Sunday, May 30, 2010

Economic recovery depends on "gas now, brake later"?

The first time I came across the phrase was in this piece in the Economist:
Mr Obama’s fiscal policy has been described as “gas now, brake later”: wider deficits in the near term to keep the economy out of depression (which would risk even bigger deficits), followed by a switch to deficit reduction to cap the rise in the national debt. The switch, however, remains a future abstraction.
So, who actually coined that phrase anyway?  (I'll admit that it is too darn "cute" a metaphor.  So, it can't be Thomas Friedman ... muahahaha)
A Google search for "gas now, brake later" points only to the Economist as a source for it.  So, ahem, the Economist making things up but does not want to claim ownership and wants to pretend that it is something like a well-accepted descriptor of the current administration's economic policies?  Hey, whatsup?

Anyway, where will this sticky gas pedal metaphor take the US?
Fortunately, America has time. Its favourable demographic trends mean its fiscal day of reckoning is further off than Europe’s and the dollar’s reserve-currency status provides manoeuvring room. Yet this may not be the blessing it seems. Getting politicians to take the deficit seriously may well be impossible unless the bond market forces them. For now Europe’s crisis has done exactly the opposite: as investors flee the euro, the dollar has soared and Treasury yields have plunged. There is not much incentive to take the foot off the gas-pedal and apply the brakes just yet.
Great!

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