This one. Brad DeLong didn't, so I'll outsource that job to him.
In Penner's defense he has some reasonable points about the debt-to-GDP ratio and future crises. He is also right that some on the left are dumbing the question down. But I would say (1.) fewer than on the right, (2.) that's not a big problem with the CBPP, and (3.) that's not a problem with DeLong. Penner, I think, has a lot of legitimate thinking on long-term problems that he is too quick to pull too far into the short-term.
UPDATE: Oh, and the point about Greece was completely gratuitous. He said that at the talk I shared the other day too. I should have raised my hand, acknowledged the potential risk of high debt levels, and asked him to lay out why he thinks us ending up like Greece is more likely than us ending up like Japan.
Shoulda, woulda, coulda...
That reducing the debt from 70% to 69% of GDP over the next decade--at a cost of between 2-10 percentage point-years of lost output--is going to pay off in lowering the severity of future financial crises by a greater amount?
ReplyDeleteThat doesn't seem to me like legitimate thinking on long-term problems...
Brad DeLong
Presumably at some point in the future there will be an opportunity to cut the debt-to-GDP ratio to ensure we're in a good position that Penner is referencing. And there are long-term misalignment that would threaten that and are worth talking about. But to get there you don't have to sacrifice growth now. You can do the long term in the long term, when it does not have those costs that you point out.
DeleteStrictly speaking, in that article you linked to, all we know for sure is that Penner thinks "the left's" goal of 70 percent debt/GDP by 2022 is too modest, right? Are we sure he wants to cut government spending next Tuesday?
ReplyDelete