Although recent employment numbers seem to have set off a fresh round of complacency, the December Strategic Analysis from the Levy Institute makes it pretty clear that more fiscal stimulus is necessary if the economy is going to reach decent levels of growth and employment anytime soon.
However, there’s very little reason to think that anything substantial is forthcoming on the stimulus front, as the US slides slowly into austerity. And the biggest obstacle is congressional opposition. Short of an historic wave election, substantial new stimulus just isn’t likely (although when it comes to increasing government spending to counteract a recession, Congress appears to be much more accommodating when there’s a Republican in the Oval Office). But short of these once-in-generation electoral outcomes, there’s another possibility: business groups could come around to the realization that they might benefit from an increase in aggregate demand and start seriously pushing their clients in Congress to pass something.
An article in Bloomberg points out that just such a push occurred in the 1940s, as a coalition of business interests, concerned about what would happen to demand as war spending wound down, pushed for fiscal stimulus (interesting side note: Fed Chairman Marriner Eccles is featured in the article as someone whose Depression-era experience in the private sector led him to conclude that government stimulus was necessary):
Dennison joined forces with Paul Hoffman of Studebaker, advertising executive William Benton, and top managers from Eastman Kodak, General Foods, Sears and General Motors in the Committee for Economic Development in 1942. Fearful that the economy would slip back into a depression once World War II ended, they advocated an activist state that spent money to promote consumption and high employment. Their position was hardly radical, and they aimed their appeal at “all who are interested in keeping the system of private enterprise and larger personal freedom.” But they understood that capitalism could survive only if there was a way to “counter the tendencies toward boom and depression.” Capitalism required growth, by whatever means necessary.
… soon even the Chamber of Commerce took the plunge and joined the growth coalition. Under the dynamic leadership of Eric Johnston, it supported the Full Employment Act of 1946, a Keynesian, albeit conservative, embrace of government spending to reduce the boom-and-bust cycle that Hoffman feared.
It’s notable that such a coalition, as far as I can tell, has not emerged in the contemporary United States. One can’t help but think that it might have something to do with the decoupling of median and average incomes; with the fact that the top 1 percent seem to be able to enjoy quite robust income growth without needing to pull the average worker along with them.