How to Avoid a Global Double Dip Recession: Make Pigs Fly

Nouriel Roubini, Dr. Doom, has advice on avoiding a global double dip recession:

First, in countries where early fiscal austerity is necessary to prevent a fiscal crisis, monetary policy should be much easier – via lower policy rates and more quantitative easing – to compensate for the recessionary and deflationary effects of fiscal tightening. In general, near-zero policy rates should be maintained in most advanced economies to support the economic recovery.

Second, countries where bond-market vigilantes have not yet awakened – the US, the UK, and Japan – should maintain their fiscal stimulus while designing credible fiscal consolidation plans to be implemented later over the medium term.

Third, over-saving countries like China and emerging Asia, Germany, and Japan should implement policies that reduce their savings and current-account surpluses. Specifically, China and emerging Asia should implement reforms that reduce the need for precautionary savings and let their currencies appreciate; Germany should maintain its fiscal stimulus and extend it into 2011, rather than starting its ill-conceived fiscal austerity now; and Japan should pursue measures to reduce its current-account surplus and stimulate real incomes and consumption.

Fourth, countries with current-account surpluses should let their undervalued currencies appreciate, while the ECB should follow an easier monetary policy that accommodates a gradual further weakening of the euro to restore competiveness and growth in the eurozone.

Fifth, in countries where private-sector deleveraging is very rapid via a fall in private consumption and private investment, the fiscal stimulus should be maintained and extended, as long as financial markets do not perceive those deficits as unsustainable.

Sixth, while regulatory reform that increases the liquidity and capital ratios for financial institutions is necessary, those higher ratios should be phased in gradually to prevent a further worsening of the credit crunch.

Seventh, in countries where private and public debt levels are unsustainable – household debt in countries where the housing boom has gone bust and debts of governments, like Greece’s, that suffer from insolvency rather than just illiquidity – liabilities should be restructured and reduced to prevent a severe debt deflation and contraction of spending.

Finally, the International Monetary Fund, the European Union, and other multilateral institutions should provide generous lender-of-last-resort support in order to prevent a severe deflationary recession in countries that need private and public deleveraging.

The only problem with his advice is that none of the parties are willing to heed any of his advice and, indeed, it may be politically impossible for them to do so. People tend to keep on doing the things that have worked for them in the past until they stop working and keep doing them for a good deal after that as well. Stick with the one that brung you. I don’t expect Germany, Japan, or China to change their export policy or China to let its currency appreciate any time soon.

30 comments… add one
  • steve Link

    Spent the morning looking at the austerity issue. As far as I can tell, austerity measures, as a supposed cure for a recession, have only “worked” when accompanied by some sort of currency devaluation and/or an accompanying boom by a major trading partner/s. Debt reduction is still necessary for long term stability, but I am dubious about reduced spending as a short term fix.

    As to the rest, what Roubini recommends sounds good, though it does have a lot of moving parts. It comes down to, as you imply, political will. That is both depressing and encouraging. I look more at the encouraging side. We are not in a situation that we cannot get out of, yet. We need to develop the will to do what is necessary. I say this knowing that there will be a lot of disagreement on what is necessary, but if we can get our two parties to engage honest discourse, I think it can be resolved. If Turkey could do it, we should be able also.

    Steve

  • As far as I can tell, austerity measures, as a supposed cure for a recession, have only “worked” when accompanied by some sort of currency devaluation and/or an accompanying boom by a major trading partner/s.

    That’s largely what Paul Krugman said yesterday on his blog. Meanwhile, the actual empirical evidence for effective Keynesian stimulus via deficit spending remains very, very slim.

    The sad reality is that it may be possible that the only thing that heals economic ills is the passage of time. The passage of time is what appears to be the constant. Note that the Japanese have tried vigorous stimulus over a period of decades to little avail.

    I say this knowing that there will be a lot of disagreement on what is necessary, but if we can get our two parties to engage honest discourse, I think it can be resolved.

    The Republicans certainly appear to be steadfast in refusing to accept increased taxes (now or in the future) and the Democrats appear equally steadfast in refusing public employees nothing and increasing benefits paid from the public purse. Until one or both of those change I don’t see much space for common ground.

  • Sam Link

    Note that the Japanese have tried vigorous stimulus over a period of decades to little avail.

    There is a huge difference. The Japanese are very happy to fund the government’s stimulus efforts with giant savings rates. We are much more of a consumption based culture (mind you other countries are happy to fund our fiscal stimulus efforts and it’s not helping).
    “To no avail”? I think that deflationary spiral is a very real problem, and we really don’t know how much worse it could have been.

