Thought for the Day: 19 March 2013

Metaphors for the role of government spending under current economic conditions and for the long haul:

  1. Put out the fire.
  2. Once the fire is out then worry about the resulting water damage to the structure.
  3. Also remember that permanently flooding the structure isn’t a good long-term solution.

Translation:

  1. Lower the unemployment rate.  Get people back to work.  Contemporary macroeconomics tells us that this will require changes to government fiscal policy, i.e., enacting some Keynesian stimulus.
  2. Worry about the deficit after we’re back to full employment (or at least close to it) and the economy is healthy again.
  3. Letting the debt be an ever increasing fraction of the GDP would not be good.  However, that’s a long term issue.  We have a near term problem which needs to be dealt with first – see Item 1.