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On the Need for More Stimulus



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The inimitable Arnold Kling:

Mark Thoma articulates the conventional view.

It’s useful to break down the economy into four major sectors — households, businesses, government, and the foreign sector…lower consumption growth will be a substantial drag on the economy…looking to housing to lead the recovery is likely to lead to disappointment….Business investment does not provide much hope either …As for foreign exports, which is one of our best hopes for growth in the long-run, it hard to see that sector leading the recovery since the rest of the world is having troubles too. …So there’s very little besides government that can provide the needed boost to the economy in the immediate future.
I would argue that this is like saying, “Our football team’s players are too small to win in this league. They can’t get any taller. Their bones can’t get any thicker. And they can’t add enough muscle. So what we have to do is make them fatter.”


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