Stimulus vs. Austerity

July 5th, 2010

Fareed Zakaria has a great set of discussions with Paul Krugman and Niall Ferguson on the state of the global economy and what the U.S. needs to do going forward.

Krugman makes the case for more stimulus, while Ferguson talks about the need to balance the budget. 

Very good spokesmen for their causes. This is basically the whole show, so if you don’t have 30 minutes, you can just check out Fareed’s Take. What he says has absolutely no chance of happening, but the outlines are just what I think is needed: another short term stimulus (potentially a combination of govt spending and tax cuts) that will give this economy another push, combined with a long term plan to slash the deficit with a combination of cuts in government programs and tax increases.

Over the last 30 years, the federal government has proved expert at doing the former while ignoring the latter. Whether real deficit reduction can happen will be a fundamental test of our system, and our future depends on it, but if we don’t have a more robust recovery, the coming deficits will prove much worse.

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