I found this in a short piece by Noam Scheiber at the New Republic, and it goes to explain the Administration's thinking:
There is a logic to Orszag’s gambit, which runs roughly as follows: It’s almost certain that Congress will pass, and the president will sign, a jobs bill early next year, probably in the neighborhood of $100 billion to $200 billion. Given that, and given the difficulty of doing anything about the long-term deficit next year, the administration needs some signal to U.S. bondholders that it takes the deficit seriously. Just not so seriously that it undercuts the extra stimulus.
Okay, so the $800 Billion Stimulus...will increase to a more Krugman friendly 1 Trillion (though still short of 1.2 Trillion that was apparently needed), but in a more politically digestible way. (Oh no, we can't do 1 Trillion in one bill, but $800 and $200? That we can do!) All this to gain the confidence of the Bond Traders...
...so the next question is, is this worth it to get...whatever we get from the Bond Traders? I'm not sure. The cuts don't seem large enough to risk another 1937, my main concern. More on this as it comes...
