If you missed Paul Krugman’s op-ed in the New York Times this past Thursday, I strongly recommend reading it. The Nobel Prize-winning economist and Princeton scholar adroitly explains why “the sudden ubiquity of deficit scare stories,” which “isn’t being driven by any actual news,” is leading Washington to focus on the wrong fiscal priorities.

In his piece, Krugman questions the current “drumbeat of dire fiscal warnings” that claim near-term federal budget deficits will threaten our economic recovery, ruin the country’s economic stability and undermine our influence in the world. He admits that the long-run budget outlook is problematic – though “much less frightening than the public is being led to believe” – but argues that short-term deficits are nowhere near as problematic as many pundits and some recently converted “apostles of fiscal rectitude” in Congress claim.

Interestingly, Krugman sees the same groupthink dynamic that dominated the nation during the run-up to the war in Iraq playing out in the budget deficit issue:

Now, as then, dubious allegations, not backed by hard evidence, are being reported as if they have been established beyond a shadow of a doubt. Now, as then, much of the political and media establishments have bought into the notion that we must take drastic action quickly, even though there hasn’t been any new information to justify this sudden urgency. Now, as then, those who challenge the prevailing narrative, no matter how strong their case and no matter how solid their background, are being marginalized.

As Krugman notes, misperceptions about current deficits are at the root of much of this fear. Notwithstanding what the president’s detractors claim, runaway spending under the Obama administration is not the cause of the federal government’s large deficit this year. Rather, it is due to a drastic reduction in tax receipts because of the ongoing economic crisis, and a group of programs, including tax cuts, two wars and a Medicare program, that the previous administration deficit-financed.

Despite these facts, budget fear mongering has already shifted policy in the wrong direction in Washington. Due in large part to the ascendance of this fiscal restraint meme, the president has asked for only $270 billion in next year’s budget to boost job creation begun under the stimulus plan; proposed freezing non-security discretionary spending for three years; and tasked his administration to create a bi-partisan commission to work up solutions to the debt and deficit *problem.*

The notion that current budget deficits are too high has become conventional wisdom on Capitol Hill, which has forced the White House to walk the tightrope of adequately funding economic recovery efforts while also trying to show fiscal restraint. The result is a trimmed down employment initiative that most Keynesian economists argue will help few people, and a spate of ill-timed budget stunts that will do little to affect future deficits.

Given the economic needs we currently face, budget deficits are acceptable for the time being. While long-term deficits present a problem, if lawmakers would truly like to being tackling them, they must do so without sacrificing the short-run needs of the economy.

Image by Flickr user Taekwonweirdo used under a Creative Commons license.