Economist's View: 'The Height of Fiscal Folly'
Mark Thoma sends us to:
Laura Tyson: 'The Height of Fiscal Folly': After three years of recovery, the economy is still operating far below its potential and long-term interest rates are hovering near historic lows. Under these circumstances, the case for expansionary fiscal measures, even if they increase the deficit temporarily, is compelling…. The economy does not need an outsize dose of fiscal austerity now; it does need a credible deficit-reduction plan to stabilize the debt-to-G.D.P. ratio gradually as the economy recovers… [a] plan… [with] an unemployment-rate target or trigger that would postpone deficit-reduction measures until the target is achieved…. The goal of deficit reduction is to ensure the economy’s long-term growth and stability. It would be the height of fiscal folly to kill the economy’s painful recovery from the Great Recession in pursuit of this goal.
