NOTHING is more untrue than the claim of key economic departments that reductions in the budget deficit and the national debt are good for the economy. The Senate and Congress argue the same way, as well as the rating agencies and multilateral institutions. These claims reveal bad economics. Those who espouse such seemingly correct objectives do not appear to understand the operational reality of government finances, especially that running a fiscal deficit is not a sin, and the role of national debt for monetary policy. Our managers treat the economy like accountants in a firm or a family, where recurring expenditures above revenues is indeed a problem.
Unfortunately, the private sector has come to support such views because its members believe that lowering the fiscal deficit and national debt will benefit them. The reality is that both benefit the private sector.