macroeconomic benefits of robust government spending, on the other hand, are clear: It will boost demand, crowd in private investment, and reduce inequality, all of which our economy desperately needs right now.
Building the case against common critiques of government borrowing, he argues that—given current economic conditions—concerns of runaway debt, high inflation, high interest rates, and crowding out of private investment are not supported.
As Mason explains, large deficits are an important part of the solution to our current crisis; they’re necessary not only to prevent a collapse in business activity and prolonged joblessness now but, in the longer term, to create a healthier and more equitable economy—one that is better able to address the major challenges of our time.