McArdle is essentially dishonest here when she states that Gross is "not buying . . . the super-Keynesian argument [sic] that we can't cut spending because the economy will contract so fast that we'll actually end up with a bigger deficit. "

If one reads the article, you will find that Gross states that:

“Debt-to-GDP is not egregious,” he said, “but it’s moving up the list.” And worse, “I’ve seen no willingness to tackle the difficult problem of entitlements from any political party.”

In other words, the current deficit is not "egregious." Rather, Gross is concerned about the "difficult problem of entitlements." That, as anyone familiar with the issue knows, stems from three sources: health care costs, health care costs, and health care costs.

As Paul Krugman, the leading voice encouraging a Keynesian solution to our current economic problems makes clear, "if you’re a serious Keynesian, you’re for maintaining and even increasing spending when the economy is depressed, even though revenue has plunged; but you’re for fiscal restraint when the economy is booming, even though revenue has increased." See here: http://nyti.ms/iTXJEl

So let's review: McArdle conflates the current deficit with the long-term structural deficit and implies that Gross is equally opposed to both when, in fact, nothing that he says in he interview supports such an interpretation of his position. In the course of making that misleading and false assertion, McArdle intentionally mischaracterizes the argument that Keynesian economists have been making.

The appropriate term to characterize such a person is dishonest.

Stuart, you seem unaware that I wrote the article you are referring to. If I had wanted to be disingenuous, surely, I could have just left that quote out?

Anyway, you've confused the point of that particular paragraph. People arguing about the deficit on both sides are arguing that the only way to close the deficit is what they want anyway, because cutting spending or raising taxes will have catastrophic effects on the economy and make it harder to repay the debt. Well, Gross, doesn't buy that; he doesn't care whether we raise taxes or cut spending, just that we make the numbers add up. And since people like him are the ones we have to convince, that matters.

Megan--Actually, I did read your article which is why I found the blog post so disingenuous.

Your response here leads me to believe that you simply miss the fact that there are really "two deficits." The first is the current deficit which is probably lower than it should be and is not sufficiently stimulating the economy. This "first deficit" is not only too small, but it is composed of too much of one ingredient (tax cuts) and two little of another (stimulative spending). As a consequence, we're not getting as much stimulative bang for the buck as we should be getting.

The "second deficit" is the long term deficit driven almost entirely by health care costs. By any historical standard (by "historical" I mean here "by any standard post-Calvin Coolidge"), the U.S. has very low tax rates. Thus, a large component of any "second deficit" reduction should be a tax increase, at least back to levels pre-Bush II. Of course, I'm not taking expenditure reduction off of the table, but the big target there is health care costs. The Republicans opposed efforts to rein in those costs when these steps were proposed via the ACA. It is wishful thinking, at best, to believe that they will ever get serious. (Imagine Republicans favoring proposals that would be adverse to insurance companies and the pharmaceutical industry. Then imagine me playing professional basketball.)

I suppose that there are people who are, using your term, "super-Keynesians." However, to apply this label to all of those who oppose attempts by Republicans to slash current domestic discretionary spending because such actions will hinder economic recovery is simplistic at best. People should be aware that the long-term (i.e., "second deficit") is a distinctly different problem than the immediate deficit. Your comments either negligently or intentionally failed to observe this distinction.

I think that Gross' comments can fairly be interpreted to mean that the "first deficit" is not much of a problem, but the "second deficit" is. (See Gross' quote noted in my first comment.)

Finally, Gross may be concerned about the deficit long-term, but bond buyers, at least for now, don't seem that concerned. As of the close of the market today (Friday the 13th), the US 10 year note closed with a 3.1730 interest rate.

It is both startling and disappointing to me that there are still people who would call themselves Keynesians (or worse: super-Keynesians) without deep shame. How many times do his theories have to be disproved?

The idea that the deficit can be reduced by public spending cuts or tax increases is a popular piece of nonsense. The flaw in this idea is that such cuts raise unemployment, which in turn increases spending on the automatic stabilisers, like unemployment benefit. In fact there is even evidence that public spending cuts actually RAISE public spending! See:

http://www.debtonation.org/wp-content/uploads/2010/06/Fiscal-Consolidation1.pdf

The above bit of nonsense is popular with those who have not grasped the difference between macroeconomics and microeconomics. A microeconomic entity (like a household or business) CAN reduce its deficit by cutting expenditure or raising income. A government which is a macroeconomic entity CANNOT.

But what a government CAN do – at least to cut the structural debt - is simply to reverse the process that brought the debt into being. What brings a structural debt into being is failing to collect enough tax to cover spending. Reversing that consists of, 1, printing money and buying back the debt (i.e. QE), and 2, raising taxes and paying off the creditors. And those tax increases would NOT reduce GDP or total numbers employed as long as the tax increase and QE were pitched at levels such that the demand reducing effect of the tax equalled the demand increasing effect of the QE.

For more details, see here:

http://ralphanomics.blogspot.com/2011/06/fast-fiscal-consolidation-would-not.html