Actually, the world may not be that different, but the surprised economists know more about the economy's problems today than they did back in January. That is why the Post did its readers a disservice when it cited the Congressional Budget Office's (CBO) assessment of various types of stimulus from January in discussing the potential shape of a new stimulus package. Specifically, CBO reported that spending on infrastructure (including green infrastructure projects) might be ineffective because of the long lead times involved in getting projects going. However, we are now looking at a long downturn, so that a program that takes a year or so to get started is still likely to provide a useful boost to the economy. Needless to say, if Congress has ignored CBO's advice and directed its stimulus toward infrastructure, much of this spending would now be kicking in, providing a substantial boost to the economy. The other big change is that consumers have now seen much of their housing equity disappear. As a result, they realize the need to save. This means that a much smaller share of any tax rebate checks will be spent than might have been true before the recent financial crisis.
--Dean Baker
