In his "sternest warning" to date, President Obama said the economy could sink into a "double-dip recession" unless the country reduces its ballooning public debt. Speaking with Fox News in Beijing, he called for a concerted effort to work toward long-term deficit reduction. Though he said he hasn't laid out a plan, a slew of economists, pundits and bloggers have offered solutions:
- Spend Now, Payback Later, writes Berkeley Economist "We really need to reduce the deficit after 2030. We really need to have more government purchases now. So raise spending now, and raise taxes and impose spending caps starting in 2013 so that by the end of the 20-year budget window the projected debt is unchanged. Thus we move the red line without increasing the spread: there's now increased supply of bonds in the long term to push up the interest rate on them. And we solve both our current near-depression problem and our post-2030 structural deficit problem."
- A Bipartisan Commission, concludes The Economist. Reducing the national debt is pretty "straightforward," write the editors. It's the politics that mess everything up: "One way to finesse these toxic politics would be to establish a bipartisan commission to fix entitlements and taxes, as proposed by Kent Conrad and Judd Gregg, respectively the most senior Democrat and Republican on the Senate Budget Committee. Its membership would be drawn from both parties, both chambers of Congress and the White House. Democrats and Republicans alike would have to make sacrifices. To preserve this grand bargain, Congress would be allowed only to approve or reject the commission’s proposal, not amend it."
- "The Glide Path Solution" will solve our fiscal woes, argues Edward Howard at Naked Capitalism: "The Obama Administration doesn’t understand how modern money works. In fact, by focusing on deficit reduction, he has increased the chances of a double dip instead of decreasing them." Harrison calls for "increasing aggregate demand by maintaining government spending while trying to liquidate zombie companies and malinvestment. This would allow the private sector to decrease debt burdens significantly over time through increased savings. It also has the benefit of reducing dependency on foreign sources of capital. The downside is a major increase in government debt, the spectre of big government and a long muddle through."
- Slash Spending, Begin with the Military writes Jesse Veverka at Seeking Alpha: "Solving America’s economic problems for the long term, as opposed to simply slapping on a Band-Aid, requires tackling our huge government debt and the trade imbalance. However neither of those can be solved without first reigning in military spending. As difficult as this may be, it is vital that we do so. If not, we may never get out of the current slump."
- 'It's Time for the Democrats to Be Democrats,' writes Turkana at The Left Coaster: "Jobs, jobs, jobs. And what we don't need is to be listening to inflation hawks or deficit hawks." Turkana argues that a jobs program is needed to revive the economy. Subsequently, the government will be in a position to pay down debt. Citing NYU Professor Nouriel Roubin, Turkana calls for "a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers."