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View Diary: Two million jobless Americans face their own fiscal cliff if unemployment benefits expire (112 comments)

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  •  Yes, actually, we do, (2+ / 0-)
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    divineorder, MKinTN

    which is why deficits should be countercyclical.

    As for the limit: It only works this well when the economy is underperforming, since government spending isn't going to displace any private spending (what private spending?). Also crucial is that we've already done all we can with the more orthodox means of stimulus, namely lowering Fed rates. This is what people refer to as the zero lower bound, and the reason we have to resort to fiscal stimulus.

    Self-serving as the policy may appear, the evidence for Keynesian stimulus is pretty strong. (Actually, most evidence we have goes in the other direction, that austerity is bad in a depressed economy. But WWII certainly indicates that deficit spending is good in a depressed economy.)

    Code Monkey like freedom / Code Monkey like peace and justice too
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    Formerly known as Jyrinx.

    by Code Monkey on Mon Nov 12, 2012 at 03:02:36 PM PST

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