Not to unduly alarm anyone, but this analysis from Eswar Prasad and Isaac Sorking at Brookings strongly suggests that even if you take an optimistic view of the U.S. policy trajectory the world is doomed anyway, largely thanks to puny stimulus coming from Europe:
The total amount of stimulus in the G-20 amounts to about $692 billion for 2009, which is about 1.4 percent of their combined GDP and a little over 1.1% of global GDP. This is a significant amount of stimulus, but appears to fall short of what is needed to tackle a crisis of the proportion we are currently in. The IMF, for instance, has called for stimulus equal to 2 percent of global GDP.
Three countries—the U.S., China and Japan—account for about $424 billion of the overall stimulus in 2009, with their shares in the overall global stimulus amounting to 39 percent (U.S.), 13 percent (China) and 10 percent (Japan). The U.S. stimulus package amounts to 1.9 percent of its 2008 GDP and the corresponding numbers for China and Japan are 2.1 percent and 1.4 percent, respectively. For the remaining G-20 economies, the total fiscal stimulus amounts to 1.0 percent of their overall GDP.
I’ve given Germany a hard time in past blog posts, but their stimulus, though probably too small, is bigger than what we’re seeing from other major European economies such as France, Italy, Spain, and the United Kingdom. A bunch of countries’ efforts, including the US, China, Germany, Korea, and Saudi Arabia look much bigger when you take 2010 into consideration. But that means the world could be looking at a very long, hard 2009. On the other hand, some of these European countries may have much more robust “automatic stabilizers” built into the basic contours of their welfare states.