Question: Is it realistic for the president to cut the deficit in half in four years, even while spending on the war [in Iraq] and moving [troops] to Afghanistan?
Paul Solman: The skepticism seems clear and well-taken. The most important factor in cutting the deficit will be future economic growth, from which government revenues derive. And if the president can revive the economy, not only will government revenues grow, but government expenditures will shrink, since the stimulus package will be shorter-term and bailouts will no longer be needed.
That’s why, for so many people who think deeply about the economy these days, the emphasis is not on the annual deficit, but on enough government spending to take up the slack being caused by the lack of consumer spending and business investment.