Larry Summers has a piece worth reading in today’s WaPo called “Preparing for the next recession.” I liked it, in terms of convincingly arguing the limits of the Fed, but beyond that, there’s wasn’t a lot in terms of actually…you know…preparing for the next downturn – other than his closing sentence that the issue “…demands urgent attention from fiscal as well as monetary policymakers.”
Luckily, I’ve got two helpful interventions. First, economists Alan Blinder and Mark Zandi wrote an important paper for CBPPs full employment project that looks at what worked and what didn’t in the last recession, broadly focusing on fiscal stimulus, Fed policy, and other market interventions (i.e. credit markets, the autos). Check it out, especially if you (incorrectly) think we don’t know or have the tools to offset even a deep recession. Whether we have the political functionality to use the tools is, of course, a different question.
Second, Ben Spielberg and I have a paper coming out in the not-too-distant future that takes a more granular look at this question of how best to prepare for the next downturn from the perspective of state fiscal relief, Unemployment Insurance, SNAP (food stamps), subsidized job creation, and housing. We’re also thinking about more efficient ways to trigger such interventions on and off in specific areas where that might be helpful.