The U.S. economy needs a new engine of growth and deficit-financed public investment has an important role to play. Deficit financedinvestment can create a "virtuous" circle whereby public investment spurs growth, in turn improving the budgetoutlook. The fiscal austerity agenda risks creating a "vicious" circle in which austerity slows growth, necessitatingfurther austerity.The budget numbers show the U.S. has a health care cost problem rather than a budget deficit problem. Fiscalausterity does not solve the health care cost problem and it also risks undermining growth. That makes fiscalausterity economic malpractice.

Finally, the politics of fiscal austerity does a double disservice. First, it pushes public understanding in the wrongdirection by presenting government as the problem when the crisis has shown it is the private sector that has failedand needs reform. Second, by misleading the public it opens the door for all sorts of policy mischief - most notablycutting Social Security.