(In these times) — Ask any macroeconomist what the most important role of the government is, and they will answer, ‘matching aggregate supply and demand.’ From an economic perspective, federal fiscal policy is simply a tool that helps us make sure the United States has the $16 trillion in purchasing power to buy the $16 trillion in goods and services that we, as a country, can produce each year.
So why are we so bad at this?
It is now six years since the Great Recession, and employment numbers are still dismal. In every other recession since World War II, employment bounced back in four years or less. Why hasn’t that happened this time? Because a large gap exists between the country’s productive potential—what we could produce if all of those unemployed people were working—and the aggregate demand for goods and services.
