From my perspective, deciding whether to tighten or ease is easy. It involves asking and answering a few questions:

Q: What is the current forecast for unemployment? A: It is that unemployment will stay around 10% for a year or more, and then slowly decline.

For Project Syndicate:

Slouching Toward Sanity: In America today – and in the rest of the world – economic-policy centrists are being squeezed.

Jared Bernstein talks about the federal budgetary impact of the stimulus program as if it were its net "cost." It isn't.

Of course, the misinformation starts with ABC's Jake Tapper:

Ten- and twenty-year average annual real returns on equities as a function of the ratio of price to a ten-year moving average of earnings:

How we wound up with a cumulative $600 billion over three years in expansionary fiscal policy.

From Ryan Lizza (Larry Summers and the White House economic team):

<< Part 1

Argument #4—that the asset purchase, asset guarantee, and bank recapitalization policies are about to have a big effect and boost the recovery—is one that I really wish were true, but I just don’t see evidence of it, at least not right now. Yes, spreads have narrowed. But asset values are still low: the S&P 500 stands about where it did early last October, after Lehman, after AIG. The banking-sector policies were supposed to boost the confidence and the risk tolerance of the private market in order to get the engine of private sector lending and borrowing and spending rolling again. Things are much better than they were at the start of March 2009, it is true. But as measured by the mark of asset prices, they are no better than they were in October 2008.

A Little Background

About a year and a half ago—in the days after the forced merger of Bear Stearns into J.P. MorganChase (JPM), say—there was a near consensus of economists that an additional dose of expansionary fiscal policy was unlikely to be necessary. The Congress had passed a first round of tax cut-based stimulus, the impact of which in the summer of 2008 is clearly visible in disposable personal income and perhaps visible in the tracks of estimated monthly real GDP. The near-consensus belief back then, however, was that that was the only expansionary discretionary fiscal policy move that was appropriate.

Paul Krugman is three doors down the hall right now, but I am going to talk to him through the magic of the internet rather than mosying down:

Does unconventional monetary policy solve the zero bound problem?: Some comments on my post on the true cost of fiscal stimulus argue that the zero lower bound aka liquidity trap isn’t really binding, because the Fed is using other measures to expand the economy. A few commenters imply that I haven’t been paying attention.

Free Exchange sends us to itself last September (Son of stimulus):

LARRY SUMMERS has seen enough. The Wall Street Journal reports:

Why oh why can't we have a better press corps? Joe Klein writes (Op-Ed Pages and Lying):

Several years ago, the first New York Times ombudsman, Dan Okrent, created a stir by pointing out factual errors in the columns of Paul Krugman...

Deficit Spending and the Recovery: Talking Points for KQED Forum Morning Appearance, September 4, 2009, 9 AM PDT, 88.5FM, San Francisco

It truly is remarkable: the Republican-leaning economists who make a living by selling their analyses of the economy to manufacturing firms that need information about demand and to financial firms that need information about industry profits are overwhelmingly assessing that the Obama short-run deficit-spending program has been and is being and will be effective--they are seeing the same 0.5 within-quarter fiscal multiplier and the same 3% boost to the second-quarter growth rate that everybody else is seeing. It's only (a) the true ideologues and (b) those who have decided to make their living by pleasing Republican politicians who are saying that the stimulus is ineffective...

By the employment-to-population ratio metric, the recession is now twice as deep as any post-1960 recession. At 59.2%, the employment-to-population ratio stands 4.1 percentage points below its December 2006 cyclical high--and 5.5 percentage points below its April 2000 all time high.

From David Wessel (Obama to Reappoint Fed Chairman Ben Bernanke - WSJ.com):