Now that Standard & Poor's has downgraded the U.S.'s AAA credit rating, it is important to respond boldly and, at the same time, lower expectations.
The first step is for our political leaders to frankly acknowledge the problems at hand: The U.S. economy will face a hard slog for an extended period; the political system is polarized; and, under current policies, the budget deficit will remain intractably large.
To respond to these challenges timidly or not at all would lead to such gloomy outcomes, we might as well think big.
What bold actions are legislatively feasible? A good start toward addressing our fiscal problem over the next decade would be to end all the 2001/2003 tax cuts when they expire at the end of 2012. And to give the economy a more immediate boost, Congress should triple the existing 2 percent payroll tax holiday and extend it for as long as unemployment remains elevated.
Here's a more specific four-point plan that could be carried out within the political system we have. To those who will scoff that even these proposals are politically impossible, I'd note that the scope for constructive legislation has now become so narrow and the costs of doing nothing so high, we need to make ambitious proposals and hope that the legislative constraints can be adjusted.