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Do You Want The Bad News Or The Bad News?
ByMartin Feldstein, professor of economics at Harvard and former chairman of Ronald Reagan’s Council of Economic Advisors, thinks we are going to need a second stimulus. Here's why:
Previous reactions to declines in household wealth indicate that such a fall will cut consumer spending by about US$500 billion every year until the wealth is restored. While a higher household saving rate will help to rebuild wealth, it would take more than a decade of relatively high saving rates to restore what was lost.
(hat tip: Mark Thoma)
