Please note: Romer writes about "dealing with the LONG-RUN budget deficit". The short-run deficit MUST be high right now.
In the current policy debate, debt is often invoked as a reason to dismiss calls for expansionary fiscal policy as a response to unemployment; you can’t solve a problem created by debt by running up even more debt.
It assumes, implicitly, that debt is debt -- that it doesn't matter who owes the money. Yet that can't be right; if it were, debt wouldn't be a problem in the first place. After all, to a first approximation debt is money we owe to ourselves. The overall level of debt makes no difference to aggregate net worth -- one person's liability is another person's asset.
The level of debt matters only because the distribution of that debt matters. Borrowing by some actors now can help cure problems created by excess borrowing by other actors in the past. Deficit-financed government spending can allow the economy to avoid unemployment and deflation while highly indebted private-sector agents repair their balance sheets, and the government can pay down its debts once the deleveraging crisis is past.
In the current policy debate, debt is often invoked as a reason to dismiss calls for expansionary fiscal policy as a response to unemployment; you can’t solve a problem created by debt by running up even more debt.
It assumes, implicitly, that debt is debt -- that it doesn't matter who owes the money. Yet that can't be right; if it were, debt wouldn't be a problem in the first place. After all, to a first approximation debt is money we owe to ourselves. The overall level of debt makes no difference to aggregate net worth -- one person's liability is another person's asset.
The level of debt matters only because the distribution of that debt matters. Borrowing by some actors now can help cure problems created by excess borrowing by other actors in the past. Deficit-financed government spending can allow the economy to avoid unemployment and deflation while highly indebted private-sector agents repair their balance sheets, and the government can pay down its debts once the deleveraging crisis is past.