Point-Counterpoint: When should we start caring about debt?

On the heels of yesterday’s debate in the LA Times, Maya MacGuineas participates in a point-counterpoint today with Dean Baker from Center for Economic and Policy Research, on the topic: When should we start caring about the debt?

Citing projections that our government may borrow close to $10 trillion over the next decade, MacGuineas stated that “Congress and the White House should immediately announce a credible deficit reduction plan that would be phased in gradually.” She noted that deficit reduction in the immediate future would likely be harmful to economic recovery efforts, and could “derail our anemic growth.”

Her take-away message, though, was that most Americans do not currently realize that taxes must go up and spending must go down in order for this country to avoid a “fiscal train wreck.” And the government must also realize, that like the stock-market and housing bubbles we have seen, “the massive government debt bubble cannot continue forever.”

In his counterpoint, Baker gave his position that the actors in the financial markets are to blame for both the stock market and housing bubbles, and that policy should not be based on their perception of what is good for the economy. He argued further that the U.S. has experienced debt of these proportions during WWII, and went on to experience a strong economy in the decades following. He finally clarified what he saw as a misconception that most of the stimulus money has yet to be spent, and thus will provide future boost to the economy. He says of the stimulus spending that “we have already gotten pretty much the full lift from the package…. [it] will remain in place through 2010, but it will be providing no additional boost in demand in future quarters compared to what it has already done.”