Explaining Southern California's economy

Visual Aid: Why fiscal responsibility may cost the U.S. money

The above chart is from the U.S Treasury's Treasury Notes blog (Cute, right?). It was written by Jan Eberly, who argues that this is not a good time to be pulling back on support for the economy, even though we're running up some significant deficits in the aftermath of the financial crisis. 

What it all boils down to is a question about what we should do in the short term:

While there is a nearly complete consensus among economists and budget analysts that deficit reduction sufficient to stabilize our debt would have significant long-run economic benefits, the literature also cautions that fiscal consolidation is contractionary in the short run. Though under certain conditions the withdrawal of fiscal support can be partially offset by economic and policy changes, those conditions do not prevail in the United States today. Interest rates are currently at historic lows, leaving little room for them to go lower, and though exports have grown at a healthy pace recently, they cannot be counted on to grow enough to offset substantial near-term cuts.

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