The recovery has failed to materialise for millions of Americans, who are now looking to things like quantitative easing 2 to somehow stimulate the economy.
But nobody thinks that’s really going to work. Even CBO chief Doug Elmendorf is a doubter.
The Congressional Budget Office, under his direction, has put together a presentation explaining how fiscal stimulus now could drive employment. And then, later, when the economy and its consumers have recovered, we can put on the brakes and control government debt.
This argument has much in common with those made by economists like Richard Koo, who suggests quantitative easing, without demand for funds, is largely useless and that, instead, the government must demand those funds in the interim. Paul Krugman has also made similar arguments for fiscal stimulus.