This would happen in two stages a smaller increase in consumption and no increase in saving. The no increase in saving (or actual decrease) would make future consumption less sustainable or manageable relative to income, as Gruen and Quiggin have been saying.

In short, public debt would be as great (over a period) as it would be under the original fiscal stimulus – but with a much worse output outcome.

I believe this is what the writer meant to say. In a sense, James Farrell has it right when he says that “deficits can pay for themselves in the long term if they restore activity and revenue permanently to a higher level but with a much superior short term output.

Org, the welfare state I was referring to is not about social conservatism, but about total government spending on social security. This would happen because pressure to lower debt, as larger deficits emerge, would impose much harsher controls over spending.

As for the interpretation, I agree with with Nicholas that Fred’s words probably don’t express exactly whay he meant. Thoma seems to be saying no more than that deficits can in principle pay for themselves in the long if they restore activity and tax revenue permamnently to a higher level.