An interesting debate on deficits has sprung up...

• Jared Bernstein argues against a narrow focus on balanced budgets.
• Greg Anrig's response
• For more on this critical debate, see the materials from this recent EPI event, our summary of it in The Watcher, and Dana's reaction.

UPDATE: Brad Plumer has a good take on the EPI event, and Ezra Klein responds. OK, that's enough.

At the Agenda for Shared Prosperity's "Beyond Balanced Budget Mania" forum earlier this month, Nobel laureate economist Joseph Stiglitz gave a much-discussed 30,000-mile aerial perspective on how to look at and evaluate deficits and what we are buying with them:

[W]e shouldn't focus on deficits themselves. What really matters is the country's balance sheet, its assets and its liabilities. Consider a company. You would never say, oh, this company is borrowing a lot and therefore, it is a bad company. You would always say what is it borrowing for? Is it for investment? You want to look at both its assets and its liabilities. You want to look at its balance sheet. Well, when we talk about the deficit, we're talking about only one part of that balance sheet. We're talking about what's happening to the liabilities, what it owes, but not to what it's spending the money on.

Perhaps implicit in Stiglitz' view is an acknowledgement of the borrowing costs of deficit financing as a liability. Or maybe he is ignoring it, which I think many who recoil at Dick Cheney's "Deficits Don't Matter" mantra are, oddly, willing to do; some progressives even perceive a deficit 'mania.' In the current political environment -- or until the next election -- the deficit-indifferent are (often tacitly) applauding the leveraging our national resources to support the policy priorities of the administration:

And if you are borrowing money, which the United States has done, to finance a war in Iraq or to finance a tax cut for upper-income Americans, then the country is being left worse off. The balance sheet does look worse. You have a liability, but you don't have any asset on the other side. But if you are borrowing money to invest in education, technology, or, say, the safety net, then you may have a stronger economy.

By the time he leaves office, President Bush will leave us paying upward of $50 billion more a year in deficit financing costs than when he took office. And for what?

The Chaney Fiscal Theorem, which asserts that Deficits Don't Matter, was the dominant view underlying the tax and budget policies of the nation's governing party for most of this decade.

$1.6 trillion in tax cuts? Doesn't matter, and not just because of the revenues they bring in, but because, really, what is an extra GDP percent or two worth of deficit? A comma in history. No matter. Greater spending increases under this administration than any in the history of the country? No worries -- we can borrow to pay for it and our credit is good (until it isn't). The additional borrowing costs? They don't matter (see Theorem).

The National Priorities Project's interactive income chart will show you, down to the penny, how much of your family's tax bill this year will go to paying interet on the nation's debt.

For the average American family in 2005, $3179.00 went to pay the interest on the debt. Not to worry, though -- according to the Cheney Theorem, it just doesn't matter.

And that is why at this point, even for President Bush, who this year took pains (and budget gimmick liberties) to propose a budget projecting a surplus in 2012, it is the Cheney Theorem that apparently ... just doesn't matter.

The CBO has released April's Monthly Budget Review. The short version: Revenues are higher this March than they were a year ago, thanks mostly to rising income and payroll taxes. The summary paragraph from the report:

The federal government recorded a deficit of $257 billion for the first six months of fiscal year 2007, CBO estimates, $46 billion less than the shortfall incurred during the same period in 2006. Revenues have risen by 8 percent in the first half of the year, whereas outlays have grown by about 3 percent.