03/28/2009 05:12 am ET Updated May 25, 2011

A Balanced What? Balanced Growth, Not A Balanced Budget

In his address to Congress last night, which DMI analyzed in a late-night report, President Obama addressed budget hawks head on. But his most important riff on budgeting wasn't his pledge to reduce the federal deficit - "another responsibility we have to our the responsibility to ensure that we do not pass on to them a debt they cannot pay" - which drew loud cheers from Republicans and Blue Dog Democrats.

In fact, his most important statement about the federal budget and the federal deficit came during a rebuke of budget hawks:

I asked this Congress to send me a recovery plan by President's Day that would put people back to work and put money in their pockets. Not because I believe in bigger government - I don't. Not because I'm not mindful of the massive debt we've inherited - I am. I called for action because the failure to do so would have cost more jobs and caused more hardships. In fact, a failure to act would have worsened our long-term deficit by assuring weak economic growth for years. That's why I pushed for quick action.

Here, President Obama is acknowledging the forgotten point of the stimulus debate: running a high deficit can actually drive future economic success. Put simply, future generations - such as, for instance, South Carolina Governor Mark Sanford's four boys - would be worse off without the stimulus package, even if government debt balloons. Of course, the catch is that the government must spend on policies that provide a return to the future generations that will pay the future interest on current debt- the government must invest.

Obama's call for action on energy, health care, and education even in the midst of an economic crisis recognizes this. Beyond a stimulus that generates consumer spending and creates jobs, these investments are also necessary to prevent economic conditions that are worse for future generations or, really, to create economic conditions that are better for future generations. State budget cuts that result in fewer teachers, fewer Medicaid services, and fewer construction projects aren't just bad because of the jobs that are lost: they affect students whose career prospects are dimmed by less education, children who grow up less healthy and drain future health services, and future workers who waste time in traffic or who can't get to work because of bad infrastructure.

Who, then, is the real generational thief?

As Gerhard Colm, an economic adviser to Roosevelt and Truman, wrote in 1952:

The dogma of a balanced budget is incompatible with the proper function of budget policy--which is to make the maximum contribution to balanced economic growth.

The debate about balanced budgets should be employed only in the face of outrageous tax cuts that provide no benefit for future Americans. Our first concern should be balanced economic growth, not balanced budgets.