Wednesday, November 12, 2008

"There is no shortage of sectors of the economy that offer opportunities for investment"

On Mark Thoma's blog, here's Tim Duy:

In the short term, policy can cushion the transition by expanding the social safety net. In the medium term, if consumption is falling, and private investment is unable to compensate, then the federal authority should fill the gap. There is no shortage of sectors of the economy that offer opportunities for investment. In so many ways, we are running on the fumes of the infrastructure investment made by the last generation. Roads, bridges, channels, etc. – you name it, there is an opportunity. Or human capital, via education? Should the federal government finally step up and fund unfunded mandates? And by all means, continue efforts to reform health care, including the development of nationwide, portable medical records tracking. Reasonable policymakers free from ideological constraints can develop a host of potential projects without relying on bridges to nowhere. You can even extend the argument to supporting Detroit – if current management and boards are swept clean. Can we afford these policies? For the moment, yes. I did not believe this in the first half of the year, as I though the global economy was running too hot to support substantial stimulus without an inflationary offset."

I agree with the terms for an auto loan, but not on the threat of inflation, which I think is real. I also agree with infrastructure spending during a recession, in order to counter the so-called Paradox of Thrift. More on that in another post.

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