Noam Scheiber’s piece is chilling if you want a domestic policy seperate from what China would appreciate. The piece correctly notes that with trillion-dollar deficits we can only afford policies that China approves us, but that certainly China (which has no socialized medicine) is in favor of socialized medicine in the United States
Iâ€™m actually wrapping up a piece on the U.S.-China economic relationship this week, and several Treasury officials have told me that, during the recent Strategic and Economic Dialogue, the Chinese confided that they would have been more concerned about the deficit had we not responded aggressively to the recession, even though the response made the short-term deficit larger. The Chinese understood the importance of running a big short-term deficit to offsetÂ our economic shocks and restore growth, these officials say.Â And the ChineseÂ were apparently reassured when administration economic officialsÂ explained how much of the short-term deficit was a function of the recession and the financial crisis (about two-thirds). Not surprisingly, the Chinese are most concerned about the structural deficit (that is, the portion of the deficit left over once you strip out the effects of the economic downturn) and what happens to it over the long-term. Despite the ugly top-line numbers, that hasn’t really changed–there isn’t much reason to beÂ more pessimistic about the long-term structuralÂ deficit thanÂ we were beforehand.