while it's difficult to see the deficit substantially shrinking until the economy recovers, alan blinder has some suggestions. he's a professor of economics at princeton and former vice-chair of the federal reserve. subtle, counterintuitive messages don't work well in public debates, which is too bad, because the right policy for the federal budget deficit today is both subtle and counterintuitive. lets start with the easy part. the deficit is too large, just as everyone says, but what, exactly, does that mean? there are two correct answers. first, today's federal deficit is so huge-- over $1.5 trillion in the current fiscal year-- that we cant keep it up very long, but, here's the first subtlety: we can keep it up for a while. after all, the treasury is having no trouble borrowing vast sums at very low interest rates today. the second, and more important, correct answer is that the budget is on an unsustainable long-run path-- meaning that current trends cannot continue indefinitely. eventually, taxes must be raised and the spending curve must be deflected downward, not one, but both. b

joining us now are the two leading economists, alan blinder and moody's mark zan. >> thank you. >> to the fed's purchase of mortgage-backed securities. which was the most important for the economy. >> it also included the fiscal stimulus. somewhat to our surprise, we didn't know going into the work, at least according to this model, the panoplyia of financial policies, including the things you mentioned and other things were more important qon quantitatively than the stimulus, the tacks rebates of 2008 and so on. >> suzanne: makers, not all of the policies have worked as well. in particular, the loan modifications are not working necessarily. how do we fix housing, do you think? >> well, you're right. i think it's -- as you put it, if you rank the order of the different policy responses, the mortgage foreclosure efforts have been least successful. at this point, i think we need to maintain currently low interest rates, and they need to work through the problems with the foreclosure mitigation plans, and make them work a little better. hopefully we get some jobs, and with that, i think

economists mark zandi and alan blinder said the stimulus of nearly $800 billion, plus the wall street bailout, known as tarp, and other measures, likely warded off an outright depression. the study found that without those programs the gross domestic product would be 6.5% lower; eight million more people would be unemployed and prices would be falling as deflation set in. but such benefits also come with high costs. last week, the white house projected a deficit of nearly $1.48 trillion for this fiscal year. that's down slightly from an earlier estimate, but still amounts to 10% of the nation's total economic output. at the same time, republicans continue to charge all that spending is doing little to help the economy. and they warn of tax hikes to come. north carolina's virginia foxx spoke on the house floor today. >> $6.1 trillion that's how much money the federal government has spent in just the first 18 months of the obama presidency, washington is spending $17 million every minute of every hour of every day, there's only one way to feed that kind of destructive habit: washington