Officially, unemployment stands at just under 10% and U6 around 16%. But Treasury outlays for unemployment compensation, according to ZeroHedge.com, suggest the real unemployment rate is closer to 13%. Were that common knowledge, Obama would be impeached.

The "more deficits" part will help if, and only if, the spending is targeted to investments that will help create the wealth that will make paying down national debt possible. And based on its performance since this crisis began, I have zero confidence that Congress will be able to target this spending appropriately. Here's a hint, guys 'n' gals: Tax breaks are less efficient at stimulating the economy than spending, and spending is less efficient than outright job creation, a la the Depression. Yet that, and such other options as diverting excessive military spending to more productive civilian investment are not even on the table.

That's the bad news. The worse news is that all our other options will be even less helpful, or even (e.g. drastic spending cuts to reduce the deficit) counterproductive.

All we need is a national sales tax of, let us say, 2%, and on a 3-year sunset frame, i.e. if it doesn't lower the deficit, it goes away. It won't stop anyone from buying a product anymore than state sales taxes of 5-6% do now. Think about it: you buy something for $100 and the governor gets another $5. Does that stop you? Make it another $2 for Uncle Sam. Will that stop you? You won't even notice it. Accompany it with a rebate for low-income folks, and then push Social Security minimum retirement age to 65 for real, change the corporate income tax structure with an alternative minimum tax based on gross sales wherever they are made (while lowering the top rate to 25%), and junking the alternative minimum tax on individuals making less than $1 million AGI, and you may just have the right combination. You live in this great country, you pay your dues! Don't want to pay your dues? Go live somewhere else!---CliffA

Wow. This is by far Ghilarducci's dumbest post to date--and that's a high bar over which to leap! Perhaps the government's inability to control any type of spending and its constant threats to tax the hell out of anything that moves is what is really driving "private pessimism." Anyone who cites Krugman is a bigger idiot than he is.

I'm with you kffdn...this is absolute idiocy

I don't even know where to begin in order to describe the sheer lunacy of this article.

The country's in debt ($12,359,785,741,124 - say that number three times fast) with a dwindling source of income (record unemployment - see comment #1)... this is no time to be straining the economy any more than we have to. The analogous well is running dry; we cannot afford to continue drawing from it!

Let us not forget that the government has no source of income except from its citizens. To rack up debt at a time like this is to wrongfully, and dangerously, plunder the peoples' piggy banks. Taking money away from the average business, family, and individual, at a time like this, is to disregard common sense altogether.

When someone, in the real world, is in debt up to their eyeballs, what's the solution? It's certainly not taking out another credit card or going on a spending spree. That compounds the problem, and frankly sounds like insanity. Instead, that someone needs to make sacrifices; needs to spend less; needs to go out to eat and to the movies less often. They need to make the most substantial payments on their debts as they can. Ultimately, they need to live a lifestyle they're unaccustomed to until their financies are in order. The American Federal Government is no different. We cannot forget, as the citizens of this great nation, the government is our collective household.

It's time we get our finances in order.

I second juggernaut. We have had enough taxing and spending (from both political parties) already. It is absolute insanity to think that we can fix our economic problems by doing more of what produced them in the first place.

And, unless it is accompanied by dropping or modifying the federal income tax drastically, the idea of a national sales tax is even more lunacy. Maybe cliffa would not notice the extra 5% outlay but I would. After taxes, mortgage, helping children pay for college, etc. the well is pretty dry (and that doesn't include much eating out).

If don't wake up and get our finances in order soon we're going to have much bigger problems than 13% real unemployment.

I read this yesterday and like juggernaut, couldn't even begin to formulate a response to such stupidity. I try hard to comment on, or if necessary, ridicule the message without actually speaking of the messenger, but this is so far out of the realm of economic reality that it makes me, at least, wonder if Ghilarducci has ever taken even Econ 101. All the other figures aside, including the absolutely astounding $1.6T FY2011 deficit that Barry and his pals have cooked up, the combined unfunded liabilities of Social Security and medicare is $107 TRILLION dollars! With current projections, it means that in 2050, over 30% of all wages earned in the US will go for those two programs! It's just crazy!

On the other hand, since the Dems seem intent on following the kind of ruinous advice people like Ghilarducci provide, the chance are there will be strong Republican majorities in the House and Senate and hopefully, instead of being stupid, they will put us back on the road to prosperity and reduced debt.

Listen, I voted for George W, twice, and to blame this financial hole we are in on "Barry" is utterly ludicrous. My stock portfolio during the last decade has had some of the lowest returns in my lifetime. Over the last 12 months my investments have finally started tracking upwards. Also, I would venture to say all of us have retrenched, in terms of our spending, that is why inventories go unsold and companies have layoffs. The best way, and least painful way, to get out of this mess is to have targeted government spending. I am surprised that no one discusses the debt incurred trying to run two wars. I certainly agree though, that everyone needs to reduce our personal debt and stop relying on credit cards and 2nd mortgages.

This article truly is astounding. You cannot tax your way into prosperity. You cannot borrow your way out of debt. Our debt is a runaway freight train that is putting the stability of our nation in grave danger (Moody's credit rating warning should be a hint). Econ 101 would not only be good for the author, but for all of the Dems in power. Perhaps while they are at it, they could enroll in "Listening to America 101" as well.

We don't want socialism we seem to be racing to embrace--it's a mess--and has resulted in less freedom and prosperity everywhere its been installed. It's too bad our President cannot learn the lesson even Bill Clinton was able to learn--to govern from the center. Bill Clinton learned what happens when you force feed a liberal agenda on America--massive shifts in power in the next midterm election. So, go ahead Dems, remain tone deaf...

