Deficit reduction cannot and should not be a goal unto itself. Fiscal policy is a powerful tool Congress has to control the money supply. Simple application of the laws of supply and demand would show that when unemployment is high, there is a high demand for money and the money supply must increase. When inflation is high, the demand for money is low, and the money supply must decrease.40 comments on this story
Generally, unemployment and inflation share an inversely proportional relationship. To increase the money supply, Congress must often deficit spend. To decrease the money supply, it must accrue a surplus, and when no adjustment is needed it can spend exactly what it takes in. Currently inflation sits at 1.59 percent (for the month of January) and unemployment sits at 7.9 percent. For the time being Congress should engage in deficit spending, and as unemployment comes down then deficit reduction should become the goal.