C'mon, let's stimulate now and cut spending later

It’s also what makes the ongoing jobs-versus-austerity debate so frustrating. What we really need is to be bolder on both jobs and austerity, by pursuing a combination policy.

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Additional stimulus is required because the labor market remains extremely weak. Delayed deficit reduction is also needed to reduce uncertainty over how the federal government will navigate its perilous fiscal path — and to boost the chances of enacting more stimulus despite the looming debt limit.

To appreciate the potential of the combination approach, look no further than the plan offered by the Domenici-Rivlin debt-reduction task force, which proposed more than $600 billion in stimulus in one year — far more than I have seen from any serious proposals for a naked stimulus (not linked to deficit cutting). What’s most remarkable about the upfront stimulus in Domenici-Rivlin is that it was supported by Republican task- force members, because it was combined with delayed deficit reduction. When was the last time you saw Republicans embrace such a large stimulus proposal?

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