I believe there is a strong case for further stimulus. Admittedly, consumption cannot be sustained indefinitely by running up the national debt. The imbalance between consumption and investment must be corrected. But to cut government spending at a time of large-scale unemployment would be to ignorethelessonsofhistory.
The obvious solution is to distinguish between investments and current consumption, and increase the former while reducing the latter. But that seems politically untenable. Most Americans are convinced that government is incapable of managing investments aimed at improving the country’s physical andhumancapital.
Again, this belief is not without justification: a quarter-century of calling the government bad has resulted in bad government. But the argument that stimulus spending is inevitably wasted is patently false:the New Deal produced the Tennessee Valley Authority, the Triborough Bridge in New York and many other public utilitiesstillinusetoday.
Moreover, the simple truth is that the private sector does not employ available resources. Mr. Obama has in fact been very friendly to business, and corporations are operating profitably. But instead of investing, they are building up liquidity. Perhaps a Republican victory will boost their confidence but, in the meantime, investment and employment require fiscal stimulus (monetary stimulus, by contrast, would be more likely to stimulate corporations to devoureachotherthantohireworkers).