Thanks to former President George W. Bush - remember the compassionate conservative? - I have a good name for the fundamental principle that should guide the Democratic alternative: compassionate deficit reduction.
The basic idea that if you increase government spending or you cut people's taxes that stimulates the economy and lowers the unemployment rate, is a very widely accepted idea. It's in every economics textbook, that's what we teach our undergraduates, and I certainly try to teach them the truth.
Fewer people working means permanently lower tax revenues.
Our estimates suggest that a tax increase of 1 percent of GDP reduces output over the next three years by nearly 3 percent. The effect is highly significant.
I think where I differ a little bit, we absolutely have to think about the deficit looking down the road. And certainly that's something the president has said that we need to, as the economy recovers, have a plan in place for getting it down.
Recovery measures work better when they raise confidence - as Franklin D. Roosevelt understood. His fireside chats, and his inaugural address proclaiming he would fight the Great Depression with the same resolve he would muster against a foreign foe, were aimed at reassuring Americans.
