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Wednesday, January 09, 2013

What can Washington do to Boost the Recovery?

The editors at MoneyWatch asked me to answer the question:

What can Washington do to Boost the Recovery?: As we enter the new year, the nation's most pressing economic problem remains the slow recovery, particularly the job market. Unemployment is still far too high and the rate at which we are creating new jobs is far too low. At the present rate of job growth, we are still several years away from full employment.
Monetary and fiscal policymakers could accelerate the return to full employment through tax cuts, increases in government spending -- particularly in areas that tend to create lots of jobs -- and further monetary easing. However, the ability of monetary and fiscal policymakers to combat the slow recovery is constrained by three things: fear that aggressive monetary policy will drive up inflation to an unacceptable level; fear that tax cuts or increases in spending will worsen our long-run debt problem; and political disputes over taxes and the size and role of government. ...[continue reading]...

Policymakers are unlikely to do more to help the economy recover, the question is whether fear of deficits and fear of inflation will cause them to adopt policies that make it worse.

    Posted by on Wednesday, January 9, 2013 at 09:10 AM in Economics, Fiscal Policy, Monetary Policy, Politics | Permalink  Comments (49)


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