A great post by Richard Heinberg. The sequester and any other deficit reduction measures will reduce GDP in a nearly 1:1 ratio. If you think the private sector is going to step in and replace that government deficit spending in a recessionary environment then you are being delusional.
His recommendation is the way forward, but we won't do it voluntarily.
The best way forward would be, yes, to continue deficit spending, with the Federal Reserve buying up most new Treasury debt and rebating the interest to the government (as it has been doing with its QE programs) . . . but—crucially—to shift that spending toward supporting a transition to a post-growth economy. Downsize the financial industry with re-regulation and a tax on financial transactions. Organize a massive debt jubilee. Provide incentives for the development of local cooperative enterprises geared toward import substitution. Create make-work programs building low-energy public transit, constructing renewable energy infrastructure, and insulating homes. Train a generation of young ecologically savvy farmers and provide them with the land and tools they’ll need to succeed.
