The Overstimulated Economy

More

An important debate is going on among liberal economists about whether the economy needs another substantial dose of fiscal stimulus lest the unemployment rate linger at unacceptably high levels for the foreseeable future. Although I supported the original $787 billion stimulus package in February as an emergency response to a crisis situation and am even sympathetic to the idea that it should have been larger, I believe that going forward additional stimulus carries more potential risks than rewards.

As I have explained in earlier columns, I believe it was only the massive spending of World War II that really ended the Great Depression. But policymakers learned the wrong lesson from this fact. They came to believe that fiscal stimulus was the appropriate response to all economic downturns. Unfortunately, there are very serious barriers to the effective use of fiscal policy as a countercyclical measure. The result, eventually, was stagflation in the 1970s. I fear a return of those conditions unless we are prudent and avoid the overuse of policies that are justified only under the extreme circumstances of an economic depression or near depression, such as we have lately experienced.

Jump to comments
Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.
Get Today's Top Stories in Your Inbox (preview)

What Is the Greatest Story Ever Told?

A panel of storytellers share their favorite tales, from the Bible to Charlotte's Web.


Elsewhere on the web

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register. blog comments powered by Disqus

Video

The Death of Film

You'll never hear the whirring sound of a projector again.

Video

How to Hunt With Poison Darts

A Borneo hunter explains one of his tribe's oldest customs: the art of the blowpipe

Video

A Delightful, Pixar-Inspired Cartoon

An action figure and his reluctant sidekick trek across a kitchen in search of treasure.

Video

I Am an Undocumented Immigrant

"I look like a typical young American."

Video

Why Did I Study Physics?

Using hand-drawn cartoons to explain an academic passion

Writers

Up
Down

More in Business

Just In