Economists See No Urgency in Deficit Reduction

Budget deficit hawks have spent much of 2016 bemoaning the fact voters appear unconcerned by federal deficits and debt and politicians have been able to avoid talking about it. But there's another group that doesn't want immediate action on the deficit either: economists.

In its twice-a-year policy survey of its members, the National Association of Business Economists found only 14 percent of the 414 economists polled wanted to see reducing the deficit and the debt as the objective of fiscal policy. The survey was released Aug. 22.

Paul Krugman


That was ahead of stimulating more economic growth as quickly as possible, which garnered the support of 12 percent of the NABE members surveyed, and using fiscal policy to address income inequality, which saw support from 6 percent of those polled.

But far and away, with 66 percent support, the most popular response was "enacting structural policies to stimulate more robust economic growth in the medium-to-long term," which is wonkspeak for "make some big tax or spending changes but don't have them take effect right away."

Even there, though, there was disagreement among economists: Fifty percent said they supported closing tax loopholes to raise revenue, while 35 percent wanted to restrain spending. Only 11 percent said a simple boost in tax rates to get more revenue was their preferred course.

The current low interest rate environment, and growing belief rates will remain lower over the long run than they have been historically, has eased concerns about the deficit among many economists. Some, such as Nobel-winner Paul Krugman, even argue for more deficit-financed spending to boost growth. Others note the danger of a heavier debt load if interest rates spike down the road.

The Congressional Budget Office has said higher-than-forecast interest rates would add more than 40 basis points to the debt as a percentage of GDP in its long-term simulations.