Fiscal space has nothing to do with public debt ratios or the size of deficits
The Project Syndicate is held out as an independent, quality source of Op Ed discussion. When you scan through the economists that contribute you see quite a pattern and it is the anathema of ‘independent’. There is really no commentary that is independent, if you consider the term relates to schools of thought that an economist might work within. We are all bound by the ideologies and language of those millieu. So I assess the input from an institution (like Project Syndicate) in terms of the heterodoxy of its offerings. A stream of economic contributions that are effectively drawn from the same side of macroeconomics is not what I call ‘independent’. And you see that in the recurring arguments that get published. In this blog post, I discuss Jeffrey Frankel’s latest UK Guardian article (August 29, 2018) – US will lack fiscal space to respond when next recession comes – which was syndicated from Project Syndicate. Frankel thinks that the US is about to experience a major recession and that its government has run out of fiscal space because it is not running surpluses. We could summarise my conclusion in one word – nonsense. But a more civilised response follows.