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Megan McArdle

Megan McArdle - Megan McArdle is a senior editor for The Atlantic who writes about business and economics. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and The Economist. More

Megan was born and raised on the Upper West Side of Manhattan, and yes, she does enjoy her lattes, as well as the occasional extra-dry skim-milk cappuccino. Her checkered work history includes three start-ups, four years as a technology project manager for a boutique consulting firm, a summer as an associate at an investment bank, and a year spent as sort of an executive copy girl for one of the disaster-recovery firms at Ground Zero … all before the age of 30.

While working at Ground Zero, Megan started Live From the WTC, a blog focused on economics, business, and cooking. She may or may not have been the first major economics blogger, depending on whether we are allowed to throw outlying variables such as Brad Delong out of the set. From there it was but a few steps down the slippery slope to freelance journalism. She has worked in various capacities for The Economist, where she wrote about economics and oversaw the founding of Free Exchange, the magazine's economics blog. She has also maintained her own blog, Asymmetrical Information, which moved to The Atlantic, along with its owner, in August 2007.

Megan holds a bachelor's degree in English literature from the University of Pennsylvania and an M.B.A. from the University of Chicago. After a lifetime as a New Yorker, she now resides in northwest Washington, D.C., where she is still trying to figure out what one does with an apartment larger than 400 square feet.

It's not your father's stimulus

By Megan McArdle
Jan 7 2009, 3:11 PM ET Comment

Arnold Kling offers a very good explanation of the problem facing would-be stimulators:

Another structural issue that I have discussed in previous lectures is the nature of the unemployment that exists. The standard recession of the post-war United States found the economy with excess inventories of durable goods, and most of the unemployed were production workers temporarily laid off from manufacturing facilities. More recently, it seems to me that a lot of our imbalances are structural. In financial services, most of the people who are leaving jobs related to mortgage origination and securitization are not coming back. In autos, some of the decline in production is cyclical, but worldwide there is too much capacity in the industry, so that many unemployed auto workers are also not coming back.

I doubt that I would want to apply the same multiplier analysis to structural unemployment that I would to cyclical unemployment. To my knowledge, neither the old-fashioned macro engineers nor the modern academics have addressed this issue.

I see an additional problem: FDR entered 1932 with a country that had saved a lot.  Barack Obama faces a country already drowning in debt.  The collapse in aggregate demand doesn't merely reflect the wealth effect of falling asset prices or a credit contraction; it reflects a large underlying debt load that was only sustainable with rising asset prices.  Until that debt load is worked off or inflated away, households are not going to be in a position to spend.

That's why the complaints that tax cuts are bad because consumers will save them instead of spend them seem very, very off to me.  We are not looking at a small contraction in aggregate demand because of excess inventories or too-tight money.  We're seeing consumers come to grips with the massive hole in their household balance sheets.  Call me crazy, but wouldn't a nation of taxpayers saving $500 put us that much closer to sustainable growth in aggregate demand?  Doing otherwise just seems to kick the can a little ways down the road.  If our fiscal policy even has the strength to do that much.


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