This paper demonstrates that the current hysteria over deficits in the US is unjustified. Markets for even long term US government debt are strong.
· Claims that economic growth falls off at anywhere near current US levels of debt to GDP are untrue. Neither is it the case that cutting deficits magically stimulates the economy. And stories about 90% limits are untrue.
· The CBO August 2010 budget revision implies that the U.S. is less endangered than most analysts claim.
· Private oligopolies in health and defense spending, along with the possibility of another banking crisis, are the real threats to the deficit, not entitlements.
· Social Security is in essentially no danger for decades and does not require any fix.
· It would be easy to stimulate the economy with a program of public investment that would substantially reduce public debts in the long run.
Read Working Paper 7: "A World Upside Down? Deficit Fantasies in the Great Recession"