How long can stimulus be used to sustain the economy?

I’ve been reading Paul Krugman’s latest book, Arguing with Zombies to better understand the stimulus funding and debt. The numbers are eye popping.

Economic stimulus is a proven way to restore confidence and to reduce the severity of market cycles. There is a depression era framework that supports the generous use of stimulus funding to return the economy to full function. The resulting debt gets repaid in following boom years.

However, we might be in some uncharted territory with Covid19 because it’s harder to quantify the need and the impact when the virus hasn’t been contained.

The question then is how long can stimulus be used to sustain the economy? Economists are coming up with different answers and some of the answers are probably making Republicans uncomfortable. Hence, the desire to get everyone back to school and work as quickly as possible.

How + When

No one has the answer to that question yet either but in Arguing with Zombies, Paul lays out a framework for public intellectuals. It is good for everyone to understand and for leaders to use especially during times of disruption and transformation.

Framework for Public Intellectuals [and Leaders]

1/ Stay with the easy stuff. 

Keep with proven data and things that have a right answers rather than sharing theories of things that may or may not pan out.

2/ Write and speak in plain language.

Maintain the integrity of the content while conveying the information in a way that is accessible to everyone regardless of education and background.

3/ Be honest about dishonesty.

Call out disinformation and policies made in bad faith. Policy decisions that affect human life should be based on verifiable facts.

4/ Talk about motives.

Everyone and every company has a motive. If we can’t be open about our motive and discuss it, than there is probably something fundamentally wrong with it.

Everything doesn’t have to be political.

I was delighted when Gavin Newsom acknowledged President Trump for fulfilling all direct requests that he could. His action follows the old adage of give credit when credit is due.

With that said, we need to look at the whole experience and outcome of the Trump Administration as we head into the 2020 election and consider how much of a role government should play in reducing market risk and inequality.

Covid19 has highlighted the level of existing inequality in deaths and infection rates. Lower socioeconomic classes have paid a higher price. Companies are writing into the Wall Street Journal [WSJ] about their contributions to the Covid19 relief efforts. Many are backfilling gaps that should have been filled by the Federal Government.

A recent WSJ email questioned whether we’ll see a heightened level of corporate responsibility for all stakeholders following the Covid19 pandemic or a return to business as usual. What are your thoughts?

Arguing with Zombies

As you have inferred, Arguing with Zombies explains why we keep having the same debates on key issues such as healthcare, climate change, inequality and debt.

Paul distills the facts and explains the motivations behind the related policies using his framework. It’s a good book to add to your reading list now.