The impact of the federal budget deficit on the economy is a source of continuing concern, both among macroeconomists and – even more urgently – among political decision makers. The old Keynesian consensus that budget deficits were generally good for the economy, in the sense of making it...

President Obama has come under increasingly fierce criticism for the size of the federal budget deficit, as both Democratic and Republican politicians loudly proclaim that federal spending should be cut. This article explains why such anti-deficit fervor is misguided and simplistic, and why,...