Economists rush to disagree about crisis solutions
Mar 9, 2009 at 12:00 AM
Some economists say the stimulus plan will only make things worse. Others admit they don't know the right course According to BusinessWeek, if the U.S. economy is a sick patient on the operating table, then economists are angry surgeons fighting for control of the scalpel and accusing one another of gross incompetence.It's bad enough that few economists predicted how bad things would get. What's worse is that even now the profession is foggy and conflicted about how to get out of this mess. That's distressing, to say the least, given the government report on Mar. 6 that the economy lost 651,000 jobs in February. The unemployment rate shot up to 8.1%, its highest since 1983.The main thing economists are battling over is whether the U.S. economy needs a large jolt of government spending. Those who think so—probably a majority—say the economy is at risk of sinking into a self-sustaining spiral, where a drop-off in consumer spending forces companies to cut jobs, leading to further cutbacks by consumers, and so on into a deeper hole.A Keynesian "Dangerous Spiral?"But a vociferous contingent of economists says that deficit spending by the government would only make matters worse. Many of them argue that the economy is going through a healthy and necessary "reset" in which spending, investment, and stock prices are being adjusted downward to reflect a lower and more sensible reassessment of long-term growth expectations.