Question:
Economists generally agree that high budget deficits today will reduce the growth rate of the economy in the future. Why? Do the reasons for the high budget deficit matter? In other words, does it matter whether the deficit is caused by lower taxes, increased defense spending, more job-training programs, and so on? In your analysis, what role do fiscal and monetary policies have in causing higher or lower budget deficits? How do budget deficits affect overall long-term economic growth and the debt that the U.S. has to contend with?