  • Drew Link

    Sam –

    I don’t think the Japanese “are very happy” to finance. They simply were a savings nation by demographics and disposition. This is changing rapidly, and there are great concerns right now about their ability to finance in the future. Articles abound.

    ““To no avail”? I think that deflationary spiral is a very real problem, and we really don’t know how much worse it could have been. ”

    I suppose this debate will go on forever, because it is inherently speculative. However, two microcosms – cash for clunkers and the housing subsidy – appear to make it clear that whatever the short term efficasy of spending stimulus, its mighty transient.

    And as a good UofC guy, I’ll continue to bang the drum: at what cost. Nobody want to deal with the cost.

  • Sam Link

    This is changing rapidly, and there are great concerns right now about their ability to finance in the future

    But Keynes would say this is a good thing, no? I’m under the impression that the purpose is to make the currency and debt less attractive so people stop hoarding it. Cash for clunkers and home buyer credits are short term, but they are also money helicopters. The amount of the credit is now in the economy when it wouldn’t have been otherwise – even if the buyer simply changed their purchase date.

    The argument Krugman et al are making is that getting hung up on multipliers, especially multipliers calculated when monetary policy is still effective, is just an aside. The bottom line is the government must do inflationary things to fight deflation and we’ve run out of monetary policy ways to do it.

    Don’t get me wrong, I’d rather have a better conceived plan for fiscal stimulus that would have a good multiplier even in normal times, but I don’t think anyone has yet proven that fiscal stimulus in any form is bad at 0% interest rates.

  • Sam Link

    a money helicopter idea from Tyler Cowen:

    2. We don’t need exotic “quantitative easing,” we can simply print up more money and hand it out to consumers through a simple vouchers program, at basically zero budgetary cost. If consumers save all that money, fiscal stimulus also won’t have much of a kick.

  • The argument Krugman et al are making is that getting hung up on multipliers, especially multipliers calculated when monetary policy is still effective, is just an aside.

    Uh, no. Let’s translate the mathematicese. “A multiplier greater than 1” means “does more good than harm”. Those who favor fiscal stimulus either via deficit spending or by tax cuts are saying that it does more good than harm. I say that’s a quantitative issue that can only be determined by measuring real results and that the real results matter.

  • Sam Link

    Let me re-state then using this Krugman quote:

    the big factor causing a high multiplier in Eichenbaum et al is the possibility of a deflationary spiral, which fiscal policy helps avoid.

    The biggest contributor to the multiplier above is not what money is being spent on, but that it avoids deflationary spiral. I think that a multiplier with this threat included is distinctly different from a multiplier calculation that involves real data gleaned from times such as WW2 where no threat of deflation existed and the government was actively suppressing private investment.

  • Right now I’m seeing several different positions being taken. The CBO is taking the position that getting empirical evidence is difficult so why bother? Dr. Krugman on the other hand takes the position that, since the empirical evidence doesn’t support his preferred policy position, such evidence as exists can’t possibly be relevant to the situation at hand. Pretty irrefutable as all articles of faith tend to be.

    As I’ve said several times here before when I took economics (as opposed to, say, Drew or Steve Verdon) Keynes was king. I’m not unalterably opposed to the idea of deficit spending as fiscal stimulus. However, I think the evidence that real deficit spending in real times frames and real circumstances does more good than harm (has a multiplier greater than one) isn’t particularly strong and those who are strongly in favor of spending for fiscal stimulus seem a lot more interested in tearing down those who present contradictory evidence than they are in producing evidence of their own.

    Early on in the Great Recession I wrote that while we were about deficit spending we should prefer investments that might pay off in the long run, e.g. nuclear power, “smart grid”, over road repair (just another way of subsidizing gasoline consumption) or giving raises to public employees (which is what an inordinate amount of spending has been devoted to) under the rubric of “jobs saved”. I still would have preferred that approach but, alas, it was not to be.

  • Sam Link

    or giving raises to public employees (which is what an inordinate amount of spending has been devoted to) under the rubric of “jobs saved”.

    Raises no, but I think subsidizing State employees keeping their positions is not that bad. Some kind of deal where Federal money is offered to keep employees now and in return any new State employees are switched to defined contribution retirement plans would be just the kind of stimulus now, medium term consolidation Roubini talks about.

