USA Debt Crisis: Is There Any Truth?

Global Economic Intersection article of the week

This morning the NY Times covered the division within the economic community over the way out of the USA's overspending / balance budgeting.

"Reasonable people can sit down and, apart from any political or policy motivations, come up with different answers," said Robert S. Chirinko, a finance professor at the University of Illinois at Chicago who studies corporate taxation.

No doubt this is true. The economic community's solutions range from more deficit spending stimulus (on the theory that boosting the economy will boost tax revenues to balance the budget) to out-and-out cutting spending (on the theory that re-balancing, while causing short-term pain, will spur long-term growth). Both extremes have some basis in main stream economic studies.

The economic objective is to find the best path through this crisis causing the least disruption and unintended consequences. These headline economists are macroeconomists who specialize in studying and modeling the economy as a whole - studying the forest, not the individual trees.

The unanswered question in macroeconomics is whether the past economic responses to economic management will work in the current situation. There are many forces which effect an economy - and no two situations are the same.

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