Recessions are a recurring phenomenon and there are repeated debates about how to combat them when the crisis hits and after the economy begins to grow again. Laurence Seidman argues that currently we are not ready to combat the next recession.
A recession involves a plunge in aggregate demand for goods and services which compels producers to cut production and employment. Fortunately, a large boost in demand can be achieved by a large fiscal stimulus-primarily a temporary large increase in tax rebates for households plus several fiscal supplements. But fiscal stimulus has always involved a large increase in government debt, something Congress understandably resists.
The assumption that a large fiscal stimulus requires an increase in government debt is false, Seidman asserts in this thought-provoking book. In fact, it is astonishingly easy to implement even a very large fiscal stimulus without any increase in government debt. All it takes is for Congress to enact a fiscal stimulus and the Federal Reserve to make a transfer (not loan) to the Treasury roughly equal to the fiscal stimulus so the Treasury doesn't have to borrow.
Stimulus-without-debt consists of a transfer (not loan) from the Federal Reserve to the Treasury so that the Treasury does not have to borrow to finance fiscal stimulus enacted by Congress.
Seidman explains all aspects of this new way to combat recession, "stimulus-without-debt." He presents evidence that fiscal stimulus works in a recession-it increases aggregate demand which stimulates production and employment. He explains why the fiscal stimulus should consist primarily of tax rebates for households plus several fiscal supplements. His analysis covers basic foundations as well as implications for inflation, central banks, and how to address secular stagnation. When the next
recession hits, we will be ready to combat it if we know how to use fiscal stimulus without increasing government debt. Seidman shows us how.
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Laurence Seidman is Chaplin Tyler Professor of Economics at the University of Delaware. He is the author of 12 books and has been featured in the American Economic Review, the Journal of Political Economy, and the Brookings Papers on Economic Activity among others on topics in macroeconomics and public finance economics.
"Putting idle people and equipment to work during an economic downturn is pure fiscal alchemy. It generates additional income at literally no cost. Yet we almost always fail do it. Larry Seidman explains why traditional traditional approaches fall short and proposes a disarmingly attractive alternative. If we'd had this compellingly argued book a decade ago, we could have avoided the trillions of dollars lost forever during The Great Recession. How To Combat Recession: Stimulus without Debt will be one of the most important economic policy books of our time." -Robert H. Frank, Henrietta Johnson Louis Professor of Management, SC Johnson College of Business, Cornell University
"Larry Seidman is always interesting--and sometimes provocative. How to Combat Recession: Stimulus without Debt is both. You may not agree with Seidman on every count-I don't-but his arguments are worth reading and cogitating over. After all, how we'll get out of 'the next recession' is a hugely important issue."-Alan S. Blinder, Gordon S. Rentschler Memorial Professor of Economics and Public Affairs, Princeton University
"When Larry Seidman speaks you should listen. I know this firsthand because of the dozens of suggestions I got when helping to put together the response to the Great Recession, the only one that in hindsight I regret not taking was Seidman's ideas. At a time when people are increasingly concerned about how to respond to next recession, Seidman's book articulates and methodically defends a brilliant, provocative and important proposal for a robust response. Economists, policymakers and the public more broadly should not wait for the next recession to occur to start discussing, debating and potentially assimilating these ideas."-Jason Furman, Professor of Practice, Harvard Kennedy School and former Chairman of the Council of Economic Advisers (2013-17)
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