Fiscal Policy Reconsidered

Abstract: For decades, economists looked to monetary policy, not fiscal policy, both when the economy needed stimulus and when it needed restraint. This clear preference rested on two beliefs: (1) that fiscal policy is too slow and too political, and (2) that monetary policy can always do the job by itself. Recent events have demonstrated that monetary policy might need help in a deep recession and also hinted that fiscal policy might be able to provide that help. In this paper, Alan Blinder proposes a number of ways to speed up fiscal policy actions and, perhaps, to make them a bit less political.