by Guest Authors Mark Weisbrot, an economist and Co-Director of the Center for Economic and Policy Research (CEPR), in Washington, D.C. – Full bio here; and Rebecca Ray, Research Associate, CEPR – LinkedIn bio here. Executive Summary Advocates of an economic strategy of “internal devaluation” have recently pointed to Latvia as an example of successful …
The major debate is over this data point: stimulus-funded projects hired 42.1 percent from the pool of unemployed people. The authors of the paper argue that this is a problem, as it is similar to the rates of hiring from the unemployed that have been observed from the 1990s-2000s.
Is the housing price crisis behind us? – unlikely, but it is closer to the end than the beginning. But it just makes you mad when money is wasted on an ineffective stimulus – and it clouds your ability to trend the data.
From 1Q2010 to 2Q2011, the stimulus caused the economy to operate above potential based on the CBO stimulus effect data. Now as the stimulus effect is waning, 2Q2011 GDP and Potential GDP are crossing. GDP trend lines show the economy is gravitating towards zero growth – and although the autopsy has not began, it is becoming clear that the stimulus did not provide the seeds necessary to reignite the economy.
My conclusion? If deleveraging is needed, stimulatory monetary and fiscal policies should accelerate the process.