There are three ways to look at budget deficits: as a hawk, a dove, or an owl.
A deficit hawk insists that there must be spending cuts and revenue increases to halt the growing deficit. Most Republicans and many conservative Democrats in Congress are deficit hawks—and so are European authorities who are imposing drastic austerity measures on Greece to get its fiscal house in order. A deficit dove, on the other hand, believes that concerns about short-term deficits are less important and attempts to shrink them should not override temporary efforts to foster economic growth. President Obama is a deficit dove. He believes that long-term deficits pose a problem for our country, but believes it is more important to focus on reviving the economy through short-term spending increases and tax cuts.
Then there is the deficit owl. Owls believe that concerns over budget deficits are misplaced and don’t think we ever need to balance the budget. They argue that any government spending that leads to deficits boosts demand and therefore economic growth. This is the basis for Modern Monetary Theory (MMT) and the subject of a Washington Post article by Dylan Matthews on Sunday that featured Levy Institute scholars James K. Galbraith and L. Randall Wray. Titled “Modern Monetary Theory, an unconventional take on economic strategy,” the article lays out the history and arguments for such an approach, and responses by its critics.
