Shocks, Crises, and False Alarms

CHAPTER 11 Why Tactical Stimulus Sputters

As we argued in the preceding chapter, though the risk of failure is low in the case of existential stimulus, the outlook for tactical stimulus is decidedly less robust. In the 2010s, tactical stimulus was deployed with the reliability of a well-oiled machine, delivering a steady stream of tax cuts and accommodative policy rates (including reactive and preemptive rate cuts with hair-trigger sensitivity), as well as enlarged central bank balance sheets courtesy of quantitative easing. In the future, this tendency to opportunistically goose the cycle will be more constrained by risk. Though the tactical stimulus machine is not broken, it is sputtering.¹

Consider the crisis that played out in the United ...