The Obama administration and the Federal Reserve (the Fed) have been busy in the first quarter, moving ahead quickly with policy actions aimed at countering the recession. In addition, to accommodative monetary policies, the government’s large stimulus spending initiatives will begin to work its way through the economy and at least part of it will be helpful. As with most previous anti-recession spending programs, the recession will likely be over before a large part of the programs have been executed. If so, we expect that at least part of the “stimulus package” will end up being reduced as forward years’ budgets are formulated in more normal economic conditions.

For now, the government appears to be entirely committed to a major anti-recession effort. The Treasury has rolled out an ambitious program to ease the credit crunch for banks, and the Fed has begun another very large wave of buying various debts in order to bring stability to credit markets. Some programs and bailouts remain in doubt—the support programs for the... MORE