As the world’s economy has entered a dramatic slowdown, there has been an interesting policy revolution. Up until recently, there was wide consensus among macroeconomists that activist fiscal policy was inadvisable. Blinder (2004), in a now prescient piece, began his reconsideration of the case against fiscal policy with the statement that "virtually every contemporary discussion of stabilization policy by economists--whether it is abstract or concrete, theoretical or practical--is about monetary policy, not fiscal policy." Taylor (2009) alludes to a similar consensus, referring to his own earlier work (Taylor 2000), to Feldstein (2002), and to Eichenbaum (1997), who quite pointedly added that, "there is now widespread agreement that countercyclical discretionary fiscal policy is neither desirable nor politically feasible." These reviews generally found that stimulus had not been effective in the past and usually appeared at the incorrect time.

Despite these admonitions, there is one thing that appears certain as of this writing: Countercyclical discretionary policy is now politically feasible. In the United States, and around the world, significant temporary stimulus packages are being drawn up. In the United States, government economists have even gone so far as to assert that stimulus actions have the consensus support of economists. In a recent article in the New York Times, for example, Christina Romer, chairwoman of the Council of Economic Advisors, said that "aggressive, well-designed fiscal stimulus is critical to reversing this severe decline." The article then continued "that the vast majority of the nation’s economists agree that one is necessary, and soon."

The purpose of my testimony is to argue that this, along with many other statements concerning the "majority of economists," is at the very least an interpretation that is subject to debate.

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Kevin A. Hassett is a senior fellow and the director of economic policy studies at AEI.