Do Deficits Matter?

Shaviro notes the problem at the outset: "Few topics in American politics are more discussed and less understood than the federal budget deficit" (1). In spite of all the talk, no one has written a serious and comprehensive study of the economic and political significance of the deficit, which Shaviro proposes to correct with this book. The first subject he considers is the reason why budget deficits are seen as important, and to address this, he considers the rationale behind a personal decision to borrow money, with the intention of elaborating form this to the wider question of government borrowing. He considers what it is that the borrower wants and receives--not just money, but certain implicit and psychic returns as well. The decision

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tter how it was financed" (63). Keynes saw the debt as creating an illusion of greater taxpayer wealth, which in turn encouraged greater consumer spending during recessions: People really would be better off when consumer spending increased. Moreover, short of full employment, the debt-finance government expenditure would in effect be free, since it would replace the lost output rather than crowd out private expenditure (63). The modern budget deficit debate is given considerable attention, and Shaviro draws a number of conclusions from the way this debate has been formed and conducted. On the macroeconomic level, the debate has returned to issues of generational questions and concerns over the size of government. Shaviro finds a more innovative change in the way the debate has responded to changes in the federal government since the 1930s in terms of its size and scope of operations, and this "involves how one should measure the effects of fiscal policy" (144). After reviewing the debate, Shaviro comes to a number of conclusions which guide him in developing a view of the deficit and its meaning. First, he notes that the budget deficit as an economic measure is deeply flawed because it ignores economic accrual, gives u
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Approximate Word count = 1749
Approximate Pages = 7 (250 words per page)