ABSTRACT

Economic Recovery: Sustaining U.S. Economic Growth in a Post-Crisis Economy [July 22, 2010]   [open pdf - 207KB]

"There is concern that this time the U.S. economy will either not return to its pre-recession growth path but perhaps remain permanently below it, or return to the pre-crisis path but at a slower than normal pace. Problems on the supply side and the demand side of the economy may lead to a weaker than normal recovery. If the pace of private spending proves insufficient to assure a sustained recovery, would further stimulus by monetary and fiscal policy be warranted? One of the important lessons from the Great Depression is to guard against a too hasty withdrawal of fiscal and monetary stimulus in an economy recovering from a deep decline. The removal of fiscal and monetary stimulus in 1937 is thought to have stopped a recovery and caused a slump that did not end until WWII. Opponents of further stimulus maintain that the accumulation of additional government debt would lower future economic growth, but supporters argue that additional stimulus is the appropriate near-term policy. In regard to the long-term debt problem, it is true that for an economy operating close to potential output, government borrowing to finance budget deficits will in theory draw down the pool of national saving, crowding out private capital investment and slowing long-term growth. However, the U.S. economy is currently operating well short of capacity and the risk of such crowding out occurring and damaging future economic growth seems low."

Report Number:
CRS Report for Congress, R41332
Author:
Publisher:
Date:
2010-07-22
Series:
Copyright:
Public Domain
Retrieved From:
Via E-mail
Format:
pdf
Media Type:
application/pdf
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