Larry Summers testified before the House Budget Committee yesterday in support of a second stimulus package. His prescription is to keep trying things that don’t work (via the WSJ’s Real Time Economics):
“I believe the balance of risks suggest a compelling case for a significant fiscal stimulus program that increases the deficit in the short run” but not over the medium to longer term, he said. The program may be most beneficial if it includes new measures for food stamps, unemployment insurance and other policies aimed at supporting low-income families, said Summers. He also argued in favor of new infrastructure investment as well as changes in Medicaid reimbursement rules and new funding to help low-income residents pay their heating bills.
Well, the last temporary tax rebate (and every other one we’ve tried in our history) didn’t work but I’m sure another will do the trick. As for infrastructure spending, maybe Summers should take a look at what Japan did after their twin bubbles popped. What he’ll find is that they tried exactly that and ended up with a stagnant economy for 15 years that continues to this day. Why, when we have real world examples to follow, do people like Summers insist on doing things that don’t work? Isn’t that the definition of insanity?