The problem is that household balance sheets will take a long time to regain lost ground. The loss of gross domestic product was 6.3 percent in the fourth quarter of 2008. The economy fell into a hole, and it will take much longer to climb out of it. It is illogical, therefore, to expect a full snapback in consumer spending until well into next year or even the year after, which means we will have a drawn-out and weak recovery at best and at worst the possibility of an even greater decline.
All this argues for yet another national stimulus program to be prepared for implementation in the event that the forces of contraction get out of control. This is no time to take a chance that a particular program will work in the context of the biggest collapse in economic confidence since the Great Depression.