The National Review does Economics
"What the senators and media don't get is the basic equation that defines the role of government deficits in the economy: The federal government deficit = non-government savings (of net financial assets). That's fact, not theory, a.k.a. an "accounting identity." Non-government savings include that of both residents of the U.S. and foreigners. If the federal budget deficit of $450 billion about equals the current account deficit, it means that all the net financial assets added by the deficit are being saved by foreigners, who desire to hold all those dollar-denominated U.S. financial assets and are willing to net export to us in order to get them.This data indicates is that the federal deficit is too small for the U.S. domestic sector to save anything! Domestic savings are low because the budget deficit is too low."
I haven't made this up. It's here (via Matt Yglesias).
Let's repeat their argument very slowly. The US domestic sector has no savings because the US government's deficit is too small. Oh my.
posted by Matthew @ 6/25/2004 04:00:00 PM
Comments: 0
