Another Fiscal Stimulus for the US?

andrew

The Economist online has a pretty interesting debate about whether the US needs another fiscal stimulus. (Screenshot below so people get the jist)




linky

What do people think? I don't recall (though I could most definitely be wrong) people clamoring for a bigger stimulus around the time of the first one. This paper seems to indicate that if another stimulus is enacted, then it should be done so in a different way to the previous one because "While states and localities received substantial grants under ARRA (the last stimulus), state and local governments have not increased their purchases of goods and services:"



That paper contains numerous references to papers which talk about the exact size and nature of the multiplier, and so I think it's slightly unfair to critisize the size of the first stimulus, given that it's really not clear how much GDP should have risen in the first place. Perhaps criticizing the exact implementation would make more sense?

Anyway, what do people think?

nesf

The problem as ever is that entities in a depressed economy tend to hoard cash instead of spend it, so any effort at stimulus has to be specifically designed to make this kind of behaviour very difficult otherwise said stimulus is going to have very little effect. e.g. pumping money into risk adverse banks will do very little to improve credit flow in an economy etc.