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>To Stimulate or Not to Stimulate…

06 Feb

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The more I read about our own country’s history of recessions and stimulus programs, the more I think we’re doing exactly the right thing, if even on too small a scale. History has shown that during recessions if the government withholds stimulus funding, or delays it, the economy almost always suffers. And the severity of that suffering seems to relate directly to the length of delay or lack of adequate funding.

There’s a very interesting article up on the Times site about Japan’s “lost decade,” where the collapse of the real estate market there at the end of the 80s led to a major economic recession in the 90s. The author interviews Japanese officials and experts on both sides of the coin (from ‘it was a total waste’ to ‘it was very effective’), in addition to American experts on the topic and on our current crisis. Here are the most revealing findings:

“After years of heavy spending in the first half of the 1990s, economists say, Japan’s leaders grew concerned about growing budget deficits and cut back too soon, snuffing out the recovery in its infancy, much as Roosevelt did to the American economy in 1936.”

and

“Dr. Ihori said the United States appeared to be striking a better balance by investing in new energy and information-technology infrastructure as well as replacing aging infrastructure.”

It seems the the consensus among experts is to deliver the stimulus, and much more after it, to lift our economy. And to spend the money wisely on things needed in the future (health care, social security) instead of relying too much on public works. Although our infrastructure is in much worse shape than even rural Japan’s in the 90s.

[Image credit: New Statesman]

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Posted by on February 6, 2009 in Government

 

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