Friday, February 20, 2009

Stimulus idea: sales tax holiday

Bob Hall (macroeconomist, in charge of the business cycle committee at NBER that dates business cycles) spoke at Vanderbilt yesterday. He used the above graph to show that the current recession is as bad as the worst post-war recession, in 1981. Bob thinks we are falling into a liquidity trap, and wants a big Keynesian stimulus program but thinks that government spending is too slow and not necessarily spent on worthwhile projects. Instead, he wants the Federal government to subsidize a temporary sales tax holiday. This has the advantage of immediacy while maintaining consumer sovereignty.

Bob and his colleague Susan Woodward (former Chief Economist at SEC and HUD), maintain a blog on the financial crisis.

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