But it collides with the 1960s' legacy. Running routine deficits meant that the federal debt (all past annual deficits) was already high before the crisis: 41 percent of the economy, or gross domestic product (GDP), in 2008. Huge deficits have now raised that to about 70 percent of GDP; Krugman-like proposals would increase debt further. It would approach the 90 percent of GDP that economists Kenneth Rogoff of Harvard and Carmen Reinhart of the Peterson Institute have found is associated with higher interest rates and slower economic growth.
Since 1800, major countries have experienced 26 episodes when government debt has reached 90 percent of GDP for at least five years, they find in a study done with Vincent Reinhart of Morgan Stanley. Periods of slower economic growth typically lasted two decades.
Now, imagine that the country had adhered to its balanced-budget tradition before the crisis. Some deficits would have remained, but the cumulative debt would have been much lower: plausibly between 10 percent and 20 percent of GDP. There would have been more room for expansion. Balancing the budget might even have forced Congress to face the costs of an aging society.
The blunder of the '60s has had a long afterlife. Economic policy is trapped between weak demand and the fears of too much debt. Yesterday's Keynesians undercut today's Keynesians. "In the long run we are all dead," Keynes said. But others are alive — and suffer from bad decisions made decades ago.
Robert J. Samuelson is a Washington Post columnist.
- Richard Davis: Can a Mormon not be a liberal?
- Jay Evensen: We're becoming a nation that...
- 33 Mark Twain quotes that prove he was an...
- In our opinion: Utah gun law that canceled...
- In our opinion: Dropouts face high risk of...
- Anne Loeser: Reverse trends about breast cancer
- Letter: The Romneys' new center
- My view: New treatment can cure Hepatitis C
- In our opinion: Utah gun law that... 150
- Richard Davis: Can a Mormon not be a... 71
- Jay Evensen: We're becoming a nation... 39
- Letter: What is ‘common good?’ 31
- Robert Bennett: Former Defense... 29
- Letter: Lessons for Greg Bell 28
- Letter: Uninformed candidate 27
- In our opinion: School reformers should... 26