JONATHAN COHN JULY 8, 2011
Paul Krugman just posted this graph. The blue line is the interest rate on ten-year bonds. The red line is the unemployment rate. The higher the blue line, the more we should worry about the federal deficit. The higher the red line, the more we should worry about jobs. And yet the debate in Washington right now is almost exclusively about how to reduce deficits, primarily by reducing government spending.
Addressing the government's long-term budget problem is important. But putting people back to work is also important. It's possible to do the two things simultaneously. In fact, an agreement to increase short-term deficits in ways that boost growth and then reduce long-term deficits through structural economic policy changes would be pretty close to ideal. But the chances of that happening seem awfully slim right now.