"The U.S. has one of the lowest debt/GDP ratios in the OECD, and one of the lowest interest burdens too; it, unlike most of the EU countries, meets the Maastricht debt/deficit criteria. In short, the U.S. would probably have little problem pulling off countercyclical deficit spending - in financial terms, that is. Politically, though, deficit spending is only slightly more respectable than pedophilia."
The Keynesian James Galbraith writes similarly:
"President Clinton worked effectively in 1993 to end the epoch of ever rising deficits [the deficits were over $300 billion in 1991 and 1992], did considerably more on that fiscal stability actually required, and did so without achieving the lower interest rates that were supposed to have accompanied deficit reduction. Currently, US deficits are the lowest in the advanced industrial world and the ratio of public debt to GDP is stable or falling. It will probably remain *so as long as economic growth continues*." p. 194: my emphasis
And Nathan argues:
"If we could sustain a deficit $370 billion higher than today just a few years ago, we could do so again during a forthcoming economic downturn."
The Marxist argument (I believe) is not that a balanced budget would improve economic performance; rather the argument is that overcoming stagnation and downturns through deficits tends to create its own problems over time (heightens the contradictions and all that):
1. profit short and stagnant businesses fear both inflation and high future taxes possibly imposed by debt ridden govts that are finding it tougher to borrow easily to pay not only for current spending but also all interet charges on its prior borrowings. That is, businesses, already profit short, may have good reason to fear taxes or simply capital crowd out from massive deficits and respond with an investment strike
2. the deficit itself provides less actual real stimulus in a recession as debt strapped businesses are forced to their knees by creditors as their loans are called in during a downturn (Robt Pollin or Blecker?); whatever econometric vindication of deficits Eisner has achieved to explain away high unemployment in the context of what certainly appeared to be substantial deficits, the point is that debt financed govt deficits are having less stimulative effect now.
3. in order to overcome their own profitability difficulties through mergers and acquistions, the most powerful firms may themselves need a recessionary environment in order to force their competitiors to the wall. (Mary Malloy?)
While many capitals thus find themselves opposed to further massive deficit spending,. fiscal stimuli are losing their effectiveness in terms of real accumulation, as well as becoming impossible as the debt to GDP ratio has risen to 52% as the debt rose 13x since 1970.
It is not always possible to spend your way out of a crisis; the very weak boom following the S and L bail out and then the massive deficits of the early 1990s is evidence of the weakening power of even radical govt actions. The problems are gettting worse and will demand new kinds of solutions.
We can continue to dismiss as right wing propaganda, as Nathan does, any suggestion that Keynesian fiscal or monetary policy may not be able to ensure the growth of and stabilize capitalism or we can entertain the question of what alternative strategies the working class will *have* to pursue in the context of the next recession. I admit that this raises very unpleasant possibilities.
According to Doug (it seems in the last post) political forces whose strength derives presumably from rentiers (?) prevent the playing of the fiscal card which would presumably (?) be effective as counter cyclical policy; thus the stability of capitalism could be ensured in the realm of politics. This raises the political struggle to the greatest importance. Does this not sound like Hilferding?
For Nathan, steps such as perhaps import taxes (I am guessing) would have to be taken to ensure that the stimulus had domestic effects. But he too envisions the possibility of a political stabilization of capitalism if the political will is there.
I would like to say that this may all be true and if it is true, then Marxism is dead. A good argument could always bury Marx's theory, and that remains the case if the political stabilization of capitalism is possible. Hilferding thought so, Marcuse argreed, the Keynesian economists are sure of it.
At least Mattick pin pointed the question Marxism must answer it is to remain a living critique of capitalism as it has evolved new political forms.
best, rakesh