How to Avoid a Lost Decade

"Larry Summers tries to stop the austerity movement from undermining the recovery:

How to avoid our own lost decade, by Larry Summers, Commentary, FT: Even with the 2008-2009 policy effort that successfully prevented financial collapse, the US is now half way to a lost economic decade. ...

That the problem in a period of high unemployment, as now, is a lack of business demand for employees not any lack of desire to work is all but self-evident... When demand is constraining an economy, there is little to be gained from increasing potential supply. ...

What, then, is to be done? This is no time for ... traditional political agendas. ... The fiscal debate must accept that the greatest threat to our creditworthiness is a sustained period of slow growth. Discussions about medium-term austerity need to be coupled with a focus on near-term growth. ... Substantial withdrawal of fiscal stimulus at the end of 2011 would be premature. Stimulus should be continued and indeed expanded by providing the payroll tax cut to employers as well as employees..."

at  http://economistsview.typepad.com/economistsview/2011/06/how-to-avoid-a-lost-decade.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+EconomistsView+%28Economist%27s+View+%28EconomistsView%29%29