Getting ready for the next recession–Summers and beyond

December 7th, 2015 at 12:08 pm

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.

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One comment in reply to "Getting ready for the next recession–Summers and beyond"

  1. Smith says:

    Here is my preemptive strike. Higher SNAP, EITC, and wage subsidies are the wrong moves. The way to create more jobs is to hire more people, not subsidize private industry, encourage substandard wages, put fair wage employers at a disadvantage, if not out of business, while suppressing everyone’s wage. If Company A hires people for less, Company B can’t compete. If employee A works for less than employee B, that hurts B’s and everyone’s prospect for a raise. A mere $2.50 of the planned minimum wage increase from from $7.25 to $12.00, let alone $15 equals the entire EITC boondoggle of a program, but doesn’t rob the middle class tax payer. This minimum rise seemed a pipe dream a few years back, including when I first used the $2.50/hour figure. Go figure. As Krugman would argue, money to the states to prevent firing school teachers, police, and fireman are an easy win. Hiring private companies to complete needed infrastructure, likewise. Increasing the federal payroll can also be a win when spent on needed services, R&D, or training programs. Afraid of waste and inefficiency. Great, hire some more employees to investigate waste and fraud. Don’t give money to corporate welfare programs, no to negative income tax, just make new jobs with Federal spending instead.


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