Debt Capacity Is a Resource To Be Used When Necessary

Live at The Economist:

Q: Are current deficit reduction plans likely to boost growth?

A: No, and debt capacity is a resource to be used in hard times: MY GUESS is that current deficit-reduction plans in Europe are unlikely to boost growth. They appear to do too much in the short term to diminish aggregate demand, and not enough in the long term to assure investors that the long-run financing dilemmas of the social insurance state are being tackled. Thus the deficit-reduction plans are...