"But we stimulators also have a problem. It looks very much like the Obama administration would like to withdraw the stimulus sooner rather than later. If so, what then? Turning back to the 1930s, we find that FDR, who was always uncomfortable with all the deficit spending that the Depression forced him into, was lured by the 1933-36 expansion into thinking that the slump was over, so he contrived a balanced budget for 1937. Unhappily, the economy, already weakening some in early 1937, took this turn back to fiscal orthodoxy very badly. The unemployment rate, which peaked at 25% when Roosevelt took office in 1933, had come down to around 11% by mid-1937. But it shot back up to 20% a year later. This raises an important question or two. Will one round of stimulus be enough? And can we wean ourselves from it? Or are our problems much more deep-seated than that?"
A reader less charitable than I might interpret your new remarks about the sustainability of the deficit as a revision of your earlier view, which was sound. Now, on the other hand, you might be construed as sounding like Mankiw on Ricardian equivalence.
epoliticus