Deficit/National Debt

This term evokes widely contrasting emotional responses across the political spectrum. On one hand, conservative and libertarian voices see an ever-growing national debt from annual deficit spending (where the government intentionally spends more money than it takes in) as ultimately leading to a very painful fiscal crisis. Their concern is that the government will not be able to fulfill its financial obligations without either extremely high tax increases or inflation, both of which could damage the economy leading to a reduction in revenue, thereby exacerbating the crisis. If the government is not able to meet its obligations, the result may be significant social strife, including scapegoating, the rise of extreme political parties, and violence. Unlike Greece, no nation can bail out the US. Thus some on the right see the looming US debt crisis in almost apocalyptic terms.

Progressive economists, such as Paul Krugman, tend to regard these right-wing concerns as unjustified hysteria. On the left there is the belief that the US can (and should) raise taxes to prevent a debt crisis. There is also significantly more comfort with inflation on the left. It is often seen as a benign Keynesian policy tool that happens to redistribute wealth from lenders (who tend to be wealthier) to borrowers (who tend to be poorer).

Meanwhile both sides blame the other side for not reducing the debt. The left wants to raise taxes and reduce military spending; the right wants to decrease spending and keep inflation in check. Politicians on both sides have claimed that economic growth from their preferred policies will increase tax revenues sufficiently to reduce the deficit.