<As for recession fighting, there is fiscal policy like tax cuts but those have a very long lag time before they effect the economy.

Usually because, thanks to the Democrats, we only manage to pass pissy little tax cuts like the one we just managed to squeak through the Senate (which even now the Democrats are trying to rescind). Make a major cut in capital gains if you want to see some instant results. Then hammer through a consistent, large, long-term tax cut that businessmen and consumers can count on, and, just as icing on the cake for small businesses and farms, kill the estate tax. Then watch the economy jump. The Democrats would rather drop rabid wolverines down their pants than see any of this happen. Not because it wouldn't work, but because they know it would.



I'm actually an advocate for lower capital gains taxes and lower taxes in general. I just firmly believe we should ensure the solvency of ss and medicare first. Regardless, tax cuts have a long lag time before they spur the economy.

Keynesian spending policies have a much better track record for lifting an economy out of recession.



This is fake prosperity, caused by taxing productive citizens and pumping the money into areas where productivity has been lacking. Kind of like putting a penny in a fuse box.



Actually there is no need for more taxes and that isn't what Keynesian economics is about. It's about running up debt and borrowing against future prosperity to spend the way our of economic bad times. Scoff if you will but it is a tried and true method for boosting the economy and has been done successfully many times in the last 60 years. Reagan said "I have an economics degree, Keynes didn't" but while he was critical of keynesian policies he was perhaps the greatest user of such policies. He quadrupled the national debt in his tenure and spent our way out of the horrible economic times of the Carter Administration.

Then of course there is monetary policy which the Federal Reserve has implemented and which usually has a much more immediate effect of the economy.



Cripes, don't get me started on the Fed. While I do not consider it the Minion of Satan that many radical right-wingers do, there is something seriously wrong with the way our economy is organized if the rate charged by the Fed can have such widespread impact. Anyway, the recent drops in interest rates, while they have helped a little, have certainly not been the fire under Wall Street's butt that everyone was hoping for.



The Fed only controls the short term rates. Market forces control long term rates and they have a much deeper impact on the economy. The market will only react positively if they feel the Fed is doing the right thing, so the Fed really is limited in its power in that respect. For instance, if the Fed cuts short term rates but the market feels the rate cut doesn't take into account long term inflationary pressures, then the long term rate could actually go up because the market feels the Fed is doing the wrong thing.

This is just an example and I don't believe that is the case at this particular juncture as inflationary forces seem to be tame. I stand by my original comments that the business cycle was due for a dip after the longest economic expansion in history, and the dip will likely last another 6 months and possible another 2 years.