By William K. Black
October 24, 2016 Quito, Ecuador
Pete Peterson is back, and his message and rhetoric are always the same. The federal budget deficit is a disaster and – any day now – will produce massive inflation. Peterson has written his 20,000th version of this fantasy in the NYT with Paul Volcker. The first rhetorical game that Peterson plays is to assert that it is bad for a sovereign nation to run budgetary deficits because they are not “sound and sustainable.” Except that the U.S. has run deficits for most of its existence without ever suffering hyper-inflation. For a nation like the U.S. with a sovereign currency, a federal budgetary deficit is not unsound and it is not unsustainable. Federal budget deficits can, depending on the circumstances, be the very definition of “sound” fiscal policy – a policy that is often essential for “sustainable” recovery and growth of the economy.