Fiscal Policy: Too Little, Always Too Late

"The history of anti-recession efforts is that they are almost always initiated too late to do any good. The chart above (click to enlarge), based on recession timelines from the National Bureau of Economic Research, shows the enactment of stimulus plans is a fairly accurate indicator that we have hit the bottom of the business cycle, meaning the economy will improve even if the government does nothing."

~Bruce Bartlett in today's NY Times

Note that the chart above shows only the legislative lag for fiscal policy, i.e. the time it takes for Congress and the President to design and implement anti-recession fiscal policy. There is also an "impact lag," which is the time period between passing fiscal stimulus policy (dates are listed above) and when that new fiscal policy change actually starts to have an impact on the economy, which could be another six months or more. By that time, the recession will almost always be over, and the fiscal stimulus will not only be unnecessary, but could actually be destabilizing.