Now Not Time for Restraint on Stimulus,   
Says Economist Philip Jefferson on NewsHour

by Stacey Kutish
8/26/2009

Professor of Economics Philip Jefferson, a former research economist at the Federal Reserve Board, recently joined analysts on PBS' NewsHour to discuss the Fed Chairman's optimistic forecast for the economy. Noting improvements in housing data and in the auto sector, Jefferson agrees with the assessment.

"We also have our international trading partners starting to turn around in Europe and Asia," he said. "So that's going to bring in some demand. And once we get consumers thinking positively again, then I think consumers will come online."

Regarding the higher than anticipated budget deficit, Jefferson says that although it may mean the need for fiscal restraint in the future, now is not the time. "The government is going to have to curtail spending, but now I don't think is the time to begin to implement that fiscal restraint, because there's still much more recovery that needs to take place," he says. "And we need the jobs. We need the demand, because the consumer is not playing his or her traditional role. Businesses are still not coming online in a strong way with respect to investment. We're going to get some help from the international economy as our trading partners start to recover, so we really need the government to continue to provide demand, which is a fundamental driver for the economy."