The odds are better than 50-50 that we will have a recession within the next few years. What does the Fed normally do when that happens? The Fed normally cuts real interest rates by five percentage points. Is it conceivable that there is going to be room to do that, even maybe allowing for Q.E. [quantitative easing], even recognizing that maybe rates could become negative 50 basis points? I submit that it’s not.

So, changes in the fiscal monetary mix are essential. They are the only tools available when the next recession comes, and I would submit that they are desirable right now.

What are the crucial elements of changing the fiscal monetary mix? One is a substantial increase in public investment. It is insane that federal investment in infrastructure is now net negative at a moment when interest rates have never been lower. And precious little is happening at the state and local level, either.

Second, strong support for social insurance. When Keynes came to the United States in 1942, he pointed out that an important virtue of Social Security was that it could absorb the excess savings that would potentially hold back U.S. economic growth after the Second World War. Those considerations were not relevant in the succeeding 60 years, but they potentially are relevant in our current period of secular stagnation. Note that an expansion of pay-as-you-go Social Security does not raise the annual budget deficit, but in every economic model contributes to raising aggregate demand by enabling households to look forward to more secure retirements.

Third, there is a strong case for doing what we can to promote housing investment. We are managing the cycle in the worst way possible from the point of view of housing. We got all of the lower-middle-income and poor people into their own houses when the price was going up and was a bubble. Then when the price plummeted, they all sold to private equity firms who rented the houses out at a 10 percent yield and earned tremendous capital gains. This is exactly the wrong moment for support for housing to be at a minimum rather than a maximum.

Fourth, related to my first point, this is the moment to be maintaining the infrastructure we have. The one thing we know — if you look at airports, if you look at highways, if you look at the water system of Flint, Michigan — it is much more costly to defer maintenance than it is to do maintenance promptly. It is every bit as much a burden on my children’s generation to defer maintenance as it is to issue paper debt, and I promise you that the costs compound far more rapidly with deferred maintenance than they do with the 13 basis points that represent the real interest costs of current long-term federal debt.

The most important determinant of our long-term fiscal picture is how successful we are at accelerating the economy’s growth rate in the next three to five years, not the austerity measures that we implement. People concerned with our long-term fiscal health should be redoubling their focus on the currently inadequate growth rate.