12.14.2009 Policy Points

What Are They Thinking?

In The New Republic, journalist Noam Scheiber describes the key economic policy debate taking place within the Obama administration. The central problem is how to reconcile two seemingly irreconcilable issues: the need for more economic stimulus and a desire to manage the federal budget deficit. Writes Scheiber:

“The entire town is more schizophrenic than I’ve ever seen,” says one senior administration official. “Everyone cares about jobs, and everyone cares about fiscal discipline. The weight shifts week by week, unemployment report by unemployment report.”

The basic problem is that any additional stimulus adds to the deficit, while deficit reduction steps on a weak economy. And so, Democrats now find themselves having to pull off a balancing act that would seem to defy the laws of economics: taking on both tasks simultaneously. “We’ve got about as difficult an economic play as is possible,” the president observed at his recent jobs summit.

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