Christina Romer’s case for the American Jobs Act is unquestionably worth your time, and does a great job of taking on objections from both the left and the right. In particular, her argument that “that fiscal stimulus will be more cost effective at speeding deleveraging and recovery” than measures that directly tackle debt as such is important as is her criticism that relative to an optimal plan the Obama initiative “may be too tilted toward broad tax cuts, when bigger increases in government investment spending and more targeted tax cuts would promote faster growth.” In defense of Obama’s view, I think fairness considerations point in favor of broad-based relief rather than targeted initiatives.
It’s worth again emphasizing the extent to which a coordinated fiscal/monetary effort could address these problems if all the relevant players wanted to.
In a world where Congress, the executive branch, and the Federal Reserve all wanted to work together the Treasury could sell $300 billion worth of bonds to the Fed. It could then mail $1,000 checks to every American. The Fed could then light the bonds on fire. It is impossible for me to understand how such an operation could fail to increase spending or speed debt-deleveraging. You would want to accompany this with an explanation of what’s going on. A statement that says “we’re going to keep doing this until unemployment falls below X% or inflation goes above Y% so alter your plans accordingly.” This will not solve all our problems, but it would solve some of them and would let us focus attention on things like health care costs, trade balances, etc. that are harder to deal with.