Chris Edley (via Mark Thoma) writes that Treasury should advance funds to the states:
Of course, when Treasury eventually collected what it was owed, the state would have to cut spending or find new revenue sources. But that would happen after the recession, when both tasks would likely prove easier economically and politically.
Arguments that are premised on the inevitable return of economic growth to rescue us from our folly sound remarkably similar to what was being said in the 20s and early 30s. (Revisions of German reparation plans and the CreditAnstalt’s bailout of the Bodencreditanstalt bank were expected to work because of the coming economic recovery.)
Given the state of the world economy right now doesn’t it makes sense to work on a solution that can have a moderate degree of success even if we have economic stagnation for a decade or two.
Synthetic Assets 