Bruce Bartlett feels that Obama's first stimulus was a special case:
The poor success rate of fiscal measures in counteracting economic downturns, and the likelihood that they will even sow the seeds of subsequent downturns, led a number of prominent economists to reject the Obama administration's stimulus proposal in February. Where I think those economists erred was in not recognizing that the current downturn was exceptional in its severity. Nor did they appreciate the fact that Fed policy was essentially impotent owing to the presence of deflation--the economy would have needed something like a negative 5% nominal Fed funds rate for monetary policy to be effective. But it is impossible for the rate to go below zero, thus hamstringing the Fed and creating a liquidity trap that brought the economy to a standstill.
Therefore, fiscal stimulus was justified in this instance, even though the general case against countercyclical policy remains valid. To use a cliché, it was the exception that proves the rule. However, now that the recession is over--economist Robert Hall of the NBER's business cycle dating committee believes it ended last summer--the case for emergency measures can no longer be justified. We are, I believe, slowly returning to normal economic conditions, and the normal rules should again apply.
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