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  • The Merits of More Spending on Infrastructure

    In his Labor Day speech Monday, the President announced a plan to pump $50 billion into infrastructure projects across the country. Brookings Senior Fellow Robert Puentes thinks this is a good move, as he believes bridges, roads, and railways are all in need of significant repairs. But he also wants the government to have a plan for using infrastructure projects to increase long term employment, and not just temporary jobs: Read more from Puentes on the federal government's infrastructure policies here .

  • IMF Economists Argue for Stimulus AND Austerity

    For much of the year, the public debate among economists and policymakers in Europe has been over whether it is time for austerity measures or more stimulus. Olivier Blanchard and Carlo Cottarelli --chief economist and head of fiscal affairs, respectively, at the IMF --write in today's Financial Times that both are necessary: The future goal is to achieve what the G20 terms “strong, sustainable, and balanced growth” . This surely requires a return to fiscal sustainability, which demands credible medium-term fiscal plans. The first goal should be to stabilise debt-to-GDP ratios. To do this over the next five years means an average improvement in structural budget deficits of 1 per cent a year in G20 countries. Continuing roughly at this rate for five more years and then stabilising would bring down average debt levels to 60 per cent of GDP by 2030. None of this should be controversial. Indeed, the divisions between fiscal tightening advocates and their opponents are often more apparent than real. The former are usually really talking about tightening in the 2011 budget cycle; from a fiscal standpoint, 2010 is already behind us. The latter are not always opposed to lower deficits in 2011, given the scale of the current stimulus that is now being withdrawn as planned. Still, some clearly prefer more front-loaded consolidation, others less. Front-loaders point to the need to maintain credible fiscal policy, which is hard to gain and easy to lose. They note that market perceptions of fiscal health can shift in a heartbeat, so countries must move pre-emptively. Read The great false choice, stimulus or austerity here .

  • Geithner in Istanbul: Reform, Fiscal Stimulus Must Continue or Recovery Will be Halted

    Treasury Secretary Timothy Geithner joined other G7 finance leaders in Istanbul to tell members of The Institute of International Finance --representing many of the world's largest bank--that reform is a necessary component of recovery, and to expect "sweeping changes," according to a Reuters report . Reuters quotes Geithner as telling bankers, "We're not going to adopt an approach that does stuff at the margin, and delays any changes that help preserve a bunch of practices that helped make this crisis much more damaging than it otherwise would have been." Geithner also stressed the need to continue fiscal stimulus, as The Wall Street Journal's Andy Jordan and Bob Davis report below:

  • The EU and the Global Economic Crisis

    David Cameron --not the leader of Britain's Tory Party, but the director of the program in European Studies at the MacMillan Center of Yale University--Cameron says the nature of the economic in the European Union is largely the same as in the United States, but the response has been markedly different. In a letter to the Financial Times , Cameron calls on Europe's leaders to develop a much stronger stimulus plan. While the EU does not have the same fiscal capacity as the US, it nevertheless is risking a deeper, more prolonged crisis as a result of not being as aggressive as the US and Britain. In this short interview, Cameron explains the nature of the EU and its response--and lack thereof--to the economic challenges it is facing today:

  • Yale Economists Discuss the Crisis

    Shortly after President Obama signed the $787 billion dollar economic recovery act, a panel of Yale professors discussed the state of the economy at Yale Law School in New Haven, CT. John Geanakoplos , William Nordhaus , and Robert Shiller --all professors in the Econ department at Yale--joined Yale Law deputy dean Jonathan Macey . The discussion, moderated by Yale president Richard Levin --himself a former professor of economics at Yale--covered the severity of the current recession, the root causes of the global economic crisis, and the specific problems of the banking system. The panel seemed to be in agreement twhen it came to fiscal stimulus (they think we need it, and we might need more than what the Obama plan provides) and the banks (we can't allow them to fail). And while there is a lot of talk of gloom, the panelists for the most part) do not give in to the gloom themselves. And they do provide prescriptions. Of course, you may or may not agree with them. As always, share your thoughts by clicking on comments below. Here's the full discussion:

  • Mankiw's Preferred Fiscal Stimulus

    Brad DeLong points out that Greg Mankiw is standing in the minority among the quoted experts in the Washington Post article, Economists Agree Time is of the Essence for Stimulus , and among economists these days. It isn't easy to find anyone who is truly happy with how Congress is handling the stimulus bill. There are plenty of economists opposed to the current stimulus package because they don't think it does enough. And there are economists who are opposed to any sort of major fiscal stimulus by the federal government. The Cato Institute bought a full page ad in the New York Times to list members of the latter group. But as we start another week of haggling over the details, it is always helpful to see economists explain what they would do. So agree with Mankiw or disagree, take a look at what he would do in My Preferred Fiscal Stimulus . And note that he, a believer in tax cuts generally, calls for a gas tax. For regular readers of Mankiw's blogs, this comes as no surprise. If you aren't familiar with his rationale for the gas tax, go back to his 2006 op-ed on the subject .