'Kelton has succeeded in instigating a round of heretical questioning, essential for a post-Covid-19 world, where the pantheon of economic gods will have to be reconfigured' Guardian'
Kelton dispels six key myths that have shaped the conventional understanding of deficits as inherently bad, instead arguing that deficits can strengthen economies and lead to faster growth. This book is a triumph, writes Professor Hans G. Despain, shifting normative grounds of government spending away from the false and unproductive idea that deficits are irresponsible and ruinous towards the productive political activity of deciding which spending programmes should be prioritised.
She demonstrates that concerns about public debt overhang are ill-founded. Kelton argues that government spending properly targeted and government debt need not be problematic. Indeed, she argues that public deficits can be very healthy for an economy. Kelton contends bigger deficits can strengthen an economy and lead to faster growth. However, the conventional wisdom regarding deficits is that they impede economic growth and weaken the economy. Conventional wisdom warns against using ‘deficits to solve problems [when] we continue to think of the deficit itself as a problem’
Kelton shatters both the deficit hawk and deficit dove view of public debt. The view of public deficits as overspending is a myth, because a government deficit creates a surplus for someone else.
To begin with, Kelton takes on the myth that governments should be fiscally run like a household. This is false because the government is nothing close to a household or private business.
Second, to view public deficits as overspending is a myth, because a government deficit creates a surplus for someone else.
The third myth is that deficits burden the next generation . It is false that deficits make the next generation poorer, and it is also false that reducing deficits will make the next generation richer. Rather, the historical record shows high national debt creates wealth and increases the income of the next generation.
The fourth myth is that deficits crowd out private business. Kelton argues that deficit spending properly targeted stimulates, or ‘crowds-in’, private business growth.
The fifth myth is that deficits make us dependent on overseas nations. Instead trade deficits should be understood as a ‘stuff’ surplus: e.g. China gets US Treasury bonds, and the US gets Apple computers and other ‘stuff’.
The sixth myth is that Social Security and public health programmes are propelling us toward a fiscal crisis; here, Kelton shows the governments can always meet demographic and healthcare fiscal obligations.
ISBN 9781529352566