Excerpts from October 27, 2009 Editorial The Case for More Stimulus in the New York Times. Bold by me.
The consensus among economists is that the recession is over, and, technically, the herd is probably right. Corporate profitability has been boosted by job cuts, pay cuts and a drive to restock depleted inventories. Immense federal stimulus has jolted the economy.
But what happens when those measures run their course? The economy is going to need more government support, or it is bound to be very weak for a very long time — and vulnerable to a relapse into recession. . .
And Washington is mired in a warped political debate. Congressional Republicans say continued economic weakness is proof that February’s stimulus package failed. Lawmakers in both parties fret that large budget deficits preclude more stimulus, lest the burden of debt outweigh the benefit of deficit spending.
Both arguments are wrong. If anything, ongoing economic problems are a sign that stimulus needs to be bolstered. Deficits are a serious issue, but the immediate need for stimulus trumps the longer-term need for deficit reduction. A self-reinforcing stretch of economic weakness would be far costlier than additional stimulus. . .
Congress and the administration should agree on ways to ease the dire financial condition of the states. Most important is continued aid for state Medicaid programs, which would ensure vital services, support jobs and free up money for other needs. . .
To be highly effective as stimulus, cash aid must be targeted to needy populations. The housing market would be better served by a reinvigorated attempt to reduce foreclosures, including, at long last, reducing principal balances for the millions of people who owe more on their homes than they are worth.Without another round of effective stimulus, the worst recession in modern memory will likely become — at best — the weakest recovery in modern memory. Another boost to federal spending that is targeted and timely should not be too much for politicians to deliver.