Elmendorf: Stimulus Now, Austerity Later

CBO Chief Doug Elmendorf testified today before the Supercommittee and said, sensibly, that “[t]he combination of fiscal policies that would be most effective would be policies that cut taxes or increase spending in the near-term, but over the medium and longer-term move in the opposite direction.” In other words, the sort of thing that President Obama proposed in his jobs bill. Higher deficits in the short term when interest rates are low and the output gap is large, followed by lower deficits down the road when (hopefully) the situation will be different.

Clearly that leaves plenty of room for disagreement around the margins about exactly which measures to adopt. But if members of Congress were willing to broadly accept Elmendorf’s ideas, we’d have an easy time working out a compromise. Instead, we live in a world where compromise is impossible because senior House aides are running around saying “Obama Is On The Ropes; Why Do We Appear Ready To Hand Him A Win?”

A legislative compromise on a bill that has a meaningful positive impact on the economy is, by definition, going to be a “win” for President Obama. It would also be a win for the American people. But if you think that beating Obama is the best thing for the long-term interests of the country, then you’ll quite sensibly work to deny him that win. Thus, no compromise and no recovery.