(4 pm. – promoted by ek hornbeck)
From Steve Benen at the Political Animal:
Yesterday, Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, explored in some detail the effects of a deficit-reduction package. His comments generated almost no media attention, which is a shame because they seem rather important.
Elmendorf argued that, in the medium and long term, small deficits could improve economic output. But what about now, in the short term, when the economy is struggling badly?
In the short term, while the economy is relatively weak and economic growth is restrained primarily by a shortfall in demand for goods and services, the policy would decrease the demand for goods and services even further and thus reduce economic output and income. [emphasis added]
The CBO director’s comments came the same afternoon as Federal Reserve Chairman Ben Bernanke reminded Congress that the recovery is still fragile, and that “sharp and excessive cuts in the very short term would be potentially damaging to that recovery.”
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