We’ve been talking about ways the administration can pump up the dwindling recovery — or more precisely, we’ve been talking a lot about how there aren’t many options given the Republican and conservadem obstruction. But here’s Krugman with a variety of reasonably ideas:
The Fed has a number of options. It can buy more long-term and private debt; it can push down long-term interest rates by announcing its intention to keep short-term rates low; it can raise its medium-term target for inflation, making it less attractive for businesses to simply sit on their cash. Nobody can be sure how well these measures would work, but it’s better to try something that might not work than to make excuses while workers suffer.
The administration has less freedom of action, since it can’t get legislation past the Republican blockade. But it still has options. It can revamp its deeply unsuccessful attempt to aid troubled homeowners. It can use Fannie Mae and Freddie Mac, the government-sponsored lenders, to engineer mortgage refinancing that puts money in the hands of American families — yes, Republicans will howl, but they’re doing that anyway. It can finally get serious about confronting China over its currency manipulation: how many times do the Chinese have to promise to change their policies, then renege, before the administration decides that it’s time to act?
Which of these options should policy makers pursue? If I had my way, all of them.
Let’s do it. Soon, please. Short of hoisting the private sector by the ankles and shaking out the $2 trillion in cash reserves its hoarding, the administration has no choice.
