The Problem With the Fiscal Cliff Is That We Need a Bigger Deficit

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Reading the generally terrible coverage of the “fiscal cliff”, you might have come away with the false impression that the danger lies in failing to come up with a plan to close the deficit.

That is not the problem at all. The danger with the fiscal cliff is that we might close the deficit too soon, and push the economy back into recession with an overly contractionary budget policy.

The markets are telling us that we need a bigger deficit next year, not a smaller one.

This entry was posted in Budget.

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