The Case for Fiscal Stimulus
Governments around the world are now developing massive fiscal stimulus packages that will cause unprecedented budget deficits – a sharp change from the reliance on monetary policy that was used to deal with previous recessions. But the emphasis on fiscal policy is justified, because the current recession is much deeper than and different from previous downturns.
CAMBRIDGE – Governments around the world are now developing massive fiscal stimulus packages that will cause unprecedented peacetime budget deficits. The fiscal deficit in the United States this year is likely to exceed 10% of GDP. A substantial part of the increased deficit will be due to a wide range of new government spending.