Wall Street's preferred deficit cuts: short-term gain with long-term pain

A clock on top of a $100 dollar bill represents keeping track of your money and watching your debt.

Following Marketplace's interview with Douglas Holtz-Eakin on spending cuts and the debt ceiling

JEREMY HOBSON: For more on this story, let's bring in our regular Monday guest Julia Coronado. She's chief economist with the investment bank BNP Paribas. She's with us live from New York. Good morning.

JULIA CORONADO: Good morning.

HOBSON: Well Julia if there is a deal that comes along with steep spending cuts, as Douglas Holtz-Eakin was just talking about -- would that satisfy the markets do you think?

CORONADO: Well, I think the ideal outcome from the market perspective, and also probably from the rating agency perspective, is something that does address the entitlements as Mr. Holtz-Eakin mentioned, and those longer term structural issues that are just going to get worse and worse, and does so in a credible way. But at the same time, doesn't cut too much or raise too many taxes in the near term because the recovery is fragile and if you do start shrinking or going back into recession, then that fiscal austerity simply becomes infeasible. So you want to ramp it up gradually, let the economy continue to get its feet under it, and then you can potentially grow your way to pay off these deficits. But you can't bring the hammer down too quickly in the near term.

HOBSON: Julia Coronado chief economist with the investment bank BNP Paribas, thanks so much as always.

CORONADO: My pleasure.

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