Will without War?

Klinedinst, Mark (2009): Will without War?

Abstract

While congress debates the merits of a stimulus package of around 900 hundred billion dollars, a historical approach to the current situation suggests that the stimulus packages currently being discussed are actually far less generous than may be needed. The Congressional Budget Office projects that we are in “a recession that will probably be the longest and the deepest since World War II.” It is often suggested that the massive spending necessitated by the nation’s involvement in World War II helped end the Great Depression. Without a comparably ambitious unifying cause, however, I am afraid that the spending required to pull us out of a decline will be considered politically unpalatable, leading to an inadequate response to the crisis. An examination of spending patterns during the nineteen-­‐thirties and nineteen-­‐forties and their application to the current scenario suggest the true extent of the stimulus that may be needed.

• Item Type: MPRA Paper
• Language: English
• Keywords: stimulus, Keynesian, depression, Okun's Law, unemployment
• Subjects: A - General Economics and Teaching > A1 - General Economics > A13 - Relation of Economics to Social Values; A - General Economics and Teaching > A2 - Economic Education and Teaching of Economics > A20 - General; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J60 - General; E - Macroeconomics and Monetary Economics > E0 - General > E00 - General

References

Abel, Andrew B. and Ben S. Bernanke (2003), Macroeconomics, 5th edition. (Using Okun’s Law, two percent of our over $14 trillion current nominal economy is about $280 billion).

Auerbach, Alan J. (2009) “Implementing the New Fiscal Policy Activism”. Available at http://www.econ.berkeley.edu/~auerbach/implementing-­‐new-­‐fiscal-­‐policy-­‐ activism.ii.pdf. (Discusses a number of reasons why fiscal activism has lately gained ground).

Brown, E. Cary (1956) “Fiscal Policy in the Thirties: A Reappraisal,” American Economic Review 46: 857-­‐879.

Bureau of Labor Statistics, http://data.bls.gov and U.S Census Bureau, http://www2.census.gov/prod2/statcomp/documents/CT1970p1-­‐05.pdf. (This is the source of data used in the tables).

Congressional Budget Office (2009), http://www.cbo.gov/ftpdocs/99xx/doc9957/01-­‐07-­‐Outlook.pdf. (Concerns that this recession will be deep).

Reinhart, Carmen M. and Kenneth S. Rogoff (2008) “The Aftermath of Financial Crises”. Available at http://www.economics.harvard.edu/faculty/rogoff/files/Aftermath.pdf. (Describes the depth and duration of other financial crises).