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As the world's economy slows down dramatically, an interesting policy revolution is taking place. Until recently, there was wide consensus among macroeconomists that activist fiscal policy was inadvisable. But in a now-prescient piece, Blinder (2004) began a reconsideration of the case against fiscal policy, stating that "virtually every contemporary discussion of stabilization policy by economists--whether it is abstract or concrete, theoretical or practical--is about monetary policy, not fiscal policy." Taylor (2009) alludes to a similar consensus, referring to his past work (Taylor 2000), to Feldstein (2002), and to Eichenbaum (1997), who quite pointedly added that, "there is now widespread agreement that countercyclical discretionary fiscal policy is neither desirable nor politically feasible." These reviews generally found that stimulus measures were ineffective in the past, and usually appeared at the incorrect time.

Despite these admonitions, there is one thing that appears certain as of this writing: Countercyclical discretionary policy is now politically feasible. Around the world, significant temporary stimulus packages are being drawn up. In the United States, government economists have even gone so far as to assert that stimulus actions have the consensus support of economists. In a recent article in the New York Times, for example, Christina Romer, chairwoman of the Council of Economic Advisors, said that "aggressive, well-designed fiscal stimulus is critical to reversing this severe decline." The article then continued "the vast majority of the nation's economists agree that [fiscal stimulus] is necessary, and soon."

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Kevin A. Hassett is a senior fellow and the director of economic policy studies at AEI.