An important New York Times article by Louis Uchitelle and Robert Pear pushes back against neo-Hooverite sentiment and carries the headline “Consensus Emerges to Let the Deficit Rise.” One key quote:
“Right now would not be the time to balance the budget,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a bipartisan Washington group that normally pushes the opposite message.
Normally pushes the opposite message is an understatement — it’s a group whose whole purpose is to push for deficit reduction. This would be as if you had Greenpeace saying that a recession was a good time to kill some whales. The difference being that unlike your hypothetical whale-killer, MacGuineas is right!’
The next step is shaping the stimulus package when it comes. Congressional Democrats and congressional Republicans are united behind the idea of providing some kind of stimulus in the relatively ineffective form of tax cuts. Democrats also favor the more effective methods of aid to state governments and new infrastructure spending. Conservatives, thus far, oppose those measures. One assumes that conservatives and progressives would also disagree about the structure of any tax cut. Conservatives want to cut the capital gains tax and other taxes whose burden falls overwhelmingly on the wealthy. Progressives, in line with economic research on what kinds of stimulus are effective, are more likely to favor FICA credits and the like. At the moment, John McCain is pushing the idea that refundable tax credits are a form of “welfare” and not a tax cut at all. I haven’t heard a ton of conservatives break with McCain on that issue, so presumably that will continue to be the party line.