(It should also be noted that the world seems to be running a $350bn surplus with itself.)
Could you explain this?
Also, do you agree with Paul Krugman that in the case of the United States it is far better to overshoot on a major fiscal stimulus plan than to be too conservative (especially since an over-generous stimulus package can be adjusted for by raising interet rates)? Truth unfolds in time through a communal process.
That aside, and with the usual disclaimer that I'm not an economist, I think it very much depends on what the stimulus is spent on.
If it's spent on windmills and railroads, it's better to overdo it.
If it's spent on building highways or digging holes in the ground and filling them up again, it's probably usually better to overdo it.
If it's spent on bailing out fatcats with schemes that reinforce "too big to fail" and "moral hazard" problems rather than solve them... well, the jury is still out on that.
I have a hypothesis that one reason why monetary policy interventions are so beloved by a certain kind of economists is that they're one-size-fits-all, so they're easy to input into simple (simplistic?) models - all .5 percentage point interest rate cuts are created equal, as it were. Whereas fiscal interventions open up a whole political can of worms about where and how the fiscal intervention is desired - all .5 trillion stimulus packages are not created equal.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Yesterday I listened to an interview with Paul Krugman in which he says:
It is true that the two relevant examples -- FDR in the 30's and Japan in the 90's -- used public works spending. And while you can argue that it helped, it certainly didn't in either case bring them out of the slump. But then if you look at it more closely you discover they really didn't do it on an adequate scale in each case. And it was in the end a public works program that ended the Great Depression, a very large public works program known as World War II. We don't have to do it on that scale, I hope, this time. But the question for conservatives here is, What is your answer? Is he really saying that what we need to do is let the free market work, let wages fall, liquidate farmers, liquidate the workers, as Herbert Hoover -- ? We have a pretty good idea of what needs to be done. And we should act on that, because the consequences of not acting would be terrible. Paul Krugman on the Crisis of `08 | WBUR and NPR's On Point with Tom Ashbrook
And it was in the end a public works program that ended the Great Depression, a very large public works program known as World War II. We don't have to do it on that scale, I hope, this time.
But the question for conservatives here is, What is your answer? Is he really saying that what we need to do is let the free market work, let wages fall, liquidate farmers, liquidate the workers, as Herbert Hoover -- ?
We have a pretty good idea of what needs to be done. And we should act on that, because the consequences of not acting would be terrible.
Paul Krugman on the Crisis of `08 | WBUR and NPR's On Point with Tom Ashbrook
To which someone responds on the website, in a similar vein as your comment:
Your guest does not seem to respect the difference between World War II spending and New Deal spending. This isn't to say that New Deal spending was bad and World War II spending was good they probably were both necessariy. They were however also very different in some key regards and one was as even your guest admits was thoroughly more effective than the other. World War II spending was focused on creating jobs in a new emerging industry New Deal spending was focused on maintaining jobs in a dieing industry, World War II spending had clear objectives, New Deal spending was just sending money chasing after problems, World War II spending was focused in large on R&D, New Deal spending was focused on maintaining an old system sometimes despite technology. The difference between the two couldn't be more clear. Let's spend but let us also follow the World War II model and spend on new enterprise with clear objectives let's not spend on ineffective dieing industries. Government spending isn't inherently good or inherently bad but there definitely is a right way and a wrong to spend money I say spend it the right way. Posted by Sam, on December 1st, 2008 at 10:46 pm EST Paul Krugman on the Crisis of `08 | WBUR and NPR's On Point with Tom Ashbrook
Your guest does not seem to respect the difference between World War II spending and New Deal spending. This isn't to say that New Deal spending was bad and World War II spending was good they probably were both necessariy. They were however also very different in some key regards and one was as even your guest admits was thoroughly more effective than the other. World War II spending was focused on creating jobs in a new emerging industry New Deal spending was focused on maintaining jobs in a dieing industry, World War II spending had clear objectives, New Deal spending was just sending money chasing after problems, World War II spending was focused in large on R&D, New Deal spending was focused on maintaining an old system sometimes despite technology. The difference between the two couldn't be more clear. Let's spend but let us also follow the World War II model and spend on new enterprise with clear objectives let's not spend on ineffective dieing industries. Government spending isn't inherently good or inherently bad but there definitely is a right way and a wrong to spend money I say spend it the right way. Posted by Sam, on December 1st, 2008 at 10:46 pm EST
