This is a common argument, but it's fundamentally flawed. We're in a very different economic regime right now than we were under GWB, and that makes all the difference.
I think you'd be hard pressed to find anyone on the left who understands the issues who is seriously arguing that deficits are never a problem, or never have to be dealt with. What a lot of us ARE arguing is that as long as we have an aggregate demand shortfall (everyone in the economy trying to save at once), paying attention to the debt is exactly the wrong thing to do, since the government is the only actor in the economy that has the freedom to act counter-cyclically and make up for the shortfall in private sector demand. The ultimate goal is to start a virtuous cycle of spending that gets us back toward full employment (and increases GDP). Then and only then does it make sense for the government to try to reduce debt through cuts.
There's decent evidence (see Delong & Summers 2012: http://delong.typepad.com/20120320-conference-draft-final-ca...) that trying to reduce debt through cuts in an economy like we have right now is counter-productive even on it's own terms (reducing the debt-gdb ratio) because any cuts you make further reduce aggregate demand and thus reduce the GDB side of that ratio even further.
It's not a democrat in the white house vs. republican in the white house thing that is causing people who were complaining about deficits under GWB to advocate against cutting short term spending now. It's all about the underlying economic conditions.
The ultimate goal is to start a virtuous cycle of spending
And where is that evidence? Included in that evidence, I'd like to see a model that predicted what actually DID happen when we tried the "stimulus" that Obama's economic advisers predicted would lower unemployment to <6% or better.
If you don't have a model that predicts things before they happened consistently, then it isn't Science. It's just guessing.
If we're going to guess, then we should fall back on models that we do understand and have a lot of data for, like how businesses and households manage debt. Common sense should be trumping guessing based upon esoteric economic models that haven't yet yielded reproducible results.
Most economics isn't science- we lack the data. That doesn't mean that the best model is derived from families or businesses; the characteristics and objectives deviate too dramatically to support that claim.
The government is a facilitator of commerce. It's not built to make a profit. It doesn't have the trust circle of a family. It is fundamentally political by mandate and by nature. It couldn't be less common!
I agree with you that it's necessary to look at evidence. But the evidence actually pretty overwhelmingly supports the general Keynesian framework for a financial crisis like this. Look at the data on austerity measures/spending vs. growth worldwide in this crisis (http://krugman.blogs.nytimes.com/2012/02/18/austerity-and-gr...), or any data on similar circumstances (the US "double-dip" in 1937 during the Great Depression, before WWII deficit spending brought us out of it, Japan in the 90s, etc.). The real question is, where is there ANY evidence/what is the model for the opposing view? Does it in any way match up with what really happened over the past 4 years? (because the AD-deficit/Keynesian view does)
Responding to the complaint about Obama's economic advisors being wrong is easy - they were wildly optimistic. However, plenty of economists including Paul Krugman were saying this at the time (http://www.nytimes.com/2009/01/09/opinion/09krugman.html?par... - note the date Jan 9, 2009, before Obama was even sworn in). The math is pretty basic - according to the aggregate demand view of the crisis you have a combined housing/financial shock that totaled at least 6% of GDB. The stimulus was MAYBE 1.5% of GDB, and that's being generous with assuming that high end tax cuts are just as effective as outright spending money (I would argue that they are not, since in a saver's economy, much of that money is just saved straight away). The Obama stimulus package was 4+ times too small to address the magnitude of the problem by this model; no one who has this view of the world is surprised that unemployment is still high (the only surprise was that Obama's advisors had such a rosy-eyed, not data-driven view of the world. They deserve a LOT of criticism for that).
Your "fall back on models that we do understand and have a lot of data for, like how businesses and households manage debt" is completely at odds with reality for two reasons. One is that it doesn't really imply what you say it does; most rational, not capitally constrained businesses/households (and the US is emphatically not capital constrained - bond yields are as low as they've ever been) invest when they have absurdly low interest rates - you're basically getting free money from the market, it's not a rational response to cut back in a situation like that. The second, and arguably more important, argument, however, is that the government occupies a fairly special position in the economy, since it alone among economic actors will never run out of money. Therefore, the government has the unique ability to act in a counter cyclical manner - it can counteract the collective saving of businesses/households to stimulate demand during recessions, and pull back when the private sector is roaring. (You give me 5% unemployment and 4-5%/yr GDP growth and I will be all for govt deficit reduction)
QE1 ran from Nov 25, 2008 to Mar 31, 2010.
QE2 ran from Nov 30, 2010 to June 30, 2011.
QE3 started Sep 13, 2012 and hasn't ended yet.
(Honest question here) I'm curious when we should expect to see the huge inflation created by the QE program, and why we haven't seen it yet if it began nearly 5 years ago...
Hasn't the US government been printing vast amount of money over the last 3-4 years, with little appreciable increase in inflation?
Keyesians argue that money supply doesn't cause inflation on its own. Probably worth looking into that, since the predictions it provides seems to match reality pretty closely..
One reason for the current benign inflation may be that there is no alternative currency with which to trade for US derived goods. Neither the rmb, euro, ruble nor even Canadian dollar are valid mediums of exchange within the US.
Meanwhile hyper-inflation in Russia in the 90's used the dollar as a stable currency with which rubles were exchanged for dollars. Hyper-inflation in Poland, Yugoslavia, and Bulgaria occurred in part due to easily exchange and convertibility of the Deutschmark.
I think you'd be hard pressed to find anyone on the left who understands the issues who is seriously arguing that deficits are never a problem, or never have to be dealt with. What a lot of us ARE arguing is that as long as we have an aggregate demand shortfall (everyone in the economy trying to save at once), paying attention to the debt is exactly the wrong thing to do, since the government is the only actor in the economy that has the freedom to act counter-cyclically and make up for the shortfall in private sector demand. The ultimate goal is to start a virtuous cycle of spending that gets us back toward full employment (and increases GDP). Then and only then does it make sense for the government to try to reduce debt through cuts.
There's decent evidence (see Delong & Summers 2012: http://delong.typepad.com/20120320-conference-draft-final-ca...) that trying to reduce debt through cuts in an economy like we have right now is counter-productive even on it's own terms (reducing the debt-gdb ratio) because any cuts you make further reduce aggregate demand and thus reduce the GDB side of that ratio even further.
It's not a democrat in the white house vs. republican in the white house thing that is causing people who were complaining about deficits under GWB to advocate against cutting short term spending now. It's all about the underlying economic conditions.