Economists Recommend Continuing Stimulus
The National Association for Business Economics (NABE), a large international association of applied economists, strategists, academics, and policy-makers, recently surveyed its 236 members on a number of government policy issues. The results show that there is not much support among economists for policy tightening over the next 12 months. In fact, the economists recommended increasing government stimulus efforts in 2013, while postponing fiscal tightening until 2014 and beyond.
Eric Morath of the Wall Street Journal quotes Jay Bryson, global economist for Wells Fargo Securities and one of the survey’s authors. “A good consensus of economists for 2013 don’t think policies should be tightened. There is a recognition that the economy remains very, very sluggish and the unemployment rate remains unacceptably high. They are looking for tightening later, rather than sooner.”
In the longer run, fiscal belt-tightening will be necessary to reduce the federal deficit. A majority of the economists believed that government fiscal policy needs to be more restrictive starting in 2014. Yet there was overwhelming support for a balanced approach to fiscal tightening. Over 90% said that Congress should both cut spending and raise taxes.
The economists were divided on the efficacy of the Federal Reserve’s quantitative easing approach. Some felt that it hadn’t done a lot for the recovery, and that there’s a risk of destabilizing the economy in the future through higher inflation.
If you’d like to read the survey yourself, you can find it here: http://www.nabe.com/Surveys.
Overall, the vast majority of the panelists believed that uncertainty about fiscal policy is holding back the pace of economic recovery. Let’s hope that our politicians are listening.