Both the left and the right have been consistently peddling the wrong prescriptions for our economy. Most liberals are focused on the need for additional fiscal stimulus, and dead-set against any premature moves toward what they consider “austerity.” Spending cuts, they say, would weaken the economy. Most conservatives are equally insistent that spending cuts need to begin now—and claim that by reducing expectations of future tax increases these cuts would help the economy. At the same time, they consider monetary policy dangerously inflationary and want the Federal Reserve to tighten it, or at least not loosen it any further.
Both sides are mistaken: the right on monetary policy, the left on budget policy, both on the relationship between them.
Read Full Article »