Tuesday, November 25, 2008

Obama promotes fiscal restraint as counterpoint to spending plans



The economy's problems are tied to a large decline in aggregate demand, which means that more demand is needed, not less or the same. While Obama's spending plans are good, his perceived need to balance that out with spending cuts will likely not produce sufficient new demand to turn things around. His appointment of Peter Orszag to OMB was a dead giveaway. Orszag is a deficit hawk as are other members of the Obama economic team. Obama and his team are operating under the notion that the government is fiscally constrained, when in fact it is not. This is gold standard thinking.

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