As President-elect Barack Obama prepares to take office, he faces a nearly unparalleled economic challenge. Instead of inheriting projected budget surpluses as President George W. Bush did in 2001, Obama will inherit a projected deficit for 2009 approaching $1 trillion. On the other hand, Obama is also inheriting an economy that is badly in need of both massive stimulus and major long-term reforms in areas such as health care, climate change and education.
Some may call for the new administration to exhibit fiscal discipline by being cautious and careful on fiscal stimulus while lowering ambition on the magnitude and timing of major initiatives on health care, education and climate change.
This would be the wrong approach. Rather than aiming lower, the right answer is a grand bargain on fiscal policy that aims higher by combining a powerful “Powell Doctrine” fiscal stimulus and a bold approach to crucial priorities with a commitment to take on our greatest long-term entitlement challenges.
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