All Not All Deficits Are Created Equal

That’s a critical point made by economist John Tatom in an article published in the Financial Analysts Journal.  (The link points to an earlier version of the paper; the final version is not available on line to the public.)

Tatom cites evidence that federal budget deficits push interest rates up by only a tiny amount, and that budget deficits are not correlated with trade deficits.  He explains how deficits caused by tax cuts may have different effects than deficits caused by increases in various types of spending.

This is a good, readable paper for you pessimists.

Business Strategy Implications:  If you are so worried about the budget deficit that it’s influencing your business decisions, you MUST read this article.