In a follow up post on his blog
....
First of all, I wasn’t blaming Bush for future deficits: I was blaming him for debt — debt that was incurred on Bush’s watch. If you don’t think that’s fair, let me echo Barney Frank and ask on what planet you spend most of your time.
Second, now that you mention it, surely much of the current deficit can be attributed to the previous administration’s policies. I mean, we’re all of seven months into the Obama administration; nearly all federal spending, all federal taxes, are dictated by laws that were in effect before Obama took office. Both Bush and before him Reagan spent years blaming all their problems on the failures of their predecessors; I think we can give Obama a few months.
Finally, about the stimulative effects of deficits: as I’ve explained a number of times, it’s the zero bound that makes all the difference. There was a case for temporary fiscal stimulus in 2002, when the economy was close to the zero bound, but most of the Bush tax cuts took effect during a period in which interest rates were well above zero, in fact during which the Fed was raising rates to keep the economy from overheating. This means that fiscal expansion wasn’t needed. Now, by contrast, we’re hard up against zero and have run out of monetary ammunition.
I don’t know if this helps, or whether I’m just (Barney Frank) arguing with a dining room table (/Barney Frank). But anyway, that’s the underlying logic.
