In favor of deficit spending

Lately I have spent a lot of time fighting despair at the prospect of the widely forecast rout of Democrats in the Congressional elections, and the "common sense" rants about government spending under Obama - as Republicans in Congress stood as the principal obstacle to spending the kind of money that might have jump-started growth.  Of course the big problem is that we don't have the Chinese Communist Party on our side.  They know how to do stimulus spending (40 high speed inter-city rail projects).  But that's for another day.

For today - thanks to Paul Krugman - here is the basic picture - spending continues in normal growth trendline but income has plummeted due to collapse in the private sector.  So - contrary to people like Niall Ferguson who say government stimulus will just lead people to buy gold and Chinese securities - it is clear that government spending is needed to create jobs - such as the (too small) $50b infrastructure program the Republicans refuse to support.  The short term deficit is now about $1.3 trillion.  That is why the Fed is printing money.  But if we really want to spur growth we have to make direct investments - such as Obama proposes.  We can if we let the Bush tax cuts above $250k expire - and use the revenue generated to put people to work.  VOTE DEMOCRATIC!