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You don't do stimulus in a recovery. The Trump administration wants to keep stimulating, keeping rates low and enacting a massive tax cut while deficit spending
by cromwellian 8y ago
You don't do stimulus in a recovery. The Trump administration wants to keep stimulating, keeping rates low and enacting a massive tax cut while deficit spending to the tune of over $900 billion.
Now, normally when there's a recession, revenue drops, automatic stabilizers kick in, and the deficit goes through the roof. But ours is already high now. Normally, in a recession, we cut rates, but rates are already historically low. Normally, in a recession we try to use fiscal policy (cutting taxes, increasing spending) to offset the drop in consumption, but we already enacted a massive tax cut.
So when the recession comes in 2019-2020, what will we have left? We've kept no powder dry.
The government put mid-term elections over fiscal health. They raced through a bunch of policies to make them look good to their voters in the last election, still lost the House, and now we are stuck with the predictable consequences.
It's not like we don't know a recession was coming anyway. If you look at 200 years of NBER data, the average business cycle averages 6-9 years before another recession. Hence recessions in 81, 90, 2000, 2008. We were due for another one anyway and the government should have been planning for this.