Since I wince a little when I see a heavily politicized New Keynesian talk about Debt Deflation (largely developed by those less rigid post-Keynesians), I thought I'd post something from the man himself.
As an aside, perhaps I shouldn't be worried, but it is a bit scary to see the New Keynesians trying to twist the flashlight of works done years ago by more open-minded and outside the box thinkers. I suppose it could be a good thing when the mainstream recognizes these oft-ignored ideas, but one wonders if they do so only to try to incorporate into their old-school toolbox. Equilibrium, mathematical convergence equations, and Hyman Minsky? Hmmm....just sounds odd to me. But the paper certainly sounds interesting and worth a read.
I will say after perusing a few things I see problems with right off the bat:
1. The paper is mistaken to shrug off ever increasing foreign debt obligations (to China etc) as not being a potential problem.
2. The model seemingly ignores the imperfect relationship between spending and employment, particularly in a globalized economy where spending can lead to more foreign employment.
3. The paper seems to treat fiscal spending as some sort of aggregate value, while failing to recognize the realistic limitations and potential mis-allocation (in an Austrian vein) or just good old long-run waste that might accrue.
4. The authors, and certainly Krugman, don't express any concern for moral hazard (which is really the main point of the argument against fiscal stimulus).
...Lots more stuff they are going to need to answer for....