Smetters said if government debt wasn't an option, investors might be more inclined to put their money into business instead, which would promote private sector growth.
But not everyone agrees that growing deficits are bad, especially now. Nobel Prize-winning economist Paul Krugman, who worries that the U.S. is in the midst of a depression, warns that "premature austerity" and "inadequate spending" by a government intent on balancing budgets could hurt the economy.
"While long-term fiscal responsibility is important, slashing spending in the midst of a depression, which deepens that depression and paves the way for deflation, is actually self-defeating," Krugman wrote in his most recent column in The New York Times.
Unemployment and Unemployment Benefits: A report released by the Labor Department today provided some discouraging news on the jobs front: new claims for state unemployment benefits last week rose by 13,000.
Economists expect more bad news ahead: While the U.S. economy gained 431,000 jobs in May, but June's figures are unlikely to come anywhere close to that. Experts predict that on Friday, the U.S. Bureau of Labor and Statistics monthly employment report will show a loss of more than 100,000 jobs.
The decline, they say, is a result of the government cutting some of the hundreds of thousands of temporary Census jobs that largely fueled May's jobs gains.
Citigroup's Wieting said he expected to see job losses last at least another month, thanks to the elimination of Census positions.
"Once those cycle through, you'll get gains in private employment, in all likelihood," he said.
But those gains aren't expected to be great either.
Though corporate earnings have improved, businesses seeking to limit their vulnerability to new taxes and health insurance liabilities have "no incentive to hire back unless it's absolutely necessary," Wieting said.
In the meantime, many unemployed Americans are at risk of losing a vital source of income if Congress -- engulfed by concerns over the rising deficit -- fails to pass the another extension of unemployment insurance.
The Senate Wednesday night rejected a measure to restore and extend unemployment benefits for the long-term jobless. Democrats vowed to continue to try to get the measure passed.
The expiration of unemployment benefits will hurt consumer spending, Blinder said.
"You give money to the unemployed and they will spend it," he said.
But Holtz-Eakin argues that the impact of spending declines by the unemployed won't be great enough to affect economic recovery.
"If you do the math," he said, "the numbers aren't big enough in a $14 trillion economy."