Monday, February 23, 2009

Greg Mankiw points us to this article by Sachs,

From Marginal Revolution:

"
I agree with Jeffrey Sachs

Greg Mankiw points us to this article by Sachs, excerpt:

President Barack Obama’s economic team is now calling for an unprecedented stimulus of large budget deficits and zero interest rates to counteract the recession. These policies may work in the short term but they threaten to produce still greater crises within a few years. Our recovery will be faster if short-term policies are put within a medium-term framework in which the budget credibly comes back to balance and interest rates come back to moderate sustainable levels....

We need to avoid reckless short-term swings in policy. Massive deficits and zero interest rates might temporarily perk up spending but at the risk of a collapsing currency, loss of confidence in the government and growing anxieties about the government’s ability to pay its debts. That outcome could frustrate rather than speed the recovery of private consumption and investment. Deficit spending in a recession makes sense, but the deficits should remain limited (less than 5 percent of GNP) and our interest rates should be kept far enough above zero to avoid wild future swings.

Posted by Tyler Cowen on February 23, 2009 at 08:09 AM in Economics | Permalink"

Me:

"Conservatives are aghast. The bail-out of the auto industry was hard enough to swallow. Government investments in infrastructure and research and development are viewed with scorn, compared with the tried and true (if disastrously failed) tax cuts of the Bush era. Rightwing pundits bemoan the evident intention of Obama and team to "tell us what kind of car to drive". Yet that is exactly what they intend to do (at least with regard to the power source under the hood), and rightly so. Free-market ideology is an anachronism in an era of climate change, water stress, food scarcity and energy insecurity. Public-private efforts to steer the economy to a safe technological harbour will be the order of the new era.

There is plenty of room for blunders, to be sure. Government activism can founder on the shoals of massive budget deficits, tax-cutting populism pushed by the right, politically motivated investments such as corn-based ethanol rather than science-based public investments, and more. Yet Obama is absolutely correct that we have no choice but to try.

John F Kennedy used to tell the Irish tale of the boys who would throw their hats over the high wall, to ensure that they would make the heroic efforts to surmount it. Obama is throwing the hat over the wall of environmental crisis, and asking us to surmount it together. This is a new era of public action, with the US back in the lead, and we will all find a new economy and new opportunities on the other side of the wall."

Is this the same person?

http://www.guardian.co.uk/commentisfree/2009/jan/28/obama-policy-technology

Posted by: Don the libertarian Democrat at Feb 23, 2009 3:08:09 PM

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