Cold-turkey deficit reduction would cause a significant recession. A recent analysis by the Congressional Budget Office estimated that going headlong over the cliff would cause our gross domestic product, which has been growing at an annual rate of around 2 percent, to fall at a rate of 2.9 percent in the first half of 2013.

Tax increases appear to have a very large sustained and highly significant negative impact on output. Since most of our exogenous tax changes are in fact reductions, the more intuitive way to express this result is that tax cuts have very large and persistent positive output effects

There's a joke in economics about the drunk who loses his keys in the street but only looks for them under the lightposts. When asked why, he says, 'because that's where the light is.' That's the problem with the deficit.

If increasing income equality is the goal, it might be wiser to put money into infrastructure than to subsidize manufacturing. Construction also pays good wages, but with lower educational requirements. And America's infrastructure needs are enormous.

A successful argument for a government manufacturing policy has to go beyond the feeling that it's better to produce 'real things' than services. American consumers value health care and haircuts as much as washing machines and hair dryers.

The goal of long-run economic growth without asset price bubbles is not only achievable, but is something we should expect if we put a sound regulatory framework in place and if policymakers remain vigilant.

If you think about it, candidate Obama, Sen. Obama, was running on sort of long-run economic issues, like restoring prosperity to the middle class, dealing with the perennial problem of health care in the United States. He talked a lot about the budget deficit, about the need to transition to clean energy.