NPR: “Why another stimulus might not help us rebuild”

October 18, 2010

Below is an excerpt; please click here to read the entire All Things Considered transcript.

“Stimulus” may be a dirty word in Washington these days, but don’t we need another boost to kick-start the economy?

Many economists say yes — even if it may not be politically feasible after the election. Economic historian Niall Ferguson, however, says a second round isn’t a good idea at all.

“The risk is that you finally stretch the credulity of financial markets to the breaking point, and investors — not only in the U.S., but abroad — say, ‘You know what? U.S. fiscal policy really is out of control,’ ” Ferguson says.

Ferguson says instead of such short-term fixes, he’d like to see plans for “medium-term fiscal stability.”

The first step, he says, is to create a solid plan to balance the budget over a five- to 10-year time frame, which would signal to businesses and investors that it’s safe to hire and expand.

“Nobody really wants to invest in any significant way in new plans under conditions of uncertainty, and there’s huge policy uncertainty,” he says.

As for those economists who disagree with him — most notably Paul Krugman, with whom he has had public feuds — Ferguson says they don’t really understand the economy.

“I have news for you — most of the academic economists know fantastically little about the way that the real world works, because they spend a lot of their time doing applied mathematics and devising fancy models that effectively simplify the way the world works, because that sounds really clever,” he says.

“What this crisis has revealed is that that cleverness is of very little value in the real world.”

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3 Responses to NPR: “Why another stimulus might not help us rebuild”

  1. JDRose1985 says:

    Help us rebuild what, exactly?

  2. JDRose1985 says:

    Help us rebuild what, exactly?

  3. JDRose1985 says:

    Help us rebuild what, exactly?

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