General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsU.S. Lacks Ammo for Next Economic Crisis
(This is from a week ago, before this week market drop)
As the U.S. economic expansion ages and clouds gather overseas, policy makers worry about recession. Their concern isnt that a downturn is imminent but whether they will have firepower to fight back when one does arrive.
Money has been Washingtons primary weapon in the decades since British economist John Maynard Keynes proposed aggressive government spending to battle the Great Depression. The U.S. generally injects cash into the economy through interest-rate cuts, tax cuts or ramped-up federal spending.
Those tools could be hard to employ when the next dip comes: Interest rates are near zero, and fiscal stimulus plans could be hampered by high levels of government debt and the prospect of growing budget deficits to cover entitlement spending on retired baby boomers.
Few economists believe the U.S. is near recession. The economy seems to have regained its footing after a first-quarter stumble, and Federal Reserve officials are considering whether to raise short-term interest rates for the first time in nearly a decade to ensure the economy doesnt overheat.
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With the U.S. expansion entering its seventh year, policy makers are planning how to respond to the next downturn, which history shows is inevitable. The current expansion is now 16 months longer than the average since World War II, and none has lasted longer than a decade... The Fed, for example, could experiment with negative interest rates. A recession also could force Congress and the White House to bridge Washingtons partisan divide to strike a deal that pairs short-run stimulus with long-run plans to reduce the deficit.
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The U.S. over the past quarter century regularly turned to the Fed to provide stimulus when the economy stumbled.
In the most recent recession, short-term interest rates were pushed to near zero, then the central bank embarked on massiveand controversialbond-buying programs to drive down long-term interest rates. The Fed also promised to keep short-term interest rates low for an extended period. The tactics were meant to make it easier for households to pay off debts, encourage new borrowing and promote risk-taking; officials hoped that would push investment and consumer spending higher.
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Many economists believe relief from the next downturn will have to come from fiscal policy makers not the Fed, a daunting prospect given the philosophical divide between the two parties. Republicans doubt federal spending expands the economy, and they seek to shrink rather than grow government. Democrats, meanwhile, say government austerity hobbles the economy, especially in a downturn.
More..
http://www.wsj.com/articles/u-s-lacks-ammo-for-next-economic-crisis-1439865442
PoliticAverse
(26,366 posts)Taitertots
(7,745 posts)The WSJ opposes money printing because it is owned by rich people.
They want any new money going to bankers (When they create money by lending) instead of going to the people (when the government prints money).
Cali_Democrat
(30,439 posts)Vincardog
(20,234 posts)Spend the money and stimulate the economy, Tax revenues will increase along with wages, problem solved.
question everything
(47,486 posts)with so many roads being torn down, detours, etc. Many are long overdue and everything has to be done by November before snow and ice.
Yet, as we were driving around and I was watching some of these loaded trucks moving slowly, I was thinking that I am glad. Glad that so much is being paid - these are good paying jobs, I think- and the economy benefits from it.
I remember after the 9/11 attack, when many worried about the projected downturn in the economy, I was listening to a panel that included Laura Tyson, who chaired the Clinton economic advisers.
And they said that since we were having a surplus - this was in the fall of 2001 - we should be able to handle this.
Of course, Cheney and Bush squandered all this surplus..