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Wednesday night time owls. Jason Furman: What does it take to rebuild a greater financial system?

The good news is that economists and policymakers understand how to handle a normal recession. After the Federal Reserve has done virtually everything it can, Biden and Congress must make another round of fiscal stimulus and family aid their first priority.

One of the lessons US policymakers learned from the inadequate response to the great recession was that it is important to do something big. The CARES law reflected this. It was an impressive and well-timed bipartisan bill that devoted a staggering 30 percent of GDP to financial aid in the first few months. The problem, however, was that legislation did not reflect the second lesson learned from the financial crisis: the response to disasters must be long-lasting. Instead, the law only offered extraordinary assistance for about four months. After that, most of the regulations expired, leaving a distressed economy without support and a paralyzed Congress and President unable to agree on action. That was predictable. Just as during the financial crisis, it was easier for the parties to come together at the start of the disaster than its effects were most acute. Thereafter, differences on how generous social benefits should be, different views on the development of the economy and the effectiveness of policies, and different policy considerations collided to restore the paralysis that characterized the US political system.

Policy makers must not allow this to happen again. Instead, they should ensure that any future response is both large and permanent. Nobody knows when the recession conditions could end. Instead of making politics time dependent, policymakers should make it contextual. Aid should be a function of the unemployment rate. This means that the aid is automatically increased or decreased under the economic conditions and provides comparatively more support to the affected areas. […]

Three more articles worth reading

TOP COMMENTS • SAVED DIARIES

QUOTE

“Because beneath all of this lies the real truth that we have avoided: Climate change is not a ‘problem’ to add to the list of concerns alongside health care and taxes. It’s a civilizing wake-up call. A powerful message – spoken in the language of fires, floods, droughts and extinctions – tells us that we need a whole new economic model and a new way of sharing this planet. Tell us we need to keep moving. ” ~~ Naomi Klein, That changes everything: Capitalism versus the climate (2014)

TWEET OF THE DAY

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Hmm What do you call a billionaire who registered a $ 40 million yacht in the Cayman Islands to avoid $ 2.4 million in US taxes while undermining public schools? Worst Secretary of Education in American history. Bye, Betsy DeVos. You will not be missed. https://t.co/KCbsTs4aCY

– Bernie Sanders (@BernieSanders) December 2, 2020

BLAST FROM THE PAST

At Daily Kos that day in 2002– The Bush administration is out of control:

Bush is furious that UN weapons inspectors cannot find hidden weapons:

In the absence of a confrontation between Iraq and the inspectors, the White House feared that the Iraqi president could win the early PR battle by giving the impression that he was sticking to it. Aides said these fears led President and Vice President Dick Cheney to give separate speeches on Monday that cast doubt on Saddam’s intentions.

How about this – if the Bush administration has evidence that Iraq is hiding weapons of mass destruction, then publish that evidence! Otherwise shut up. It is telling that the best the bushies can do is whine.

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