Monday, January 4, 2010

Feldstein on the Possibility of a Double Dip Recession

My favorite mainstream economist warned yesterday at the annual meeting of the American Economic Association that a double dip recession was a very real possibility. WSJ has the details:
Veteran economist Martin Feldstein, of Harvard University, is not sure the U.S. economy will escape a second trip back into recession in the new year. Feldstein, who is also the emeritus president of the business cycle dating organization the National Bureau of Economic Research, tied this risk of a renewed downturn after the worst recession in decades to a poorly conceived government stimulus effort. “I supported the idea we needed to have a fiscal stimulus, somewhat to the dismay of my conservative friends,” Feldstein said Sunday at a meeting of the American Economic Association in Atlanta. But the design of the stimulus was put in the hands of congress and it was poorly done, which meant it “delivered much less” in actual stimulus than its nearly $800 billion price tag suggested it should. While the stimulus has helped push the economy out of recession so far, other negative forces still at play raise questions about the effort’s ultimate durability. “There is a significant risk the economy could run out of steam sometime in 2010,” Feldstein warned. In his comments, Feldstein was also worried about the longer run U.S. fiscal situation, which contains a rising and worrisome tide of U.S. debt.
Remember, I said he was mainstream so he was a supporter of the Keynesian stimulus package, but he also knows how to read data and sees that the Keynesian antidote is a failure.

1 comment:

  1. This is just sad. Wenzel has now aligned himself with Pres. Obama and Martin Feldstein in order to keep his "double-dip" forecast alive.

    Oh I know, Wenzel's reasons are different and so those two guys are just lucky while Wenzel is insightful. Yet if the Austrian school of economics teaches anything, it teaches that forecasting is used by charlatans to fleece the gullable.