Minority Leader Pelosi Is Making The Wrong Deficit Argument

As best as I can tell, most moderate and farther left economists still think we need some deficit spending: the economy is still too far below capacity, wages are stalled, and unemployment could be lower (while inflation isn’t a concern at this point). You don’t have to be a known MMT/Chartalist sympathizer to think this (though it helps!). So I can’t see this op-ed by Rep. Nancy Pelosi as a good sign:

Why isn’t there a rule requiring lawmakers to account for new expenditures by finding offsetting budget cuts or revenue increases when Congress enacts them? In fact, there is.

In 1982, George Miller, a progressive Democratic Congressman from California, had a simple but transformative idea to cut the deficit and restore fiscal responsibility to Washington, which he called pay as you go, or paygo. Under this rule, when Congress wanted to pass a new law that would increase the deficit, legislators would have to pay for the cost with matching revenue increases or spending cuts….

The Republican refusal to adhere to paygo is not only a problem for our deficit. It undermines the long-overdue passage of broad, bipartisan tax reform that would lower the corporate rate, close special interest loopholes, end costly tax expenditures, and ensure that all Americans are paying their fair share.

To contain and reduce the national debt, we must return to a simple rule called pay as you go. We can restore fairness to the tax code, delivering reforms that support bigger paychecks and better infrastructure for the American people, even as we honor basic fiscal realities.

Yes, we did this at the tail-end of the Clinton administration–and it led to record private sector debt. I’m fine with raising taxes on the wealthy to reduce asset price inflation and prices of inelastic goods (e.g., housing in many metro areas–you can’t have gentrification without a gentry class), but deficit reduction–or neutrality–for its own sake is unwarranted.

This is yet another reason why we can’t have nice things.

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