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…
Maximum Stimulus Now
Those who are most concerned about the weak labor market should be most willing to do whatever it takes — including combining delayed budget cuts with stimulus — to get the most stimulus passed. And those who favor a combined approach shouldn’t be characterized (as I have been) as pro-austerity and anti-stimulus. If anything, proponents of the combined approach seem to be the only ones with even a remotely viable approach to getting substantial additional stimulus.
Likewise, those who are most worried about our long-term fiscal health shouldn’t fret too much about additional stimulus today, if it is combined with future budget cuts. Stimulus now would have only a modest long-term impact on national debt. So if it can lead to a deal, while also easing short-term pain from unemployment, what’s not to like?