Economist Brad DeLong Wants A Second Stimulus Plan

Economist Brad DeLong is stumping for another fiscal stimulus plan. This one, he suggests, should be targeted directly to the states. 

From the WSJ Real Time Economics blog, here is what he proposes:

* Seek from the Congress for authority to guarantee the debt of states that, in response to the current recession, (a) seek to conduct their own state-level fiscal expansions, and (b) devise plans and strategies for the long-term repayment of the debt the federal government guarantees that the Secretary of the Treasury certifies as prudent and sustainable.

* Seek an additional $500 billion of federal aid to states for the federal fiscal year that begiins Oct. 1, 2001, to be distributed per capita and conditioned on their maintaining effort at the provision of public services — on their not repeating the mistake of Herbert Hoover of cutting government employment and spending in a downturn.

The blog notes that DeLong’s proposal is tinged perhaps a bit by self-interest since he happens to be an employee of the State of California as a professor at the University of California at Berkeley. 

DeLong took some umbrage at that comment and fired back to the WSJ blog the following:

Truth to tell, the possibility that an additional round of fiscal expansion targeted at aid to the states might trickle down and help pay for my forthcoming master bathroom renovation literally never crossed my mind over the past week…

What did cross my mind was (a) memories of Paul Krugan last fall warning about this, (b) running the numbers on the deterioration of the forecast over the past six months, (c) Peter Schrag’s recountings of Sacramento politics over lunch, and Gene Smolensky’s and John Ellwood’s repeated pointings-out that California is only the worst case as far as fiscal contraction by state governments are concerned, and (d) my eighteen-year-old Michael’s summer job, which involves going to California budget conference committee hearings and taking notes…

I’m sure that DeLong has nothing but the fate of the nation in mind and that he has not been put up to this by anyone in Sacramento.

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