Monday, October 20, 2008

Bernanke's goals for a stimulus package (& mine)

Ben Bernanke tells the Congress that a good fiscal stimulus package should:

  • [have] its peak effects on aggregate spending... during the period in which economic activity would otherwise be expected to be weak;
  • maximize the beneficial effects on spending and activity per dollar of increased federal expenditure or lost revenue;
  • [ensure] funds are used effectively and responsibly;
  • limit longer-term effects on the federal government's structural budget deficit;
  • [and redress] specific factors that have the potential to extend or deepen the economic slowdown... [such as] improve access to credit by consumers, homebuyers, businesses, and other borrowers.

This is a good list, but it leaves of an important category: the many good forms of supply-side economics. These spending priorities such as expanding children's access to health care, improving schools for the disadvantaged, increasing research on energy efficiency, and so forth both spur aggregate demand today and build productive capacity for the future.

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