The economy seems caught between a rock and a hard place: ever mounting deficits and ever mounting job losses - leading to a soaring jobs deficit. The economy should have created some 3 million jobs for new entrants into the labor force over the past two years, instead it has lost roughly 8.5 million.
If spending is cut back, to tame the deficit, this jobs problem could only get worse. If spending is not cut back, long-term interest rates may rise as inflationary expectations grow. And the jobs problem may still grow worse.