Martin Feldstein, a distinguished economist with impeccable right-wing credentials, says we need to increase government spending by a lot, and soon:
The only way to prevent a deepening recession will be a temporary program of increased government spending. Previous attempts to use government spending to stimulate an economic recovery, particularly spending on infrastructure, have not been successful because of long legislative lags that delayed the spending until a recovery was well underway. But while past recessions lasted an average of only about 12 months, this downturn is likely to last much longer, providing the scope for successful countercyclical spending.
A fiscal package of $100 billion is not likely to be large enough to revive the economy. The fall in household wealth resulting from the collapse of the stock market and the decline of home prices may cut aggregate spending by $300 billion a year or more.
He’s supporting John McCain for President, and as such he gingerly avoids pointing out that this is the reverse of what his preferred candidate is proposing. But if Feldstein really wants to do good, he needs to follow up this op-ed with some conversations with McCain and other neo-Hooverites like Saxby Chambliss and Norm Coleman and get them to drop their obsession with spending freezes as a solution to our problems.