Tianchen Xu on expected fiscal stimulus measures in China

Our overall take is quite positive in that MoF is willing to tackle China’s many economic challenges by leveraging its borrowing room.  The immediate benefits to the economy will be limited, as the MoF avoided large-scale direct cash handouts to households.  However, its commitment to restoring local public finances through fiscal transfer and debt replacement is highly commendable. 

In the medium term, it will put an end to the aggressive deleveraging by local governments and ease the resulting deflationary pressure.  And as their financial position stabilises, local governments will be better positioned to support the economy by providing public services and embark on public investments.

~ Tianchen Xu, Senior Economist, Economist Intelligence Unit, "China's briefing on stimulus gets lukewarm investor reception," Reuters, October 12, 2024

(Xu reacted to news conference with Finance Minister Lan Foan announcing more "counter-cyclical measures" this year without providing details on size of fiscal stimulus.)

The Economist on the 2020-21 government borrowing binge

In recent years government debt appeared to matter less and less even as countries borrowed more and more.  Falling interest rates made debts cheap to service, even as they grew to levels that would have seemed dangerous a generation before.  The pandemic put both trends into overdrive: the rich world borrowed 10.5% of its gdp in 2020 and another 7.3% in 2021, even as long-term bond yields plunged.  Now central banks are raising interest rates to fight inflation and public debt is becoming more burdensome.  Our calculations show that government budgets will feel a squeeze far more quickly than is commonly understood.

~ The Economist, "How higher interest rates will squeeze government budgetsRising borrowing costs will hit taxpayers sooner than you think," July 12, 2022

Laura Rublin on economic stimulus

Ultralow interest rates and ultrahigh spending by the Federal Reserve and federal government helped the U.S. economy not only survive the devastating impact of the Covid-19 pandemic, but also thrive in its near aftermath.

~ Laura Rublin, "2021 Midyear Roundtable: Yes, There's Plenty of Value Left in This Market," Barron's, July 17, 2021

Rob Arnott on the Biden proposed $1.9 billion stimulus package

Words matter.  Applying the word stimulus to spending large quantities of money on a fiscal basis that we don't already have, creating new money from the central bank, it all feels good.  Stimulus, think of it as a little bit like heroin.  I've heard that heroin feels good.  But it doesn't do you a lot of good long-term.

~ Rob Arnott, Yahoo Finance interview, 0:45 mark, January 25, 2021

Steve Mnuchin: "Now is not the time to worry about shrinking the deficit"

Now is not the time to worry about shrinking the deficit or shrinking the Fed balance sheet. There was a time when the Fed was shrinking the balance sheet and coming back to normal. The good news is that gave them a lot of room to increase the balance sheet, which they did. And I think both the monetary policy working with fiscal policy and what we were able to get done in an unprecedented way with Congress is the reason the economy is doing better. 

~ Treasury Secretary Steve Mnuchin, interview on CNBC’s "Squawk Box” from the White House, September 14, 2020

Paul Krugman gives alien invasion metaphor to explain fiscal stimulus

If we discovered that space aliens were planning to attack, and we needed a massive build-up to counter the space alien threat, and inflation and budget deficits took secondary place to that, this slump would be over in 18 months.

~ Paul Krugman: An Alien Space Invasion Could Fix the Economy," Time.com, August 16, 2011

Business Week economist on government spending to fight the Great Depression

Just as we saved our way into depression, we must squander our way out of it.

~ Virgil Jordon, Business Week economist, 1932

Stephanie Pomboy is bullish on fiscal stimulus under Trump

We can finally get back to the business of real economic growth - real men building real things.  It all sounds fabulous.  And it will be - if and when it happens.

~ Stephanie Pomboy, MacroMavens, January 7, 2017
(as quoted by Kopin Tan in the Jan. 9th issue of Barron's)

Paul Krugman denies efficacy of routine Keynesian stimulus

I know that some people find this hard to understand — perhaps because they don’t want to understand — but people like me have never claimed that fiscal expansion is always and everywhere the right policy, even in response to recession. Nor are other arguments, like the argument that falling wages reduce, not increase, unemployment, universal. All of the unorthodox policy recommendations and conclusions are contingent on the economy being in a liquidity trap, in which short-run nominal interest rates are up against the zero lower bound and can’t go lower.

And liquidity-trap conditions are rare; in fact, they’ve only happened twice in US history. Unfortunately, we’re living in one of those episodes right now.

~Paul Krugman, Nobel laureate, New York Times, "Even More on 1921", April 2, 2011

Richard Burnstein says don't fight the Fed in 2011 (or even 2012)

We can argue to great length as to whether all this monetary and fiscal policy is good for the long-term health of the U.S. economy. But it's hard to fight the fact that in the next 12 to 18 to 24 months, this is going to put the wind in the sails of the U.S. economy.

Richard Burnstein, CEO and CIO, Richard Burnstein Advisors, "Experts agree: Get over your fear and get back into stocks", USA Today, December 17th, 2010

Robert Albertson on the Fed as the only adult in Washington

I really respect the Fed because they really are the only adult in Washington, trying to do the right thing but, my simple view has always been monetary policy is a great brake; it's not such a good accelerator and fiscal policy is the great accelerator. We haven't done much good with fiscal lately so hopefully the animal spirits of America take over.

~Robert Albertson, head of investment strategy at Sandler O'Neill & Partners LP, Bloomberg Television's "Surveillance Midday", November 9th, 2010

Henry Morganthau on the New Deal spending binge

We have tried spending money. We are spending more than we have ever spent before and it does not work…..I say after eight years of this Administration we have just as much unemployment as when we started, and an enormous debt to boot!

~ FDR's Treasury secretary and close friend, Henry Morganthau, 1939

U.S. Capitol
1922-1925

John Chambers on the stimulus package

The government is doing the right thing with the stimulus package. Clearly, when others aren't spending, the public sector needs to help lead the way. The U.S. has a real opportunity to redefine how technology is used in areas like health care and education.

~ John Chambers, CEO, Cisco Systems, "The $2.5 Trillion Question," Conde Nast Portfolio, April 2009

Noriel Roubini on the need for fiscal stimulus to prevent a financial meltdown

Given the collapse of private aggregate demand, consumption, residential investment and non-residential investment in structures are falling, and capital expenditure by the corporate sector was already falling before the latest financial shock and will now be plunging at an even faster rate. You need to give a boost to aggregate demand to ensure that an unavoidable two-year recession does not become a decadelong stagnation.

Since the private sector is not spending, and since the first fiscal stimulus plan (tax rebates for households and tax incentives to firms) failed miserably as households and firms are saving rather than spending and investing, it is necessary now to boost public consumption of goods and services via a massive spending program (a $300 billion fiscal stimulus).

The U.S. government should have a plan to immediately spend on infrastructure and new green technologies; also unemployment benefits should be sharply increased, together with targeted tax rebates only for lower income households at risk; and federal block grants should be given to state and local government to boost their infrastructure spending (roads, sewer systems, etc.). If the private sector does not or cannot spend, old-fashioned, traditional Keynesian spending by the government is necessary. It is true that the U.S. already has large and growing budget deficits; but $300 billion of public works is more effective and productive than spending $700 billion to buy toxic assets.

… Radical action can – and should – be taken to control the damage and prevent this meltdown from occurring.

~ Nouriel Roubini, "The New New Deal," Forbes.com, October 9, 2008