South By North Strategies, Ltd.

Robert Kuttner of Demos debunks some of the conventional wisdom guiding the thinking of the National Commission on Fiscal Responsibility and Reform.

But there’s a problem with all this fiscal alarmism. It confuses three entirely separate concerns: the current large deficits, which are caused by the deep recession; the long-term health of Social Security; and the inexorably rising costs of Medicare and of health care generally. If you unpack these issues, a different picture and set of choices emerges.
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There are two basic roads to fiscal balance. We can cut spending, raise taxes, depress the rate of growth — and balance the budget at a lower level of economic output. Call it the austerity cure.
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Or we can have more deficit spending in the short run, get economic growth back on track and only raise taxes and trim spending once we have a strong recovery. With that approach, we get fiscal balance at a higher level of economic output. Call it the prosperity cure.