DeLong ponders a second stimulus:
Any second stimulus package passed this fall would have little impact on the economy until late 2010, that is true. But come late 2010 we might really need more demand to curb unemployment. On balance the inflationary risks of having an extra stimulus hit the economy in late 2010 if it is not needed are outweighed by the deflationary risks of not having an extra stimulus hit the economy in late 2010 if it is needed. It is like driving a car with its windshield painted black by looking in the rear view mirror.
My friend Niall Ferguson sees this as King Kong of Deflation versus Godzilla of Inflation. I do not begrudge policy makers for making mistakes in this kind of climate. What I will begrudge them for is not correcting mistakes if evidence subsequently proves them wrong. We had eight years of that.