So long as spending goes to investments yielding a modest return of 6%, the long-term debt will be reduced, even as the short-term deficit increases, owing to the higher tax revenues generated by the larger output in the short run and the more rapid growth in the long run. Trying to “square the circle” between the need to stimulate the economy and please the deficit hawks, Obama has proposed deficit reductions that, while alienating liberal democrats, were too small to please the hawks.