So much economic nonsense has been spouted in Washington, D.C., the past few days, with Obama focusing on "cash for caulkers," the Republicans worried about his "ambitious" agenda inhibiting private-sector investment, and the press abetting or at least mistaking the terms of this "debate," it's worth considering some fundamental points made by this analysis.

The paper, by Joseph Gagnon of the Peterson Institute for International Economics (which is certainly no left-wing outfit), points out that the recent recession was more like the Great Depression than previous ones, and thus calls for government intervention. In a nutshell, says Gagnon, the goldbugs are wrong that hyperinflation is looming. Yes, the unemployment rate fell in November, to "only" 10 percent, but it's absurd to assume that definitely represents some sort of a turn-around. The fact is we've seen one false dawn after another in the past year, and the odds of a strong rebound any time soon are slim to none. Where is inflation to come from?

As Gagon observes, "Governments and central banks around the world eased macroeconomic policies aggressively in response to the 2008 financial crisis, arguably forestalling a second Great Depression," and he goes on to note: "More recently, however, policymakers have been talking about when to withdraw the stimulus. This focus on exit is misguided. Current forecasts show an extended period of economic stagnation in the developed world. We need additional stimulus now."

The primary issue he leaves open is whether government stimulus should come in monetary or fiscal form.

To be sure, Gagnon argues that monetary stimulus is normally preferable, because it doesn't impact federal revenue, and thus would not increase the current federal budget deficit and the debt required to finance it. But he acknowledges that problem may be outweighed by concerns over jobs.

As Gagnon puts it, there are two reasons to believe such concerns ought to be paramount: Traditional estimates of how effective monetary policy can be at stimulating GDP, the so-called GDP gap, are difficult to make with any confidence, and "excess" unemployment, that is, the amount beyond what is normal even during recovery, may be greater than most forecasts assume.

So the economist concedes that he may wrong to favor a monetary response alone to the current environment. "This choice thus will be too timid if it turns out that the GDP gap is more negative than estimated. For that reason, and because of the possibility that the structural rate of unemployment may have risen more than estimated, direct labor market policies may be an appropriate companion to the policies considered in this paper."

Besides the bugaboo of inflation, Gagnon takes on the concern in some quarters that more stimulus of any kind will merely create another asset bubble. Here he notes that it's primarily the use of leverage that creates such bubbles, and that leverage is currently falling. And he says bank regulators can easily and should most definitely see to it that it doesn't return to the levels that fueled the most recent bubble.

That leaves the question of what type of fiscal stimulus would be most effective should a monetary response be insufficient. But Gagnon leaves that question untouched.

So here we arrive at the current impasse in Washington, with Keynesians arguing for spending on infrastructure, alternative energy projects and the like and Friedmanites arguing for tax cuts instead.

My two cents: The clearest indication of the failure of tax cuts to generate job growth is the economic record of the Bush Administration, where they generated the smallest number of new jobs of any recovery since the one following the Great Depression. So why not try something else for a change?

If only the media coverage of the dueling Beltway job summits during the past couple of days dared point this out, we might have a more rational basis for policy discussions. But I, for one, am not holding my breath.