Yes, Boosting Private Safe-Asset Wealth in a Balance-Sheet Recession Is a Very Good Thing to Do
Mark Thoma comments on Antonio Fatas, who gets hives when he reads James Capretta, who was highlighted by Greg Mankiw playing for Team Republican:
Economist's View: I don't think the evidence supports the assertion that the preponderance of the [Recovery Act] stimulus was saved rather than spent. But suppose that it was. For consumers in particular, this is a form of balance sheet repair…. [I]t looks like the policy is doing nothing. But since consumers won't begin spending normally until their balance sheets are repaired, high savings allows us to exit the recession faster than otherwise….
Again, though, there is plenty of evidence that runs counter to the claim that the stimulus [was saved and so] did nothing…