The uptick in market volatility this week represents a blip compared to what may occur when markets are forced to deal head on with a serious stimulus reduction.
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We can imagine both bullish and bearish outcomes to stimulus reduction, but believe the Fed would be wise to choose a path that is well telegraphed and methodical.
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In the same moment, he has urged both expensive stimulus and deficit reduction.
Arguments over the economy have made legislators reluctant to endorse either new stimulus or deficit reduction before the mid-term elections in November.
Congress got itself in this mess because a few dozen self-styled tea partiers have refused since last summer to help build a consensus agreement on either short-term stimulus or deficit reduction.
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In theory, he and Congress could couple a bigger stimulus with more ambitious deficit-reduction by reforming entitlements (such as health care and pensions for the elderly) and taxes.
Sam Nunn (D-GA), chairman of the Senate Armed Services Committee, roughly 80 percent of the "sacrifice" the government is being asked to make to achieve deficit reduction and provide economic stimulus is coming out of Defense Department spending cuts.
It is possible that another sharp decline in stock prices combined with a worsening jobs picture could drive President Obama and Congress to a deal along the lines of what the White House is likely to propose next week: a short-term stimulus combined with longer term deficit reduction.
And finally, they must design a fiscal plan than includes both short-term stimulus and real long-term deficit reduction.
But that stimulus should be paired with a vastly larger dose of long-run deficit reduction perhaps 10 to 20 times as large as the stimulus over the 10-year budget window.
In his letter, Gaffney details the dual benefit to America and Americans of a tax reduction -- a necessary stimulus to the civilian economy and a concomitant boost for the Nation's defense.
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As inflation begins to take hold, though, the reduction or removal of government stimulus programs, and especially the differential speed at which this will occur around the world, will pump increased volatility into commodity markets.
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So let us work together for the worldwide reduction of interest rates and a scale of stimulus round the world equal to the depth of the recession and the dimensions of the recovery we must make.
Once these benefits have been bestowed, the economy has recovered, and the need for deficit reduction has become as urgent as the need for stimulus is today, how does Congress take them away?
Like the House-passed stimulus bill, the Senate Republican proposal would also accelerate marginal rate reduction of the 28 percent bracket to 25 percent.
While deficit reduction plans must go ahead, "measures to reduce the stimulus should be taken only once recovery is secure - and this is the position we will continue, like our European partners, to follow", he said.
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Marginal tax rate cuts might bring needed new stimulus to the economy, but in most cases probably at the expense of deficit reduction.
They have long argued that Labour have failed to put forward an alternative to the government's deficit reduction plan and would simply borrow more to pay for a short-term stimulus.
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