"Our macroeconomic view, in short, can be stated as follows. We must escape from economic management by quarterly indicators and the demands of the political business cycle....Our priority should be a medium-term fiscal framework, with the first steps starting this year. That must be matched by improvements in the delivery of health, education, skills, and technology; social protection for those in need; and a decent regard for the long-term investments needed to rebuild an economy crushed by the bubbles of wishful thinking."
Sachs and Osborne point out what most of us know -- we will never return to good economic growth with unsustainably high government budget deficits -- so they advocate real policies to quickly address and reduce the size of government deficits. Well intended short-term stimulus at this point, according to these authors, would be counter-productive. But they do not discount a role for government since they forcefully advocate a public role in "... regulation, high quality education, pre-commercial innovation, and a world-class science and technology base.
Sachs is director of the Earth Institute at Columbia University . More information about him and a link to the FT article can be found at:http://www.earth.columbia.edu/articles/view/1804
It is a question of priorities. It doesn't matter if it was Bush or Obama who caused a larger national debt. It doesn't even matter the goodness or the motivations of the government spending. What matters most today is that most people -- at home and abroad -- wonder and worry if the US will find a way to reverse the very large deficits of the last couple of years. We see what those kinds of worries did to Greece and the Euro. Greece now must experience a macro shock treatment if it is to convince the world that it is credit-worthy. The US situation is not as dire now -- but the lesson is instructive.
First things first. If we remove the shackles of debt incredibility then we set the stage for a return to economic growth. It is this economic growth that will restore the job engine and the income growth that will allow some wiggle room to work on social inequity. Reversing the order of things right now makes no sense and helps no one.