The false choice between growth and deficit reduction

February 23, 2012

There is a raging debate about jobs and growth on the one hand and deficit reduction on the other hand. I think that is absolutely a false choice.

I believe we need a serious deficit reduction program, enacted now with implementation delayed for two or three years to give the recovery more time to get traction, and then to combine that with the stimulus.

You put those together — by the way, that framework is consistent with the budget that President Obama announced, which has a stimulus — and then begin a 10-year program for bringing deficits down to the point where the debt-GDP ratio is stabilized.

Getting the stimulus in place now is imperative given the level of fiscal drag.

The global economy, as we all know, is undergoing a historic transformation. In that context, the United States has tremendous strengths: our dynamism; flexible labor and capital markets; the rule of law; better demographics than Europe, Japan or China. We also have, among other things, enormous natural resources, including now a vast increase in captured oil and gas due to shale gas technology.

Therefore, in my judgment, we should succeed.

However, to realize that potential, we have to meet three large areas of policy challenges. If we fail to meet them, then I think we could sustain long-term economic duress and probably, at some point, a crisis.

Number one: We must move to a sound, fiscal trajectory instead of the unsustainable path we’re on.

Number two: [We need] a robust public investment in areas that are critical for competitiveness.

Number three, [we need] reform in areas that are central to our economy: K-12 education, immigration and energy policy.

I think we should have a more progressive income tax code, and I do think that the more affluent should be paying more than they’re paying now, and that is to fill the need both to significantly increase revenue and also to fund the vast array of programs that the great preponderance of American people want the government to have.

I think we need to focus on the spending side, but I think a lot of the focus that’s coming from the critics is nonconstructive. I think we must preserve a social safety net, and I think that includes the federal health-care programs and Social Security. I think we need a lot more spending in the areas of public investment if we’re going to be competitive. Go to Shanghai Airport and go to Kennedy [International Airport] and tell me which is the First World country. South Korea has greater broadband access than we do. We cannot compete if we’re not going to have public investment.

If you look at the history of this country, we’ve had tremendous political resilience. We have a dynamic society, all of which causes me to think that, yes, we’ll get back on track.

‘The United States has tremendous strengths

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