Public works: Filling the hole

Barack Obama’s latest solution to America’s economic crisis will need some careful oversight AS AMERICA’S recession continues to deepen, one mercy is that there is no longer any serious debate that a fiscal stimulus is required to fill the hole left by the collapse of private demand. As American firms and households cut back and the Federal Reserve runs out of room to cut interest rates, the case for the government stepping in has become unanswerable. No one knows exactly how much Barack Obama will seek from Congress when he is sworn in on January 20th, at the end of a debilitatingly long transition period. But comments from those close to him suggest a figure of anywhere from $500 billion to $700 billion over the next two years. And that figure could easily rise. Estimates suggest that the economy may now be contracting at an annualised rate of more than 5%, so when the fourth-quarter figures emerge in late January, the calls for even more dramatic action will get louder. The ... (link)