In an attempt to increase home ownership, particularly by minorities and the less affluent, virtually every branch of the government undertook an attack on underwriting standards starting in the early 1990s.
Monetary policy alone is a sufficiently powerful and flexible tool to end recessions…. Discretionary fiscal policy, in contrast, does not appear to have had an important role in generating recoveries.
“Things got bad and things got worse”
A recent study by Christina D. Romer and David H. Romer, then economists at the University of California, Berkeley, finds that a dollar of tax cuts raises the G.D.P. by about $3. According to the Romers, the multiplier for tax cuts is more than twice what Professor Ramey (University of California at San Diego) finds for spending increases.
The case for fiscal policy has not yet been made by its advocates.
Bruce Bartlett (former Treasury official) on why none of the stimulus measures is likely to work:
There is a reason why Keynesian fiscal policy has been out of fashion for decades. The evidence suggests none of the ideas work.
Gary Becker (Nobel Laureate) on the wisdom of increased government spending:
The widespread collapse of the financial sector, and the wholesale retreat from risky assets, clearly has called for a highly pro-active Fed. But it is not obvious why this should lead to greater confidence in the power of government spending stimulus packages.
Wait a minute. Isn’t it excessive spending that got us into this mess in the first place? Spending more now seems like drinking Scotch to cure a hangover.