How to Combat Recession: Stimulus Without Debt

248 Pages·2018·2.618 MB·English

by  Laurence S. Seidman

HOW TO COMBAT
RECESSION

How to Combat
Recession
Stimulus without Debt
Laurence Seidman
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Library of Congress Cataloging- in- Publication Data
Names: Seidman, Laurence S., author.
Title: How to combat recession : stimulus without debt / Laurence Seidman.
Description: New York, NY : Oxford University Press, [2018]
Identifiers: LCCN 2017053675| ISBN 9780190462178 (hardcover : alk. paper) |
ISBN 9780190462192 (epub)
Subjects: LCSH: Recessions—United States. | Monetary policy—United States.
Classification: LCC HB3743 .S45 2018 | DDC 339.5/20973—dc23
LC record available at https://lccn.loc.gov/2017053675
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Printed by Sheridan Books, Inc., United States of America
CONTENTS
1. Introduction | 1
2. How Would a Benevolent Ruler Combat a Recession? | 7
3. What Is Stimulus without Debt? | 17
4. Do Tax Rebates Work in a Recession? | 58
5. What about Other Kinds of Fiscal Stimulus? | 97
6. Would Stimulus without Debt Be Inflationary? | 127
7. Would Stimulus without Debt Weaken the Fed’s Balance
Sheet? | 137
8. Would Stimulus without Debt Undermine the Fed’s
Independence? | 150
9. Can’t Monetary Stimulus Overcome a Severe
Recession? | 157
10. Can Stimulus without Debt Be Used by Other
Countries? | 173
11. What Have Others Written about Stimulus without
Debt? | 179
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12. Can Stimulus without Debt Combat Secular
Stagnation? | 195
13. Would Stimulus without Debt Work
in a Plausible Model? | 200
14. Are We Ready for the Next Severe Recession? | 211
REFERENCES | 221
INDEX | 227
HOW TO COMBAT
RECESSION

Chapter 1
Introduction
Are we ready to combat the next severe recession? We can be,
but we’re not. A severe recession always involves a plunge in ag-
gregate demand for goods and services that compels producers
to sharply cut back production and employment. To recover
from the recession, aggregate demand must be boosted all the
way back up to normal. Economic analysis and experience shows
that waiting for the free market to reverse the plunge in aggre-
gate demand takes much too long— usually half a decade to a full
decade. Monetary stimulus— cutting interest rates to zero—i s
much too weak to induce a huge boost in demand because ex-
perience shows that sensible consumers and business managers
aren’t willing to go deeper in debt by borrowing to spend in a
severe recession. Fortunately, a huge boost in demand can be
achieved by a large fiscal stimulus—a temporary large increase
in tax rebates for households, federal grants to state and local
governments, tax credits to partly reimburse firms for purchases
of capital goods, and government spending on infrastructure
maintenance projects.
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