Larry Summers, former Treasury Secretary under Clinton and an important economic voice, is urging the US government to spend more. According to Summers, the case for substantial investment promotion is overwhelming. He believes increasing the amount of infrastructure spending will reduce the burden on future generations, both by sparking growth and by expanding the economy's capacity. Of course, this is a case that's been made by Keynesians for the last six years. Accommodative monetary policies have been helpful, but ultimately fiscal policy does a better job of creating demand. For instance, infrastructure spending would directly create jobs, which the US government can finance at essentially a zero interest rate. Alas, politics in Washington make any sort of fiscal expansion a near impossibility at the moment. (VIEW LINK)



Jay Soloff

The problem isn't even so much with federal spending, although that would help certainly, but state and local governments have cut way back. Regarding federal borrowing, when they do go up, it would presumably be in line with a growing economy and thus greater tax receipts. Also, much of the spending is based on automatic spending programs due to the recession (welfare, food stamps, unemployment, medicaid/medicare) and doesn't necessarily target job growth but maintaining a minimum standard of living. Much of that will go away (not the medical stuff) as the economy improves.

Jordan Eliseo

With average deficits of nearly $1 Trillion a year post GFC - i think they've given fiscal stimulus a decent shake. Might be able to borrow at zero in real terms now, but will that last forever?