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More evidence that the facts tend to be liberal these days

March 1, 2013

Labs for Testing Fiscal Policy Positions by Owen Zidar

And Paul Krugman wonders, “Will it make any difference that Ben Bernanke has now joined the ranks of the hippies?”

Earlier this week, Mr. Bernanke delivered testimony that should have made everyone in Washington sit up and take notice.

First of all, he pointed out that the budget picture just isn’t very scary, even over the medium run: “The federal debt held by the public … is projected to remain roughly 75 percent of G.D.P. through much of the current decade.”

He then argued that given the state of the economy, we’re currently spending too little, not too much …

Finally, he suggested that austerity in a depressed economy may well be self-defeating even in purely fiscal terms: “Besides having adverse effects on jobs and incomes, a slower recovery would lead to less actual deficit reduction in the short run for any given set of fiscal actions.”

So the deficit is not a clear and present danger, spending cuts in a depressed economy are a terrible idea and premature austerity doesn’t make sense even in budgetary terms …

Mr. Bernanke is a fine economist, but no more so than, say, Columbia’s Joseph Stiglitz, a Nobel laureate and legendary economic theorist whose vocal criticism of our deficit obsession has nonetheless been ignored. No, the point is that Mr. Bernanke’s apostasy may help undermine the argument from authority — nobody who matters disagrees! — that has made the elite obsession with deficits so hard to dislodge.

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