I am travelling today and then have commitments at the other end. So very little time to write. But I did read some interesting papers over the weekend which bear on the question of whether fiscal policy in the US was effective or not. The neo-liberals (mainstream macroeconomists) claim that fiscal policy is not effective. The extremists among them invoke – Ricardian Equivalence – which claims that private households and firms fear that the rising deficits will require higher tax rates and so they save more now – which means that for every dollar of new government spending there is a dollar less of private spending – so no effect. All the evidence contradicts the extreme view. There is also mounting evidence that the recent fiscal interventions have been very effective. A study I read yesterday went a step further and analysis the impact of targetting low income groups. They found that type of public spending was very expansionary. Their results support my contention that a Job Guarantee would be a very effective (and cheap) fiscal solution (as a first step) to a private spending collapse. But for all the naysayers – sorry, the evidence is mounting that fiscal policy saved the world.