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The ongoing stimulus/austerity/debt chatter is tired and cliche written, so we appreciate the latest contribution from economist Tyler Cowen on the deficit and what it actually means.Here’s the nut of what what he has to say: Tt’s not about nominal numbers. There’s nothing special about a 90% debt-to-GDP ratio that will suddenly cause the system to collapse. What matters are the underlying factors causing sky-high deficits.
Among the factors: Political dysfunction, lack of a strong will, etc.
And healthcare. Costs continue to surge, in large part because the system is so screwed up. Rather than thinking that sky-high costs themselves are to be attacked, the roots of the market failure must be addressed.
Sadly, most public economists in the debate focus a lot on the big picture, the nominal descriptors, and a view from the top down. But this misses the point: what matters are the micro factors that cause the system to get screwed up in the first place, and very few folks in the debate are spending much time on that.