Here’s the thing: deficits DO matter, but not in the way that is being formulated by President Obama. If a government spends too much after getting us to a state of full employment and higher economic growth, excessive government spending can create inflationary pressures. So to that extent, there is a limit... Contrary to conventional “gold standard” thinking, where every dollar spent has to be ‘financed’ by an ounce of gold already in existence, our government can "afford" anything that it is for sale in its own currency (unless we artificially constrain ourselves via stupid self-imposed limits such as a debt ceiling – the US being the only sovereign issuer of its currency that chooses to constrain itself this way).
The debate that the President is calling for, then, should not be focused on “affordability” but on what constitutes the national priorities of our government. The political process, not a non-existent gold standard, or a foolishly imposed debt ceiling of questionable constitutionality, should determine our national priorities. Promising jam tomorrow in exchange for “eating our peas” today might make for a good sound bite, but it is predicated on a fundamentally flawed model. The whole basis of our growth over the past quarter century has been based on households borrowing and the continuation of negative saving trends. A good place to start recovery efforts, therefore, would be to change this method of economic growth toward restoring incomes and job growth, rather than propping up zombie banks and embracing “rentier economics” through this misconceived emphasis of public debt reduction... Concerns about government deficits and the government debt have served as a very useful way of masking the real issue, the unwillingness of conservatives to allow the government to work for the good of the population, something that a democratic government is supposed to do.
---Marshall Auerbach via Naked Capitalism (My Italics)