Suppose the old Reaganaut-Bushie battle cry, “Deficits Do Not Matter!” turns out to be true?

U.S. orthodox macroeconomists are criticizing the Trump Administration’s proposed business tax cuts for widening federal deficits in the years ahead, by possibly a few trillion dollars. But why? Do we not live in the Age of Mobius-Strip Economics? The central bank the Bank of Japan has been buying back trillions of dollars of Japanese government bonds (JGBs) under its ongoing quantitative easing program—in fact, so much that the Japan national debt will be effectively vaporized, perhaps within 10 years. The BoJ owns 42.3% of the JGB market at present. Despite record low unemployment rates, the BoJ has been unable to…

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