Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Friday, September 29, 2006

Greg Mankiw Puzzles Jason Furman

Max Sawicky gives Jason the keys to MaxSpeak. Jason takes it out for a spin, and admits to being puzzled by Greg Mankiw:

MaxSpeak, You Listen!: NOT SUCH A PRETTY PICTURE
by Jason Furman
: My friend Greg Mankiw says we shouldn't be worried about the current fiscal [deficit] situation, just the looming fiscal challenge. I'm not quite sure what to make of the statement, back in the Clinton administration our argument for running large [current] surpluses and reducing the debt was precisely to prepare for the looming fiscal challenges...

Jason's right. The appropriate stance for fiscal policy right now is not to have--as Mankiw maintains--a debt-to-GDP level equal to some historical average, but to have a low debt-to-GDP ratio in order to be well-positioned for the stresses that the next two generations of population aging and rising medical capabilities place on the federal budget.

It's not rocket science.

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