  • Dave is quite right here. Roubini is looking at the problem like an engineer would (I’d argue most economists are trained this way as well, so nothing personal) and the problem is seen as one of fine tuning and engine. Problem is it isn’t an engine it deals with people and entities comprised of people, like politicians, powerful corporations, unions, etc. As such, while the engineering approach might tell you how to solve the problem the feasibility of such solutions is like Dave said, making pigs fly.

    Early on in the Great Recession I wrote that while we were about deficit spending we should prefer investments that might pay off in the long run, e.g. nuclear power, “smart grid”, over road repair (just another way of subsidizing gasoline consumption) or giving raises to public employees (which is what an inordinate amount of spending has been devoted to) under the rubric of “jobs saved”. I still would have preferred that approach but, alas, it was not to be.

    This too. What we’ve done with the stimulus spending is, in many cases, spend the money to keep unsustainable processes going like public employees and their unions. Many states have budget shortfalls much larger than they are reporting due to legal loopholes that allows them to not report pension plan short falls.

    If stimulus spending works in general, then why not do it all the time. The notion is typically that stimulus spending works when various entities in the economy aren’t spending–e.g. corporations are not interested in buying stuff at $5 and then due to inflation selling the finished product at $4. So the government can help by stepping in and buying at $6. At the same time you pursue inflationary policies to stop the deflation that is the root cause. Fine, makes sense. We don’t have deflation right now. We don’t. It isn’t in any data. So for it to work now, the belief has to be it works all the time, so why not do it all the time. If you don’t think running massive deficits from now to eternity is a good policy, then please explain your current thinking? I bet those in favor or stimulus spending can’t.

  • Something that I think is worth remembering is that money is fungible. Here in Illinois by and large public employees have not foregone the regular raises in their contracts and the state has taken money from the federal government to retain public employees with. De facto that’s using the money to give raises.

    Add cases like this to the well-documented cases in which federal stimulus money has been used for raises outright and you begin to understand why ordinary people who aren’t public employees might be increasingly unhappy with the situation. It ain’t investment and it ain’t creating jobs. It’s just payback to the organizations that make political donations and turn out their members to vote.

  • BTW and just for the record I don’t think that fine-tuning the economy is possible by anybody whether Keynesian, neo-Keynesian, monetarist, or what have you. I think that if you throw enough force in the form of money, regulation, etc. at something you’re bound to have some effect but translating that into lowering the unemployment rate by a half percent or increasing GDP by a point at will is beyond anybody’s capabilities.

  • Drew Link

    I think its pretty much been summed up. If its so damned good, why not do it all the time??

    Deflationary spiral arguments are convenient straw men. And I always invoke Christie Romer’s work on tax stimulus, because it removes the usual criticism of left vs right economists. But if you want stimulus, why not use the tool with the biggest multiplier?

    The answer is obvious, the real goal of most spending stimulus advocates is expanding the size of government, by creating spending programs. The costs be damned.

  • Drew Link

    I’d like to associate myself completely with Dave’s last two points. The process is an axe, not a scalpel, and politically tainted.

  • steve Link

    “I think its pretty much been summed up. If its so damned good, why not do it all the time??”

    “The answer is obvious, the real goal of most spending stimulus advocates is expanding the size of government, by creating spending programs. The costs be damned.”

    This should be obvious, but we dont do it all of the time because the goal is not to increase the size of government. The size of government, the part that most think of as government, has stayed stable for a long time. It is entitlements which are growing. That is a transfer system which requires relatively few government workers.

    Yes, it is an axe, not a scalpel. We do it because it seems to have worked for a long time. Some sort of deficit spending has been used, tax cuts or spending, to help get out of recessions. Of course, not all recessions are created equal. I would refer you to Thoma’s recent writings on the effects of stimulus when near the lower bound. Depending on your model, you do achieve a multiplier greater than one. Zandi has done calculations. In his models, not all stimuli are created equal. He does note that after the stimulus is over, it has a negative effect as it is paid back.

    http://www.economy.com/mark-zandi/default.asp

    The stimulus also addresses one of the great weaknesses of the Chicago school of thought, market/consumer psychology. People and markets are not entirely rational. The act on emotion also. If everyone is afraid that the economy will get worse, they will not spend and the economy will get worse. The response may be rational, but what if the expectation was not? A lack of fiscal stimulus would have seen, IMHO, markedly higher unemployment. The fear generated by having ever higher levels of unemployment becomes self reinforcing. People panic.

