Do Deficits Necessarily Indicate or Induce Economic Weakness?

Intuition – or maybe our political culture – tells us that deficits are bad. Two types of deficits, the federal budget deficit and the trade deficit, draw scorn from many Americans and provide us with ripe topics for Discourse discussions.

In this Discourse, we discuss both deficit types and review reasons for dissatisfaction with them. Just as certainly, we recall historic ideas and glimpse into modern, technical realities that cast doubt on our intuitive or cultural aversion; some of the material we review might even allow us to accept that the deficits can indicate or even induce economic strength. The essay also strives to illuminate understanding of the interrelationship of the two deficits, sometimes referred to as the “twin deficits” when they occur contemporaneously. All the while we still recognize that deficits can be problematic, deficits can indicate and induce economic weakness.

Warning: The essay that we will read to…