Must-Read: Jared Bernstein and Ben Spielberg: Preparing for the Next Recession: Lessons from the American Recovery and Reinvestment Act

Must-Read: I dissent from one of Jared and Ben’s points here: it is not at all clear to me that a lower national debt is always and everywhere a better thing. At current interest rates–and until interest rates “normalize”, if they ever do–there are major plusses from a higher debt, and no minuses I can see. And if a high debt stops being optimal because interest rates normalize? Then we can (and should) pay it down.

The argument that we should not have a higher debt now is an argument about political disfunction when it comes time that it is appropriate to pay it down, not an argument about the economics:

Jared Bernstein and Ben Spielberg: Preparing for the Next Recession: Lessons from the American Recovery and Reinvestment Act: “Moving forward… a stronger set of automatic stabilizers would help…

…we recommend that policymakers:

• Make UI’s EB program more responsive to economic conditions….
• Have temporarily higher SNAP benefits (and perhaps higher SNAP administrative funds for states) take effect automatically when a trigger… reaches certain thresholds;
• Make state fiscal relief, in the form of higher federal payments to help states cover their Medicaid costs, take effect automatically… and
• Prepare for additional discretionary steps during downturns by establishing a dedicated fund for subsidized jobs and job creation programs and considering one-time housing vouchers….

Some policymakers… may hesitate to enact them due to concerns that such measures would increase our debt as a share of GDP…. All else being equal, we agree that a lower debt-to-GDP ratio is better for the economy over the long run.  All else is not equal, however, especially during recessions. The benefits of more effective fiscal stimulus measures to fight recessions outweigh the potential drawbacks of higher debt…