What is up with Brad Delong? It is like he is itching for a job in the Obama administration. By his own admission he is no macro-economist but surely he knows the difference between effective demand at the level of the grass roots and supply push. Then again maybe he is a macro-economists…of the fresh water variety. Just read the following:
Even after central banks have pushed government bond prices as high as they can go, they should keep buying government bonds for cash, in the hope that people whose pockets are full of cash will spend more of it, and that this will directly pull people out of joblessness and into employment.
Here is a rather old fashioned idea: temporarily beef-up both the number of those covered by UI and the level of the replacement wage so that unemployed workers will have cash to spend on things like mortgages, rents, food and transportation. Surely this seems better than hoping those who already have pockets full of cash will spend more of it and pull people out of employment. And while unemployed workers are spending their UI, the Obama administration can find a little bit of breathing room to come up with a coherent plan to the financial mess instead of playing hanky panky ad hocery with the Fed, the Treasury and Wall street.
Dude trickle down is so like…the eighties.