    Lastly, remember how Keynes made his money. Preserving a market economy is part of the goal with fiscal stimulus. it should be reserved for times when monetary policy has reached its limits, ignoring the GNP crowd I will concede here (I assume Sumner is not alone). It is countercyclical activity that attempts to stave off, when used as above, to avoid severe unemployment and the resultant political unrest. See 1930s, US and Europe.

    Steve

  • steve Link

    Oh, and since we like Romer, let’s remember the rest of her work. Once the economy is back on course, we need to pay back on the debt created, unlike the debt created by conservative presidents since 1980. Her work showed that tax increases which were perceived as aimed at cutting deficits did not negatively impact the economy.

    Steve

  • PD Shaw Link

    BTW/ Dave — The Springfield State Journal Register had a three-part series on state pensions. I’m not sure there was anything new to me other than the claim that underfunding of the pensions began in the 50s. Plus, someone proposes using bankrupty to void the constitutional obligation.

    http://www.sj-r.com/firstinprint/x767638332/Pension-changes-face-series-of-hurdles

    http://www.sj-r.com/firstinprint/x1980745823/Public-safety-workers-enjoy-best-pension-deals

    http://www.sj-r.com/firstinprint/x767633158/Mismanagement-has-turned-state-pension-systems-into-morass

  • Drew Link

    I find this comment extremely dissappointing, and disingenuous:

    “This should be obvious, but we dont do it all of the time because the goal is not to increase the size of government.:

    To paraphrase Steve Olberman (am I really doing this??) ‘Only if you’ve been on another planet for a year and a half.’ See: Emanuel, Rahm re: wasted crises.

    “The size of government, the part that most think of as government, has stayed stable for a long time. It is entitlements which are growing. That is a transfer system which requires relatively few government workers.”

    This is just sloppy analysis. Should we just measure the scope of government, and its edicts’ draw on our national economic resources by the bricks and mortar employed, the number of workers? No. Rather, by the drain on resources. I can’t imagine anyone arguing otherwise. And we have been on an unsustainable path for 50 years. One that is going to go cataclysmic within the next 10.

    “Yes, it is an axe, not a scalpel. We do it because it seems to have worked for a long time.”

    Really? Says who? And you turn around and contradict yourself: ‘He does note that after the stimulus is over, it has a negative effect as it is paid back.’ We can’t just (assume, and) advertise the perceived positive……….and then ignore the negative.

    “The stimulus also addresses one of the great weaknesses of the Chicago school of thought, market/consumer psychology.”

    Stop right there. Gary Becker, and others, have been at the forefront of pointing out human reactions and market behavior. And they don’t presume rationality.

    Which obviates this: “People and markets are not entirely rational. The act on emotion also.”

    You should read a recent interview with Gene The Machine Fama. (I’ll try to find the link.) But he lays to waste the disinformation his critics spew, and you have apparently bought into.

    “If everyone is afraid that the economy will get worse, they will not spend and the economy will get worse.”

    So if they are afraid they’ll spend because the Feds give them a 10% subsidy? Are they only 10% afraid? C’mon.

    “A lack of fiscal stimulus would have seen, IMHO, markedly higher unemployment.”

    Perhaps you could share your calculations. ( ;-> )
    And also those of the unemployment and other costs resulting from the stimulus.

    “Preserving a market economy is part of the goal with fiscal stimulus. it should be reserved for times when monetary policy has reached its limits….”

    This is a diversionary argument. Fiscal stimulus comes in two flavors: Spending and tax cutting. I’ve never seen a study with a tax multiplier less than the spending multiplier. Tax cutting would apperar to be the rationally preferred option……..unless other objectives are in mind. Which brings us full circle. Its not just monetary policy vs spending. And certainly you are not going to argue that monetary policy has not been used. Right?

    “It is countercyclical activity that attempts to stave off, when used as above, to avoid severe unemployment and the resultant political unrest.”

    That’s nice, so shouldn’t we use the best available policies?

    Steve – Everything you have done has just been soft analysis and conjecture in support of spending, without acknowledging alternatives or costs.

    We’ve had massive stimulus, and yet we are going sideways. Its the engineer in me, I’m an empiricist. Not good for spending stimulus.

  • Yes, it is an axe, not a scalpel. We do it because it seems to have worked for a long time. Some sort of deficit spending has been used, tax cuts or spending, to help get out of recessions.

