Published for www.keithhennessey.com, June 8th, 2012
Lefty: Growth of the U.S. economy is slowing due to insufficient domestic demand and headwinds, especially from Europe. We need to make sure we don’t make the same mistakes as those Europeans who are weakening their economies through austerity. I’m for growth now. We need to increase highway spending, hire more teachers and policeman, and prevent tax increases, except for on the rich.
Righty: I’m not sure I agree with your diagnosis but want to focus on your “growth now” point. Why does it have to be either-or? Why can’t we pursue growth policies and austerity policies simultaneously? You and I disagree both on what policies best lead to increased economic growth and on the best way to address our underlying fiscal problems, but I don’t see why we have to choose between the two goals.
Lefty: Because austerity hurts economic growth and because our need for growth policies is urgent. We need to prioritize growth now because the economy is weak now.
Righty: I’m not being clear. I agree that the short-term outlook is for weak growth at best, and I don’t want to do anything to hurt that.