A second federal stimulus may wreck the U.S. economy, writes former U.S. Treasury economist Bruce Bartlett.
“An important debate is going on among liberal economists about whether the economy needs another substantial dose of fiscal stimulus lest the unemployment rate linger at unacceptably high levels for the foreseeable future,” writes Bartlett in his column in Forbes magazine.
“Although I supported the original $787 billion stimulus package in February as an emergency response to a crisis situation and am even sympathetic to the idea that it should have been larger, I believe that going forward additional stimulus carries more potential risks than rewards.”
Though the massive spending of World War II finally ended the Great Depression, policymakers learned the wrong lesson.
“They came to believe that fiscal stimulus was the appropriate response to all economic downturns,” writes Bartlett.
“Unfortunately, there are very serious barriers to the effective use of fiscal policy as a countercyclical measure. The result, eventually, was stagflation in the 1970s.”
Bartlett says he sees the same thing that happened during the Presidency of Jimmy Carter happening once more.
“I fear a return of those conditions unless we are prudent and avoid the overuse of policies that are justified only under the extreme circumstances of an economic depression or near depression, such as we have lately experienced,” says Bartlett.
Not surprisingly, sometime Obama adviser, and former Clinton administration secretary of labor Robert Reich, disagrees.
In a column in The San Francisco Chronicle, Reich writes, There ought to be a second stimulus, even if we go into deficit to a larger extent.”
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