Friday, June 17, 2011

Nothing Really To Say Here

...FLG just found this an insightful point:
In the wake of the financial crisis, governments round the world pulled out all the stops, adding targeted stimulus measures on top of the "automatic stabilisers" (lower tax revenues, higher benefit payments) that usually kick in. This shock'n'awe approach was designed to head off the possibility of a second Great depression. But it makes it more difficult to get back to normal. Any government that is concerned about its long-term fiscal position may not want to balance its budget today but will want to bring down the deficit to a more usual level, say 2-3% of GDP. But the effect of this reasonable-sounding approach is to impart a hefty fiscal tightening and inspire a lot of political opposition.

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