In a normal business cycle, low interest rates are usually enough to generate sufficient demand to boost economic growth to its historical average of roughly 3 percent. But there is nothing normal about the present cycle. The Fed has extracted about all the juice it can from low rates and continues to squeeze. It could also spur investment by tolerating higher inflation than its 2 percent target. But the basic problem --- spurring demand on the part of consumers and borrowers --- is outside its purview.
Only Congress can provide the extra dollars for that, but lawmakers have been unwilling or unable to take action, even just to provide basics like federal unemployment benefits or highway and bridge repair.
Given that failure to act, it is a wonder the economy has managed to grow at 2 percent. To assume that it will continue to do so or that it will fully recover without the government sector engaging in a meaningful way is to hope against evidence.
Oh my! What is "insightful" about that commentary is the insight it gives into the utter dearth of basic economic knowledge existing among the members of the NYT Editorial Board.
I'll keep this very brief and simply pluck out what I pray exploded out as obvious malarkey to the majority of my readers. This notion that "only Congress" has the wherewithal to get the economy humming at historically-average speed---and that the government sector has not engaged---is the definition of ignorance, if not pure political pander, if not, well, malarkey.
Reality: Only "lawmakers" engaging with the private-sector can provide the uncertainty that would restrain capital investment while corporate balance sheets are flush with cash and interest rates are at record lows. The fact that the economy has managed to grow at 2 percent amid such government sector meddling is a wonder.
Here's a list, compiled back in August 2012 by Cato's Thomas Firey, of 15 government sector engagements ($2.4 trillion worth) that have occurred since 2008. Allow me to add TARP, The Affordable Care Act and, in terms of Fed-meddling, the trillions of dollars printed under the QE programs. Oh, and regarding "basics like federal unemployment benefits", count the number of unemployment benefits-related acts below:
|#||Name||Stimulus (Billions)||Became Law||Public Law||Note|
|1.0||Economic Stimulus Act of 2008||$167||2/13/2008||110-185||A ”timely,” “targeted,” and “temporary” fiscal stimulus.|
|1.0.1||Unemployment Compensation Extension Act of 2008||$5.7||11/21/2008||110-449||Extends unemployment insurance, using borrowed funds so as to provide stimulus.|
|2.0||American Recovery and Reinvestment Act of 2009||$819||2/17/2009||111-16||This package of public works projects, tax breaks, unemployment insurance extension, and other spending would keep unemployment below 8%.|
|2.0.1||Cash for Clunkers Extension||$2||8/7/2009||111-47||Continues the subsidy for new car purchases that was first enacted as part of ARRA.|
|2.1||Worker, Homeownership and Business Assistance Act of 2009||$44.7||11/6/2009||111-92||Extends and expands the homebuyer tax credit program.|
|2.2||Temporary Extension Act of 2010||$8.1||3/2/2010||111-144||Extends unemployment insurance, using borrowed funds so as to provide stimulus.|
|2.3||Hiring Incentives to Restore Employment Act||$17.6||3/18/2010||111-147||AKA the “Jobs for Main Street Act,” this “jobs bill” would ”spur job growth and strengthen the private sector.”|
|2.4||Continuing Extension Act of 2010||$18.1||4/15/2010||111-157||Extends unemployment insurance, using borrowed funds so as to provide stimulus.|
|2.5||Homebuyer Assistance and Improvement Act of 2010||$145||7/2/2010||111-198||Extends the deadline for submitting paperwork for homebuyer credit.|
|2.6||Unemployment Compensation Extension Act of 2010||$33.9||7/22/2010||111-205||Extends unemployment insurance, using borrowed funds so as to provide stimulus.|
|2.6.1||United States Manufacturing Enhancement Act of 2010||$3||8/11/2010||111-227||Reduces or suspends various import duties.|
|2.7||Small Business Jobs Act of 2010||$85.4||9/27/2010||111-240||Expands SBA loan programs and provides other small business assistance.|
|3.0||Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010||$916.8||12/17/2010||111-312||A package of tax breaks, including a cut in the Social Security payroll tax, an extension of the Bush income tax rates, and an extension of unemployment insurance.|
|3.1||Temporary Payroll Tax Cut Continuation Act of 2011||N/A||12/23/2011||112-78||Extends the Social Security payroll tax cut, extends unemployment insurance, and other provisions.|
|4.0||Middle Class Tax Relief and Job Creation Act of 2012||$167.6||2/22/2012||112-96||Extends the Social Security payroll tax cut, among other provisions.|