Deficit Hysteria: A Common Sense Look at America's Rush to Balance the Budget / Edition 1

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The political consensus in the United States today is that the nation avoid deficit spending. But as virtuous and unassailable as that goal sounds, it has fallacies and dangers. In a lucid, nontechnical writing style, Benavie shows that deficits can be either good or bad and explains how to tell the difference. Deficits, or government borrowing, can be beneficial or harmful depending on what the government does with the money. Preventing such borrowing, Benavie points out, would be comparable to preventing one's family from borrowing money to buy a house or to put a child through college.

Deficits can be beneficial to the nation's economic health in three main ways. When the economy slumps, a deficit, which is automatically created, helps to reduce the severity of the recession. When the economy is seriously depressed, boosting the deficit may be the only cure. Finally, deficits to support such investments as basic research, cleaning up toxic waste, and rebuilding inner cities are crucial to the economic health of future generations.

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Editorial Reviews

Benavie (economics, University of North Carolina-Chapel Hill) explains, in a non-technical style, that national budget deficits can be harmful or beneficial, depending on what the government does with money that is borrowed. He shows how deficits help reduce the severity of recession and depression, and how they support such investments as basic research, cleaning up toxic waste, and rebuilding inner cities. Annotation c. by Book News, Inc., Portland, Or.
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Product Details

  • ISBN-13: 9780275963088
  • Publisher: ABC-CLIO, Incorporated
  • Publication date: 9/30/1998
  • Edition description: New Edition
  • Edition number: 1
  • Pages: 166
  • Lexile: 1380L (what's this?)
  • Product dimensions: 6.14 (w) x 9.21 (h) x 0.44 (d)

Meet the Author

ARTHUR BENAVIE is Professor of Economics at the University of North Carolina at Chapel Hill.

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Table of Contents

Introduction 1
1 The Deficit: A Symbol of Evil in American Politics 15
1 Jefferson and Jackson: Balancing the Budget to Keep Government Small 16
2 The Dominant Republicans: Balancing the Budget to Expand the Government 17
3 The Great Depression Generates Revolutionary Thoughts about the Deficit 17
4 Reagan and Beyond: The Deficit Resumes Its Evil Image 20
2 Jobs, Inflation, and the Deficit 25
1 Creating Jobs 25
2 Jobs versus Inflation 27
3 What's So Bad about Inflation? 29
4 How Does the Government Regulate Total Spending? 30
5 Monetary versus Fiscal Policy 32
6 Structural versus Automatic Deficits 33
7 Deficits in a Recession 37
8 Deficits and Interest Rates at High Employment 38
9 Deficit Aversion and Jobs 41
10 Mismeasuring the Deficit 46
3 The Deficit and Our Future Standard of Living 57
1 Productivity 57
2 Deficit Hawks 59
3 Public Investment Hawks 63
4 Public Investment and the Deficit 66
5 Public Investment: Pork or Progress? 70
6 The Impact of Deficit Phobia 71
4 The Rich, the Poor, and the Deficit 79
1 Our Growing Income Inequality 79
2 Deficit Hawks and the Rich versus the Poor 80
3 Deficit Reduction, Recessions, and Poverty 83
4 Helping the Poor - and the Not So Poor 83
5 The Baby Boomers and the Future Deficit 87
1 A Projected Nightmare 87
2 Future Deficit and Tax Scenarios 88
3 Remedies 89
6 Social Security, Medicare, and the Deficit 95
1 Social Security and Medicare: Are They Going Bankrupt? 95
2 Trust Fund Bankruptcy Is an Illusion 97
3 The Economic Impact of a Trust Fund Surplus 99
4 Reforming Social Security 101
7 How Do European Countries Do It? 105
1 Zero Deficits Are Not the Goal 105
2 Deficits and the Debt-GDP Ratio 107
3 How Big Can the Public Debt Be? 108
4 A Danger of Deficit Targets 108
8 Goal '95: A Balanced Budget by 2002 113
1 The Republicans Embrace a Balanced Budget 113
2 President Clinton Succumbs 115
3 Proposed Cuts to Balance the Budget 115
4 Clinton's Economists on the Balanced Budget 117
5 An Argument for a Balanced Budget 117
6 Balance the Budget? Yes, the Operating Budget! 119
9 Deficit Myths: What's True, What's False? 123
Myth 1 We Must Pay Off the Public Debt 124
Myth 2 Deficits Can Bankrupt Our Government 124
Myth 3 Deficits Cause Inflation 125
Myth 4 Deficits Increase Interest Rates 125
Myth 5 Interest on the Public Debt Will Impoverish Future Generations 126
Myth 6 Budget Deficits Create Trade Deficits 126
Myth 7 Deficits Cause Capital Flight 127
Myth 8 Deficits Increase the Tax Burden of Future Generations 128
Myth 9 The Public Debt Will Reduce Our Children's Standard of Living 128
Myth 10 Deficits Crowd Out Private Investment 129
Myth 11 Interest on the Public Debt Crowds Out Other Government Spending 129
Myth 12 The Solution Is a Balanced Budget Amendment to the Constitution 131
10 Questions and Answers 135
Selected Bibliography 141
Index 143
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