The political debate in the United States and Europe has focused attention on public financial deficits and how best to resolve them. Tragically, the debate largely ignores the deficits that most endanger our future.
In the United States, as Republican deficit hawks tell the story, “America is broke. We must cut government spending on social programs we cannot afford. And we must lower taxes on Wall Street job creators so they can invest to get the economy growing, create new jobs, increase total tax revenues, and eliminate the deficit.”
Democrats respond, “Yes, we’re pretty broke, but the answer is to raise taxes on Wall Street looters to pay for government spending that primes the economic pump by putting people to work building critical infrastructure and performing essential public services. This puts money in people’s pockets to spend on private sector goods and services and is our best hope to grow the economy.”
Democrats have the better side of the argument, but both sides have it wrong on two key points.
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