US Debt A 'Phantom Menace,' Krugman Argues

In the debate over stimulus vs. deficit, both Paul Krugman and the Times are right. The major short-term threat to our economy is contraction caused by unemployment, shrinking credit, and reduced spending and production. This is what stimulus is supposed to fix, and in the short run, deficit spending is necessary. Undermining this effort by budget-balancing moves will only make it harder for the economy to recover. The deficit hawks are right, however, to keep an eye on the growing red ink, especially in light of our government's tendency towards deficit spending even in good economic times. If deficit hawks get too concerned too early, their loud voices could undermine confidence in the economy. What is needed is adequate spending now, but with an "exit strategy" meant to get us back in the black when the economy is back on track, but not before. That way investors and others will understand that the huge deficits are not a long-term trend, which would likely be unsustainable. This would allow short-term and long-term confidence to be maintained. Given that this would involve some austerity, a bipartisan commission might be the way to go, with its recommendations given the "fast track" in Congress - simple thumbs up or down, no amendments. (Kudos to the Economist magazine for suggesting much of this - it's a great idea!)
Read the Article at HuffingtonPost