Reorienting Fiscal Policy after the Great Recession
The paper evaluates the fiscal policy initiatives during the Great Recession in the United States. It argues that, although the nonconventional fiscal policies targeted at the financial sector dwarfed the conventional countercyclical stabilization efforts directed toward the real sector, the relatively disappointing impact on employment was a result of misdirected funding priorities combined with an exclusive and ill-advised focus on the output gap rather than on the employment gap. The paper argues further that conventional pump-priming policies are incapable of closing this employment gap. In order to tackle the formidable labor market challenges observed in the United States over the last few decades, policy could benefit from a fundamental reorientation away from trickle-down Keynesianism and toward what is termed here a "bottom-up approach" to fiscal policy. This approach also reconsiders the nature of countercyclical government stabilizers.
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- Reinhart, Karmen & Rogoff, Kenneth, 2009. ""This time is different": panorama of eight centuries of financial crises," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 77-114, March.
- Reinhart, Carmen & Rogoff, Kenneth, 2009. "This Time It’s Different: Eight Centuries of Financial Folly-Preface," MPRA Paper 17451, University Library of Munich, Germany.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009.
"Varieties of Crises and Their Dates,"
in: This Time Is Different: Eight Centuries of Financial Folly
Princeton University Press.
- Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, number 8973, 06-2016.
- Justin Weidner & John C. Williams, 2011. "What is the new normal unemployment rate?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue feb14.
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