Ramesh Ponnuru and I have a new article in The New Republic where we argue that conservatives should embrace more aggressive monetary policy while liberals should not fear budget tightening. Our point is that the Fed could be doing far more to restore robust nominal spending and if it did so, it would be possible to do fiscal consolidation without harming the economy. For example, if the Fed were targeting nominal GDP and government spending cuts proved to be contractionary, then the Fed would offset them so as to maintain a stable nominal GDP growth rate. It is a win-win situation. Conservatives get fiscal consolidation and liberals get a meaningful boost to aggregate demand.
Joe Weisenthall objects by arguing the following: