A fiscal stimulus for the US economy – either tax cuts or increased spending – would very probably be wasteful, late and have no impact on the US downturn. But it would still be a good idea. It would act as an insurance policy against a protracted and severe downturn that continued into late 2008 or 2009 and against the chance that Federal Reserve monetary policy is limited in its ability to offset it.

If enacted quickly, so it takes effect by mid-year; if targeted, so money ends up in the pockets of people who will actually spend it; and if temporary, so as not to wreck an already fragile budgetary position, a fiscal stimulus would have advantages. Fiscal policy avoids the troubled financial system and hands money directly to consumers. It would also make spectacular interest rate cuts less necessary.