In recent months, the economy has set the agenda for President Obama, and has greatly damaged him in the process. Yesterday’s speech, launching the American Jobs Act, was the president’s attempt to set the agenda for the economy. Clive Crook says that this revitalised president was politically impressive, and adds that we should have seen more of him before now. I will leave the politics to others, and instead ask whether Mr Obama’s plan represents good economics.
That, of course, depends on your definition of “good economics”. Recently, mainstream economic advice (from the IMF, for example) has frequently recommended that there should be some fiscal easing in the short term in order to support demand, and that this should be combined with credible plans to ensure that the government debt ratio is sustainable in the long term. In addition, many economists have argued that any new measures to support the economy should have desirable supply side effects, rather than simply boosting demand in the short term. Against this benchmark, how do the president’s proposals stack up? Read more