Two things to keep in mind in light of today’s news: One is that the CBO keeps ringing the alarm bells — even today, in the course of trimming, a little bit, its deficit estimate for 2010: “Continued large deficits and the resulting increases in federal debt over time would reduce long-term economic growth.”
Which is to say, Paul Krugman & Co. aside, spending and deficits can be a brake on growth as well as an accelerator of it. Today’s stimulus is tomorrow’s burden.
The second thing: Take another look at Greece. Greece is falling apart. Krugman & Co. will tell you that’s the result of too much austerity and not enough stimulus spending. But there is another lesson to take away from Greece: When you let the public sector get that big — so big it dominates the economy — then it is nearly impossible to cut back public-sector spending without creating an economic crisis. Our stimulus programs are geared, in no small part, toward achieving permanent expansions of the public sector. Which is to say, we’re stimulating ourselves into a Greek corner. Best to reverse course now before we’re locked in good and tight.