>Sure, but we were talking about sustainability and trends
>by period.
Max, I think we are talking about the sustainability *and* stimulative effects of debt financing (do note that even Michael Meeropol has doubts about the latter). According to Daniel Shaviro *Do Deficits Matter?* the late Robert Eisner, the hero of James Galbraith, thought the crucial blow to Keynesianism was the occurence in the 1970s of recesssion with high unemployment during periods when the budget deficit, as conventionally measured, was unprecedently high. He then sought to show that deficits, as correctly measured, actually do have stimulating and employment promoting effects that Keynesianism predicts.
Shaviro continues: "Accordingly, following familiar econometric procedure, Einser seeks to corrorborate the stimulative effects of deficits by analyzing not the actual inflation-adjusted defict but a counterfactual and hypothetical number: the employment deficit, equaling what the actual inflation-adjusted deficit might have been had unemployment been, of, say, 4,5,6 percent. On this basis, he claims to show that deficits (as adjusted) really WERE larger during the 1960s, with their relatively high growth and low unemployment, than during the 1970s, with their worse performance in both respects. He has more trouble explaining why the 1980s, which had higher deficits than either of the two preceding decades even on an an inflation adjusted, high employment basis, should have featured higher unemployment and slower growth than in the 60s."
p.110
And then there is the question Doug has raised: why the last five years have had lower unemployment and higher growth despite lower deficits than in the 80s?
I was surprised to read somewhere a very favorable review of this book by Eisner.
So let the debate continue about sustainability and 'stimulatability'. I do appreciate Max's detailed knowledge of budgets, deficits and debts, and thanks to Andrew for the cross national data.
Rakesh