"FIRST: Deficit and debt numbers are meaningless on their own. They have to be viewed as a percent of the national economy.
That ratio is critical. As long as the yearly deficit continues to drop as a percent of the national economy, as it's been doing for several years now, we can more easily pay what we owe. [alea's note - the US runs a deficit and yet the debt as a percentage of GDP declines. Why? Because the economy is growing relatively faster than the deficit]
SECOND: America needs to run larger deficits when lots of people are unemployed or underemployed -- as they still are today, when millions remain too discouraged to look for jobs and millions more are in part-time jobs and need full-time work.
As we've known for years -- in every economic downturn and in every struggling recovery - more government spending helps create jobs -- teachers, fire fighters, police officers, social workers, people to rebuild roads and bridges and parks. And the people in these jobs create far more jobs when they spend their paychecks.
This kind of spending thereby grows the economy -- thereby increasing tax revenues and allowing the deficit to shrink in proportion.
Doing the opposite -- cutting back spending when a lot of people are still out of work -- as Congress has done with the sequester, as much of Europe has done -- causes economies to slow or even shrink, which makes the deficit larger in proportion [alea's note - he is talking about the fiscal multiplier]....
THIRD AND FINALLY: Deficit spending on investments like education and infrastructure is different than other forms of spending, because this spending builds productivity and future economic growth. [alea's note - building infrastructure is less like an expense and more like creating an asset]"
http://www.huffingtonpost.com/robert-reich/austerity-101-the-three-r_b_8305940.html
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