    Really? Exactly how often has this been done? I’m sure deficits go up during recessionary years, but is that due to increased government spending–i.e. stimulus spending? Or a fall in revenues due to declining tax base?

  • PD Shaw:

    Do state courts have the power under their powers in equity to set aside the Illinois constitution? I would think not.

  • He does note that after the stimulus is over, it has a negative effect as it is paid back.

    Have we ever paid back the cost of a stimulus? I can’t recall an example offhand. See here. That should be a chart of deficits in real dollars 1940 through 2010. I see no repaying of the WWII deficit in it. Sure, there have been a few years here and there when we’ve run a small surplus but the amount under the curve is practically all above the zero line.

    That’s my biggest problem with counter-cyclical deficit spending. We never get around to the pro-cyclical real spending cuts.

  • PD Shaw Link

    I assume they are theorizing about getting into federal bankruptcy court. Bankruptcy being a federal prerogative, the supremacy clause making federal law superior to the state constitution, and bankruptcy courts have equitable powers. The problem is that the Bankruptcy Code doesn’t currently mention states and state sovereign immunity (which Illinois could waive).

    The sovereign immunity angle I’ve mentioned to state workers to their horror. A constitutional right may exist, but the state is free to limit / choke off remedies to enforce that right. I have a right to the state contributing to public education, but I have no remedy to enforce it.

  • PD Shaw:

    Would a federal court, potentially including the Supreme Court, have the authority to hear a state’s bankruptcy proceedings? Not only do I not see it but I can only wonder on the can of worms that allowing a federal court to hear such a suit might open. Since “a state is a party” in such a suit the Supreme Court might have original jurisdiction. Again, this sounds like a can of worms to me.

  • PD Shaw Link

    The federal courts hear cases against states in certain instances (fourteenth amendment, commerce clause violations), which are defined narrowly. I believe states can waive sovereign immunity, and I could certainly see a situation arising in which a state without the political ability to correct its finances would consent or volunteer to federal bankruptcy court jurisdiction. This seems to me to be primarily a political issue. Will a state consent to such a measure?

    The legal issue to me is whether a bankruptcy court has authority/jurisdiction over such a bankruptcy, particularly when Congress only authorized it to hear municipal (sub-division of state) bankruptcies? It seems like the Code would need to be amended. I believe the question of whether it would be Constitutional of Congress to do so given it’s enumerated powers was put to the floor at Volokh, and I came away believing the answer was “yes.” Some of the country’s earliest legislative initiatives surrounded the (Hamiltonian) idea that the solvency of the states was paramount to the health of all.

    Anyway, I’m proposing something different. The Illinois General Assembly direct all disputes over pension payments to the Illinois Court of Claims for adjudication and to await appropriation from the political branches. You are basically taking away state court judge jurisdiction and equitable powers. I don’t think that’s a just result, but I don’t think public unions should feel confident they have the highest hand.

  • steve Link

    “To paraphrase Steve Olberman (am I really doing this??) ‘Only if you’ve been on another planet for a year and a half.’ See: Emanuel, Rahm re: wasted crises.”

    Health care reform and the stimulus are separate entities. Which permanent increases are coming out of the stimulus? 1/3 was a tax cut. A big chunk went to the states. Infrastructure spending does not permanently increase the size of govt.

    “This is just sloppy analysis. Should we just measure the scope of government, and its edicts’ draw on our national economic resources by the bricks and mortar employed, the number of workers? No. Rather, by the drain on resources. I can’t imagine anyone arguing otherwise. And we have been on an unsustainable path for 50 years. One that is going to go cataclysmic within the next 10.”

    Again, we are talking about the stimulus. The increase in government spending we are seeing was set a long time ago, as you note. It is entitlement spending that is killing us. If we control entitlement spending, the rest of govt, non-defense discretionary spending, has been relatively stable, as a percent of GDp for a long time. When you complain about govt growing I find it disingenuous to not specify what is actually growing.

    “Really? Says who? And you turn around and contradict yourself: ‘He does note that after the stimulus is over, it has a negative effect as it is paid back.’ We can’t just (assume, and) advertise the perceived positive……….and then ignore the negative.”

    The recessions of 1960, 1973-1975, 1980-1982 were all affected by deficit spending, either by tax cuts or increased spending. Even the inventory depression of 1949 saw some deficit spending compared with the surplus we had before. As the consumer and industry regain confidence the economy grows. At that point, see the above recessions, the growth of the economy can make up for the deficit spending. (Yes, to be sure, many of our recessions were created or at least abetted by faulty govt policy, but I am talking about fiscal response to a recession.)

