As an economist and observer of economic policy for the past 50 years, I had trouble recalling the same economic history as that laid out by Karl Smith in his article in The Sentinel (“Build now and worry about paying for it later,” Opinion, May 3).
As an example, he asserts that “For decades economists have decried budget deficits as a drag on the economy and a burden on future generations.” While it is true that this was the claim of conservative economists, and it was certainly the standard of the Republican Party in the past, it was clearly not the view of the Keynesian mainstream which drove economic policy.
To them (and I was included), the economy was viewed as going through a natural cycle of highs and lows, and government spending and the tax structure had an important role to play in mitigating the extremes of the highs and lows. When the economy was in decline and tax revenues were falling, government spending served to minimize these declines. Deficits were a normal part of this process, with the excess of government spending over tax revenues serving as a “boost” to counteract the decline in consumer spending as personal income fell.
On the other hand, when the economy expanded, the resulting increase in tax revenues, greater than the increase in government spending because of a progressive income tax, eventually would lead to a budget surplus. This budget surplus, and its control of spending, would keep inflation in check (i.e., keep the economy from overheating).
The most recent example of this was during the Clinton expansion of the 1990s, when surpluses were noted for each of the four years from 1998 to 2001. This was exactly as predicted by Keynesian economics for the latter years of an expansion. The potential surplus from the current Obama expansion, which had reduced the deficit by almost two thirds between 2009 and 2015, will not happen due to the extreme tax cut of the Trump administration. It’s like starting over again with large deficits to try and eventually produce a surplus.
Sorry I never got to the issue of paying for the needed infrastructure fixes. I guess the easiest source of the funds would be to simply cancel the tax cuts for people on the high end of income (say, above $1 million) and also cancel the tax cuts for corporations.
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