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Stimulus Without Debt

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  • LAURENCE SEIDMAN

    (Department of Economics,University of Delaware)

Abstract

A sobering lesson from the Great Recession is that widespread worry about government debt generates strong political resistance to enacting a fiscal stimulus large enough to overcome a severe recession. Fortunately there is a way to implement fiscal stimulus without increasing government debt. The purpose of this article is to explain the stimulus-without-debt plan, defend it, and urge Keynesian economists to advocate it in today’s weak recovery and in future recessions. Under the plan, in a severe recession, fiscal stimulus enacted by Congress should be accompanied by a “dual-mandate transfer” from the Federal Reserve to the U.S. Treasury of the same magnitude so that the Treasury does not have to borrow to finance the fiscal stimulus. This article contrasts this stimulus-without-debt plan with alternative stimulus plans.

Suggested Citation

  • Laurence Seidman, 2014. "Stimulus Without Debt," Working Papers 14-01, University of Delaware, Department of Economics.
    • Handle: RePEc:dlw:wpaper:14-01.
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    File URL: http://www.lerner.udel.edu/sites/default/files/ECON/PDFs/RePEc/dlw/WorkingPapers/2014/UDWP2014-01.pdf
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    References listed on IDEAS

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    1. Valerie A. Ramey, 2011. "Identifying Government Spending Shocks: It's all in the Timing," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 126(1), pages 1-50.
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    3. Kenneth Lewis & Laurence Seidman, 2011. "Did the 2008 rebate fail? a response to Taylor and Feldstein," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 34(2), pages 183-204.
    4. Jonathan A. Parker & Nicholas S. Souleles & David S. Johnson & Robert McClelland, 2013. "Consumer Spending and the Economic Stimulus Payments of 2008," American Economic Review, American Economic Association, vol. 103(6), pages 2530-2553, October.
    5. Laurence Seidman, 2011. "Great Depression II," Challenge, Taylor & Francis Journals, vol. 54(1), pages 32-53.
    6. Laurence Seidman, 2001. "Reviving Fiscal Policy," Challenge, Taylor & Francis Journals, vol. 44(3), pages 17-42.
    7. Laurence Seidman, 2012. "Keynesian stimulus versus classical austerity," Review of Keynesian Economics, Edward Elgar Publishing, vol. 1(0), pages 77-92.
    8. Martin Feldstein, 2009. "Rethinking the Role of Fiscal Policy," American Economic Review, American Economic Association, vol. 99(2), pages 556-559, May.
    9. Laurence Seidman, 2011. "Keynesian Fiscal Stimulus: What Have We Learned from the Great Recession?," Working Papers 11-11, University of Delaware, Department of Economics.
    10. John B. Taylor, 2009. "The Lack of an Empirical Rationale for a Revival of Discretionary Fiscal Policy," American Economic Review, American Economic Association, vol. 99(2), pages 550-555, May.
    11. Laurence S Seidman, 2012. "Keynesian Fiscal Stimulus: What Have We Learned from the Great Recession?," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 47(4), pages 273-284, November.
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. A debt-free stimulus?
      by Economic Logician in Economic Logic on 2014-01-31 20:58:00

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    1. Seidman, Laurence & Lewis, Kenneth, 2015. "Stimulus without debt in a severe recession," Journal of Policy Modeling, Elsevier, vol. 37(6), pages 945-960.

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