On: How Depressions Work

[jorgeortiz85]

Which is why fiscal stimulus is temporary. It's necessary while the economy is at less than full employment, but once the economy starts picking up fiscal stimulus should drop off.

[gojomo → jorgeortiz85]

That's the cover story. But how much of the $819 billion in the stimulus bill is set to automatically expire in 2 years, or when the economy reaches certain growth targets? Roughly: none. A lot of the spending won't even get flowing until 2010 or 2011, when the economy may be recovering just fine on its own.

[tptacek → gojomo]

But now you've left the argument about whether fiscal intervention is productive, and embarked instead on an argument about politics.

[gojomo → tptacek]

Theoretically, prompt fiscal intervention could temporarily fund productive projects for timely general economic benefit.

Practically, politics means fiscal intervention arrives late, stays too long, and is targeted to reward favored groups and centralize power.

There's no separating the two without a magic wand to implement benevolent stimulus without a political process.