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Does No Jobs Mean No Deficit Reduction?

September 4th, 2011 . by economistmom

Nope. Simplest reason why not: the deficit reduction we’re talking about is over the next ten years. The extra or at least more effective stimulus we’re talking about better come sooner. Many of the same policies that contribute to the adverse longer-term fiscal outlook provide very little offsetting benefit to the near term. Getting our longer-term act together would give global investors, right now, more confidence in the security of Treasury bonds and help keep the cost of borrowing–for stimulus right now–low. So it seems the so-called “super committee” has no reason to shy away from its task of (another $1.5 trillion over ten years in) deficit reduction. There’s lots of opportunity for them to become “superheroes” in conquering both the near-term and the longer-term challenges facing our economy. And President Obama could encourage them by offering his own leadership on this issue–and let’s hope we hear some of that on Thursday. As “super” as they might be or might become, they can’t do it without his help.

(Link to this Concord Coalition video on YouTube here.)

3 Responses to “Does No Jobs Mean No Deficit Reduction?”

  1. comment number 1 by: Centerist Cynic

    My gut tells me that we will continue to have arguing which will reinforce the belief government does not work. This in turn will continue to undermine the economy.

    The President continues to undermine his authority by appearing to give in to Republican demands. Republicans undermine their authority by refusing to admit that spending reductions eliminate jobs.

  2. comment number 2 by: AMTbuff

    >President Obama could encourage them by offering his own leadership on this issue

    Yes he could. He needs to present a counterpart to the Ryan plan, with progressive policy changes that eliminate, not merely reduce slightly, the long-term fiscal gap. Then the real debate can finally begin. Markets will cheer even this beginning of the conversation, and the recession will end that very day.

    Until this happens it’s all theatrics.

  3. comment number 3 by: Ralph Musgrave

    “give global investors, right now, more confidence in the security of Treasury bonds”?????? What are you on about? Global investors are clamouring for bonds to such an extent that the REAL rate of interest on those bonds is NEGATIVE. The US is currently making a PROFIT out of its creditors. So long as you can rip your creditors off, why stop?

    And if those interest rates turn positive, that’s still no problem. As Keynes pointed out, money for stimulus can be borrowed or printed. If the “borrow” option looks expensive, go for the print option.

    And now some economic illiterate will object to that by chanting “Mugabwe” and “Weimar”. I’ll be back in a few hours to deal with that entirely predictable objection.