No doubt people here know that I am concerned about any stimulus package that comes out without realising that “potential output” has taken a knock. I believe that people out there that are nervous about the stimulus package have the same concern in mind.
However, it appears that Obama does not feel the same way 🙁
Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished
Well, if he believes that the economy’s capacity is undiminished, and he believes the CBO’s potential output estimates, and he ALSO believes the economy then won’t recover then he can justify some stimulus. However, if the capacity of the economy really is undiminished he should make it clear WHY the economy won’t recover and then focus any government intervention into solving this specific problem.
Of course, I do think capacity has been diminished – at least a little. If this is solely the cause (which I’m not necessarily saying) there is little that the government can do – other than helping to reduce the cost of market adjustment …