There's so much economic nonsense in some of the comments, I'm not sure where to begin. Ok, I do know where to begin: anyone who combines Social Security and Medicare into a single "oh my god it's going bankrupt" statement is being so intellectually dishonest that you should distrust everything else they say. SS is, according to the non-partisan CBO, entirely solvent until 2044 according to the best projections. That's actually longer than any other time in the program's history. Medicare is funded entirely separately from SS, and it is indeed in trouble, but primarily because of runaway health care costs that other developed countries have figured out how to control.
Government spending is not analogous to a "collective household" for one absolutely critical reason - households can't print money, aka households have only a "fiscal policy" to work with, not a "monetary policy". Too bad Obama has cast his (and the country's) lot in with the "strong dollar" advocates whose position on monetary policy has caused a trade deficit that is far more future trouble for this country than a couple of years' high budget deficits. To discuss the economy entirely in terms of budget deficit while ignoring the trade deficit is to demonstrate incredible ignorance of macroeonomics in the modern world.
Finally, don't be scared by absolute numbers. Any economist will tell you that budget figures should always be presented as percent of GDP, and in that context, even the temporarily high budget deficits right now are lower than post-World War II, even though we're still actively fighting two wars right now.

Thanks to mbelvadi for some sensible comments. The hysterics about the debt constantly confuse debt and the current budget deficit. The true believers who are attacking Ghilarducci allegedly believe in free markets. Then why is the U.S able to move current bonds at such low rates? Why does the market say there isn't a huge debt problem?

The U.S. sold a historically high level of debt last year ($2.1 trillion) but the benchmark Treasury yield has, according to the Wall Street Journal, "stayed at an historically low level, churning between 3.2% and 3.9% for most of the past year." Markets are not signalling any fear of either the U.S.being unable to repay debt, or of future inflation. Why? Because they see 10 percent unemployment in the U.S. stretching forward, and an anemic jobs recovery at best.

And that is Ghilarducci's point! The economy is still very weak, and needs stimulus. (Her "tax" reference to Senator McConnell is just a joke to stir up the village idiots, and it seems to have worked--Ghilarducci knows not to raise taxes in a deep recession, except perhaps on the very rich, where it won't affect the macroeconomy.)

Juggernaut makes a traditional, and wrong, equation between a national economy and a household. Governments need to stimulate the economy in a downturn, and they need to borrow to do so. The problem in the U.S. is that we entered this deep recession with a high level of budget deficits debt caused by Bush's wars, domestic spending increases, and the refusal to pay for them while actually pushing tax cuts--incredible irresponsiblity, aided and abetted by Congress, when the business cycle was up. Clinton and Gore left Bush a federal budget in SURPLUS, for God's sake, and eight years of Republican rule torched that surplus, and drove our economy into a hole, while creating the greatest potential economic crisis since the Great Depression.

Bush and his allies (and folks like the rightwingers here on brainstorm) pushed us into this very deep hole, and Obama is struggling to get us out. But the last people to take advice from are the ones who caused the problem and their syncophants--like many of the commenters here.

I'll put good money on the table that swygant didn't feel the 5% state sales tax he just paid on his new $400 HDTV, and wouldn't feel an extra 2% for a Federal sales tax either. It wouldn't stop him from buying it in either case.

The mass of commentary here is a mass of finger pointing. Nobody put forward a set of concrete proposals, in light of national commitments (including two wars for which we haven't had the guts to pay), to lower the deficit while leaving room for targeted job creation measures. Yeah, some spending has to be reined in--for both near and long term. But there is no question that the revenue structure has to be changed as well. I tried to offer some concrete agenda here, albeit incomplete. The folks who think the world is a free lunch are living on the planet Zolar along with Joe Stalin's communists.

CliffA

macheath - not McConnell - gets it right: "The U.S. sold a historically high level of debt last year ($2.1 trillion) but the benchmark Treasury yield has, according to the Wall Street Journal, 'stayed at an historically low level, churning between 3.2% and 3.9% for most of the past year.' Markets are not signalling any fear of either the U.S. being unable to repay debt, or of future inflation."

One can "thread the needle" and provide a short-term stimulus and a long-term deficit reduction if the long-term bond market rates, which macheath cites, stay low. The Agenda by Bob Woodward (1994)explains how the Clinton administration gained the confidence of the bond markets and implemented the economic policies that led to both high employment and the budget SURPLUS in 2000. Our current dilemma is much worse than 1993, but policies balancing short-term debt with long-term deficit reduction are possible (if McConnell will ever let the Senate count as high as 60.)

It's curious how "unproductive military spending" is always such a popular target. Quite aside from whatever the stuff gets used for, people seem to overlook the fact that the stuff has to be manufactured in the first place. That is, airplanes, tanks, guns, uniforms, rations, and all that other materiel gets made by somebody. It's their job, to put it as plainly as possible. Cut military spending here or there or somewhere else, and you've cut Tom's or Dick's or Harry's job, creating more unemployment.

It's all well and good to claim breezily that Tom, Dick, and Harry are now free to do something more "productive," but that's just one more irresponsible pipe dream.

The argument isn't that military spending is "unproductive," but that it is substantially LESS productive than civilian investment. There's a wealth of research to that effect.

So it only makes sense to re-examine spending priorities when we're 1) already spending so much more than everyone else on defense; 2) embroiled in two wars whose justifications and prospects for success are dubious and 3) in desperate need of both short- and long-term investment in other areas.