Recent total government budget deficits, now running at about 3.4 percent of gross domestic product (GDP), have managed to partially rescue the U.S. economy from the full consequences of its long, debt-driven boom. But if we are to avoid a steep recession, much more will be needed

The paper argues in favor of significant budget deficits based on the understanding that the expansion of the 1990s was fueled by a great build-up of debt, and that this would eventually give way to a severe recession unless offset by a strong fiscal stimulus. In 2001, with the total government...