With so many economic problems hitting our nation at the same time, the list of economic policies being implemented or under consideration may be an all-time record. The list ranges from limited quick fixes to expansive long-term reforms, including everything from immediately buying stakes in the nation’s largest banks and rapidly expanding the social safety net to long-term regulatory reform. It is of course very important that we get the mix right—serving our need for quick and effective action as well as supporting our long-run economic goals.
Part of getting that mix right is understanding that different goals require different tools and that the policy tools chosen should reinforce each other to serve both our short-term and long-term needs. The full set of policies we need can be divided into four categories: stabilization, stimulus, recovery, and growth—an agenda that will deliver the prosperous economy we all desire.
Each element is necessary, and none alone is enough. Stabilization policies get the financial markets back in shape, but don’t restore the languishing economy beyond that. Stimulus policies may stop the bleeding and nudge us down the road to a better economy, but it’s just a nudge.
Recovery policies get us jobs and push us down the road to a growing economy with a thriving middle-class, but it leaves much of the job undone. Growth policies are the most important for getting our nation on track economically, but they don’t stop the immediate suffering and they need stabilization, stimulus, and recovery to build on. While the policy specifics may be subject for debate, the need for the full package, soon, is hard to refute.
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