PhotoRepublicans preached fiscal austerity when the economy needed stimulus, and have turned to fiscal profligacy now that it doesn’t. But how bad a thing is this fiscal profligacy? It’s not good – it means higher debt, which will in turn reduce the “fiscal space” for responding to the next crisis. The cases aren’t symmetric – this deficit will do much less good than austerity did harm. Remember, the direct effect of fiscal policy is to change overall spending in the economy: a fiscal expansion means more spending, a fiscal contraction means less spending.

Source: New York Times February 09, 2018 18:11 UTC