Deficit Spending Does Not “Save” Economies

Kurt Bouwhuis, Mackinac Center Intern

Here is a great letter to the editor by Don Boudreaux concerning deficit spending.

24 August 2009

Editor, Washington Post
1150 15th St., NW
Washington, DC 20071

Dear Editor:

E.J. Dionne alleges that Uncle Sam’s massive deficit spending during the past year helped save the economy from a “cataclysmic” failure (“Why We Didn’t Crash,” August 24).  This claim is fishy.

If economies are buoyed by massive deficit spending, then it’s difficult to explain why the economy tanked in the first place.  When George W. Bush became President in 2001, Uncle Sam’s budget was in surplus by $128 billion.  Starting in 2002, however, and continuing until today, Uncle Sam has been on a budget-busting spending spree.  From 2002 through 2007 (the year before the economy started to crash), Washington’s cumulative budget deficits amounted to $1.68 TRILLION dollars.  (The deficit for 2008 added another $458.6 billion to this fat figure.)  Moreover, total spending by the federal government was, in inflation-adjusted dollars, 25 percent higher in 2007 than it was in 2001.

One can always argue that these deficits were ill-timed or too small.  But an argument at least equally compelling is that deficit spending in fact does not keep economies humming along smoothly.

Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030


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