A Non-Stimulating Stimulus?

As the financial crisis continues to attack the global economy, there is increased pressure on governments around the world to introduce discretionary fiscal stimulus programs. Up until now, we have observed massive interventions in the financial sector, massive easing of monetary policy, especially in the US, and the allowance of automatic stabilizers to produce a very substantial easing of fiscal policy. A discretionary fiscal stimulus program has just been enacted in the UK. In the US, a growing number of policymakers are proposing larger and larger stimulus packages, while the European Union is debating its own future fiscal stimulus program. Additionally, the IMF has just called for additional fiscal stimulus programs. Even Japan, with a public debt exceeding 170% of GDP, is urged to engage in fiscal activism.