‘Stimulus’ Snake Oil’

September 7, 2010 · Filed Under Uncategorized 

A year after the US economy stopped falling, we are still mired in “the worst labor-market crisis since the Great Depression,” writes Laura Tyson in The New York Times. Voicing the consensus of the left-liberal economic establishment — she’s reportedly a leading candidate to head up President Obama’s Council of Economic Advisers — Tyson argues that the US unemployment rate, still stuck at 9.6 percent, is reason to try “a second fiscal stimulus” to raise “aggregate demand.” She’s wrong in a number of illuminating ways.

First, the highest unemployment rates are highly concentrated in relatively few states — largely the ones with the highest home-foreclosure rates. That suggests that the root problems are localized, lingering debt woes — so a nationwide quick fix designed to entice people to borrow more and save less is doubly off-base.

http://www.nypost.com/p/news/opinion/opedcolumnists/stimulus_snake_oil_RySPWcspAZ79U9cskrpHUK

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