Image giving an economics undergraduate the following question: “Unemployment is high. Inflation is low. Borrowing costs are cheap. What should the government do?” and they responded “cut the short-term deficit immediately to show strength!” You’d have to give them a bad grade, right? But that’s what our government, Democrats and Republicans, are doing.
But there’s a theory that by cutting $39 billion from the government over the weekend and by Obama’s signaling that he is transitioning to tackling the long-term debt he will unleash the confidence of the private market.
From So, When Do the Confidence Fairies Arrive? << Rortybomb
Good explanation on why short term cuts are not going to help much.