From Financial Crisis to Recovery (Collection)

5. Stimulus Is Not a Dirty Word

The emails with the Obama transition team began only days after the November 2008 election. The economy was in free fall, and Obama’s people were scrambling to respond. They were convinced, as were most economists, that a big fiscal stimulus plan was needed, and they were asking how big I thought it should be. What kinds of tax cuts and government spending increases should it include?¹ They also asked me to use my model of the U.S. economy to quantify the impact of various proposals on GDP, jobs, and unemployment.

Although I had been an economic advisor to the McCain campaign, I knew Obama’s economic advisors well. Jason Furman, who had been a scholar at the Brookings Institution, a Democratic-leaning think tank, ...