How deficit reduction and stimulus can be achieved simultaneously
On his Washington Post blog today, the same thing . The deficit hawks and stimulus lovers are so busy arguing that the other party is completely insane that they鈥檙e unable to recognize that they actually are working for the same cause (the economy, stupid)鈥揳nd should be instead coming together symbiotically:
It seems we鈥檙e getting the worst of both worlds: The argument over deficits is keeping us from doing what we need to do to help the economy grow right now, but it isn鈥檛 going to be enough to get us to do what we need to do to help the economy grow later, either. And the outcome of that could be ugly: If growth is anemic when the eventual fiscal crisis does come, that鈥檚 going to make a response much, much harder.
I think policymakers need to be reminded that in keeping with the desirable 鈥渟ymbiotic鈥� relationship, not all deficit-financed policies for short-term stimulus, and not all deficit-reducing policies for longer-term fiscal sustainability, are created equal. Deficit financing a policy doesn鈥檛 automatically make that policy an effective stimulus, especially if it鈥檚 really a way of funding a longer-term entitlement or more permanent tax cut 鈥渙n the cheap鈥� (鈥�not). (Do you remember the 鈥渢hree Ts鈥� of effective stimulus? Timely, (well-)Targeted, and Temporary?鈥�) And refusing to pass extensions of unemployment compensation or other low-income support programs in the name of 鈥渇iscal responsibility鈥� is just an excuse to shun the short-term stimulus mission altogether, because as Ezra explains, these are not the kind of policies we have to worry about as the big contributors to the long-term fiscal gap. Unemployment compensation subsides when unemployment subsides. But a 鈥渄oc fix鈥� and relief from the alternative minimum tax are (at least seemingly) forever.
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