How deficit reduction and stimulus can be achieved simultaneously

Deficit hawks and stimulus lovers need to recognize that they actually are working for the same cause, and should be coming together symbiotically.

By , Guest blogger

  • close
    Standing nearby roadway ramps with peeling paint at the foot of the Brooklyn Bridge, Vice President Joe Biden spoke during a news conference on June 2. Vice President Biden's appearance mark the start of the Brooklyn Bridge Rehabilitation Project with $30 million of stimulus funding. Some policy makers argue that more stimulus is needed to jump start the economy, while others say additional spending should be suspended considering the country's ballooning deficit.
    View Caption

On his Washington Post blog today, Ezra Klein basically says the same thing I did a few days ago. The deficit hawks and stimulus lovers are so busy arguing that the other party is completely insane that they’re unable to recognize that they actually are working for the same cause (the economy, stupid)–and should be instead coming together symbiotically:

It seems we’re 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’t 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’s going to make a response much, much harder.

I think policymakers need to be reminded that in keeping with the desirable “symbiotic” 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’t automatically make that policy an effective stimulus, especially if it’s really a way of funding a longer-term entitlement or more permanent tax cut “on the cheap” (…not). (Do you remember the “three Ts” of effective stimulus? Timely, (well-)Targeted, and Temporary?…) And refusing to pass extensions of unemployment compensation or other low-income support programs in the name of “fiscal responsibility” 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 “doc fix” and relief from the alternative minimum tax are (at least seemingly) forever.

Recommended: Fiscal deal will cost you: 8 tax changes

Add/view comments on this post.

------------------------------

The Christian Science Monitor has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.

Share this story:

We want to hear, did we miss an angle we should have covered? Should we come back to this topic? Or just give us a rating for this story. We want to hear from you.

Loading...

Loading...

Loading...