    “You should read a recent interview with Gene The Machine Fama. (I’ll try to find the link.) But he lays to waste the disinformation his critics spew, and you have apparently bought into.”

    Please do, I enjoy his stuff.

    “I’ve never seen a study with a tax multiplier less than the spending multiplier. Tax cutting would apperar to be the rationally preferred option”

    http://www.economy.com/mark-zandi/documents/Economic_Stimulus_House_Plan_012109.pdf

    Note that few or no studies, have to reread Thoma, have been done with interests rate this low.

    “Perhaps you could share your calculations. ( ;-> )
    And also those of the unemployment and other costs resulting from the stimulus.”

    Again? You dont believe them. The same analysts who believed that the Bush tax cuts helped, and you probably supported, are the ones making the claims that the stimulus helped employment.

    “And certainly you are not going to argue that monetary policy has not been used.”

    Monetary policy is preferred. What do we do when we are zero bound?

    “Everything you have done has just been soft analysis and conjecture in support of spending, without acknowledging alternatives or costs.

    We’ve had massive stimulus, and yet we are going sideways. Its the engineer in me, I’m an empiricist. Not good for spending stimulus.”

    The alternatives with monetary policy used up are limited. You dont strike me as a quantitative easing fan, but I could be wrong.

    I expected a much worse recession, given its global nature, and it may yet happen, so I am semi-happy we are going sideways. I think we have a huge balance sheet to repair, consumer wise. I am a pragmatist, but also a believer in our economy/country. We bounce back.

    Steve

  • steve Link

    “Have we ever paid back the cost of a stimulus?”

    Not really, so I will admit to overstating my case a bit. What we do is grow our economy, reducing debt compared with GDP. But then, at least post WWII, we really have not used a stimulus for every recession. One of the weaknesses in my belief, but with other’s beliefs also, s that we have not enough data points and there are always mitigating factors. Hence, the use of models, which leads to its own problems.

    “Really? Exactly how often has this been done? I’m sure deficits go up during recessionary years, but is that due to increased government spending–i.e. stimulus spending? Or a fall in revenues due to declining tax base?”

    A fall in revenue usually leads to deficit spending, so I should be more precise. The 2001 recession saw tax cuts, resulting in deficit spending beyond the expected loss of revenue. The 1980-1982 recession saw increased spending and tax cuts on top of decreased revenue. The 1973-1975 recession saw tax rebates. The 1960 recession saw increased spending, 151 billion to 165 billion in 1961. I should note that from my POV, tax cuts and increased spending resulting in increased deficit spending are both a form of stimulus.

    Steve

  • steve Link

    Waldman makes a very good case about stimulus spending. Following his logic, which I mostly agree with, we should avoid fiscal policy as much as possible, and it is important to use it well when used.

    http://www.interfluidity.com/v2/862.html

    Loved these lines from comments.

    I agree with you that the “experts” of the world don’t know enough to make good decisions for us and shouldn’t be trusted to try, but when we leave things to the private sector, rather than getting reasonably good outcome from a robust, decentralized decisionmaking apparatus that makes good choices with widely dispersed local information, we get a centralized financial system chock through with corrupt incentives looking for the next big thing to replace building houses in the desert. Neither our current private sector or public sector are capable of managing the complexity of our economy even tolerably well. (not, I think, because the economy has grown too complex, but rather because our institutions have grown too stupid.)…..

    I really want to emphasize this — I am not in favor of private allocation as opposed to public allocation. I am in favor of high quality allocation and want to argue for techniques to improve the quality of allocation from every quarter. I think abstract stimulus/austerity decisions will lead us to do stupid things, spend money unwisely, or cut productive activity.”

    Steve

  • Health care reform and the stimulus are separate entities.

    They both follow from the crisis model that Drew is pointing to. In fact, it is an idea that dates back to the 1980’s to Robert Higgs who suggested the very idea. If you are in government use a crisis, real or imaginary or exaggerated, to expand the size and scope of government (i.e. your power). Pretty simple really.

    Pretty much undermines what you have in your 3 walls of text.

  • steve Link

    Except that it was proposed way before the crisis. It is a reform that started with Truman. Clinton tried it. If the crisis had not occurred, they would have tried to pass it. They also increased troop strength in Afghanistan. Is that related to the crisis? Was that intended to increase the scope of government?

    Steve

Leave a Comment