Stimulating deficit dilemma

NY Times:

When economists met privately with Democratic leaders of the House on Wednesday, the topic was how to pump billions more into the economy to stimulate job creation. They left with a homework assignment: How to cut trillions from future federal budget deficits.

That seemingly contradictory mix captures the unusual political and policy tension in the White House and Congress these days as the politicians deal with an economy that has begun a slow but jobless recovery and a public that is increasingly fretful about the accumulating debt.

Not since the early 1990s have Washington’s policy makers faced this balancing act between demands for immediate economic stimulus and pressure for longer-term plans to restore fiscal stability. But this time is a lot worse, both in the severity of the economic downturn and the size of the deficit.

“It is a complicated balance because these imperatives point in different directions,” Lawrence H. Summers, the senior economic adviser to President Obama, said in an interview. “Imagine a business if it were trying to execute a plan of rapid expansion for two years, followed by retrenchment and cost-cutting for the next three. It would be a complicated business strategy to execute.”

The complications are evident as Democrats shape the stimulus measures under discussion now, as well as in the administration’s drafting of its budget for the fiscal year 2011, which is due by February and which will include “proposals to put our country back on firm fiscal footing,” Peter R. Orszag, the budget director, said last week.

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It is not just the stimulus. Democrats are proposing health care programs and anti energy programs that will both suck money out of the economy. This will leave less revenue for dealing with the huge deficits they are already running as a result of other stimulus programs, and especially the one introduced earlier this year.

I still do not get a sense that they have any plan to deal with the deficits they are piling up. You certainly do not get any reassurance from the way they eagerly pile on more an more debt with health care and energy programs that drive up cost of both health care and energy. Both mean that voters will have less left over to invest in pumping up the economy to help pay for the mess the Obama administration is making.