GIVEN THAT THE DEBT IS ONLY AN AESTHETIC PROBLEM...:

Prune and Grow (DAVID BROOKS, 6/12/10, NY Times)

Some theorists will tell you that if governments shift their emphasis to deficit cutting, they risk sending the world back into recession. There are some reasons to think this is so, but events tell a more complicated story.

Alberto Alesina of Harvard has surveyed the history of debt reduction. He’s found that, in many cases, large and decisive deficit reduction policies were followed by increases in growth, not recessions. Countries that reduced debt viewed the future with more confidence. The political leaders who ordered the painful cuts were often returned to office. As Alesina put it in a recent paper, “in several episodes, spending cuts adopted to reduce deficits have been associated with economic expansions rather than recessions.”

This was true in Europe and the U.S. in the 1990s, and in many other cases before. In a separate study, Italian economists Francesco Giavazzi and Marco Pagano looked at the way Ireland and Denmark sharply cut debt in the 1980s. Once again, lower deficits led to higher growth.

So the challenge for the U.S. in the years ahead is to consolidate intelligently. That means reducing deficits while at the same time making the welfare state more efficient, boosting innovation in areas like energy, and spending more money on growth-enhancing sectors like infrastructure.

That’s a tough balancing act.

...it certainly makes sense that dealing with it improves people's view of their country, even if it otherwise has no or even a deleterious economic effect.

Posted by Orrin Judd at June 12, 2010 9:00 AM